Century Bancorp 10K 2005 Annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2005
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-15752

CENTURY BANCORP, INC.

(Exact name of registrant as specified in its charter)


COMMONWEALTH OF MASSACHUSETTS		04-2498617
State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification number)

400 MYSTIC AVENUE, MEDFORD, MA		02155
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number including area code:

(781) 391-4000

Securities registered pursuant to Section 12(g) of the Act:

Class A Common Stock, $1.00 par value

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” inRule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes o No þ

State the aggregate market value of the registrant’s voting and nonvoting stock held by nonaffiliates, computed using the closing price as reported on Nasdaq as of June 30, 2005 was $106,196,298.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of February 28, 2006:

Class A Common Stock, $1.00 par value 3,479,788 Shares
Class B Common Stock, $1.00 par value 2,061,300 Shares

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).


(1)		Portions of the Registrant’s Annual Report to Stockholders for the fiscal year ended December 31, 2005 are incorporated into Part II, Items 5-8 of this Form 10-K.

CENTURY BANCORP INC.

FORM 10-K

TABLE OF CONTENTS


			Page

PART I
	ITEM 1	BUSINESS		1-5
	ITEM 1A	RISK FACTORS		5
	ITEM 1B	UNRESOLVED STAFF COMMENTS		6
	ITEM 2	PROPERTIES		6
	ITEM 3	LEGAL PROCEEDINGS		6
	ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		6

PART II
	ITEM 5	MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS		7
	ITEM 6	SELECTED FINANCIAL DATA		7
	ITEM 7	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		8
	ITEM 7a	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		8
	ITEM 8	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		8
	ITEM 9	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		8
	ITEM 9A	CONTROLS AND PROCEDURES		8
	ITEM 9B	OTHER INFORMATION		8

PART III
	ITEM 10	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT		58-61
	ITEM 11	EXECUTIVE COMPENSATION		61-65
	ITEM 12	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		66-68
	ITEM 13	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		68

PART IV
	ITEM 14	PRINCIPAL ACCOUNTANT FEES AND SERVICES		68-69
	ITEM 15	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES		69-70
SIGNATURES				71
EX-10.1 2000 Stock Option Plan, as amended on 12/30/05
EX-10.4 2004 Stock Option Plan, as amended 12/30/04
EX-23.1 Consent of Independent Registered Public Accounting Firm
EX-31.1 SEC. 302 Certification of CEO
EX-31.2 SEC. 302 Certification of CFO
EX-32.1 SEC. 906 Certification of CEO
EX-32.2 SEC 906 Certification of CFO

PART I


ITEM 1.	*BUSINESS*

The Company

Certain statements contained herein are not based on historical facts and are “forward-looking statements” within the meaning of Section 21A of the Securities Exchange Act of 1934. Forward-looking statements, which are based on various assumptions (some of which are beyond the Company’s control), may be identified by a reference to a future period or periods, or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” “anticipate” “continue” or similar terms or variations on those terms, or the negative of these terms. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset/liability management, the financial and securities market and the availability of and costs associated with sources of liquidity.

The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Century Bancorp, Inc. (together with its bank subsidiary, unless the context otherwise requires, the “Company”), is a Massachusetts state chartered bank holding company headquartered in Medford, Massachusetts. The Company is a Massachusetts corporation formed in 1972 and has one banking subsidiary (the “Bank”): Century Bank and Trust Company, formed in 1969. The Company had total assets of approximately $1.7 billion on December 31, 2005. The Company presently operates 23 banking offices in 16 cities and towns in Massachusetts ranging from Braintree in the south to Beverly in the north. The Bank’s customers consist primarily of small and medium-sized businesses and retail customers in these communities and surrounding areas, as well as local governments and institutions throughout Massachusetts.

The Company’s results of operations are largely dependent on net interest income, which is the difference between the interest earned on loans and securities and interest paid on deposits and borrowings. The results of operations are also affected by the level of income/fees from loans, deposits, as well as operating expenses, the provision for loan losses, the impact of federal and state income taxes and the relative levels of interest rates and economic activity.

The Company offers a wide range of services to commercial enterprises, state and local governments and agencies, non-profit organizations and individuals. It emphasizes service to small and medium-sized businesses and retail customers in its market area. The Company makes commercial loans, real estate and construction loans, consumer loans, and accepts savings, time and demand deposits. In addition, the Company offers to its corporate and institutional customers automated lockbox collection services, cash management services and account reconciliation services, and actively promotes the marketing of these services to the municipal market. Also, the Company provides full service securities brokerage services through its subsidiary, Century Financial Services, Inc. in conjunction with Commonwealth Equity Services, Inc., a full service securities brokerage business.

The Company is also a provider of financial services including cash management, transaction processing and short term financing to municipalities in Massachusetts and Rhode Island. The Company has deposit relationships with approximately 30% of the 351 cities and towns in Massachusetts.

During February 2003 the Company began construction of an addition to its corporate headquarters building. The property is located adjacent to its current headquarters in Medford, Massachusetts and provides additional corporate office space and an expanded banking floor. The building was substantially completed during the fourth quarter of 2004 and $14,500,000 has been expended in connection with this expansion. The capital expenditure has provided a five-story addition containing approximately 50 thousand square feet of office and branch banking space. Occupancy costs have increased by approximately $960,000 for 2005 as a result of the addition.

On March 21, 2003, the Company completed the acquisition of Capital Crossing Bank’s branch office at 1220 Boylston Street, Chestnut Hill, Massachusetts, and substantially all of the retail deposits at Capital Crossing’s main office at 101 Summer Street, Boston, Massachusetts. Century closed the Chestnut Hill branch and transferred all customers of the branch to its nearby branch office at 1184 Boylston Street, Brookline, Massachusetts. In addition, Century transferred all of the retail deposits from Capital Crossing’s Summer Street branch to its branch at 24 Federal Street, Boston, Massachusetts.

The acquisition included $192,700,000 in deposits. The acquisition also included a premium paid to Capital Crossing of approximately $3,900,000. This premium was subsequently reduced by a gain of $395,000 from the sale of the acquired Chestnut Hill branch and a rebate of $282,000 for closed accounts at the Boston office.

During the third quarter of 2005, the Company announced plans to continue its stock repurchase plan. Under the program, the Company is authorized to repurchase up to 300,000 shares, or less than 9%, of Century Bancorp Class A Common Stock. The program expires on July 11, 2006.

In 2005, the Company opened a new branch location on State Street in Boston, Massachusetts. In 2004, the Company opened one branch on Albany Street in Boston, Massachusetts.

During the fourth quarter of 2004, the Company announced that it entered into an Investment Management Agreement with Blackrock Financial Management, Inc. for the Company’sAvailable-For-Sale securities portfolio. During 2005 the Company began experiencing strong loan growth, and believes that reinvesting the investment cash flows in loans will help to achieve improvements in its yield. The expense related to this contract ended June 30, 2005 and the contract terminated January 31, 2006.

On December 2, 2004, Century Bancorp, Inc. (the “Company”) consummated the sale of a trust preferred securities offering, in which it issued $36,083,000 of subordinated debt securities due 2034 to Century Bancorp Capital Trust II, a Delaware statutory trust (the “Trust”) and an unconsolidated subsidiary formed by the Company, and the Trust simultaneously issued $35,000,000 of trust preferred securities (35,000 trust preferred securities at a liquidation amount of $1,000 per security). The Trust also issued 1,083 common securities to the Company for a purchase price of $1,000 per common security. No underwriting commissions were paid in connection with the issuances. All of the securities were issued in a private placement exempt from registration under 4(2) of the Securities Act of 1933, as amended and/or Regulation D promulgated thereunder.

The terms of the debt securities are governed by an Indenture dated December 2, 2004 between the Company and Wilmington Trust Company, as Trustee. The debt securities accrue interest (which is payable quarterly) at an initial rate of 6.65% for the first ten years and then convert to the three month LIBOR plus a margin of 1.87%. The debt securities are not redeemable by the Company during the first ten years, absent certain changes in tax, investment company or bank regulatory statutes or regulations.

Also, the Company, through its subsidiary, Century Bancorp Capital Trust, announced the redemption of their 8.30% Trust Preferred Securities, with a redemption date of January 10, 2005. The total amount of this redemption was $29,639,000.

Availability of Company Filings

Under the Securities Exchange Act of 1934, Sections 13 and 15(d), periodic and current reports must be filed with the Securities and Exchange Commission (SEC). The public may read and copy any materials filed with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at1-800-SEC-0030. The Company electronically files the following reports with the SEC:Form 10-K (Annual Report),Form 10-Q (Quarterly Report),Form 11-K (Annual Report for Employees’ Stock Purchase and Savings Plans),Form 8-K (Report of Unscheduled Material Events) and, as required,Form S-4, S-3 and8-A (Registration Statements). The Company may file additional forms. The SEC maintains an Internet site that contains reports and other information regarding issuers, including the Company, that file electronically with the SEC, atwww.sec.gov, in which all forms filed electronically may be accessed. Additionally, our annual report onForm 10-K, quarterly reports onForm 10-Q and current reports onForm 8-K with the SEC and additional shareholder information is available free of charge on the Company’s website:www.century-bank.com.

Employees

As of December 31, 2005, the Company had 288 full-time and 103 part-time employees. The Company’s employees are not represented by any collective bargaining unit. The Company believes that its employee relations are good.

Financial Services Modernization

On November 12, 1999, President Clinton signed into law The Gramm-Leach-Bliley Act (“Gramm-Leach”) which significantly altered banking laws in the United States. Gramm Leach enables combinations among banks, securities firms and insurance companies beginning March 11, 2000. As a result of Gramm Leach, many of the depression-era laws that restricted these affiliations and other activities that may be engaged in by banks and bank holding companies, were repealed. Under Gramm-Leach, bank holding companies are permitted to offer their customers virtually any type of financial service that is financial in nature or incidental thereto, including banking, securities underwriting, insurance (both underwriting and agency) and merchant banking.

In order to engage in these new financial activities, a bank holding company must qualify and register with the Federal Reserve Board as a “financial holding company” by demonstrating that each of its bank subsidiaries is “well capitalized,” “well managed,” and has at least a “satisfactory” rating under the Community Reinvestment Act of 1977 (“CRA”). The Company has not elected to become a financial holding company under Gramm-Leach.

These new financial activities authorized by Gramm-Leach may also be engaged in by a “financial subsidiary” of a national or state bank, except for insurance or annuity underwriting, insurance company portfolio investments, real estate investment and development and merchant banking, which must be conducted in a financial holding company. In order for the new financial activities to be engaged in by a financial subsidiary of a national or state bank, Gramm-Leach requires each of the parent bank (and any bank affiliates) to be well capitalized and well managed; the aggregate consolidated assets of all of that bank’s financial subsidiaries may not exceed the lesser of 45% of its consolidated total assets or $50 billion; the bank must have at least a satisfactory CRA rating; and, if that bank is one of the 100 largest banks, it must meet certain financial rating or other comparable requirements.

Gramm-Leach establishes a system of functional regulation, under which the federal banking agencies will regulate the banking activities of financial holding companies and banks’ financial subsidiaries, the U.S. Securities and Exchange Commission will regulate their securities activities, and state insurance regulators will regulate their insurance activities. Gramm-Leach also provides new protections against the transfer and use by financial institutions of consumers’ nonpublic, personal information.

Holding Company Regulation

The Company is a bank holding company as defined by the Bank Holding Company Act of 1956, as amended (the “Holding Company Act”) and is registered as such with the Board of Governors of the Federal Reserve System (the “FRB”), which is responsible for administration of the Holding Company Act. Although the Company may meet the qualifications for electing to become a financial holding company under Gramm-Leach, the Company has elected to retain its pre-Gramm-Leach status for the present time under the Holding Company Act. As required by the Holding Company Act, the Company files with the FRB an annual report regarding its financial condition and operations, management and intercompany relationships of the Company and the Bank. It is also subject to examination by the FRB and must obtain FRB approval before (i) acquiring direct or indirect ownership or control of more than 5% of the voting stock of any bank, unless it already owns or controls a majority of the voting stock of that bank, (ii) acquiring all or substantially all of the assets of a bank, except through a subsidiary which is a bank, or (iii) merging or consolidating with any other bank holding company. A bank holding company must also give the FRB prior written notice before purchasing or redeeming its equity securities, if the gross consideration for the purchase or redemption, when aggregated with the net consideration paid by the company for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the Company’s consolidated net worth.

The Holding Company Act prohibits a bank holding company, with certain exceptions, from (i) acquiring direct or indirect ownership or control of more than 5% of any class of voting shares of any company which is not a bank or a bank holding company, or (ii) engaging in any activity other than managing or controlling banks, or

furnishing services to or performing services for its subsidiaries. A bank holding company may own, however, shares of a company engaged in activities which the FRB has determined are so closely related to banking or managing or controlling banks as to be a proper incident thereto.

The Company and its subsidiaries are examined by federal and state regulators. The FRB has responsibility for holding company activities and performed a review as of December 2003.

Federal Deposit Insurance Corporation Improvement Act of 1991

On December 19, 1991, the FDIC Improvement Act of 1991 (the “1991 Act”) was enacted. This legislation provides for, among other things: enhanced federal supervision of depository institutions, including greater authority for the appointment of a conservator or receiver for undercapitalized institutions; the establishment of risk-based deposit insurance premiums; a requirement that the federal banking agencies amend their risk-based capital requirements to include components for interest-rate risk, concentration of credit risk, and the risk of nontraditional activities; expanded authority for cross-industry mergers and acquisitions; mandated consumer protection disclosures with respect to deposit accounts; and imposed restrictions on the activities of state-chartered banks, including the Bank.

Provisions of the 1991 Act relating to the activities of state-chartered banks significantly impact the way the Company conducts its business. In this regard, the 1991 Act provides that insured state banks, such as the Bank, may not engage as principal in any activity that is not permissible for a national bank, unless the FDIC has determined that the activity would pose no significant risk to the BIF and the state bank is in compliance with applicable capital standards. Activities of subsidiaries of insured state banks are similarly restricted to those activities permissible for subsidiaries of national banks, unless the FDIC has determined that the activity would pose no significant risk to the BIF and the state bank is in compliance with applicable capital standards.

Interstate Banking

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, as amended (the “Interstate Banking Act”) generally permits bank holding companies to acquire banks in any state and preempts all state laws restricting the ownership by a bank holding company of banks in more than one state. The Interstate Banking Act also permits a bank to merge with anout-of-state bank and convert any offices into branches of the resulting bank if both states have not opted out of interstate branching; permits a bank to acquire branches from anout-of-state bank if the law of the state where the branches are located permits the interstate branch acquisition; and operated de novo interstate branches whenever the host state opts-in to de novo branching. Bank holding companies and banks seeking to engage in transactions authorized by the Interstate Banking Act must be adequately capitalized and managed.

USA PATRIOT Act

Under Title III of the USA PATRIOT Act, also known as the “International Money Laundering Abatement and Anti-Terrorism Act of 2001”, all financial institutions are required in general to identify their customers, adopt formal and comprehensive anti-money laundering programs, scrutinize or prohibit altogether certain transactions of special concern, and be prepared to respond to inquiries from U.S. law enforcement agencies concerning their customers and their transactions. Additional information-sharing among financial institutions, regulators, and law enforcement authorities is encouraged by the presence of an exemption from the privacy provisions of the Gramm-Leach Act for financial institutions that comply with this provision and the authorization of the Secretary of the Treasurer to adopt rules to further encourage cooperation and information-sharing. The effectiveness of a financial institution in combating money laundering activities is a factor to be considered in any application submitted by the financial institution under the Bank Merger Act.

Sarbanes-Oxley Act

The Sarbanes-Oxley Act, signed into law July 30, 2002, addresses, among other issues, corporate governance, auditor independence and accounting standards, executive compensation, insider loans, whistleblower protection and enhanced and timely disclosure of corporate information. The SEC has adopted a substantial number of

implementing rules and the National Association of Securities Dealers, Inc. has adopted corporate governance rules that have been approved by the SEC and are applicable to the Company. The proposed changes are intended to allow stockholders to monitor more effectively the performance of companies and management. As directed by Section 302(a) of the Sarbanes-Oxley Act, the Company’s Chief Executive Officer and Chief Financial Officer are each required to certify that the Company’s quarterly and annual reports do not contain any untrue statement of a material fact. This requirement has several parts, including certification that these officers are responsible for establishing, maintaining and regularly evaluating the effectiveness of the Company’s disclosure controls and procedures and internal controls over financial reporting; that they have made certain disclosures to the Company’s auditors and the Board of Directors about the Company’s disclosure controls and procedures and internal controls over financial reporting, and that they have included information in the Company’s quarterly and annual reports about their evaluation of the Company’s internal controls and whether there have been significant changes in the Company’s internal disclosure controls or in other factors that could significantly affect controls subsequent to the evaluation and whether there have been any significant changes in the Company’s internal controls over financial reporting that have materially affected or reasonably likely to materially affect the Company’s internal controls over finance reporting, and compliance with certain other disclosure objectives. Section 906 of the Sarbanes-Oxley Act requires an additional certification that each periodic report containing financial statements fully complies with the requirements of Section 13(a) and 15(d) of the Securities Exchange Act of 1934 and that the information in the report fairly presents, in all material respects, the financial conditions and results of operations of the Company.

Competition

The Company experiences substantial competition in attracting deposits and making loans from commercial banks, thrift institutions and other enterprises such as insurance companies and mutual funds. These competitors include several major commercial banks whose greater resources may afford them a competitive advantage by enabling them to maintain numerous branch offices and mount extensive advertising campaigns. A number of these competitors are not subject to the regulatory oversight that the Company is subject to, which increases these competitors’ flexibility.

ITEM 1A. RISK FACTORS

The risk factors that may affect the Company’s performance and results of operations include the following:

(i) the Company’s business is dependent upon general economic conditions in Massachusetts;

(ii) the Company’s earnings depend to a great extent upon the level of net interest income generated by the Company, and therefore the Company’s results of operations may be adversely affected by increases or decreases in interest rates or by the shape of the yield curve;

(iii) the banking business is highly competitive and the profitability of the Company depends upon the Company’s ability to attract loans and deposits in Massachusetts, where the Company competes with a variety of traditional banking companies, some of which have vastly greater resources, and nontraditional institutions such as credit unions and finance companies;

(iv) at December 31, 2005, approximately 57.5% of the Company’s loan portfolio was comprised of commercial and commercial real estate loans, exposing the Company to the risks inherent in financings based upon analyses of credit risk, the value of underlying collateral, including real estate, and other more intangible factors, which are considered in making commercial loans;

(v) at December 31, 2005, approximately 32.3% of the Company’s loan portfolio was comprised of residential real estate loans, exposing the Company to the risks inherent in financings based upon analyses of credit risk and the value of underlying collateral. Accordingly, the Company’s profitability may be negatively impacted by errors in risk analyses, by loan defaults and the ability of certain borrowers to repay such loans may be adversely affected by any downturn in general economic conditions;

(vi) acts or threats of terrorism and actions taken by the United States or other governments as a result of such acts or threats, including possible military action, could further adversely affect business and economic conditions in the United States of America generally and in the Company’s markets, which could adversely

affect the Company’s financial performance and that of the Company’s borrowers and on the financial markets and the price of the Company’s Class A common stock;

(vii) changes in the extensive laws, regulations and policies governing bank holding companies and their subsidiaries could alter the Company’s business environment or affect the Company’s operations; and

(viii) the potential need to adapt to industry changes in information technology systems, on which the Company is highly dependent to secure bank and customer financial information, could present operational issues, require significant capital spending or impact the Company’s reputation.

These factors, as well as general economic and market conditions in the United States of America, may materially and adversely affect the Company’s performance, results of operations and the market price of shares of the Company’s Class A common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

The SEC’s Division of Corporate Finance uses a comment letter process to communicate SEC staff concerns and potential deficiencies to issuers in order to improve disclosure. No comments received by the Company from the SEC during the year ended December 31, 2005 remain unresolved.


ITEM 2.	*PROPERTIES*

The Company owns its main banking office, headquarters, and operations center in Medford, which have just been expanded, and 12 of the 23 other facilities in which its branch offices are located. The remaining offices are occupied under leases expiring on various dates from 2006 to 2026. The Company believes that its banking offices are in good condition.


ITEM 3.	*LEGAL PROCEEDINGS*

The Company and its subsidiaries are parties to various claims and lawsuits arising in the course of their normal business activities. Although the ultimate outcome of these suits cannot be ascertained at this time, it is the opinion of management that none of these matters, even if it resolved adversely to the Company, will have a material adverse effect on the Company’s consolidated financial position.


ITEM 4.	*SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS*

No matters were submitted to a vote of the Company’s Stockholders during the fourth quarter of the fiscal year ended December 31, 2005.

PART II


ITEM 5.	*MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS*

(a) The Class A Common Stock of the Company is traded on the NASDAQ National Market system under the symbol “CNBKA.” The price range of the Company’s Class A common stock since January 1, 2004 is shown on page 8. The Company’s Class B Common Stock is not traded on NASDAQ or any other national securities exchange.

Generally speaking, the shares of Class A Common Stock are not entitled to vote on any matter, including in the election of Company Directors, but, in limited circumstances, may be entitled to vote as a class on certain extraordinary transactions, including any merger or consolidation (other than one in which the Company is the surviving corporation or one which by law may be approved by the directors without any stockholder vote) or the sale, lease, or exchange of all or substantially all of the property and assets of the Company. Since the vote of a majority of the shares of Class B Common Stock, voting as a class, is required to approve certain extraordinary corporate transactions, the holders of Class B Common Stock have the power to prevent any takeover of the Company not approved by them.

(b) Approximate number of equity security holders as of December 31, 2005.


	Approximate Number
Title of Class	of Record Holders

Class A Common Stock		348
Class B Common Stock		54

(c) Under the Company’s Articles of Organization, the holders of the Class A Common Stock are entitled to receive dividends per share equal to at least 200% of dividends paid, if any, from time to time, on each share of Class B Common Stock.

The following table shows the dividends paid by the Company on the Class A and Class B Common Stock for the periods indicated.


	Dividends Per Share
	Class A		Class B

2004
First quarter	$	.12	$	.06
Second quarter		.12		.06
Third quarter		.12		.06
Fourth quarter		.12		.06
2005
First quarter	$	.12	$	.06
Second quarter		.12		.06
Third quarter		.12		.06
Fourth quarter		.12		.06

As a bank holding company, the Company’s ability to pay dividends is dependent in part upon the receipt of dividends from the Bank, which is subject to certain restrictions on the payment of dividends. A Massachusetts trust company may pay dividends out of net profits from time to time, provided that either (i) the trust company’s capital stock and surplus account equal an aggregate of at least 10% of its deposit liabilities, or (ii) the amount of its surplus account is equal to at least the amount of its capital account.


ITEM 6.	*SELECTED FINANCIAL DATA*

The information required herein is shown on page 9.


ITEM 7.	*MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION*

The information required herein is shown on pages 11 through 22.


ITEM 7A.	*QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK*

The information required herein is shown on page 18 and 19.


ITEM 8.	*FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA*

The information required herein is shown on pages 23 through 57.


ITEM 9.	*CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE*

None.

ITEM 9A. CONTROLS AND PROCEDURES

The principal Executive Officer and principal Financial Officer have evaluated the disclosure controls and procedures as of December 31, 2005. Based on this evaluation, the principal executive officer and principal financial officer have concluded that the disclosure controls and procedures effectively ensure that information required to be disclosed in the Company’s filings and submissions with the Securities and Exchange Commission under the Exchange Act, is accumulated and reported to Management (including the principal executive officer and the principal financial officer) and is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. In addition, the Company has reviewed its internal controls and there have been no significant changes in its internal controls or in other factors that could significantly affect those controls subsequent to the date of its last evaluation. Management’s report on internal control over financial reporting is shown on page 57. The attestation report of the registered public accounting firm is shown on page 56.

ITEM 9B. OTHER INFORMATION

None.

Financial Highlights


	2005			2004			2003			2002			2001
	(Dollars in thousands, except share data)

FOR THE YEAR
Interest income	$	72,811		$	65,033		$	69,298		$	71,124		$	67,459
Interest expense		32,820			23,646			23,942			24,718			27,701

Net interest income		39,991			41,387			45,356			46,406			39,758
Provision for loan losses		600			300			450			1,200			1,500

Net interest income after provision for loan losses		39,391			41,087			44,906			45,206			38,258
Other operating income		10,973			10,431			10,009			10,266			8,863
Operating expenses		40,318			37,663			34,272			34,089			30,025

Income before income taxes		10,046			13,855			20,643			21,383			17,096
Provision for income taxes		3,166			4,974			8,963			7,879			6,237

Net income	$	6,880		$	8,881		$	11,680		$	13,504		$	10,859

Average shares outstanding, basic		5,535,202			5,526,202			5,519,800			5,516,590			5,535,309
Average shares outstanding, diluted		5,548,467			5,553,197			5,548,615			5,534,059			5,541,745
Shares outstanding at year-end		5,535,442			5,534,088			5,524,438			5,517,425			5,515,350
Earnings per share:
Basic	$	1.24		$	1.61		$	2.12		$	2.45		$	1.96
Diluted	$	1.24		$	1.60		$	2.11		$	2.44		$	1.96
Dividend payout ratio		31.3	%		24.2	%		17.2	%		13.9	%		15.2	%
AT YEAR-END
Assets	$	1,728,769		$	1,833,701		$	1,688,911		$	1,557,201		$	1,271,022
Loans		689,645			580,003			512,314			514,249			462,772
Deposits		1,217,040			1,394,010			1,338,853			1,146,284			888,408
Stockholders’ equity		103,201			104,773			103,728			100,256			84,599
Book value per share	$	18.64		$	18.93		$	18.78		$	18.17		$	15.34
SELECTED FINANCIAL PERCENTAGES
Return on average assets		.41	%		.55	%		.74	%		1.02	%		1.03	%
Return on average stockholders’ equity		6.57	%		8.61	%		11.57	%		14.64	%		13.70	%
Net interest margin, taxable equivalent		2.58	%		2.75	%		3.08	%		3.77	%		4.06	%
Net (recoveries) charge-offs as a percent of average loans		0.04	%		0.01	%		0.04	%		(0.04	)%		0.01	%
Average stockholders’ equity to average assets		6.31	%		6.38	%		6.40	%		6.98	%		7.49	%
Efficiency Ratio		79.1	%		72.7	%		61.9	%		60.1	%		61.7	%

Per Share Data

2005, Quarter Ended

December 31,

September 30,

June 30,

March 31,

Market price range (Class A)

High

32.00

35.19

31.55

30.35

Low

27.00

30.31

26.00

27.75

Dividends Class A

0.12

Dividends Class B

0.06


	2004, Quarter Ended
	December 31,		September 30,		June 30,		March 31,

Market price range (Class A)
High	$	32.79	$	33.62	$	33.74	$	37.51
Low		28.15		30.38		29.75		32.80
Dividends Class A		0.12		0.12		0.12		0.12
Dividends Class B		0.06		0.06		0.06		0.06

Management’s Discussion and Analysis of Results of Operations and Financial Condition

Forward-looking Statements

Certain statements contained herein are not based on historical facts and are “forward-looking statements” within the meaning of Section 21A of the Securities Exchange Act of 1934. Forward-looking statements, which are based on various assumptions (some of which are beyond the Company’s control), may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” “anticipate,” “continue” or similar terms or variations on those terms, or the negative of these terms. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary polices of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset/liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity.

Overview

Century Bancorp, Inc. (together with its bank subsidiary, unless the context otherwise requires, the “Company”), is a Massachusetts state chartered bank holding company headquartered in Medford, Massachusetts. The Company is a Massachusetts corporation formed in 1972 and has one banking subsidiary (the “Bank”): Century Bank and Trust Company formed in 1969. The Company had total assets of $1.7 billion on December 31, 2005. The Company presently operates 23 banking offices in 16 cities and towns in Massachusetts ranging from Braintree in the south to Beverly in the north. The Banks customers consist primarily of small and medium-sized businesses and retail customers in these communities and surrounding areas, as well as local governments and institutions throughout Massachusetts.

Century Bancorp, Inc. (the “Company”) had net income of $6,880,000 for the year ended December 31, 2005, compared with net income of $8,881,000 for year ended December 31, 2004 and net income of $11,680,000 for the year ended December 31, 2003. Basic earnings per share were $1.24 in 2005, compared to $1.61 in 2004 and $2.12 in 2003. Diluted earnings per share were $1.24 in 2005, compared to $1.60 in 2004 and $2.11 in 2003. The

Company’s earnings in 2005 were negatively impacted by a decrease in net interest income, increases in salary expense as well as costs associated with the Company’s new addition to its corporate headquarters building and the addition of a lockbox image system. The Company believes that the net interest margin will continue to be challenged as rates continue to rise. This is mainly the result of deposit and borrowing pricing that has the potential to increase faster than corresponding asset categories. During 2003, the Company’s earnings were also negatively affected by a net tax charge of $1,183,000 associated with the Real Estate Investment Trust (“REIT”) settlement. This charge was the result of an agreement with the Massachusetts Department of Revenue (“DOR”) settling a dispute related to taxes that the DOR claimed were owed from the Company’s REIT.

Total assets were $1,728,769,000 at December 31, 2005, a decrease of 5.7% from total assets of $1,833,701,000 on December 31, 2004.

On December 31, 2005, stockholders equity totaled $103,201,000, compared with $104,773,000 on December 31, 2004. Book value per share decreased to $18.64 at December 31, 2005 from $18.93 on December 31, 2004.

During February 2003, the Company began construction of an addition to its corporate headquarters building. The property is located adjacent to its current headquarters in Medford, Massachusetts and provides additional corporate office space and an expanded banking floor. The building was substantially completed during the fourth quarter of 2004 and $14,500,000 has been expended in connection with this expansion. The capital expenditure has provided a five-story addition containing approximately 50,000 square feet of office and branch banking space. Occupancy costs have increased by approximately $960,000 for 2005 as a result of the addition.

On March 21, 2003, the Company completed the acquisition of Capital Crossing Banks branch office at 1220 Boylston Street, Chestnut Hill, Massachusetts, and substantially all of the retail deposits at Capital Crossings main office at 101 Summer Street, Boston, Massachusetts. Century closed the Chestnut Hill branch and transferred all customers of the branch to its nearby branch office at 1184 Boylston Street, Brookline, Massachusetts. In addition, Century transferred all of the retail deposits from Capital Crossings Summer Street branch to its branch at 24 Federal Street, Boston, Massachusetts. The acquisition included $192,700,000 in deposits. The acquisition also included a premium paid to Capital Crossing of approximately $3,900,000. This premium was subsequently reduced by a gain of $395,000 from the sale of the acquired Chestnut Hill branch and a rebate of $282,000 for closed accounts at the Boston office.

In 2005, the Company opened a new branch location on State Street in Boston, Massachusetts. In 2004, the Company opened one branch on Albany Street in Boston, Massachusetts.

During the fourth quarter of 2004, the Company announced that it entered into an Investment Management Agreement with BlackRock Financial Management, Inc. for the Company’sAvailable-For-Sale securities portfolio. During 2005 the Company began experiencing strong loan growth, and believes that reinvesting the investment cash flows in loans will help to achieve improvements in its yield. The expense related to this contract ended on June 30, 2005 and the contract terminated January 31, 2006.

Also during the fourth quarter of 2004, the Company consummated the sale of a trust preferred securities offering, in which it issued $36,083,000 of subordinated debt securities due 2034 to its newly formed unconsolidated subsidiary Century Bancorp Capital Trust II. Century Bancorp Capital Trust II issued 35,000 shares of Cumulative Trust Preferred Securities with a liquidation value of $1,000 per share. These securities pay dividends at an annualized rate of 6.65% for the first ten years and then convert to the three-month LIBOR rate plus 1.87% for the remaining twenty years. The total amount of this issuance was $36,083,000. The Company is using the proceeds primarily for general business purposes. Also, the Company, through its subsidiary, Century Bancorp Capital Trust, announced the redemption of their 8.30% Trust Preferred Securities, with a redemption date of January 10, 2005. The total amount of this redemption was $29,639,000.

Critical Accounting Policies

Accounting policies involving significant judgments and assumptions by management, which have, or could have, a material impact on the carrying value of certain assets and impact income, are considered critical accounting policies. The Company considers the following to be its critical accounting policies: allowance for loan losses and impairment of investment securities. There have been no significant changes in the methods or assumptions used in the accounting policies that require material estimates and assumptions.

Allowance for Loan Losses

Arriving at an appropriate level of allowance for loan losses necessarily involves a high degree of judgment. Management maintains an allowance for loan losses to absorb losses inherent in the loan portfolio. The allowance is based on assessments of the probable estimated losses inherent in the loan portfolio. Managements methodology for assessing the appropriateness of the allowance consists of several key elements, which include the formula allowance, specific allowances for identified problem loans and the unallocated allowance.

The formula allowance evaluates groups of loans to determine the allocation appropriate within each portfolio segment. Individual loans within the commercial and industrial, commercial real estate and real estate construction loan portfolio segments are assigned internal risk ratings to group them with other loans possessing similiar risk characteristics. Changes in risk grades affect the amount of the formula allowance. Risk grades are determined by reviewing current collateral value, financial information, cash flow, payment history and other relevant facts surrounding the particular credit. Provisions for losses on the remaining commercial and commercial real estate loans are based on pools of similar loans using a combination of historical loss experience and qualitative adjustments. For the residential real estate and consumer loan portfolios, the reserves are calculated by applying historical charge-off and recovery experience and qualitative adjustments to the current outstanding balance in each loan category. Loss factors are based on the Company’s historical loss experience, as well as regulatory guidelines.

Specific allowances for loan losses entails the assignment of allowance amounts to individual loans on the basis of loan impairment. Certain loans are evaluated individually and are judged to be impaired when management believes it is probable that the Company will not collect all the contractual interest and principle payments as scheduled in the loan agreement. Under this method, loans are selected for evaluation based upon a change in internal risk rating, occurence of delinquency, loan classification or non-accrual status. A specific allowance amount is allocated to an individual loan when such loan has been deemed impaired and when the amount of a probable loss is able to be estimated on the basis of: (a.) fair value of collateral, (b.) present value of anticipated future cash flows or (c.) the loan’s observable fair market price.

The unallocated allowance recognizes the model and estimation risk associated with the formula allowance and specific allowances, as well as management’s evaluation of various conditions, including business and economic conditions, delinquency trends, charge-off experience and other quality factors, the effects of which are not directly measured in the determination of the formula and specific allowances. The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainly because they are not identified with specific problem credits.

Management has identified certain risk factors, which could impact the degree of loss sustained within the portfolio. These include: (a.) market risk factors, such as the effects of economic variability on the entire portfolio, and (b.) unique portfolio risk factors that are inherent characteristics of the Company’s loan portfolio. Market risk factors may consist of changes to general economic and business conditions that may impact the Company’s loan portfolio customer base in terms of ability to repay and that may result in changes in value of underlying collateral. Unique portfolio risk factors may include industry concentrations and geographic concentrations or trends that may exacerbate losses resulting from economic events which the Company may not be able to fully diversify out its portfolio.

Management believes that the allowance for loan losses is adequate. In addition, various regulatory agencies, as part of the examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

Impaired investment Securities

If a material decline in fair value below the amortized cost basis of an investment security is judged to be ‘‘other-than-temporary,” the cost basis of the investment is written down to fair value. The amount of the write down is included as a charge to earnings. An ‘‘other-than-temporary” impairment exists for debt securities if it is probable that the Company will be unable to collect all amounts due according to contractual terms of the security. Some factors considered for ‘‘other than temporary” impairment related to a debt security include an analysis of yield which results in a decrease in expected cash flows, whether an unrealized loss is issuer specific, whether the issuer has defaulted on scheduled interest and principal payments, whether the issuer’s current financial condition hinder its ability to make future scheduled interest and principal payments on a timely basis or whether there was downgrade in ratings by rating agencies.

The Company has the ability and intent to hold these investments until recovery of fair value, which may be maturity.

Results of Operations and Financial Condition

The following table sets forth the distribution of the Company’s average assets, liabilities and stockholders’ equity, and average rates earned or paid on a fully taxable equivalent basis for each of the years indicated.


	Year Ended December 31,
	2005								2004								2003
				Interest		Rate						Interest		Rate						Interest		Rate
	Average			Income/		Earned/			Average			Income/		Earned/			Average			Income/		Earned/
	Balance			Expense(1)		Paid(1)			Balance			Expense(1)		Paid(1)			Balance			Expense(1)		Paid(1)
	(Dollars in thousands)

ASSETS
Interest-earning assets:
Loans(2)	$	641,103		$	41,274		6.44	%	$	546,147		$	33,384		6.11	%	$	500,723		$	33,134		6.62	%
Securitiesavailable-for-sale:
Taxable		580,129			19,518		3.36			570,935			18,528		3.25			782,782			28,735		3.67
Tax-exempt		878			22		2.51			61			1		1.64			92			3		3.26
Securitiesheld-to-maturity:
Taxable		311,738			11,635		3.73			319,860			12,296		3.84			162,988			7,152		4.39
Federal funds sold		15,847			362		2.28			69,461			824		1.19			24,730			274		1.11
Interest-bearing deposits in other banks		50			—		0.64			251			—		0.13			30			—		0.58

Total interest-earning assets		1,549,745			72,811		4.70	%		1,506,715			65,033		4.32			1,471,345			69,298		4.71	%
Non interest-earning assets		118,325								120,306								114,919
Allowance for loan losses		(9,353	)							(8,813	)							(8,901	)

Total assets	$	1,658,717							$	1,618,208							$	1,577,363


LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing deposits:
NOW accounts	$	237,016		$	3,265		1.38	%	$	250,224		$	1,966		0.79	%	$	260,383		$	2,267		0.87	%
Savings accounts		76,131			287		0.38			79,037			302		0.38			79,333			319		0.40
Money market accounts		366,622			7,018		1.91			412,220			5,010		1.22			392,066			5,111		1.30
Time deposits		265,310			8,835		3.33			242,791			6,833		2.81			239,189			7,246		3.03

Total interest-bearing deposits		945,079			19,405		2.05			984,272			14,111		1.43			970,971			14,943		1.54
Securities sold under agreements to repurchase		39,746			813		2.05			40,937			331		0.81			51,402			457		0.89
Other borrowed funds and subordinated debentures		268,878			12,602		4.69			194,932			9,204		4.72			170,344			8,542		5.01

Total interest-bearing liabilities		1,253,703			32,820		2.62	%		1,220,141			23,646		1.94	%		1,192,717			23,942		2.01	%
Non interest-bearing liabilities
Demand deposits		283,876								279,361								267,284
Other liabilities		16,463								15,511								16,429

Total liabilities		1,554,042								1,515,013								1,476,430

Stockholders’ equity		104,675								103,195								100,933
Total liabilities & stockholders’ equity	$	1,658,717							$	1,618,208							$	1,577,363

Net interest income(1)				$	39,991							$	41,387							$	45,356

Net interest spread							2.08	%							2.38	%							2.70	%

Net interest margin							2.58	%							2.75	%							3.08	%


(1)		On a fully taxable equivalent basis calculated using a federal tax rate of 35%.

(2)		Nonaccrual loans are included in average amounts outstanding.

The following table summarizes the year to year changes in the Company’s net interest income resulting from fluctuations in interest rates and volume changes in earning assets and interest-bearing liabilities. Changes due to rate are computed by multiplying the change in rate by the prior year’s volume. Changes due to volume are computed by multiplying the change in volume by the prior year’s rate. Changes in volume and rate that cannot be separately identified have been allocated in proportion to the relationship of the absolute dollar amounts of each change.


	Year Ended December 31,
	2005 Compared with 2004									2004 Compared with 2003
	Increase/(Decrease)									Increase/(Decrease)
	Due to Change in									Due to Change in
	Volume			Rate			Total			Volume			Rate			Total
	(Dollars in thousands)

Interest income:
Loans	$	6,041		$	1,849		$	7,890		$	2,881		$	(2,631	)	$	250
Securitiesavailable-for-sale:
Taxable		302			688			990			(7,145	)		(3,063	)		(10,208	)
Tax-exempt		20			1			21			(1	)		(1	)		(2	)
Securitiesheld-to-maturity:
Taxable		(308	)		(353	)		(661	)		6,128			(984	)		5,144
Federal funds sold		(903	)		440			(463	)		529			21			550
Interest-bearing deposits in other banks		—			—			—			1			(1	)		—

Total interest income		5,152			2,625			7,777			2,393			(6,659	)		(4,266	)

Interest expense:
Deposits:
NOW accounts		(109	)		1,408			1,299			(86	)		(215	)		(301	)
Savings accounts		(11	)		(4	)		(15	)		(1	)		(16	)		(17	)
Money market accounts		(606	)		2,614			2,008			255			(356	)		(101	)
Time deposits		673			1,329			2,002			108			(521	)		(413	)

Total interest-bearing deposits		(53	)		5,347			5,294			276			(1,108	)		(832	)
Securities sold under agreements to repurchase		(10	)		492			482			(87	)		(39	)		(126	)
Other borrowed funds and subordinated debentures		3,466			(68	)		3,398			1,152			(490	)		662

Total interest expense		3,403			5,771			9,174			1,341			(1,637	)		(296	)

Change in net interest income	$	1,749		$	(3,146	)	$	(1,397	)	$	1,052		$	(5,022	)	$	(3,970	)

The Company’s operating results depend primarily on net interest income and fees received for providing services. Net interest income on a fully taxable equivalent basis decreased 3.4% in 2005 to $39,991,000, compared with $41,387,000 in 2004. The decrease in net interest income for 2005 was mainly due to an 6.2% or a seventeen basis point decrease in the net interest margin. The level of interest rates, the ability of the Company’s earning assets and liabilities to adjust to changes in interest rates and the mix of the Company’s earning assets and liabilities affect net interest income. The net interest margin on a fully taxable equivalent basis decreased to 2.58% in 2005 from 2.75% in 2004, which had decreased from 3.08% in 2003. The Company believes that the net interest margin will continue to be challenged as rates continue to rise. This is mainly the result of deposit and borrowing pricing that has the potential to increase faster than corresponding asset categories.

Average earning assets were $1,549,745,000 in 2005, an increase of $43,030,000 or 2.9% from the average in 2004, which was 2.4% higher than the average in 2003. Total average securities, including securitiesavailable-for-sale and securitiesheld-to-maturity were $892,745,000. The stable securities volume was mainly attributable to a continued shift in asset concentration to loans. An increase in securities rates resulted in higher

securities income, which increased 1.1% to $31,175,000. Total average loans increased 17.4% to $641,103,000 after increasing $45,424,000 in 2004. The primary reason for the increase in loans across all of the business lines is due, in large part, to the hiring of additional officers as well as an emphasis on small business loans. The increase in loan volume and increases in loan rates resulted in higher loan income, which increased by 23.6% or $7,890,000 to $41,274,000. Total loan income was $33,134,000 in 2003.

The Company’s sources of funds include deposits and borrowed funds. On average, deposits showed an decrease of 2.7% or $34,678,000 in 2005 after increasing by 2.0% or $25,378,000 in 2004. Deposits decreased in 2005 primarily as a result of a decrease in money market accounts, which decreased by 11% or $45,598,000. Borrowed funds and subordinated debentures increased by 37.9% in 2005 following an increase of 14.4% in 2004. The majority of the Company’s borrowed funds are borrowings from the Federal Home Loan Bank (FHLB) and retail repurchase agreements. Borrowings from the FHLB increased by approximately $69,542,000 and retail repurchase agreements decreased by $1,191,000. Interest expense totaled $32,820,000 in 2005, an increase of $9,174,000 or 38.8% from 2004 when interest expense decreased 1.2% from 2003. This increase in interest expense is due to increases in deposit and borrowed funds rates.

Provision for Loan Loss

The provision for loan losses was $600,000 in 2005, compared with $300,000 in 2004 and $450,000 in 2003. These provisions are the result of managements evaluation of the amounts and quality of the loan portfolio considering such factors as loan status, collateral values, financial condition of the borrower, the state of the economy and other relevant information. Additional provisions have been made due to growth in the loan portfolio.

The allowance for loan losses was $9,340,000 at December 31, 2005, compared with $9,001,000 at December 31, 2004. Expressed as a percentage of outstanding loans at year-end, the allowance was 1.35% in 2005 and 1.55% in 2004. The coverage ratio decreased mainly as a result of the continued low levels of problem assets.

Non-performing loans, which include all non-accruing loans and certain restructured, accruing loans, totaled $949,000 on December 31, 2005, compared with $628,000 on December 31, 2004.

Other Operating Income

During 2005, the Company continued to experience positive results in its fee-based services including fees derived from traditional banking activities such as deposit related services, its automated lockbox collection system and full service securities brokerage offered through Commonwealth Equity Services, Inc., an unaffiliated registered securities broker-dealer and investment adviser.

Under the lockbox program, which is not tied to extensions of credit by the Company, the Company’s customer arranges for payments of its accounts receivable to be made directly to the Company. The Company records the amounts paid to its customers, deposits the funds to the customer’s account and provides automated records of the transactions to customers. Typical customers for the lockbox service are municipalities who use it to automate tax collections, cable TV companies and other commercial enterprises.

Through Commonwealth Equity Services, Inc., an unaffiliated company, the Bank provides full service securities brokerage services. Registered representatives employed by the Bank offer investment advice, execute transactions and assist customers in financial and retirement planning. Commonwealth Equity Services, Inc. provides research to and supervises representatives in exchange for payment by the Bank for a fixed fee and a share in the commission revenues.

Total other operating income in 2005 was $10,973,000, an increase of $542,000 or 5.2% compared to 2004. This increase followed an increase of $422,000 or 4.2% in 2004, compared to 2003. Service charge income, which continues to be a major area of other operating income with $5,846,000 in 2005, saw an increase of $575,000 compared to 2004. This follows an increase of $489,000 compared to 2003. Service charges on deposit accounts increased mainly because of an increase in overdraft charges associated with a new overdraft fee protection program. Lockbox revenues totaled $2,807,000, down $143,000 in 2005 and a decrease of $236,000 in 2004. This decrease was mainly attributable to competitive pricing pressures. Through Commonwealth Equity Services, Inc.,

brokerage commissions decreased to $462,000 in 2005, from $670,000 in 2004, primarily as a result of decreased transaction volume. Brokerage commissions increased in 2004 by $91,000 mainly as a result of increased transaction volume.

Operating Expenses

Total operating expenses were $40,318,000 in 2005, compared to $37,663,000 in 2004 and $34,272,000 in 2003.

Salaries and employee benefits expenses increased by $931,000 or 4.0% in 2005, after increasing by 6.9% in 2004. The increases for 2005 and 2004 were mainly attributable to an increase in staff levels and merit increases in salaries.

Occupancy expense increased by $801,000 or 26.7% in 2005, this followed an increase of $349,000 or 13.2% in 2004. The increase in 2005 was mainly attributable to depreciation and real estate taxes associated with the addition to the corporate headquarters as well as full-year costs associated with the opening of one new branch in 2004 and partial year costs associated with the opening of one new branch in 2005. The increase in 2004 was mainly attributable to full-year costs associated with the opening of two new branches in 2003 and the partial year cost associated with the opening of one new branch in 2004. Equipment expense increased by $607,000 or 25.5% in 2005; this followed an increase of $677,000 or 39.8% in 2004. The increase in 2005 was mainly attributable to full-year costs of depreciation and service contract expense associated with the addition of the lockbox image system, as well as depreciation associated with the addition to the corporate headquarters. The increase in 2004 was mainly attributable to increased depreciation and service contract expense associated with the additions of check and lockbox image systems. Other operating expenses increased by $316,000 in 2005, which followed a $862,000 increase in 2004. The increase for 2005 was primarily the result of increased consulting costs associated with the BlackRock contract. The expense related to this contract ended on June 30, 2005 and the contract terminated January 31, 2006. The increase for 2004 was primarily the result of increased legal, audit, personnel recruitment and marketing expense. The costs increased mainly because of compliance related services. Marketing increased because of an increase in advertising.

Provision for Income Taxes

Income tax expense was $3,166,000 in 2005, $4,974,000 in 2004 and $8,963,000 in 2003. The effective tax rate was 31.5% in 2005, 35.9% in 2004 and 43.4% (37.7%, excluding REIT settlement) in 2003. The decrease in the effective tax rate for 2005 and 2004 was mainly attributable to less earnings at the Bank that caused a decrease in both federal and state taxes. The portion of earnings subject to a higher tax rate decreased in 2005 and 2004. The federal tax rate was 34% in 2005 and 35% in 2004. Also, 2005 had a higher proportion of non-taxable income. Included in tax expense for 2003 is a net tax charge of $1,183,000 associated with the REIT settlement. This charge was the result of an agreement with the Massachusetts DOR settling a dispute related to taxes that the DOR claimed were owed from the Company’s REIT.

Market Risk and Asset Liability Management

Market risk is the risk of loss from adverse changes in market prices and rates. The Company’s market risk arises primarily from interest rate risk inherent in its lending and deposit taking activities, and to that end, management actively monitors and manages its interest rate risk exposure.

The Company’s profitability is affected by fluctuations in interest rates. A sudden and substantial increase in interest rates may adversely impact the Company’s earnings to the extent that the interest rates borne by assets and liabilities do not change at the same speed, to the same extent, or on the same basis. The Company monitors the impact of changes in interest rates on its net interest income using several tools. One measure of the Company’s exposures to differential changes in interest rates between assets and liabilities is an interest rate risk management

test. This test measures the impact on net interest income of an immediate change in interest rates in 100 basis point increments.


Change in Interest Rates		Percentage Change in
(in Basis Points)		Net Interest Income(1)

	+300		(13.1	)%
	+200		(8.6	)%
	+100		(4.3	)%
	−100		1.1	%
	−200		1.5	%


(1)		The percentage change in this column represents net interest income for 12 months in various rate scenarios versus the net interest income in a stable interest rate environment.

The Company’s primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on the Company’s net interest income and capital, while structuring the Company’s asset-liability structure to obtain the maximum yield-cost spread on that structure. The Company relies primarily on its asset-liability structure to control interest rate risk.

Liquidity and Capital Resources

Liquidity is provided by maintaining an adequate level of liquid assets that include cash and due from banks, federal funds sold and other temporary investments. Liquid assets totaled $152,679,000 on December 31, 2005, compared with $238,235,000 on December 31, 2004. In each of these two years, deposit and borrowing activity has generally been adequate to support asset activity.

The source of funds for dividends paid by the Company is dividends received from the Bank. The Company and the Bank are regulated enterprises and their abilities to pay dividends are subject to regulatory review and restriction. Certain regulatory and statutory restrictions exist regarding dividends, loans and advances from the Bank to the Company. Generally, the Bank has the ability to pay dividends to the Company subject to minimum regulatory capital requirements.

Capital Adequacy

Total stockholders’ equity was $103,201,000 at December 31, 2005, compared with $104,773,000 at December 31, 2004. The decrease in 2005 was primarily the result of a decrease in accumulated other comprehensive income somewhat offset by earnings less dividends paid.

Federal banking regulators have issued risk-based capital guidelines, which assign risk factors to asset categories and off-balance sheet items. The current guidelines require a Tier 1capital-to-risk assets ratio of at least 4.00% and a totalcapital-to-risk assets ratio of at least 8.00%. The Company and the Bank exceeded these requirements with a Tier 1capital-to-risk assets ratio of 15.46% and 12.11%, respectively, and totalcapital-to-risk assets ratio of 16.48% and 13.13%, respectively at December 31, 2005. Additionally, federal banking regulators have issued leverage ratio guidelines, which supplement the risk-based capital guidelines. The minimum leverage ratio requirement applicable to the Company is 4.00% and at December 31, 2005, the Company and the Bank exceeded this requirement with leverage ratios of 8.58% and 6.72%, respectively.

Contractual Obligations, Commitments, and Contingencies

The Company has entered into contractual obligations and commitments. The following tables summarize the Company’s contractual cash obligations and other commitments at December 31, 2005.

Contractual Obligations and Commitments by Maturity

Payments Due — by Period

Less than

One to

Three to

After Five

Contractual Obligations

Total

One Year

Three Years

Five Years

Years

(Dollars in thousands)

FHLB advances

298,656

197,156

22,000

63,500

16,000

Subordinated debentures

36,083

—

36,083

Retirement benefit obligations

16,978

1,457

3,083

3,255

9,183

Lease obligations

5,342

1,081

1,964

1,344

953

Other

Treasury, tax and loan

1,418

—

Customer repurchase agreements

50,010

—

Total contractual cash obligations

408,487

251,122

27,047

68,099

62,219

Amount of Commitment Expiring — by Period

Less than

One to

Three to

After Five

Other Commitments

Total

One Year

Three Years

Five Years

Years

Lines of credit

143,533

27,407

26,016

1,769

88,341

Standby letters of credit

10,272

3,915

390

5,200

767

Other commitments

62,217

13,369

35,966

2,199

10,863

Total commitments

216,022

44,691

62,372

9,168

99,971

Financial Instruments With Off-Balance Sheet Risk

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments primarily include commitments to originate and sell loans, standby letters of credit, unused lines of credit and unadvanced portions of construction loans. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet. The contract or notational amounts of those instruments reflect the extent of involvement the Company has in these particular classes of financial instruments.

The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for loan commitments, standby letters of credit and unadvanced portions of construction loans is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Financial instruments with off-balance sheet risk at December 31,are as follows:


Contract or Notational Amount	2005		2004
	(Dollars in thousands)

Financial instruments whose contract amount represents credit risk:
Commitments to originate 1-4 family mortgages	$	1,814	$	2,511
Standby letters of credit		10,272		11,195
Unused lines of credit		143,533		118,008
Unadvanced portions of construction loans		52,469		33,754
Unadvanced portions of other loans		7,934		10,907

Commitments to originate loans, unadvanced portions of construction loans and unused letters of credit are generally agreements to lend to a customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on acase-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the borrower.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance by a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Recent Accounting Developments

FASB Emerging Issues Task Force (“EITF”)Issue 03-1,“The Meaning ofOther-Than-Temporary Impairment and Its Application to Certain Investments”

In November 2005, the FASB issued FSPFAS 115-1 and 124-1 “The Meaning ofOther-Than-Temporary Impairment and Its Application to Certain Investments”. This FSP nullifies certain requirements ofEITF 03-1 and supersedes EITF TopicNo. D-44, “Recognition ofOther-Than-Temporary Impairment upon the Planned Sale of a Security Whose Cost Exceeds Fair Value”. This FSP addresses the determination as to when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. Additionally, the FSP addresses accounting considerations subsequent to the recognition ofother-than-temporarily impairment and requires certain disclosures about unrealized losses that have not been recognized asother-than-temporary impairments.Other-than-temporary impairment per FSPFAS 115-1 andFAS 124-1 require an investor to apply other existing guidance that is pertinent to the determination of whether an impairment is other than temporary rather than the evaluation guidance set forth inEITF 03-1. The guidance does require an impairment charge to be recognized in the current period if it is determined that a security will be sold in a subsequent period where the fair value is not expected to be fully recovered by the time of sale. This FSP is effective forother-than-temporary impairment analysis conducted in periods beginning after December 15, 2005. The adoptions ofEITF 03-1 andEITF 03-1-1did not have a material impact on the Company’s financial position or results of operations and the Company does not believe that the adoption of FSPFAS 115-1 and 124-1 will have a material impact on the Company’s financial position.

In December 2004, the FASB issued a revised Statement No. 123, (revised 2004) (SFAS 123R), “Share-Based Payment”. This Statement replaces SFAS No. 123,Accounting for Stock-Based Compensation, and supercedes APB Opinion No. 25,Accounting for Stock Issued to Employees, and its related implementation guidance. This Statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This Statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for theaward-the requisite service period (usually the vesting period).This Statement is effective as of the beginning of the first annual reporting period that begins after June 15, 2005. The Company voted to accelerate the vesting of certain unvested“out-of-the-money” stock options awarded to Century Bank employees pursuant to the Century Bancorp, Inc. 2000 and 2004 Employee Stock Option Plans so that they immediately vested as of December 30, 2005. The Board also voted a technical amendment to each of the Plans to eliminate the possibility that the terms of any outstanding or future stock option would require a cash settlement on the occurrence of any circumstance outside the control of the Company. These amendments avoid classification of the Company’s stock options as liabilities under SFAS 123R.

The Company decided to accelerate the vesting of certain stock options primarily to reduce the non-cash compensation expense that would otherwise be expected to be recorded in conjunction with the Company’s required adoption of SFAS 123R in 2006. SFAS 123R, which becomes effective for the Company on January 1, 2006, is an accounting rule that requires companies to record compensation expense over a stock option’s vesting period, even if the exercise price of a stock option exceeds the current market value of the company’s common stock. There will be no earnings impact in 2006.

On December 30, 2005 the Board vote approved the acceleration and immediate vesting of all unvested options with an exercise price of $31.60 and $31.83 or greater per share. As a consequence of the Board vote, options to purchase 23,950 shares of Century Bancorp Class A common stock became exercisable immediately. The average of the high and low price at which the Company’s common stock traded on December 30, 2005, the date of the Board vote, was $29.28 per share. The Company estimates that, as a result of this accelerated vesting, approximately $190,000 of 2006 non-cash compensation expense will be eliminated that would otherwise have been recognized in the Company’s earnings.

CENTURY BANCORP, INC.

Consolidated Balance Sheets


	December 31,
	2005			2004
	(Dollars in thousands except share data)

ASSETS
Cash and due from banks (note 2)	$	47,626		$	36,209
Federal funds sold and interest-bearing deposits in other banks		105,053			202,026

Total cash and cash equivalents		152,679			238,235
Securitiesavailable-for-sale, amortized cost $546,524 in 2005 and $614,729 in 2004 (note 3)		532,982			609,806
Securitiesheld-to-maturity, market value $277,769 in 2005 and $343,399 in 2004 (notes 4 and 9)		286,578			345,369
Loans, net (note 5)		689,645			580,003
Less: allowance for loan losses (note 6)		9,340			9,001

Net loans		680,305			571,002
Bank premises and equipment (note 7)		25,228			26,265
Accrued interest receivable		7,127			6,800
Other assets (note 12)		43,870			36,224

Total assets	$	1,728,769		$	1,833,701


LIABILITIES AND STOCKHOLDERS’ EQUITY
Demand deposits	$	296,696		$	280,871
Savings and NOW deposits		239,326			268,317
Money market accounts		279,245			485,006
Time deposits (note 8)		401,773			359,816

Total deposits		1,217,040			1,394,010
Securities sold under agreements to repurchase (note 9)		50,010			38,650
Other borrowed funds (note 10)		304,722			214,906
Subordinated debentures (note 10)		36,083			65,722
Other liabilities		17,713			15,640

Total liabilities		1,625,568			1,728,928
Commitments and contingencies (notes 7, 14 and 15)
Stockholders’ equity (note 11):
Common stock, Class A,
$1.00 par value per share; authorized 10,000,000 shares; issued 3,453,202 shares in 2005 and 3,434,448 shares in 2004		3,453			3,434
Common stock, Class B,
$1.00 par value per share; authorized 5,000,000 shares; issued 2,082,240 shares in 2005 and 2,099,640 shares in 2004		2,082			2,099
Additionalpaid-in-capital		11,416			11,395
Retained earnings		97,338			92,611

		114,289			109,539
Unrealized loses on securitiesavailable-for-sale, net of taxes		(8,270	)		(3,009	)
Additional minimum pension liability, net of taxes		(2,818	)		(1,757	)

Total accumulated other comprehensive income, net of taxes (note 3)		(11,088	)		(4,766	)

Total stockholders’ equity		103,201			104,773

Total liabilities and stockholders’ equity	$	1,728,769		$	1,833,701

See accompanying Notes to Consolidated Financial Statements.

CENTURY BANCORP, INC.

Consolidated Statements of Income


	Year Ended December 31,
	2005		2004			2003
	(Dollars in thousands except share data)

INTEREST INCOME
Loans	$	41,274	$	33,384		$	33,134
Securitiesavailable-for-sale		19,540		18,529			28,738
Securitiesheld-to-maturity		11,635		12,296			7,152
Federal funds sold and interest-bearing deposits in other banks		362		824			274

Total interest income		72,811		65,033			69,298
INTEREST EXPENSE
Savings and NOW deposits		3,552		2,268			2,586
Money market accounts		7,018		5,010			5,111
Time deposits (note 8)		8,835		6,833			7,246
Securities sold under agreements to repurchase		813		331			457
Other borrowed funds and subordinated debentures		12,602		9,204			8,542

Total interest expense		32,820		23,646			23,942

Net interest income		39,991		41,387			45,356
Provision for loan losses (note 6)		600		300			450

Net interest income after provision for loan losses		39,391		41,087			44,906
OTHER OPERATING INCOME
Service charges on deposit accounts		5,846		5,271			4,782
Lockbox fees		2,807		2,950			3,186
Brokerage commissions		462		670			579
Net (losses) gains on sales of securities		—		(91	)		1
Other income		1,858		1,631			1,461

Total other operating income		10,973		10,431			10,009
OPERATING EXPENSES
Salaries and employee benefits (note 13)		24,197		23,266			21,763
Occupancy		3,798		2,997			2,648
Equipment		2,987		2,380			1,703
Other (note 16)		9,336		9,020			8,158

Total operating expenses		40,318		37,663			34,272

Income before income taxes		10,046		13,855			20,643
Provision for income taxes (note 12)		3,166		4,974			7,780
Retroactive REIT settlement (note 12)		—		—			1,183

Net income	$	6,880	$	8,881		$	11,680

SHARE DATA (NOTE 11)
Weighted average number of shares outstanding, basic		5,535,202		5,526,202			5,519,800
Weighted average number of shares outstanding, diluted		5,548,467		5,553,197			5,548,615
Net income per share, basic	$	1.24	$	1.61		$	2.12
Net income per share, diluted		1.24		1.60			2.11

See accompanying Notes to Consolidated Financial Statements.

CENTURY BANCORP, INC.

Consolidated Statements of Changes in Stockholder’s Equity


																		Accumulated
	Class A			Class B			Additional					Treasury			Treasury			Other			Total
	Common			Common			Paid-in		Retained			Stock			Stock			Comprehensive			Stockholders’
	Stock			Stock			Capital		Earnings			Class A			Class B			Income (Loss)			Equity
	(Dollars in thousands except share data)

BALANCE, DECEMBER 31, 2002	$	3,781		$	2,168		$	11,123	$	81,755		$	(5,941	)	$	(41	)	$	7,411		$	100,256
Net income		—			—			—		11,680			—			—			—			11,680
Other comprehensive income, net of tax:
Unrealized holding losses arising during period, net of $3,200 in taxes		—			—			—		—			—			—			(6,311	)		(6,311	)

Comprehensive income																						5,369
Conversion of Class B Common Stock to Class A Common Stock, 5,010 shares		5			(5	)		—		—			—			—			—			—
Stock options exercised, 7,013 shares		7			—			104		—			—			—			—			111
Cash dividends, Class A Common Stock, $0.45 per share		—			—			—		(1,532	)		—			—			—			(1,532	)
Cash dividends, Class B Common Stock, $0.225 per share		—			—			—		(476	)		—			—			—			(476	)

BALANCE, DECEMBER 31, 2003		3,793			2,163			11,227		91,427			(5,941	)		(41	)		1,100			103,728
Net income		—			—			—		8,881			—			—			—			8,881
Other comprehensive income, net of tax:
Unrealized holding losses arising during period, net of $2,741 in taxes		—			—			—		—			—			—			(4,164	)		(4,164	)
Less: reclassification adjustment for gains included in net income, net of $36 in taxes		—			—			—		—			—			—			55			55
Minimum pension liability adjustment		—			—			—		—			—			—			(1,757	)		(1,757	)

Comprehensive income																						3,015
Conversion of Class B Common Stock to Class A Common Stock, 15,460 shares		16			(16	)		—		—			—			—			—			—
Stock options exercised, 9,650 shares		9			—			168		—			—			—			—			177
Cash dividends, Class A Common Stock, $0.48 per share		—			—			—		(1,642	)		—			—			—			(1,642	)
Cash dividends, Class B Common Stock, $0.24 per share		—			—			—		(505	)		—			—			—			(505	)
Elimination of treasury stock due to change in Massachusetts law (Note 1)		(384	)		(48	)		—		(5,550	)		5,941			41			—			—

BALANCE, DECEMBER 31, 2004		3,434			2,099			11,395		92,611			—			—			(4,766	)		104,773
Net income		—			—			—		6,880			—			—			—			6,880
Other comprehensive income, net of tax:
Unrealized holding losses arising during period, net of $3,357 in taxes		—			—			—		—			—			—			(5,261	)		(5,261	)
Minimum pension liability adjustment		—			—			—		—			—			—			(1,061	)		(1,061	)

Comprehensive income																						558
Conversion of Class B Common Stock to Class A Common Stock, 17,400 shares		17			(17	)		—		—			—			—			—			—
Stock options exercised, 1,354 shares		2			—			21		—			—			—			—			23
Cash dividends, Class A Common Stock, $0.48 per share		—			—			—		(1,649	)		—			—			—			(1,649	)
Cash dividends, Class B Common Stock, $0.24 per share		—			—			—		(504	)		—			—			—			(504	)

BALANCE, DECEMBER 31, 2005	$	3,453		$	2,082		$	11,416	$	97,338			—			—		$	(11,088	)	$	103,201

See accompanying Notes to Consolidated Financial Statements.

CENTURY BANCORP, INC.

Consolidated Statements of Cash Flows


	Year Ended December 31,
	2005			2004			2003
	(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	6,880		$	8,881		$	11,680
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		600			300			450
Deferred income taxes		128			470			(1,416	)
Net depreciation and amortization		3,348			1,848			1,754
(Increase) decrease in accrued interest receivable		(327	)		1,650			920
Increase in other assets		(3,646	)		(4,368	)		(6,639	)
Loans originated for sale		—			—			(267	)
Proceeds from sales of loans		—			—			270
Gain on sales of loans		—			—			(3	)
Loss (gain) on sales of securitiesavailable-for-sale					91			(1	)
Increase (decrease) in other liabilities		299			1,699			(6,614	)

Net cash provided by operating activities		7,282			10,571			134
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from calls/maturities of securitiesavailable-for-sale		180,317			389,172			665,635
Proceeds from sales of securitiesavailable-for-sale		—			88,198			—
Purchase of securitiesavailable-for-sale		(112,235	)		(390,398	)		(616,783	)
Proceeds from calls/maturities of securitiesheld-to-maturity		60,950			56,930			125,254
Purchase of securitiesheld-to-maturity		(2,022	)		(204,309	)		(195,991	)
(Decrease) increase in investments purchased payable		—			(29,330	)		(13,739	)
Net (increase) decrease in loans		(110,369	)		(67,639	)		2,102
Capital expenditures		(1,916	)		(6,728	)		(10,217	)

Net cash provided by (used in) investing activities		14,725			(164,104	)		(43,739	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in time deposit accounts		41,957			199			137,292
Net (decrease) increase in demand, savings, money market and NOW deposits		(218,927	)		54,958			55,277
Net proceeds from the exercise of stock options		23			177			112
Cash dividends		(2,153	)		(2,147	)		(2,008	)
Net increase (decrease) in securities sold under agreements to repurchase		11,360			(1,400	)		(11,750	)
Net increase (decrease) in other borrowed funds		89,816			78,577			(33,091	)
Issuance (retirement) of subordinated debentures		(29,639	)		36,083			889

Net cash (used in) provided by financing activities		(107,563	)		166,447			146,721

Net (decrease) increase in cash and cash equivalents		(85,556	)		12,914			103,116
Cash and cash equivalents at beginning of year		238,235			225,321			122,205

Cash and cash equivalents at end of year	$	152,679		$	238,235		$	225,321

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest	$	33,369		$	23,165		$	24,102
Income taxes		3,050			4,600			15,632
Change in unrealized gains on securitiesavailable-for-sale, net of taxes	$	(5,261	)	$	(4,109	)	$	(6,311	)

See accompanying Notes to Consolidated Financial Statements.

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

BASIS OF FINANCIAL STATEMENT PRESENTATION

The consolidated financial statements include the accounts of Century Bancorp, Inc. (the “Company”) and its wholly-owned subsidiary, Century Bank and Trust Company (the “Bank”). The consolidated financial statements also include the accounts of the Bank’s wholly-owned subsidiaries, Century Subsidiary Investments, Inc. (CSII), Century Subsidiary Investments, Inc. II (CSII II), Century Subsidiary Investments, Inc. III (CSII III) and Century Financial Services Inc. (CFSI). CSII, CSII II, CSII III are engaged in buying, selling and holding investment securities. CFSI has the power to engage in financial agency, securities brokerage and investment and financial advisory services and related securities credit.

The Company also owns 100% of Century Bancorp Capital Trust II (CBCT II). The entity is an unconsolidated subsidiary of the Company.

All significant intercompany accounts and transactions have been eliminated in consolidation. The Company provides a full range of banking services to individual, business and municipal customers in Massachusetts. As a bank holding company, the Company is subject to the regulation and supervision of the Federal Reserve Board. The Bank, a state chartered financial institution, is subject to supervision and regulation by applicable state and federal banking agencies, including the Federal Reserve Board, the Federal Deposit Insurance Corporation (the “FDIC”) and the Commonwealth of Massachusetts Commissioner of Banks. The Bank is also subject to various requirements and restrictions under federal and state law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be granted and the interest that may be charged thereon, and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of the Bank. In addition to the impact of regulation, commercial banks are affected significantly by the actions of the Federal Reserve Board as it attempts to control the money supply and credit availability in order to influence the economy. All aspects of the Company’s business are highly competitive. The Company faces aggressive competition from other lending institutions and from numerous other providers of financial services. The Company has one reportable operating segment.

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and to general practices within the banking industry. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ from those estimates.

Material estimates that are susceptible to change in the near-term relate to the allowance for loan losses. Management believes that the allowance for loan losses is adequate based on independent appraisals and review of other factors associated with the loans. While management uses available information to recognize loan losses, future additions to the allowance for loan losses may be necessary based on changes in economic conditions. In addition, regulatory agencies periodically review the Company’s allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance for loan losses based on their judgements about information available to them at the time of their examination.

Certain reclassifications were made to prior year amounts to conform with the current year presentation.

INVESTMENT SECURITIES

Debt securities that the Company has the positive intent and ability to hold to maturity are classified asheld-to-maturity and reported at amortized cost; debt and equity securities that are bought and held principally for the purpose of selling are classified as trading and reported at fair value, with unrealized gains and losses included in earnings; and debt and equity securities not classified as eitherheld-to-maturity or trading are classified asavailable-for-sale and reported at fair value, with unrealized gains and losses excluded from earnings and reported

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

as a separate component of stockholders’ equity, net of estimated related income taxes. The Company has no securities held for trading.

Premiums and discounts on investment securities are amortized or accreted into income by use of the level-yield method. If a decline in fair value below the amortized cost basis of an investment is judged to beother-than-temporary, the cost basis of the investment is written down to fair value. The amount of the write down is included as a charge to earnings. Gains and losses on the sale of investment securities are recognized at the time of sale on a specific identification basis.

LOANS

Interest on loans is recognized based on the daily principal amount outstanding. Accrual of interest is discontinued when loans become 90 days delinquent unless the collateral is sufficient to cover both principal and interest and the loan is in the process of collection. Loans, including impaired loans, on which the accrual of interest has been discontinued are designated non-accrual loans. When a loan is placed on non-accrual, all income which has been accrued but remains unpaid is reversed against current period income and all amortization of deferred loan fees is discontinued. Non-accrual loans may be returned to an accrual status when principal and interest payments are not delinquent or the risk characteristics of the loan have improved to the extent that there no longer exists a concern as to the collectibility of principal and income. Income received on non-accrual loans is either recorded in income or applied to the principal balance of the loan depending on management’s evaluation as to the collectibility of principal.

Loan origination fees and related direct incremental loan origination costs are offset and the resulting net amount is deferred and amortized over the life of the related loans using the level-yield method.

The Bank accounts for impaired loans, except those loans that are accounted for at fair value or at lower of cost or fair value, at the present value of the expected future cash flows discounted at the loan’s effective interest rate. This method applies to all loans, uncollateralized, as well as collateralized, except large groups of smaller-balance homogeneous loans that are collectively evaluated for impairment, loans that are measured at fair value. Management considers the payment status, net worth and earnings potential of the borrower, and the value and cash flow of the collateral as factors to determine if a loan will be paid in accordance with its contractual terms. Management does not set any minimum delay of payments as a factor in reviewing for impaired classification. Loans are charged-off when management believes that the collectibility of the loan’s principal is remote. In addition, criteria for classification of a loan as in-substance foreclosure has been modified so that such classification need be made only when a lender is in possession of the collateral. The Bank measures the impairment of troubled debt restructurings using the pre-modification rate of interest.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is based on management’s evaluation of the quality of the loan portfolio and is used to provide for losses resulting from loans which ultimately prove uncollectible. In determining the level of the allowance, periodic evaluations are made of the loan portfolio which take into account such factors as the character of the loans, loan status, financial posture of the borrowers, value of collateral securing the loans and other relevant information sufficient to reach an informed judgement. The allowance is increased by provisions charged to income and reduced by loan charge-offs, net of recoveries.

Management maintains an allowance for loan losses to absorb losses inherent in the loan portfolio. The allowance is based on assessments of the probable estimated losses inherent in the loan portfolio. Management’s methodology for assessing the appropriateness of the allowance consists of several key elements, which include the formula allowance, specific allowances for identified problem loans and the unallocated allowance.

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

While management uses available information in establishing the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluations. Loans are charged-off in whole or in part when, in management’s opinion, collectibility is not probable.

BANK PREMISES AND EQUIPMENT

Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets or the terms of leases, if shorter. It is general practice to charge the cost of maintenance and repairs to operations when incurred; major expenditures for improvements are capitalized and depreciated.

STOCK OPTION ACCOUNTING

The Company currently accounts for employee stock options using the intrinsic value method. Under the intrinsic value method, no compensation cost is recognized related to options if the exercise price of the option is greater than or equal to the fair market value of the underlying stock on the date of grant. Under an alternative method, the fair value method, the “cost” of the option is estimated on the date of grant using an option valuation model and recognized as compensation expense over the vesting period of the option. The Company generally awards stock options annually.

Had compensation cost for the Company’s stock option plans been determined based on the fair value at the grant date, the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:


	December 31,
	2005		2004		2003
	(Dollars in thousands,
	except share data)

Net income:
As reported	$	6,880	$	8,881	$	11,680
Less:
Pro forma stock based compensation cost (net of tax):	$	282	$	151	$	140

Pro forma and diluted	$	6,598	$	8,730	$	11,540
Basic earning per share
As reported	$	1.24	$	1.61	$	2.12
Pro forma	$	1.19	$	1.58	$	2.09
Diluted earnings per share
As reported	$	1.24	$	1.60	$	2.11
Pro forma	$	1.19	$	1.57	$	2.08

In determining the pro forma amounts, the fair value of each option grant was estimated as of the date of grant using Black-Scholes option-pricing model with the following weighted average assumptions:


	December 31,
	2004			2003

Dividend yields		1.59	%		1.69	%
Expected life		9 years			8 years
Expected volatility		28	%		26	%
Risk-free interest rate		3.95	%		3.78	%

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

of the high and low price at which the Company’s common stock traded on December 30, 2005, the date of the Board vote, was $29.28 per share. The Company estimates that, as a result of this accelerated vesting, approximately $190,000 of 2006 non-cash compensation expense will be eliminated that would otherwise have been recognized in the Company’s earnings.

INCOME TAXES

The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. Under this method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

TREASURY STOCK

Effective July 1, 2004, companies incorporated in Massachusetts became subject to Chapter 156D of the Massachusetts Business Corporation Act, provisions of which eliminate the concept of treasury stock and provide that shares reaquired by a company are to be treated as authorized but unissued shares. As a result of this change in law, the Company has reclassified, for the balance sheets presented, shares previously classified as treasury shares as a reduction to issued shares of common stock, and, accordingly, adjusted the stated value of common stock and paid in capital. At December 31, 2004 the Company had 431,150 shares at a cost of $5,982,000 previously classified as treasury stock.

PENSION

The Bank provides pension benefits to its employees under a noncontributory, defined benefit plan which is funded on a current basis in compliance with the requirements at the Employee Retirement Income Security Act of 1974 (ERISA) and recognizes costs over the estimated employee service period.


2.	Cash and Due From Banks

The Company is required to maintain a portion of its cash and due from banks as a reserve balance under the Federal Reserve Act. Such reserve is calculated based upon deposit levels and amounted to $746,000 at December 31, 2005 and $725,000 at December 31, 2004.


3.	SecuritiesAvailable-for-Sale


	December 31, 2005								December 31, 2004
			Gross		Gross		Estimated				Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
	(Dollars in thousands)

U.S. Government and Agencies	$	301,914		—	$	7,782	$	294,132	$	384,504	$	182	$	3,824	$	380,862
Mortgage Backed Securities		224,256		24		5,728		218,552		187,170		165		1,577		185,758
Obligations of states and political subdivisions		807		—		—		807		499		—		—		499
FHLB Stock		16,312		—		—		16,312		13,895		—		—		13,895
Other		3,235		46		102		3,179		28,661		174		43		28,792

	$	546,524	$	70	$	13,612	$	532,982	$	614,729	$	521	$	5,444	$	609,806

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)


	December 31, 2003
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(Dollars in thousands)

U.S. Government and Agencies	$	674,766	$	3,981	$	2,253	$	676,494
Mortgage Backed Securities		8,977		209		145		9,041
Obligations of states and political subdivisions		—		—		—		—
FHLB Stock		13,084		—		—		13,084
Other		4,617		278		179		4,716

	$	701,444	$	4,468	$	2,577	$	703,335

Included in U.S. Government and Agencies is one U.S. Government security totalling $2,000,000 with gross unrealized gains (losses) totalling ($21,000), ($5,000) and $6,000 in 2005, 2004 and 2003, respectively. Also included in U.S. Government and Agency securities are securities pledged to secure public deposits and repurchase agreements amounting to $53,774,000 at December 31, 2005. Also included are securities pledged for borrowing at the Federal Home Loan Bank amounting to $262,051,000 at December 31, 2005.

The following table shows the temporarily impaired securities of the Company’s securitiesavailable-for-sale portfolio at December 31, 2005. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for 12 months or less and a continuous loss position for 12 months and longer. There are 22 and 99 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively out of a total of 178 holdings at December 31,2005. The Company believes that the investments are temporarily impaired.

December 31, 2005

Less Than 12 Months

12 Months or Longer

Total

Unrealized

Temporarily Impaired Investments*

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

(Dollars in thousands)

U.S. Government and Agencies

16,636

346

277,496

7,436

294,132

7,782

Mortgage Backed Securities

72,786

1,308

144,913

4,420

217,699

5,728

Other

132

1,464

1,596

102

Total temporarily impaired securities

89,554

1,670

423,873

11,942

513,427

13,612


*		The decline in market value is attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until recovery of fair value, which may be maturity, the Company does not consider these investments to beother-than-temporarily impaired at December 31, 2005.

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

The following table shows the temporary impaired securities of the Company’s securitiesavailable-for-sale portfolio at December 31, 2004. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for 12 months or less and a continuous loss position for 12 months and longer. There are 93 and 9 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively out of a total of 176 holdings at December 31, 2004. The Company believes that the investments are temporarily impaired.


	December 31, 2004
	Less Than 12 Months				12 Months or Longer				Total
			Unrealized				Unrealized				Unrealized
Temporarily Impaired Investments*	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(Dollars in thousands)

U.S. Government and Agencies	$	238,849	$	3,064	$	29,232	$	760	$	268,081	$	3,824
Mortgage Backed Securities		161,567		1,436		4,258		141		165,825		1,577
Other		25,990		12		1,519		31		27,509		43

Total temporarily impaired securities	$	426,406	$	4,512	$	35,009	$	932	$	461,415	$	5,444


*		The decline in market value is attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until recovery of fair value, which may be maturity, the Company does not consider these investments to beother-than-temporarily impaired at December 31, 2004.

The following tables show the contractual maturity distribution of the Company’s securitiesavailable-for-sale at December 31, 2005 and the weighted average yields of securities, which are based on the amortized cost, calculated on a fully taxable equivalent basis.

Obligations

of States and

Mortgage

Political

Estimated

U.S. Government

Backed

Subdivisions

Fair

and Agencies

Yield

Securities

Yield

and Other

Yield

Total

Yield

Value

(Dollars in thousands)

December 31, 2005

Within one year

74,997

2.29

—

0.00

907

3.36

75,904

2.30

74,785

After one but within five years

226,917

3.09

220,544

3.97

600

4.20

448,061

3.52

435,898

After five but within ten years

—

0.00

3,713

3.52

—

0.00

3,713

3.52

3,499

Non-maturing

—

0.00

—

0.00

18,846

4.30

18,846

4.30

18,800

301,914

2.89

224,257

3.96

20,353

4.25

546,524

3.38

532,982

The actual maturities of mortgage backed securities, collateralized mortgage obligations and corporate debt securities will differ from the contractual maturities due to the ability of the issuers to prepay underlying obligations.

The weighted average remaining life of investment securitiesavailable-for-sale at December 31, 2005, 2004 and 2003 was 2.3, 2.7 and 3.5 years, respectively. Included in the weighted average remaining life calculation at December 31, 2005 and 2004 there were $15,000,000 and $134,100,000 respectively of U.S. agency obligations that are callable at the discretion of the issuer. These call dates were not utilized in computing the weighted average remaining life. The Bank realized gross gains in 2004 and 2003 of $693,000 and $0, respectively. The Bank realized gross losses in 2004 and 2003 of $784,000 and $1,000, respectively.

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)


4.	Investment SecuritiesHeld-to-Maturity


	December 31, 2005								December 31, 2004
			Gross		Gross		Estimated				Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
	(Dollars in thousands)

U.S. Government Agencies	$	159,952	$	—	$	4,770	$	155,182	$	186,324	$	175	$	1,609	$	184,890
Mortgage Backed Securities		126,626		109		4,148		122,587		159,045		589		1,125		158,509
Other		—		—		—		—		—		—		—		—

	$	286,578	$	109	$	8,918	$	277,769	$	345,369	$	764	$	2,734	$	343,399


	December 31, 2003
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(Dollars in thousands)

U.S. Government Agencies	$	6,400	$	278	$	—	$	6,678
Mortgage Backed Securities		191,447		1,548		908		192,087
Other		25		—		—		25

	$	197,872	$	1,826	$	908	$	198,790

Included in U.S. Government Agencies securities are securities pledged to secure public deposits amounting to $6,000,000 at December 31, 2005. Also included are securities pledged for borrowing at the Federal Home Loan Bank amounting to $124,632,000 at December 31, 2005.

The following table shows the temporarily impaired securities of the Company’s securitiesheld-to-maturity portfolio at December 31, 2005. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for 12 months or less and a continuous loss position for 12 months and longer. There are 20 and 64 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively out of a total of 91 holdings at December 31, 2005. The Company believes that the investments are temporarily impaired.

December 31, 2005

Less Than 12 Months

12 Months or Longer

Total

Unrealized

Temporarily Impaired Investments*

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

(Dollars in thousands)

U.S. Government Agencies

19,561

407

135,621

4,363

155,182

4,770

Mortgage Backed Securities

29,740

624

89,038

3,524

118,778

4,148

Total temporarily impaired securities

49,301

1,031

224,659

7,887

273,960

8,918


*		The decline in market value is attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until recovery of fair value, which may be maturity, the Company does not consider these investments to beother-than-temporarily impaired at December 31, 2005.

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

The following table shows the temporary impaired securities of the Company’s securitiesheld-to-maturity portfolio at December 31, 2004. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for 12 months or less and a continuous loss position for 12 months and longer. There are 50 and 5 securities temporarily impaired for less than 12 months and for 12 months or longer, respectively out of a total of 98 holdings at December 31, 2004. The Company believes that the investments are temporarily impaired.


	December 31, 2004
	Less Than 12 Months				12 Months or Longer				Total
			Unrealized				Unrealized				Unrealized
Temporarily Impaired Investments*	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
	(Dollars in thousands)

U.S. Government Agencies	$	133,367	$	1,609	$	—	$	—	$	133,367	$	1,609
Mortgage Backed Securities		74,165		673		15,678		452		89,843		1,125

Total temporarily impaired securities	$	207,532	$	2,282	$	15,678	$	452	$	223,210	$	2,734


*		The decline in market value is attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until recovery of fair value, which may be maturity, the Company does not consider these investments to beother-than-temporarily impaired at December 31, 2004.

The following tables show the contractual maturity distribution of the Company’s securitiesheld-to-maturity at December 31, 2005 and the weighted average yields of securities, which are based on the amortized cost, calculated on a fully taxable equivalent basis.

U.S.

Mortgage

Estimated

Government

Backed

Market

Agencies

Yield

Securities

Yield

Total

Yield

Value

(Dollars in thousands)

Within one year

—

0.00

297

6.52

297

6.52

302

After one but within five years

159,952

3.27

117,230

4.20

277,182

3.67

268,793

After five but within ten years

—

0.00

9,099

4.04

9,099

4.04

8,674

159,952

3.27

126,626

4.20

286,578

3.68

277,769

The weighted average remaining life of investment securitiesheld-to-maturity at December 31, 2005, 2004 and 2003 was 3.0, 3.3 and 3.5 years, respectively. Included in the weighted average remaining life calculation at December 31, 2005 and 2004 there were $5,000,000 and $139,900,000 respectively of U.S. agency obligations that are callable at the discretion of the issuer. These call dates were not utilized in computing the weighted average remaining life.


5.	Loans

The Company’s lending activities are conducted principally in Massachusetts. The company grants single and multi-family residential loans, commercial and commercial real estate loans, and a variety of consumer loans. To a lesser extent, the Company grants loans for the construction of residential homes, multi-family properties, commercial real estate properties, and land development. Most loans granted by the company are secured by real estate collateral. The ability and willingness of commercial real estate, commercial, construction, residential

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

and consumer loan borrowers to honor their repayment commitments is generally dependent on the health of the real estate market in the borrowers’ geographic areas and the general economy.

The following summary shows the composition of the loan portfolio at the dates indicated.


	December 31,
	2005					2004					2003					2002					2001
			Percent					Percent					Percent					Percent					Percent
	Amount		of Total			Amount		of Total			Amount		of Total			Amount		of Total			Amount		of Total

Construction and land development	$	58,846		8.5	%	$	51,918		9.0	%	$	34,121		6.7	%	$	33,155		6.4	%	$	39,256		8.5	%
Commercial and industrial		94,139		13.7	%		71,962		12.4	%		39,742		7.8	%		46,044		9.0	%		59,162		12.8	%
Industrial revenue bonds		—		0.0	%		—		0.0	%		—		0.0	%		—		0.0	%		48		0.0	%
Commercial real estate		302,279		43.8	%		258,524		44.6	%		293,781		57.3	%		291,598		56.7	%		241,419		52.2	%
Residential real estate		146,355		21.2	%		118,223		20.4	%		86,780		16.9	%		92,291		17.9	%		88,450		19.1	%
Consumer		9,977		1.5	%		8,607		1.5	%		8,025		1.6	%		8,169		1.6	%		7,701		1.7	%
Home Equity		76,710		11.1	%		69,957		12.0	%		49,382		9.6	%		41,527		8.1	%		26,016		5.6	%
Overdrafts		1,339		0.2	%		812		0.1	%		483		0.1	%		1,465		0.3	%		720		0.1	%

	$	689,645		100.0	%	$	580,003		100.0	%	$	512,314		100.0	%	$	514,249		100.0	%	$	462,772		100.0	%

At December 31, 2005, 2004, 2003, 2002 and 2001 loans were carried net of discounts of $4,000, $20,000, $138,000, $492,000, and $969,000 respectively. Included in these amounts at December 31, 2005, 2004, 2003, 2002 and 2001, residential real estate loans were carried net of discounts of $0, $16,000, $133,000, $487,000 and $959,000 respectively, associated with the acquisition of loans from another financial institution. Net deferred loan fees of $482,000, $485,000, $389,000, $315,000, and $389,000 were carried in 2005, 2004, 2003, 2002 and 2001 respectively.

The following table summarizes the remaining maturity distribution of certain components of the Company’s loan portfolio on December 31, 2005. The table excludes loans secured byone-to-four family residential real estate and loans for household and family personal expenditures. Maturities are presented as if scheduled principal amortization payments are due on the last contractual payment date.

Remaining Maturities of Selected Loans at

December 31, 2005

One Year

One to Five

Over

or Less

Years

Five Years

Total

(Dollars in thousands)

Construction and land development

19,973

31,270

7,603

58,846

Commercial and industrial

39,999

46,011

8,129

94,139

Commercial real estate

34,762

107,441

160,076

302,279

Total

94,734

184,722

175,808

455,264

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

The following table indicates the rate variability of the above loans due after one year.

December 31, 2005

One to Five

Over

Years

Five Years

Total

(Dollars in thousands)

Predetermined interest rates

111,403

26,869

138,272

Floating or adjustable interest rates

73,319

148,939

222,258

Total

184,722

175,808

360,530

The Company’s commercial and industrial (C&I) loan customers represent various small and middle market established businesses involved in manufacturing, distribution, retailing and services. Most clients are privately owned with markets that range from local to national in scope. Many of the loans to this segment are secured by liens on corporate assets and the personal guarantees of the principals. The Bank is placing greater emphasis on building its C&I base in the future. The regional economic strength or weakness impacts the relative risks in this loan category. There is little concentration to any one business sector and loan risks are generally diversified among many borrowers.

Commercial real estate loans are extended to finance various manufacturing, warehouse, light industrial, office, retail and residential properties in the Bank’s market area, which generally includes Eastern Massachusetts and Southern New Hampshire. Loans are normally extended in amounts up to a maximum of 80% of appraised value and normally for terms between three to five years. Amortization schedules are long-term and thus a balloon payment is due at maturity. Under most circumstances, the Bank will offer to re-write or otherwise extend the loan at prevailing interest rates. During recent years, the Bank has emphasized non-residential type owner-occupied properties. This compliments our C&I emphasis placed on the operating business entities and will be continued. The regional economic environment affects the risk of both non-residential and residential mortgages.

Residential real estate (1-4 family) includes two categories of loans. Approximately $10,322,000 of loans are classified as “Commercial and Industrial” type loans secured by 1-4 family real estate. Primarily, these are small businesses with modest capital or shorter operating histories where the collateral mitigates some risk. This category of loans shares similar risk characteristics with the C&I loans, notwithstanding the collateral position.

The other category of residential real estate loans are mostly 1-4 family residential properties located in the Bank’s market area. General underwriting criteria are largely the same as those used by Fannie Mae but normally only one or three year adjustable interest rates are used. The Bank utilizes mortgage insurance to provide lower down payment products and has provided a “First Time Homebuyer” product to encourage new home ownership. Residential real estate loan volume has increased and remains a core consumer product. The economic environment impacts the risks associated with this category.

Home equity loans are extended as both first and second mortgages on owner occupied residential properties in the Bank’s market area. Loans are underwritten to a maximum loan to property value of 75%.

The Bank intends to maintain a market for construction loans, principally for smaller local residential projects or an owner occupied commercial project. Individual consumer residential home construction loans are also extended on a similar basis.

Bank officers evaluate the feasibility of construction projects, based on independent appraisals of the project, architects or engineers evaluations of the cost of construction, and other relevant data. As of December 31, 2005, the Company was obligated to advance a total of $52,469,000 to complete projects under construction.

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

The composition of non-accrual loans and impaired loan agreements is as follows:


	December 31,
	2005		2004		2003		2002		2001
	(Dollars in thousands)

Loans on non-accrual	$	949	$	628	$	1,175	$	511	$	423
Impaired loans on non-accrual included above	$	886	$	452	$	1,137	$	487	$	292
Total recorded investment in impaired loans	$	886	$	964	$	1,618	$	1,116	$	1,089
Average recorded value of impaired loans	$	1,384	$	1,156	$	2,043	$	1,273	$	2,149
Loans 90 days past due and still accruing	$	—	$	160	$	—	$	—	$	9
Interest income on non-accrual loans according to their original terms	$	75	$	66	$	100	$	50	$	43
Interest income on non-accrual loans actually recorded	$	—	$	—	$	70	$	—	$	32
Interest income recognized on impaired loans	$	202	$	105	$	116	$	60	$	116

The composition of impaired loans at December 31, is as follows:


	2005		2004		2003		2002		2001

Residential real estate, multi-family	$	—	$	512	$	541	$	629	$	656
Construction and land development		675		—		—		—		—
Commercial real estate		—		—		—		487		433
Commercial and industrial		211		452		1,077		—		—

Total impaired loans	$	886	$	964	$	1,618	$	1,116	$	1,089

There were no impaired loans with specific reserves from December 31, 2000 through December 31, 2005 and in the opinion of management, none of the above listed impaired loans required a specific reserve.

The Company was servicing mortgage loans sold to others without recourse of approximately $1,078,000, $1,538,000, $2,397,000, $4,444,000 and $6,888,000 at December 31, 2005, 2004, 2003, 2002 and at December 31, 2001 respectively. Additionally, the Company was servicing mortgage loans sold to others with limited recourse. The outstanding balance of these loans with limited recourse was approximately $80,000, $86,000, $183,000, $194,000, and $338,000 at December 31, 2005, 2004, 2003, 2002 and at December 31, 2001 respectively.

Directors and officers of the Company and their associates are customers of, and have other transactions with, the Company in the normal course of business. All loans and commitments included in such transactions were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than normal risk of collection or present other unfavorable features.

The following table shows the aggregate amount of loans to directors and officers of the Company and their associates during 2005.

Balance at

Repayments

Balance at

December 31, 2004

Additions

and Deletions

December 31, 2005

(Dollars in thousands)

$1,482

743

289

1,936

Loans are placed on non-accrual status when any payment of principaland/or interest is 90 days or more past due, unless the collateral is sufficient to cover both principal and interest and the loan is in the process of collection. The Company monitors closely the performance of its loan portfolio. In addition to internal loan review, the Company has contracted with an independent organization to review the Company’s commercial and commercial

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

real estate loan portfolios. This independent review was performed in each of the past five years. The status of delinquent loans, as well as situations identified as potential problems, are reviewed on a regular basis by senior management and monthly by the Board of Directors of the Company.

The relatively low level of nonperforming assets of $949,000 in 2005 and $628,000 in 2004 resulted from fewer additions to nonperforming assets during the year combined with an improvement in the resolution of nonperforming assets including payments on nonperforming loans.

In addition to the above, as of December 31, 2005, the Company continues to monitor closely $14,077,000 of loans for which management has concerns regarding the ability of the borrowers to perform. The majority of the loans are secured by real estate and are considered to have adequate collateral value to cover the loan balances at December 31, 2005, although such values can fluctuate with changes in the economy and the real estate market.


6.	Allowance for Loan Losses

The Company maintains an allowance for loan losses in an amount determined by management on the basis of the character of the loans, loan performance, the financial condition of borrowers, the value of collateral securing loans and other relevant factors. The following table summarizes the changes in the Company’s allowance for loan losses for the years indicated.


	Year Ended December 31,
	2005		2004		2003		2002		2001
	(Dollars in thousands)

Year-end loans outstanding (net of unearned discount)	$	689,645	$	580,003	$	512,314	$	514,249	$	462,772

Average loans outstanding (net of unearned discount)	$	641,103	$	546,147	$	500,723	$	488,465	$	443,395

Balance of allowance for loan losses at the beginning of year	$	9,001	$	8,769	$	8,506	$	7,112	$	5,662

Loans charged-off:
Commercial	$	366	$	1	$	240	$	—	$	27
Commercial real estate		—		—		—		58		343
Residential real estate		—		194		—		—		12
Consumer		324		113		125		87		55

Total loans charged-off		690		308		365		145		437

Recovery of loans previously charged-off:
Commercial		75		117		127		276		154
Real estate		235		103		29		—		184
Consumer		119		20		22		63		49

Total recoveries of loans previously charged off:		429		240		178		339		387

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)


	Year Ended December 31,
	2005			2004			2003			2002			2001
	(Dollars in thousands)


Net loan charge-offs (recoveries)		261			68			187			(194	)		50
Additions to allowance charged to operating expense		600			300			450			1,200			1,500

Balance at end of year	$	9,340		$	9,001		$	8,769		$	8,506		$	7,112

Ratio of net charge-offs during the year to average loans outstanding		0.04	%		0.01	%		0.04	%		(0.04	)%		0.01	%

Ratio of allowance for loan losses to loans outstanding		1.35	%		1.55	%		1.71	%		1.65	%		1.54	%

These provisions are the result of management’s evaluation of the quality of the loan portfolio considering such factors as loan status, collateral values, financial condition of the borrower, the state of the economy and other relevant information. The pace of the charge-offs depends on many factors including the national and regional economy. Cyclical lagging factors may result in charge-offs being higher than historical levels.

The allowance for loan losses is an estimate of the amount needed for an adequate reserve related to the inherent risk of loss. This amount is determined by an evaluation of the loan portfolio including input from an independent organization engaged to review selected larger loans, a review of loan loss experience and current economic conditions. At December 31 of each year the allowance was comprised of the following:


	2005					2004					2003					2002					2001
			Percent					Percent					Percent					Percent					Percent
			of Loans					of Loans					of Loans					of Loans					of Loans
			in Each					in Each					in Each					in Each					in Each
			Category					Category					Category					Category					Category
			to Total					to Total					to Total					to Total					to Total
	Amount		Loans			Amount		Loans			Amount		Loans			Amount		Loans			Amount		Loans
	(Dollars in thousands)

Construction and land development	$	1,014		8.5	%	$	806		9.0	%	$	563		6.7	%	$	303		6.4	%	$	402		8.5	%
Commercial and industrial		1,575		13.7			1,232		12.4			895		7.8			832		9.0			971		12.8
Commercial real estate		4,131		43.8			3,626		44.6			4,182		57.3			3,131		56.7			2,554		52.2
Residential real estate		778		21.2			628		20.4			551		16.9			556		17.9			498		19.1
Consumer and other		173		1.7			144		1.6			130		1.7			147		1.9			130		1.8
Home equity		600		11.1			546		12.0			385		9.6			321		8.1			203		5.6
Unallocated		1,069					2,019					2,063					3,216					2,354

	$	9,340		100.0	%	$	9,001		100.0	%	$	8,769		100.0	%	$	8,506		100.0	%	$	7,112		100.0	%

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)


7.	Bank Premises and Equipment


	December 31,
	2005			2004			2003			Estimated Useful Life
	(Dollars in thousands)

Land	$	3,650		$	3,650		$	3,650			—
Bank premises		16,916			6,198			6,198			30-39 years
Construction in progress (note 14)		—			11,766			7,506
Furniture and equipment		22,726			19,740			17,969			3-10 years
Leasehold improvements		5,102			5,083			4,446			30-39 years or lease term

		48,394			46,437			39,769
Accumulated depreciation and amortization		(23,166	)		(20,172	)		(18,180	)

	$	25,228		$	26,265		$	21,589

The Company and its subsidiaries are obligated under a number of noncancelable operating leases for premises and equipment expiring in various years through 2026. Total lease expense approximated $1,076,000, $1,084,000 and $886,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

Future minimum rental commitments for noncancelable operating leases with initial or remaining terms of one year or more at December 31, 2005 were as follows:


Year	Amount
	(Dollars in thousands)

2006	$	1,081
2007		1,017
2008		947
2009		743
2010		601
Thereafter		953

	$	5,342


8.	Deposits

The Company offers savings accounts, NOW accounts, demand deposits, time deposits and money market accounts. The Company offers cash management accounts which provide either automatic transfer of funds above a specified level from the customer’s checking account to a money market account or short-term borrowings. Also, an account reconciliation service is offered whereby the Company provides a computerized report balancing the customer’s checking account.

Interest rates on deposits are set bi-monthly by the Bank’s rate-setting committee, based on factors including loan demand, maturities and a review of competing interest rates offered. Interest rate policies are reviewed periodically by the Executive Management Committee.

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

Time Deposits as of December 31, are as follows:


	2005		2004		2003
	(Dollars in thousands)

Three months or less	$	205,722	$	206,518	$	207,180
Three months through six months		46,398		36,323		33,011
Six months through twelve months		60,677		36,059		52,640
Over twelve months		88,976		80,916		66,786

	$	401,773	$	359,816	$	359,617

Time Deposits of $100,000 or more as of December 31, are as follows:


	2005		2004		2003
	(Dollars in thousands)

Three months or less	$	181,146	$	169,423	$	165,198
Three months through six months		27,455		15,576		2,852
Six months through twelve months		20,317		7,866		8,003
Over twelve months		30,383		20,428		3,759

	$	259,301	$	213,293	$	179,812


9.	Securities Sold Under Agreements to Repurchase


	2005			2004			2003
	(Dollars in thousands)

Amount outstanding at December 31,	$	50,010		$	38,650		$	40,500
Weighted average rate at December 31,		3.05	%		0.97	%		0.77	%
Maximum amount outstanding at any month end	$	52,680		$	49,700		$	58,830
Daily average balance outstanding during the year	$	39,746		$	40,937		$	51,402
Weighted average rate during the year		2.05	%		0.81	%		0.89	%

Amounts outstanding at December 31, 2005, 2004, and 2003 carried maturity dates of the next business day. U.S. Government and Agency securities with a total book value of $52,009,000, $39,460,000, and $40,560,000 were pledged as collateral and held by custodians to secure the agreements at December 31, 2005, 2004, and 2003, respectively. The approximate market value of the collateral at those dates was $50,328,000, $38,989,000, and $40,638,000, respectively.


10.	Other Borrowed Funds and Subordinated Debentures


	2005			2004			2003
	(Dollars in thousands)

Amount outstanding at December 31,	$	340,805		$	280,628		$	165,968
Weighted average rate at December 31,		4.79	%		4.62	%		4.86	%
Maximum amount outstanding at any month end	$	393,734		$	280,628		$	233,600
Daily average balance outstanding during the year	$	268,878		$	194,932		$	170,344
Weighted average rate during the year		4.69	%		4.72	%		5.01	%

FEDERAL HOME LOAN BANK BORROWINGS

Federal Home Loan Bank (“FHLB”) borrowings are collateralized by a blanket pledge agreement on the Bank’s FHLB stock, certain qualified investment securities, deposits at the Federal Home Loan Bank and

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

residential mortgages held in the Bank’s portfolio. The Bank’s borrowing capacity at the Federal Home Loan Bank at December 31, 2005 was approximately $320,256,000 based on levels of FHLB stock held and mix of overnight and term advances on that date. In addition, the Bank has a $14,500,000 line of credit with the FHLB. A schedule of the maturity distribution of FHLB advances with the weighted average interest rates is as follows:


	December 31,
	2005					2004					2003
			Weighted					Weighted					Weighted
			Average					Average					Average
	Amount		Rate			Amount		Rate			Amount		Rate
	(Dollars in thousands)

Within 1 year	$	197,156		4.15	%	$	105,000		2.22	%	$	35,000		1.55	%
Over 1 year to 2 years		2,500		3.66	%		1,120		7.20	%		—		0.00	%
Over 2 years to 3 years		19,500		5.38	%		—		0.00	%		1,178		7.20	%
Over 3 years to 5 years		63,500		5.72	%		51,500		5.25	%		19,500		5.38	%
Over 5 years		16,000		4.43	%		55,500		5.32	%		78,500		5.40	%

Total	$	298,656		4.58	%	$	213,120		3.79	%	$	134,178		4.41	%

SUBORDINATED DEBENTURES

In May 1998, the Company consummated the sale of a trust preferred securities offering, in which it issued $29,639,000 of subordinated debt securities due 2029 to its newly formed unconsolidated subsidiary Century Bancorp Capital Trust.

Century Bancorp Capital Trust then issued 2,875,000 shares of Cumulative Trust Preferred Securities with a liquidation value of $10 per share. These securities pay dividends at an annualized rate of 8.30%. The Company redeemed through its subsidiary, Century Bancorp Capital Trust, their 8.30% Trust Preferred Securities, January 10, 2005.

In December 2004, the Company consummated the sale of a trust preferred securities offering, in which it issued $36,083,000 of subordinated debt securities due 2034 to its newly formed unconsolidated subsidiary Century Bancorp Capital Trust II.

Century Bancorp Capital Trust II then issued 35,000 shares of Cumulative Trust Preferred Securities with a liquidation value of $1,000 per share. These securities pay dividends at an annualized rate of 6.65% for the first ten years and then convert to the three-month LIBOR rate plus 1.87% for the remaining twenty years. The Company is using the proceeds primarily for general business purposes.

OTHER BORROWED FUNDS

The Bank had $4,500,000 of overnight federal funds purchased on December 31, 2005. This borrowing carried an interest rate at 4.00%.

The Bank serves as a Treasury Tax and Loan depository under a note option with the Federal Reserve Bank of Boston. This open-ended interest bearing borrowing carries an interest rate equal to the daily Federal funds rate less 0.25%. This amount totaled $1,418,000 and $1,638,000 at December 31, 2005 and 2004, respectively.

The Bank also has an outstanding loan in the amount of $148,000 borrowed against the cash value of a whole life insurance policy for a key executive of the bank.

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)


11.	Stockholders’ Equity

DIVIDENDS

Holders of the Class A common stock may not vote in the election of directors, but may vote as a class to approve certain extraordinary corporate transactions. Holders of Class B may vote in the election of directors. Class A common stockholders are entitled to receive dividends per share equal to at least 200% per share of that paid, if any, on each share of Class B common stock. Class A common stock is publicly traded. Class B common stock is not publicly traded, however, it can be converted on a share for share basis to Class A common stock at any time at the option of the holder. Dividend payments by the Company are dependent in part on the dividends it receives from the Bank, which are subject to certain regulatory restrictions.

EARNINGS PER SHARE (EPS)

Diluted EPS includes the dilutive effect of common stock equivalents; basic EPS excludes all common stock equivalents. The only common stock equivalents for the Company are the stock options discussed below. The dilutive effect of these stock options for 2005, 2004 and 2003 was an increase of 13,265, 26,995 and 28,815 shares, respectively.

STOCK OPTION PLAN

During 2000 and 2004, common stockholders of the Company approved stock option plans (the “Option Plans”) that provides for granting of options for not more than 150,000 shares of Class A common stock per plan. Under the Option Plans, all officers and key employees of the Company are eligible to receive non-qualified and incentive stock options to purchase shares of Class A common stock. The Option Plans are administered by the Compensation Committee of the Board of Directors, whose members are ineligible to participate in the Option Plans. Based on management’s recommendations, the Committee submits its recommendations to the Board of Directors as to persons to whom options are to be granted, the number of shares granted to each, the option price (which may not be less than 85% of the fair market value for non-qualified stock options, or the fair market value for incentive stock options, of the shares on the date of grant) and the time period over which the options are exercisable (not more than ten years from the date of grant). There were 130,133 options exercisable at December 31, 2005.

Stock option activity under the plan is as follows:


	December 31, 2005					December 31, 2004					December 31, 2003
				Weighted					Weighted					Weighted
				Average					Average					Average
	Amount			Exercise Price		Amount			Exercise Price		Amount			Exercise Price

Shares under option:
Outstanding at beginning of year	$	131,787		$	26.65		95,062		$	22.84		67,000		$	19.52
Granted		—			—		47,050			32.64		35,750			27.58
Cancelled		(300	)		28.56		(675	)		26.68		(675	)		15.49
Exercised		(1,354	)		16.82		(9,650	)		18.31		(7,013	)		15.93

Outstanding at end of year		130,133		$	26.74		131,787		$	26.65		95,062		$	22.84

Exercisable at end of year		130,133		$	26.74		67,486		$	22.22		42,399		$	18.65

Available to be granted at end of year		149,775					149,475					45,850

Weighted average fair value of options granted during the year		NA				$	10.69				$	6.84

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

At December 31, 2005, the 130,133 options outstanding have exercise prices between $15.063 and $35.010, with a weighted average exercise price at $26.74 and a weighted average remaining contractual life of 6 years.

The Bank and the Company are subject to various regulatory requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material affect on the Bank and the Company’s financial statements. Under capital adequacy guidelines and regulatory framework for prompt corrective action, the Bank and the Company must meet specific capital guidelines that involve quantitative measures of the Bank and the Company’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank and the Company’s capital amounts and classification are also qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank and the Company to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulation) to risk weighted assets (as defined), and Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2005, that the Bank and the Company meet all capital adequacy requirements to which it is subject.

As of December 31, 2005, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier risk- based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes would cause a change in the Bank’s categorization.

The Bank’s actual capital amounts and ratios are presented in the following table.


						For Capital				To be Well Capitalized
	Actual					Adequacy Purposes				Action Provisions
	Amount		Ratio			Amount		Ratio		Amount		Ratio

As of December 31, 2005
Total Capital (to risk-weighted assets)	$	119,839		13.13	%	$	73,001		8.00%	$	91,251		10.00%
Tier 1 capital (to risk-weighted assets)		110,499		12.11	%		36,500		4.00%		54,751		6.00%
Tier 1 capital (to 4th Qtr. average assets)		110,499		6.72	%		65,729		4.00%		82,162		5.00%
As of December 31, 2004
Total Capital (to risk-weighted assets)		116,698		13.47	%		69,312		8.00%		86,640		10.00%
Tier 1 capital (to risk-weighted assets)		107,697		12.43	%		34,656		4.00%		51,984		6.00%
Tier 1 capital (to 4th Qtr. average assets)		107,697		6.54	%		65,835		4.00%		82,294		5.00%

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

The Company’s actual capital amounts and ratios are presented in the following table.


	Actual					For Capital Adequacy Purposes				To be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio		Amount		Ratio

As of December 31, 2005
Total Capital (to risk-weighted assets)	$	150,603		16.48	%	$	73,108		8.00%	$	91,385		10.00%
Tier 1 capital (to risk-weighted assets)		141,263		15.46	%		36,554		4.00%		54,831		6.00%
Tier 1 capital (to 4th Qtr. average assets)		141,263		8.58	%		65,821		4.00%		82,276		5.00%
As of December 31, 2004
Total Capital (to risk-weighted assets)		174,984		20.14	%		69,503		8.00%		86,879		10.00%
Tier 1 capital (to risk-weighted assets)		136,311		15.69	%		34,752		4.00%		52,127		6.00%
Tier 1 capital (to 4th Qtr. average assets)		136,311		8.27	%		65,940		4.00%		82,425		5.00%


12.	Income Taxes

The current and deferred components of income tax expense for the years ended December 31 are as follows:


	2005		2004		2003
	(Dollars in thousands)

Current expense:
Federal	$	2,842	$	4,277	$	5,783
State		196		227		4,596

Total current expense		3,038		4,504		10,379

Deferred expense (benefit):
Federal		117		427		102
State		11		43		(1,518	)

Total deferred expense (benefit)		128		470		(1,416	)

Provision for income taxes	$	3,166	$	4,974	$	8,963

Income tax accounts included in other assets at December 31 are as follows:


	2005		2004
	(Dollars in thousands)

Currently receivable	$	486	$	474
Deferred income tax asset, net		12,509		8,518

	$	12,995	$	8,992

Income tax expense for the years presented is different from the amounts computed by applying the statutory Federal income tax rate of 35% for 2005 and 35% for 2004 and 2003 to income before Federal income taxes. The

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

following tabulation reconciles Federal income tax expense based on statutory rates to the actual income tax expense for the years ended December 31:


	2005			2004			2003
	(Dollars in thousands)

Federal income tax expense at statutory rates	$	3,516		$	4,849		$	7,225
State income tax, net of federal income tax benefit		135			176			2,001
Insurance gains		(356	)		(260	)		(159	)
Effect of tax-exempt interest		(8	)		—			(1	)
Other		(121	)		209			(103	)

	$	3,166		$	4,974		$	8,963

Effective tax rate		31.5	%		35.9	%		43.4	%

The following table sets forth the Company’s gross deferred income tax assets and gross deferred income tax liabilities at December 31:


	2005			2004
	(Dollars in thousands)

Deferred income tax assets:
Allowance for loan losses	$	3,907		$	3,765
Deferred compensation		4,136			3,855
Unrealized loss on securitiesavailable-for-sale		5,271			1,914
Unrecognized SERF liability		2,026			1,264
Acquisition premium		380			721
Investments writedown		33			33
Deferred gain		156			176
Other		1			8

Gross deferred income tax asset		15,910			11,736

Deferred income tax liabilities:
Accrued dividends		(70	)		(41	)
Depreciation		(1,191	)		(1,277	)
Limited partnerships		(2,048	)		(1,836	)
Other		(92	)		(64	)

Gross deferred income tax liability		(3,401	)		(3,218	)

Deferred income tax asset net	$	12,509		$	8,518

During 2003, the Company incurred a net tax charge of $1,183,000 associated with the Real Estate Investment Trust (“REIT”) settlement. This charge was the result of an agreement with the Massachusetts Department of Revenue (“DOR”) settling a dispute related to taxes that the DOR claimed were owed from the Company’s REIT.

Based on the Company’s historical and current pretax earnings, management believes it is more likely than not that the Company will realize the deferred income tax asset existing at December 31, 2005. Management believes that existing net deductible temporary differences which give rise to the deferred tax asset will reverse during periods in which the Company generates net taxable income. In addition, gross deductible temporary differences are expected to reverse in periods during which offsetting gross taxable temporary differences are expected to reverse. Factors beyond management’s control, such as the general state of the economy and real estate values, can effect

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

future levels of taxable income, and no assurance can be given that sufficient taxable income will be generated to fully absorb gross deductible temporary differences.


13.	Employee Benefits

The Company has a qualified Defined Benefit Pension Plan (the “Plan”), which is offered to all employees reaching minimum age and service requirements. Stability in the size of the work force, modest increases in compensation expense offset by lower accruals for those hired after March 31, 2004 resulted in a decrease in pension cost.

The measurement date for the Plan is September 30 for each year. The benefits expected to be paid in each year from2006-2010 are $563,000, $572,000, $613,000, $687,000, and $754,000. The aggregate benefits expected to be paid in the five years from 2011-2015 are $4,922,000. The Company plans to contribute $1,480,000 to the Plan in 2006.

The weighted-average asset allocation of pension benefit assets at September 30, were:


Asset Category	2005		2004

Debt Securities		73%		66%
Equity Securities		14%		15%
Other		13%		19%

The Company has a Supplemental Insurance/Retirement Plan (the Supplemental Plan), which is limited to certain officers and employees of the Company. The Supplemental Plan is voluntary and participants are required to contribute to its cost. Under the Supplemental Plan, each participant will receive a retirement benefit based on compensation and length of service. Individual life insurance policies, which are owned by the Company, are purchased covering the lives of each participant. Decreased compensation expense resulted in decreased cost for the Supplemental Plan.

The measurement date for the Supplemental Plan is September 30 for each year. The benefits expected to be paid in each year from2006-2010 are $894,000, $960,000, $938,000, $916,000, and $898,000. The aggregate benefits expected to be paid in the five years from 2011-2015 are $4,261,000.


							Supplemental Insurance/
	Defined Benefit Pension Plan						Retirement Plan
	2005			2004			2005			2004

Change in benefit obligation
Benefit obligation at beginning of year	$	14,076		$	13,353		$	11,857		$	13,368
Service cost		760			714			128			12
Interest cost		914			868			746			869
Actuarial (gain)/loss		2,869			(628	)		1,676			(2,331	)
Benefits paid		(280	)		(231	)		(277	)		(61	)

Benefit obligation at end of year	$	18,339		$	14,076		$	14,130		$	11,857

Change in plan assets
Fair value of plan assets at beginning of year	$	10,803		$	9,285
Actual return on pian assets		282			224
Employer contributions		1,389			1,525
Benefits paid		(280	)		(231	)

Fair value of plan assets at end of year	$	12,194		$	10,803

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)


							Supplemental Insurance/
	Defined Benefit Pension Plan						Retirement Plan
	2005			2004			2005			2004

(Unfunded) funded status	$	(6,145	)	$	(3,273	)	$	(14,130	)	$	(11,857	)
Unrecognized prior service benefit (cost)		1,421			1,441			(1,091	)		(1,155	)
Unrecognized net actuarial loss		(7,401	)		(4,216	)		(3,062	)		(1,437	)

Accrued benefit cost	$	(165	)	$	(498	)	$	(9,977	)	$	(9,265	)

Accumulated benefit obligation	$	16,680		$	13,037		$	13,291		$	11,151
Weighted-average assumptions as of December 31
Discount rate — Liability		5.50	%		6.50	%		5.50	%		6.50	%
Discount rate — Expense		6.00	%		6.50	%		6.00	%		6.50	%
Expected return on plan assets		8.00	%		8.00	%		N/A			N/A
Rate of compensation increase		4.00	%		4.00	%		4.00	%		4.00	%
Components of net periodic benefit cost
Service cost	$	760		$	714		$	128		$	12
Interest cost		914			868			746			869
Expected return on plan assets		(854	)		(597	)		—			—
Recognized prior service cost		(20	)		(4	)		64			64
Recognized net losses		256			224			51			174

Net periodic cost	$	1,056		$	1,205		$	989		$	1,119

Additional minimum pension liability	$	3,135		$	2,201		$	1,708		$	820

Assumptions for expected return on plan assets and discount rates in the Company’s Plan and Supplemental Plan are periodically reviewed. As part of the review, management in consultation with independent consulting actuaries perform an analysis of expected returns based on the plan’s asset allocation. This forecast reflects the Company’s and actuarial firm’s expected return on plan assets for each significant asset class or economic indicator. The range of returns developed relies both on forecasts and on broad-market historical benchmarks for expected return, correlation, and volatility for each asset class. Also, as a part of the review, the Company’s management in consultation with independent consulting actuaries perform an analysis of discount rates based on expected returns of high grade fixed income debt securities.

The Company offers a 401 (k) defined contribution plan for all employees reaching minimum age and service requirements. The pian is voluntary and employee contributions are matched by the Company at a rate of 33.3% for the first 6% of compensation contributed by each employee. The Company’s match totaled $217,000 for 2005, $211,000 for 2004 and $218,000 for 2003. Administrative costs associated with the plan are absorbed by the Company. The Company does not offer any post retirement programs other than pensions.


14.	Commitments and Contingencies

A number of legal claims against the Company arising in the normal course of business were outstanding at December 31, 2005. Management, after reviewing these claims with legal counsel, is of the opinion that their resolution will not have a material adverse effect on the Company’s consolidated financial position or results of operation.

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)


15.	Financial Instruments With Off-Balance Sheet Risk

Contract or Notational Amount


	2005		2004
	(Dollars in thousands)

Financial instruments whose contract amount represents credit risk:
Commitments to originate 1-4 family mortgages	$	1,814	$	2,511
Standby letters of credit		10,272		11,195
Unused lines of credit		143,533		118,008
Unadvanced portions of construction loans		52,469		33,754
Unadvanced portions of other loans		7,934		10,907

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)


16.	Other Operating Expenses


	Year Ended December 31,
	2005		2004		2003
	(Dollars in thousands)

Marketing	$	1,478	$	1,403	$	1,265
Processing services		1,281		1,379		1,292
Supplies		605		728		775
Telephone		489		583		511
Postage and delivery		820		826		735
Legal and audit		881		812		478
Consulting		616		316		316
Software maintenance/amortization		876		653		743
Insurance		370		316		248
Director’s fees		200		258		270
FDIC assessment		186		198		208
Core deposit tangible amortization		388		388		320
Capital expense amortization		9		—		137
Other		1,137		1,160		860

	$	9,336	$	9,020	$	8,158


17.	Fair Values of Financial Instruments

The following methods and assumptions were used by the Company in estimating fair values of its financial instruments.

Excluded from this disclosure are certain financial instruments for which it is not practical to estimate their value and all nonfinancial instruments. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

CASH AND CASH EQUIVALENTS

The carrying amounts reported in the balance sheet for cash and cash equivalents approximate the fair values of these assets because of the short-term nature of these financial instruments.

SECURITIESHELD-TO-MATURITY AND SECURITIESAVAILABLE-FOR-SALE

The fair value of these securities, excluding certain state and municipal securities whose fair value is estimated at book value because they are not readily marketable, is estimated based on bid prices published in financial newspapers or bid quotations received from securities dealers.

LOANS

For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying amounts. The fair value of other loans is estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Incremental credit risk for non-performing loans has been considered.

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

ACCRUED INTEREST RECEIVABLE AND PAYABLE

The carrying amounts for accrued interest receivable and payable approximate fair values because of the short-term nature of these financial instruments.

DEPOSITS

The fair value of deposits with no stated maturity is equal to the carrying amount. The fair value of time deposits is based on the discounted value of contractual cash flows, applying interest rates currently being offered on the deposit products of similar maturities. The fair value estimates for deposits do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of alternative forms of funding (“deposit base intangibles”).

REPURCHASE AGREEMENTS AND OTHER BORROWED FUNDS

The fair value of repurchase agreements and other borrowed funds is based on the discounted value of contractual cash flows. The discount rate used is estimated based on the rates currently offered for other borrowed funds of similar remaining maturities.

SUBORDINATED DEBENTURES

The fair value of subordinated debentures is based on the discounted value of contractual cash flows. The discount rate used is estimated based on the rates currently for other subordinated debentures of similar remaining maturities.

OFF-BALANCE SHEET INSTRUMENTS

The fair values of the Company’s unused lines of credit and unadvanced portions of construction loans, commitments to originate and sell loans and standby letters of credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing.

The carrying amounts and fair values of the Company’s financial instruments at December 31, are as follows:

2005

2004

Carrying

Amounts

Fair Value

Amounts

Fair Value

(Dollars in thousands)

Financial assets:

Cash and cash equivalents

152,679

238,235

Securitiesavailable-for-sale

532,982

609,806

Securitiesheld-to-maturity

286,578

277,769

345,369

343,399

Net loans

680,305

665,515

571,002

565,539

Accrued interest receivable

7,127

6,800

Financial liabilities:

Deposits

1,217,040

1,216,610

1,394,010

1,397,901

Repurchase agreement and other borrowed funds

354,732

358,263

253,556

255,036

Subordinated debentures

36,083

35,769

65,722

65,801

Accrued interest payable

1,891

2,305

Standby letters of credit

—

118

—

136

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

LIMITATIONS

Fair value estimates are made at a specific point in time, based on relevant market information and information about the type of financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Bank’s entire holdings of a particular financial instrument. Because no active market exists for some of the Bank’s financial instruments, fair value estimates are based on judgements regarding future expected loss experience, cash flows, current economic conditions, risk characteristics and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore cannot be determined with precision. Changes in assumptions and changes in the loan, debt and interest rate markets could significantly affect the estimates. Further, the income tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on the fair value estimates and have not been considered.


18.	Quarterly Results of Operations (unaudited)

2005 Quarters

Fourth

Third

Second

First

(In thousands, except share data)

Interest income

18,788

18,289

18,082

17,652

Interest expense

9,421

8,533

7,745

7,121

Net interest income

9,367

9,756

10,337

10,531

Provision for loan losses

150

Net interest income after provision for loan losses

9,217

9,606

10,187

10,381

Other operating income

2,633

2,720

2,937

2,683

Operating expenses

10,100

10,067

10,116

10,035

Income before income taxes

1,750

2,259

3,008

3,029

Provision for income taxes

478

727

973

988

Net income

1,272

1,532

2,035

2,041

Share data:

Average shares outstanding, basic

5,535,442

5,535,388

5,535,317

5,534,651

Average shares outstanding, diluted

5,548,548

5,559,425

5,540,598

5,543,783

Earnings per share, basic

0.23

0.28

0.37

Earnings per share, diluted

0.23

0.28

0.37

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)


	2004 Quarters
	Fourth		Third		Second		First
	(In thousands, except share data)

Interest income	$	16,892	$	16,077	$	16,102	$	15,962
Interest expense		6,578		5,561		5,502		6,005

Net interest income		10,314		10,516		10,600		9,957
Provision for loan losses		150		150		—

Net interest income after provision for loan losses		10,164		10,366		10,600		9,957
Other operating income		2,432		2,501		2,745		2,753
Operating expenses		9,452		9,587		9,560		9,064

Income before income taxes		3,144		3,280		3,785		3,646
Provision for income taxes		1,117		1,147		1,382		1,328

Net income	$	2,027	$	2,133	$	2,403	$	2,318

Share data:
Average shares outstanding, basic		5,528,008		5,526,438		5,525,665		5,524,659
Average shares outstanding, diluted		5,547,913		5,552,202		5,553,500		5,557,984
Earnings per share, basic	$	0.37	$	0.39	$	0.44	$	0.42
Earnings per share, diluted	$	0.37	$	0.38	$	0.43	$	0.42


19.	Parent Company Financial Statements

The balance sheets of Century Bancorp, Inc. (“Parent Company”) as of December 31, 2005 and 2004 and the statements of income and cash flows for each of the years in the three-year period ended December 31, 2005 and presented below. The statements of changes in stockholders’ equity are identical to the consolidated statements of changes in stockholders’ equity and are therefore not presented here.

Balance Sheets


	December 31,
	2005		2004
	(Dollars in thousands)

ASSETS:
Cash	$	30,458	$	58,704
Investment in subsidiary, at equity		107,388		110,189
Other assets		1,550		2,465

Total assets	$	139,396	$	171,358


LIABILITIES AND STOCKHOLDERS’ EQUITY:
Liabilities	$	112	$	863
Subordinated debentures		36,083		65,722
Stockholders’ equity		103,201		104,773

Total liabilities and stockholders’ equity	$	139,396	$	171,358

CENTURY BANCORP, INC.

Notes to Consolidated Financial Statements — (Continued)

Statements of Income


	December 31,
	2005			2004			2003
	(Dollars in thousands)

Income:
Dividends from subsidiary	$	4,505		$	5,786		$	2,825
Interest income from deposits in bank		798			313			377
Other income		72			80			74

Total Income		5,375			6,179			3,276
Interest expense		2,468			2,653			2,460
Operating expenses		186			216			250

Income before income taxes and equity in undistributed income of subsidiary		2,721			3,310			566
Provision for income taxes		(638	)		(873	)		(790	)

Income before equity in undistributed income of subsidiary		3,359			4,183			1,356
Equity in undistributed income of subsidiary		3,521			4,698			10,324

Net income	$	6,880		$	8,881		$	11,680

Statements of Cash Flows


	Year Ended December 31,
	2005			2004			2003
	(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	6,880		$	8,881		$	11,680
Adjustments to reconcile net income to net cash provided by operating activities:
Undistributed income of subsidiary		(3,521	)		(4,698	)		(10,324	)
Depreciation and amortization		9			—			138
Decrease (increase) in other assets		906			(1,098	)		(61	)
(Decrease) increase in liabilities		(751	)		444			(1,245	)

Net cash provided by operating activities		3,523			3,529			188

CASH FLOWS FROM FINANCING ACTIVITIES:
Subordinated debt issuance (retirement)		(29,639	)		36,083			889
Capital payment to bank subsidiary		—			—			(13,000	)
Stock options exercised		23			177			111
Cash dividends paid		(2,153	)		(2,147	)		(2,008	)
Treasury stock repurchases		—			—			—

Net cash (used in) provided by financing activities		(31,769	)		34,113			(14,008	)

Net (decrease) increase in cash		(28,246	)		37,642			(13,820	)

Cash at beginning of year		58,704			21,062			34,882

Cash at end of year	$	30,458		$	58,704		$	21,062

Report of Independent Registered Public Accounting Firm

KPMG LLP

Independent Registered Public Accounting Firm

99 High Street

Boston, Massachusetts 02110

The Board of Directors and Stockholders

Century Bancorp, Inc.:

We have audited the accompanying consolidated balance sheets of Century Bancorp, Inc. and subsidiary as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Century Bancorp, Inc. and subsidiary as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, based on criteria established inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 27, 2006 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

Boston, Massachusetts

February 27, 2006

Report of Independent Registered Public Accounting Firm

KPMG LLP

Independent Registered Public Accounting Firm

99 High Street

Boston, Massachusetts 02110

The Board of Directors and Stockholders

Century Bancorp, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report onInternal Control Over Financial Reporting, that Century Bancorp, Inc. and subsidiary maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Century Bancorp, Inc. and subsidiary maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,2005, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Century Bancorp, Inc. and subsidiary as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2005, and our report dated February 27, 2006 expressed an unqualified opinion on those consolidated financial statements.

Boston, Massachusetts

February 27, 2006

Management’s Report on Internal Control Over Financial Reporting

CENTURY BANCORP, INC.

400 Mystic Avenue

Medford, Massachusetts 02155

We, together with the other members of Century Bancorp, Inc. and subsidiary (the “Company”), are responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control — Integrated Framework. Based on our assessment we believe that, as of December 31, 2005, the Company’s internal control over financial reporting is effective based on those criteria.

The Company’s independent registered public accounting firm has issued an audit report on our assessment of the Company’s internal control over financial reporting. Their report appears on page 56.




Marshall M. Sloane Chairman and CEO		Paul V. Cusick, Jr. Vice President and Treasurer

February 27, 2006

PART III


ITEM 10.	*DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT*

The directors of the Company and their ages as of December 31, 2005 are as follows:


Name	Age		Position

George R. Baldwin		62	Director, Century Bancorp, Inc., and Century Bank and Trust Company
Roger S. Berkowitz		53	Director, Century Bancorp, Inc., and Century Bank and Trust Company
Karl E. Case, Ph.D.		59	Director, Century Bancorp, Inc., and Century Bank and Trust Company
Henry L. Foster, D.V.M.		80	Director Emeritus, Century Bancorp, Inc., and Century Bank and Trust Company
Marshall I. Goldman, Ph.D.		75	Director, Century Bancorp, Inc., and Century Bank and Trust Company
Russell B. Higley, Esquire		66	Director, Century Bancorp, Inc., and Century Bank and Trust Company
Linda Sloane Kay		44	Director, Century Bancorp, Inc.; Director and Vice President, Century Bank and Trust Company
Fraser Lemley		65	Director, Century Bancorp, Inc., and Century Bank and Trust Company
Joseph J. Senna, Esquire		66	Director, Century Bancorp, Inc., and Century Bank and Trust Company
Barry R. Sloane		50	Director, Co-President and Co-Chief Operating Officer, Century Bancorp, Inc.; Director, Co-President and Co-Chief Executive Officer, Century Bank and Trust Company
Jonathan G. Sloane		47	Director, Co-President and Co-Chief Operating Officer, Century Bancorp, Inc.; Director, Co- President and Co-Chief Executive Officer, Century Bank and Trust Company
Marshall M. Sloane		79	Chairman, Chief Executive Officer, Century Bancorp, Inc.; Chairman , Century Bank and Trust Company
Stephanie Sonnabend		52	Director, Century Bancorp, Inc., and Century Bank and Trust Company
George F. Swansburg		63	Director, Century Bancorp, Inc., and Century Bank and Trust Company
Jon Westling		63	Director, Century Bancorp, Inc., and Century Bank and Trust Company

Mr. Baldwinbecame a director of the Company in 1996. He has been a director of Century Bank and Trust Company since 1995. Mr. Baldwin is President and CEO of Baldwin & Co., which is a financial services firm. He was formerly President and Chief Executive Officer of Kaler Carney Liffler & Co.

Mr. Berkowitz became a director of the Company in 1996. He was elected a director of Century Bank/Suffolk in 1989 and has been a director of Century Bank and Trust Company since the banks merged in 1992. Mr. Berkowitz is President and CEO of Legal Seafoods, Inc.

Dr. Case became a director of the Company in 1996. Dr. Case has been a director of Century Bank and Trust Company since 1995. He is a Professor of Economics at Wellesley College and a Visiting Scholar at the Federal Reserve Bank of Boston.

Dr. Foster has been a director of the Company since its organization in 1972. He was a founding director of Century Bank and Trust Company in 1969. He is currently Director Emeritus. He is Founder and Chairman Emeritus of Charles River Laboratories, Inc. Formerly, he was Chairman of the Board of Charles River Laboratories, Inc.

Dr. Goldman has been a director of the Company since its organization in 1972. He was also a founding director of Century Bank and Trust Company in 1969. He is a Professor Emeritus of Economics at Wellesley College and Associate Director of the Davis Center for Russian Studies at Harvard University.

Mr. Higley became a director of the Company in 1996. He has been a director of Century Bank and Trust Company since 1986. Mr. Higley is an attorney in private practice.

Ms. Kay became a director of the Company in 2005. Ms. Kay joined Century Bank and Trust Company in 1983 as Assistant Vice President of Marketing and currently serves as Vice President for Business Development in Chestnut Hill.

Mr. Lemley became a director of the Company in 1996. He has been a director of Century Bank and Trust Company since 1988. Mr. Lemley is Chairman of the Board and CEO of Sentry Auto Group.

Mr. Senna became a director of the Company in 1986. He has been a director of Century Bank and Trust Company since 1979. Mr. Senna is an attorney and managing partner of C&S Capital Properties, LLC, a real estate management and development firm. Formerly, he was CEO and Treasurer of Sunnyhurst Farms Convenience Stores.

Mr. Barry R. Sloane became a director of the Company in 1997. He has been a director of Century Bank and Trust Company since 1997. Mr. Sloane is Co-President and Co-Chief Operating Officer of Century Bancorp and Co-President and Co-Chief Executive Officer of Century Bank and Trust Company. Formerly, he was Managing Director of Steinberg, Priest & Sloane Capital Management, LLC, which is an investment advisory firm.

Mr. Jonathan G. Sloane became a director of the Company in 1986. He has been a director of Century Bank and Trust Company since 1992. Mr. Sloane is currently Co-President and Co-Chief Operating Officer of Century Bancorp Inc. and Co-President and Co-Chief Executive Officer of Century Bank and Trust Company.

Mr. Marshall M. Sloane is the founder of the Company and has been Chairman and Chief Executive Officer since its organization in 1972. He founded Century Bank and Trust Company in 1968 and is currently its Chairman.

Ms. Sonnabend became a director of the Company in 1997. She has been a director of Century Bank and Trust Company since 1997. Ms. Sonnabend is CEO and President of Sonesta International Hotels Corporation.

Mr. Swansburg became a director of the Company in 1986. He has been a director of Century Bank and Trust since 1992. From 1992 to 1998 he was President and Chief Operating Officer of Century Bank and Trust Company. He is now retired from Century Bank and Trust Company.

Mr. Westling became a director of the Company in 1996. He has been a director of Century Bank and Trust Company since 1995. Mr. Westling is President Emeritus of Boston University.

All of the Company’s directors are elected annually and hold office until their successors are duly elected and qualified. A majority of the members of the Company’s Board of Directors have been determined by the Company’s Board of Directors to be independent within the meaning of Rule 4200(a)(15) of the National Association of Security Dealers’ listing standards. There are no family relationships between any of the directors or executive officers, except that Barry R. Sloane and Jonathan G. Sloane are the sons of Marshall M. Sloane and Linda Sloane Kay is the daughter of Marshall M. Sloane.

Executive officers are elected annually by the Board prior to the Annual Meeting of Shareholders to serve for a one year term and until their successors are elected and qualified. The following table sets forth the name of each executive officer of the Company and the principal positions and offices he holds with the Company.


Marshall M. Sloane		Chairman and Chief Executive Officer; Chairman, Century Bank and Trust Company. Mr. Sloane is 79 years old.
Jonathan G. Sloane		Director, Co-President and Co-Chief Operating Officer; Director, Co-President and Co-Chief Executive Officer, Century Bank and Trust Company. Mr. Sloane is 47 years old.
Barry R. Sloane		Director and Co-President and Co-Chief Operating Officer; Director, Co- President and Co-Chief Executive Officer, Century Bank and Trust Company. Mr. Sloane is 50 years old.
Paul V. Cusick, Jr.		Vice President and Treasurer; Executive Vice President, Chief Financial Officer and Treasurer, Century Bank and Trust Company. Mr. Cusick is 61 years old.
Paul A. Evangelista		Executive Vice President, Century Bank and Trust Company with responsibility for retail, cash management, operations and marketing. Mr. Evangelista is 42 years old. He joined the Company in 1999.
David B. Woonton		Executive Vice President, Century Bank and Trust Company with responsibility for lending. Mr. Woonton is 50 years old. He joined the Company in 1999.

The Audit Committee

The Audit Committee meets with KPMG LLP, the independent registered public accounting firm, in connection with the annual audit of the Company’s financial statements. The Audit Committee is composed of four directors, Joseph J. Senna, Chair, George R.Baldwin, Stephanie Sonnabend, and Jon Westling, each of whom is independent as defined by the National Association of Securities Dealers’ current listing standards. The Company did not rely on certain exemptions in Exchange ActRule 10A-3 from the audit committee independence requirements. The Audit Committee includes an “audit committee financial expert”, Joseph J. Senna, as that term is defined in Item 401(h) ofRegulation S-K. The Audit Committee reviews the findings and recommendations of the FRB, FDIC, and Massachusetts Bank Commissioner’s staff in connection with their examinations and the internal audit reports and procedures for the Company and its subsidiaries. The Audit Committee met five times during 2005.

Audit Committee Report

The Audit Committee of the Company’s Board of Directors is responsible for providing independent, objective oversight of the Companys’ accounting functions and internal controls. The Audit Committee operates under a written charter first adopted and approved by the Board of Directors in 2000. The Audit Committee has reviewed and reassessed its Charter. A copy of the Audit Committee Charter was last published in the10-K for the period ending December 31, 2003.

Management is responsible for the Company’s internal controls and financial reporting process. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and to issue their reports thereon. The Audit Committee’s responsibility is to monitor and oversee these processes.

The Audit Committee has reviewed and discussed the audited financial statements with management and the independent registered public accounting firm. The Audit Committee has also discussed with KPMG LLP, the independent registered public accounting firm for the Company, the matters required to be discussed by Codification of Statements on Auditing Standards No. 61 (Communication with Audit Committees). The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm as required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). Additionally, the Audit Committee has discussed with KPMG LLP the firm’s independence.

Based on the review and discussions referred to in the paragraph above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report onForm 10-K for the last fiscal year for filing with the Securities and Exchange Commission.

Joseph J. Senna, Chair, George R. Baldwin, Stephanie Sonnabend, Jon Westling

Nominating Committee

The Company’s Nominating Committee has three director members, each of whom has been determined to be independent by the Company’s Board of Directors. The Nominating Committee operates pursuant to a written policy. The Committee developed criteria for the selection of new directors to the Board, including but not limited to, diversity, age, skills, experience, time availability (including the number of other boards a director candidate sits on), NASDAQ listing standards, applicable federal and state laws and regulations, in the context of the needs of the Board and the Company and such other criteria as the Committee shall determine to be relevant. The Committee did meet during 2005.

Code of Ethics

The Company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions. A copy of the Company’s code of ethics may be obtained upon written request to Investor Relations, Century Bancorp, Inc., 400 Mystic Avenue, Medford, Massachusetts.


ITEM 11.	*EXECUTIVE COMPENSATION*

Director Compensation

Directors not employed by the Company receive an $8,000 retainer per year, $250 per Century Bancorp, Inc. Board meeting attended, $750 per Century Bank and Trust Company Board and $500 per committee meeting attended.

Compensation Committee Report on Executive Compensation

The Compensation Committee is a committee of the Board of Directors composed of Jon Westling as Chairman, Fraser Lemley and Roger S. Berkowitz, each of whom is independent as defined by the National Association of Securities Dealers’ current listing standards. It reviews the salaries of the Company’s officers and administers the Company’s Supplemental Executive Insurance/Retirement Income Plan and Incentive Compensation Plan.

Decisions on compensation of the Company’s executives are generally made by the Compensation Committee of the Board of Directors. Each member of the Compensation Committee is a non-employee director. The goal of the Committee is to provide competitive levels of compensation in order to attract and retain qualified executive personnel. The Compensation Committee believes that the actions of each executive officer have the potential to affect the short and long term profitability of the Company. Accordingly, the Compensation Committee places considerable importance on the design and administration of the executive compensation program.

The Company has an executive compensation program that is driven by the overall performance of the Company, the increase in shareholder value, the performance of the business unit directly affected by the executive

and by the performance of the individual executive. The three primary components of the executive compensation program are base salary, cash incentive plan and stock based incentive plans.

Base Salary

Base salary levels are set so that the Company has the management talent to meet the challenges in the financial services industry. Several factors are included in setting base salaries including the responsibilities of the executive officer, the scope of the executive’s position, individual performance and salary levels at peer banks. Historically, the Company’s executive compensation practices have been designed to provide total compensation in the middle range of compensation levels at similar banking institutions. Salary increases for the senior management group have averaged 3% to 8% during the last several years.

Cash Incentive Plans

The Company has a cash incentive compensation plan which provides for the award of bonuses up to a percentage of base salary to officers of the Company or its subsidiaries. Recipients of incentive compensation are selected by the Compensation Committee, upon the recommendation of management, as eligible to participate in the plan. Awards are based upon the attainments of established objectives including profitability, expense control, sales volume and overall job performance. Upon recommendation of the Compensation Committee, the Board of Directors determines the amounts, if any, to be awarded. Earned bonuses for 2005, 2004 and 2003 are shown in the Summary Compensation Table.

Executive Benefits

The Company’s executive compensation package includes a special benefits component in addition to base salary and cash and stock incentive plans. These special benefits are viewed as less important than the above. Where such benefits are provided, they are intended to support other business purposes including facilitating business development efforts.

Employment Agreements

The Company has entered into an employment agreement with Mr. David Woonton. The agreement grants two years of severance pay upon a change of control of the Company.

Chief Executive Officer Compensation

Mr. Marshall Sloane is eligible to participate in the same executive compensation plans available to other executive officers described above. The 2005 cash compensation for Mr. Sloane was $840,140 which was base salary.

Conclusion

The Compensation Committee believes that the executive compensation package will motivate the management team to enhance the performance of the company.

Summary of Cash and Certain Other Compensation

The following table shows, for fiscal years ending December 31, 2003, 2004 and 2005, the cash compensation paid by the Company and its subsidiaries, as well as certain other compensation paid, accrued or granted for those years to the five most highly compensated executive officers of the Company.

Summary Compensation Table


									Long-Term Compensation
									Awards				Payouts
									Restricted		Securities
Name			Annual Compensation						Stock		Underlying		LTIP		All Other
And			Salary		Bonus		Other		Awards		Options		Payouts		Compensation
Principal Position	Year		($)		($)		($)		($)		(#)		($)		($)(1)

Marshall M. Sloane		2005		840,140		0		0		0		0		0		120,560
Chairman and CEO,		2004		788,578		0		0		0		12,000		0		106,478
Century Bancorp, Inc.		2003		760,000		0		0		0		12,000		0		87,860
Chairman of the Board, Century Bank and Trust Company
Jonathan G. Sloane		2005		417,000		0		0		0		0		0		11,346
Co-President and Co-COO,		2004		397,000		4,000		0		0		7,000		0		11,830
Century Bancorp, Inc.		2003		385,000		0		0		0		6,000		0		9,476
Co-President and Co-CEO, Century Bank and Trust Company
Barry R. Sloane(2)		2005		417,000		0						0				1,214
Co-President and Co-COO,		2004		295,929		4,000		0		0		7,000		0		713
Century Bancorp, Inc.Co-President and Co-CEO, Century Bank and Trust Company
Paul V. Cusick, Jr.		2005		286,598		0		0		0		0		0		10,654
Vice President and Treasurer,		2004		272,950		4,000		0		0		4,000		0		17,380
Century Bancorp, Inc.		2003		265,000		0		0		0		3,000		0		16,713
Executive Vice President, CFO and Treasurer, Century Bank and Trust Company
David B. Woonton		2005		251,990		0		0		0		0		0		13,512
Executive Vice President,		2004		239,990		4,000		0		0		2,500		0		5,550
Century Bank and Trust Company		2003		233,000		0		0		0		2,000		0		3,996


(1)		Term insurance premiums paid for Supplemental Executive Insurance/Retirement Income Plan and matching contribution for the 401(k) plan.

(2)		Mr. Barry R. Sloane joined the Company during April of 2004; his salary reflects payment for the partial year.

Aggregated Option Exercises in 2005 and Year-end Option Values

The following table provides information relating to option/SAR exercises in 2005 by our named executive officers and the value of such officers’ unexercised options/SARs at December 31,2005.


									Value of Unexercised
					Number of Securities				In-The-Money
	2005				Underlying Options				Options at
	Shares Acquired		Value		at Year End (#)				Year End (#)(1)
	On Exercise (#)		Realized ($)		Exercisable		Unexercisable		Exercisable		Unexercisable

Marshall M. Sloane		354	$	0		36,000		0	$	135,480		0
Jonathan G. Sloane		—		0		25,000		0		137,082		0
Barry R. Sloane		—		0		7,000		0		0		0
Paul V. Cusick, Jr.		—		0		11,500		0		46,886		0
David B. Woonton		—		0		8,500		0		45,694		0


(1)		Based on a per share market price of $29.50

COMPARISON OF FIVE-YEAR
Cumulative Total Return*

Value of $100 Invested on December 31, 2000 at:


	12/31/01		12/31/02		12/31/03		12/31/03		12/31/03
Century		138.72		186.95		253.58		214.17		215.94
Nasdaq Banks		108.27		110.84		142.58		163.17		159.40
Nasdaq U.S.		79.32		54.84		81.99		89.22		91.12


*		Assumes that the value of the investment in the Company’s Common Stock and each index was $100 on December 31, 2000 and that all dividends were reinvested.

Supplemental Executive Insurance/Retirement Income Plan

Executive officers of the Company or its subsidiaries who have at least one year of service may participate in the Supplemental Executive Insurance/Retirement Income Plan (the “Supplemental Plan”).

The Company maintains split dollar life insurance policies for participants, in addition to the group term life insurance, which provides life insurance equal to twice the individual’s salary with a maximum of $200,000, which they receive under a policy the Company maintains for its employees generally. The split dollar insurance provides

death benefits if the participant dies while in the employ of the Company, equal to $2,925,000, $2,084,000, $1,433,000, and $1,260,000, for Messrs. Marshall M. Sloane, Jonathan G. Sloane, Cusick, and Woonton, respectively.

Premiums paid by the Company in 2005 amounted to $87,800, $63,500, $27,200, and $65,000, for policies on the lives of Messrs. Marshall M. Sloane, Jonathan G. Sloane, Cusick, and Woonton. The policies are on an “insurance bonus” basis, which means that the Company pays the full amount of all premiums on the policies but an amount equal to the one-year term cost of the insurance is treated for tax purposes as a bonus to the insured. The Company is the owner of these policies and each participating employee has received an assignment of a portion of each policy’s proceeds equal to the death benefits described above. Upon the death of a participant, the Company will receive benefits equal to the difference between the death benefits payable to the named beneficiary under the Supplemental Plan and the face amount of the policy (less any policy loans then in force).

A participant in the Supplemental Plan is also entitled to retirement benefits. Participants, upon retirement at age 65, after a specified number of years of service, are entitled to receive for life, with ten years certain, 75% of their highest 36 months compensation for certain executives, or 66% of such compensation if the participants are senior officers (as determined by the Compensation Committee), less the primary social security benefits and the benefit received from the defined benefit retirement plan. If a participant retires or terminates employment prior to age 65 such person is entitled to a reduced benefit. Five years of service are required for any benefits to become vested. Thereafter benefits vest incrementally.

The following table illustrates representative annual retirement benefits at various compensation levels for executive management employees under the Supplemental Plan who retire at age 65 and with 15 years of service, without reflecting the required offset of benefits from social security and the defined benefit retirement plan.


Three Year	Executive Officer		Senior Officer
Average Compensation	Annual Benefit		Annual Benefit

$100,000	$	75,000	$	66,666
150,000		112,500		100,000
200,000		150,000		133,300
250,000		187,500		166,700
300,000		225,000		200,000
400,000		300,000		266,700
600,000		450,000		400,000
800,000		600,000		533,300

As of January 1, 2005, Messrs. Marshall M. Sloane, Jonathan G. Sloane, Cusick, and Woonton were 100%, 100%, 100%, and 32.5%, vested, respectively, under the Supplemental Plan.

The Company has entered into an agreement with Mr. Marshall Sloane to freeze his Supplemental Executive/Insurance Retirement Income Plan benefit. The frozen benefit is $2,925,000 of pre-retirement death benefit and $455,034 of annual retirement income. In consideration of this frozen benefit, the Company has acquired a life insurance policy providing a death benefit of $25,000,000 upon the death of the survivor of Mr. Sloane or Mrs. Sloane.


ITEM 12.	*SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS*

The following table sets forth certain information as to the number and percentage of shares of Class A and Class B Common Stock beneficially owned as of December 31, 2005 (i) by each person known by the Company to own beneficially more than 5% of the Company’s outstanding shares of Class A or Class B Common Stock (ii) by each of the Company’s directors and certain officers; and (iii) by all directors and officers of the Company as a group. As of December 31, 2005, there were 3,453,202 shares of Class A Common Stock and 2,082,240 shares of Class B Common Stock outstanding.


Number of Beneficial
Owner & Address or Number	Class A			% A			Class B			% B
of Persons in Group	Owned			Owned			Owned			Owned

Endicott Management Company(9)		389,300			11.27	%
237 Park Avenue, Suite 801 New York, NY 10017
Wellington Management Co., LLP(10)		279,143			8.08	%
237 Park Avenue, Suite 801 New York, NY 10017
Banc Funds Co., LLC(12)		186,550			5.40	%
208 S. LaSalle Street Chicago, IL 60604
JAM Managers, L.L.C.(11)		230,000			6.69	%
One Fifth Avenue New York, NY 10003
Marshall M. Sloane(a)(b)		23,830	(1)		0.69	%		1,695,930	(2)		81.45	%
400 Mystic Ave. Medford, MA 02155


Number of Beneficial
Owner & Address or Number	Class A			%A			Class B			%B
of Persons in Group	Owned			Owned			Owned			Owned

George R. Baldwin(a)		4,621			0.13	%
Roger S. Berkowitz(a)		3,648			0.11	%
Karl E. Case(a)		2,641			0.08	%
Paul V. Cusick, Jr.(b)		14,845			0.43	%
Paul A. Evangelista(b)		1,226			0.04	%
Henry L. Foster, D.V.M.(a)		11,152			0.32	%		1,000			0.05	%
Marshall I. Goldman(a)		2,550	(3)		0.07	%		30,000	(4)		1.44	%
Russell B. Higley, Esquire(a)		4,698			0.14	%
Linda S. Kay(a)		8,419	(6)		0.24	%		60,000	(6)		2.88	%
Fraser Lemley(a)		8,814			0.26	%
Joseph J. Senna(a)		47,449	(5)		1.37	%
Barry R. Sloane(a)		3,222	(8)		0.09	%
Jonathan G. Sloane(a) (b)		19,334	(7)		0.56	%		60,000			2.88	%
Stephanie Sonnabend(a)		2,161			0.06	%
George F. Swansburg(a)		30,040			0.87	%
Jon Westling(a)		2,987			0.09	%
David B. Woonton(b)		—			0.00	%
All directors and officers as a group (18 in number)(iii)		191,637			5.55	%		1,846,930			88.70	%


(a)		Denotes director of the Company.


(b)		Denotes officer of the Company.

(1)		Includes 2,500 shares owned by Mr. Sloane’s spouse and also includes 14,657 shares held in trust for Mr. Sloane’s grandchildren.

(2)		Includes 1,500 shares owned by Mr. Sloane’s spouse, 1,694,430 shares held by Sloane Family Enterprises LP, and does not include 120,000 shares owned by Mr. Sloane’s children. Mr. Sloane disclaims beneficial ownership of such 120,000 shares and 1,694,430 shares held by Sloane Family Enterprises LP.

(3)		Does not include 9,000 shares held of record by Mr. Goldman’s children; Mr. Goldman disclaims beneficial ownership of such shares.

(4)		Does not include 9,000 shares held of record by Mr. Goldman’s children; Mr. Goldman disclaims beneficial ownership of such shares.

(5)		Includes 34,800 shares owned by Mr. Senna’s spouse.

(6)		Includes 8,295 shares owned by Ms. Kay’s spouse.

(7)		Includes 76.45 shares owned by Mr. Sloane’s spouse and includes 355 shares owned by Mr. Jonathan Sloane’s children.

(8)		Includes 40 shares owned by son and 71 shares owned by spouse Candace Lapidus Sloane.

(9)		The Company has relied upon the information set forth in the Form 13F filed with the SEC by The Endicott Group on February 9, 2006.


(10)		The Company has relied upon the information set forth in the Schedule 13G filed with the SEC by the Wellington Management Company, LLP on February 14, 2006.

(11)		The Company has relied upon the information set forth in the Schedule 13D filed with the SEC by Sy Jacobs,c/o JAM Managers, L.L.C. on February 15, 2006.

(12)		The Company has relied upon the information set forth in the Schedule 13G filed with the SEC by the Banc Funds Co., LLC on January 30, 2006.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires the Company’s Executive Officers and Directors, and any persons who own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership of securities with the SEC and NASDAQ. Executive Officers, Directors, and greater than 10% stockholders (of which, to the Company’s knowledge, there currently are none) are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such reports received by it or written representations from certain reporting persons that no other reports were required, the Company believes that, during 2005, all Section 16(a) filing requirements applicable to its Executive Officers and Directors were complied with. A Form 3 was filed late for Linda Sloane Kay during 2005. The Company learned in January of 2006 that in 2002, Mr. Marshall Sloane inadvertently failed to file a Form 4 for two 10 share purchases he made for gifts to grandchildren. Those purchases were reported in a Form 5 filed in January of 2006.

Equity Compensation Plan Information

The following schedule provides information, with respect to the Company equity compensation plans on equity securities (common shares) that are authorized for issuance as of December 31, 2005:

Number of Shares

Remaining Available for

Future Issuance Under

Number of Shares

Equity Compensation

to be Issued

Weighted-Average

Plans (Excluding

Upon Exercise of

Exercise Price of

Shares Reflected in

Outstanding Options

Column (a))

Plan Category

(a)

(b)

(c)

Equity compensation plans approved by security holders

130,133

26.74

149,775

Equity compensation plans not approved by security holders

—

Total

130,133

26.74

149,775

All compensation plans have been previously approved by shareholders. There are 79,425 shares available for future issuance for the Employee plan.


ITEM 13.	*CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS*

Certain Directors and Officers of the Company and Bank and members of their immediate family are at present, as in the past, customers of the Bank and have transactions with the Bank in the ordinary course of business. In addition, certain of the Directors are at present, as in the past, also Directors, Officers or Stockholders of Corporations or members of partnerships that are customers of the Bank and have transactions with the Bank in the ordinary course of business. Such transactions with Directors and Officers of the Company and the bank and their families and with such corporations and partnerships were made in the ordinary course of business, were made on substantially the same terms, including interest rates and collateral on loans, as those prevailing at the time for comparable transactions with other persons, and did not involve more than the normal risk of collectibility or present other features unfavorable to the Bank.

Mr. Russell Higley’s law firm performed professional services for the Bank related to real estate loan originations. Total fees paid by the Bank to Mr. Higley’s firm in 2005 were $46,175.

In consideration of Mr. Swansburg serving as Administrator of Century Bancorp Capital Trust II, the Company has agreed to compensate him with an annual fee of $14,500.

PART IV


ITEM 14.	*PRINCIPAL ACCOUNTANT FEES AND SERVICES*

The Audit Committee separately pre-approves each of the following services, in compliance with the requirements of Sarbanes-Oxley and SEC regulations, before they are rendered by the auditor: financial audit, attest, preparation of tax returns, as well as, audit of 401(k) and pension plans. The Audit Committee’s pre-approval procedures, in compliance with the requirements of Sarbanes-Oxley and SEC regulations, allow the Company’s auditors to perform certain services without specific permission from the Audit Committee, as long as these services comply with the following requirements: (a) the services consist of special projects relating to strategic tax savings initiatives, corporate tax structure engagements, as well as, merger and acquisition consulting; (b) aggregate special project services can not exceed $50,000 during the calendar year; and (c) the Audit Committee must be informed

about each service at its next scheduled meeting. All other services provided by the Company’s auditor must be separately pre-approved before they are rendered.


	Fiscal 2005		Fiscal 2004
Description of Fees	Amount		Amount

Audit fees(1)	$	298,000	$	283,000
Audit-related fees(2)		21,000		20,000
Tax fees(3)		31,950		36,950
Other fees		0		0

	$	350,950	$	339,950


(1)		includes fees for annual audit, renewal of quarterly financial statement, internal control attestations.

(2)		includes fees for the audit of 401K and pension plans.

(3)		includes fees for tax compliance and tax consulting.


ITEM 15.	*EXHIBITS AND FINANCIAL STATEMENT SCHEDULES*

(a) (1) Financial Statements.

The following financial statements of the company and its subsidiaries are presented in Item 8:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets — December 31, 2005 and 2004

Consolidated Statements of Income — Years Ended December 31, 2005, 2004 and 2003

Consolidated Statements of Changes in Stockholders’ Equity -Years ended December 31, 2005, 2004 and 2003

Consolidated Statements of Cash Flows-Years Ended December 31, 2005, 2004, and 2003

Notes to Consolidated Financial Statements

(2) Financial Statement Schedules

All schedules are omitted because either the required information is shown in the financial statements or notes incorporated by reference, or they are not applicable, or the data is not significant.

(3) Exhibits


3	.1	Certificate of Incorporation of Century Bancorp, Inc., incorporated by reference previously filed with registrant’s initial registration statement onForm S-1 dated May 20, 1987 (RegistrationNo. 33-13281).
3	.2	Bylaws of Century Bancorp, Inc., incorporated by reference previously filed with registrant’s initial registration statement onForm S-1 dated May 20, 1987 (RegistrationNo. 33-13281).
4	.1	Form of Common Stock Certificate of the Company incorporated by reference previously filed with registrant’s initial registration statement onForm S-1 dated May 20, 1987 (RegistrationNo. 33-13281).
4	.2	Century Bancorp, Inc. 401(K) Plan, incorporated by reference onForm S-8 filed on June 25, 1997.
4	.3	Registration Statement relating to the 8.30% Junior Subordinated Debentures issued by Century Bancorp Capital Trust, incorporated by reference onForm S-2 filed on April 23, 1998.
10	.1	2000 Stock Option Plan, as amended on December 30, 2005.
10	.2	Supplemental Executive Retirement Benefit with Marshall M. Sloane, incorporated by reference on Form 10K for the year ended December 31, 2002.
10	.3	Supplemental Executive Retirement and Insurance Plan, incorporated by reference on Form 10K for the year ended December 31, 2002.
10	.4	2004 Stock Option Plan, as amended on December 30, 2005.


10	.5	Investment Management Agreement dated October 28, 2004 with BlackRock Financial Management, Inc. for Century’savailable-for-sale portfolio between Century Bank and Trust Company and BlackRock Financial Management, Inc. Terminated January 31, 2006, incorporated by reference on Form 10-K for the year ended December 31, 2004.
10	.6	Century Bancorp Capital Trust II Purchase Agreement dated November 30, 2004, between Century Bancorp Capital Trust II and the Company and Sandler O’Neill Partners, L.P., First Tennessee Bank National Association and Keefe, Bruyette and Woods, Inc., incorporated by reference on Form 10-K for the year ended December 31, 2004.
10	.7	Century Bancorp Capital Trust II Indenture, dated December 2, 2004, between the Company and Wilmington Trust Company, incorporated by reference on Form 10-K for the year ended December 31, 2004.
10	.8	Century Bancorp Capital Trust II Amended and Restated Declaration of Trust, dated December 2, 2004, between the Trustees of Century Bancorp Capital Trust II, the Administrator, the Company and Sponsors, incorporated by reference onForm 10-K for the year ended December 31, 2004.
10	.9	Century Bancorp, Inc. Guarantee Agreement, dated December 2, 2004, between the Century Bancorp, Inc. and Wilmington Trust Company, incorporated by reference onForm 10-K for the year ended December 31, 2004.
11		Statement Regarding Computation of Per Share Earnings — incorporated herein by reference to Item 8 of the Notes to Consolidated Financial Statements of the Company’s 2005 Annual Report to Stockholders.
12		Statement regarding Computation of Ratios incorporated herein by reference to Item 6 of the notes to Consolidated Financial Statements of the Company’s 2005 Annual Report to Shareholders.
14		Code of Ethics Policy — This information is presented in Part III, Item 10.
21		Subsidiaries of the Registrant — This information is presented in Part I, Item 7, Management’s Discussion and Analysis of Results of Operations and Financial Condition.
23	.1	Consent of Independent Registered Public Accounting Firm.
31	.2	Certification of Chief Executive Officer of the Company Pursuant to Securities Exchange ActRules 13a-14 and15d-14.
31	.	Certification of Chief Financial Officer of the Company Pursuant to Securities Exchange ActRules 13a-14 and15d-14.
32	.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32	.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99	.1	Audit Committee Charter, incorporated by reference, filed withForm 10-K for the year ended December 31, 2003.

(b) Exhibits required by Item 601 ofRegulation S-K.

See (a)(3) above for exhibits filed herewith.

Schedules to Consolidated Financial Statements required byRegulation S-X are not required under the related instructions or are inapplicable, and therefore have been omitted.

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 14th day of March, 2006.

Century Bancorp, Inc.


	By:	/s/ Marshall M. Sloane

Marshall M. Sloane, Chairman and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and on the date indicated.


/s/ George R. Baldwin George R. Baldwin, Director		/s/ George F. Swansburg George F. Swansburg, Director

/s/ Roger S. Berkowitz Roger S. Berkowitz, Director		/s/ Jon Westling Jon Westling, Director

/s/ Karl E. Case Karl E. Case, Ph.D., Director		/s/ Marshall M. Sloane Marshall M. Sloane, Chairman and Chief Executive Officer

/s/ Marshall I. Goldman Marshall I. Goldman, Ph.D., Director		/s/ Jonathan G. Sloane Jonathan G. Sloane, Director, Co-President and Co-Chief Operating Officer

/s/ Russell B. Higley Russell B. Higley, Esquire, Director		/s/ Barry R. Sloane Barry R. Sloane, Director, Co-President and Co-Chief Operating Officer

/s/ Linda Sloane Kay Linda Sloane Kay, Director and Vice President		/s/ Paul V. Cusick Paul V. Cusick, Jr., Vice President and Treasurer Principal Financial Officer

/s/ Fraser Lemley Fraser Lemley, Director		/s/ Anthony C. LaRosa Anthony C. LaRosa, CPA, Senior Vice President Century Bank and Trust Company, Principal Accounting Officer
/s/ Joseph Senna Joseph Senna, Director

/s/ Stephanie Sonnabend Stephanie Sonnabend, Director

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	8th grade Avg

Century Bancorp (CNBKA) 10-K2005 FY Annual report

Content analysis