Georgetown Bancorp 10-Q 2014 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to          

Commission File Number: 001-35595

GEORGETOWN BANCORP, INC.

(Exact name of registrant as specified in its charter)

Maryland	80-0817763
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
2 East Main Street, Georgetown, MA	01833
(Address of principal executive office)	(Zip Code)

(978) 352-8600

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

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

Indicate the number of shares outstanding of the registrant’s common stock, as of the latest practicable date:  Common Stock, $0.01 par value, 1,827,083 shares outstanding as of August 7, 2014.

Form 10-Q

GEORGETOWN BANCORP, INC.

Table of Contents

		Page
Part I.	Financial Information
Item 1:	Financial Statements
	Consolidated Statements of Financial Condition at June 30, 2014 (unaudited) and December 31, 2013	1
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2014 and 2013 (unaudited)	2
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2014 and 2013 (unaudited)	3
	Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2014 and 2013 (unaudited)	4
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013 (unaudited)	5
	Notes to Consolidated Financial Statements	7
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4:	Controls and Procedures	38
Part II.	Other Information
Item 1:	Legal Proceedings	38
Item 1A:	Risk Factors	38
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3:	Defaults upon Senior Securities	38
Item 4:	Mine Safety Disclosures	38
Item 5:	Other Information	39
Item 6:	Exhibits	39
SIGNATURES		40

PART I—FINANCIAL INFORMATION

ITEM 1. Financial Statements

GEORGETOWN BANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	At			At
	June 30,			December 31,
	2014			2013
	(Unaudited)
	(In thousands)
ASSETS
Cash and due from banks	$	2,551		$	3,290
Short-term investments	1,750			3,005
Total cash and cash equivalents	4,301			6,295
Securities available for sale, at fair value	20,547			18,281
Securities held to maturity, at amortized cost	905			1,050
Federal Home Loan Bank stock, at cost	2,907			2,907
Loans held for sale	2,070			1,001
Loans, net of allowance for loan losses of $2,172,000 at June 30, 2014 and $2,396,000 at December 31, 2013	224,406			223,912
Premises and equipment, net	3,715			3,669
Accrued interest receivable	725			729
Bank-owned life insurance	2,948			2,898
Other assets	2,052			2,291
Total assets	$	264,576		$	263,033
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	180,464		$	175,961
Short-term Federal Home Loan Bank advances	26,750			32,825
Long-term Federal Home Loan Bank advances	24,100			22,100
Mortgagors’ escrow accounts	1,324			1,230
Accrued expenses and other liabilities	2,238			1,975
Total liabilities	234,876			234,091
Commitments and contingencies	—			—
Stockholders’ equity:
Preferred stock, $0.01 par value per share: 50,000,000 shares authorized; none outstanding	—			—
Common stock, $0.01 par value per share: 100,000,000 shares authorized, 1,828,184 shares issued at June 30, 2014 and 1,831,518 shares issued at December 31, 2013	18			18
Additional paid-in capital	19,194			19,212
Retained earnings	11,887			11,388
Accumulated other comprehensive income (loss)	33			(389		)
Unearned compensation - ESOP (90,506 shares unallocated at June 30, 2014 and 94,126 shares unallocated at December 31, 2013)	(960		)	(1,001		)
Unearned compensation - Restricted stock (39,500 shares non-vested at June 30, 2014 and 35,751 shares non-vested at December 31, 2013)	(472		)	(286		)
Total stockholders’ equity	29,700			28,942
Total liabilities and stockholders’ equity	$	264,576		$	263,033

See accompanying notes to consolidated financial statements.

1

GEORGETOWN BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(In thousands, except share and per share data)
Interest and dividend income:
Loans, including fees	$	2,623	$	2,189	$	5,253	$	4,345
Securities	151		84		288		138
Short-term investments	1		1		2		3
Total interest and dividend income	2,775		2,274		5,543		4,486
Interest expense:
Deposits	210		133		404		273
Short-term Federal Home Loan Bank advances	14		8		29		12
Long-term Federal Home Loan Bank advances	140		141		270		292
Total interest expense	364		282		703		577
Net interest and dividend income	2,411		1,992		4,840		3,909
Provision for loan losses	—		73		—		163
Net interest and dividend income, after provision for loan losses	2,411		1,919		4,840		3,746
Non-interest income:
Customer service fees	139		148		279		281
Mortgage banking income, net	81		234		124		655
Income from bank-owned life insurance	25		25		50		49
Net gain on sale of other real estate owned	8		3		8		22
Other	30		35		65		59
Total non-interest income	283		445		526		1,066
Non-interest expenses:
Salaries and employee benefits	1,177		1,234		2,416		2,431
Occupancy and equipment expenses	243		211		495		442
Data processing expenses	145		162		316		348
Professional fees	125		131		270		218
Advertising expenses	88		75		176		150
FDIC insurance	42		35		85		75
Other general and administrative expenses	279		278		578		573
Total non-interest expenses	2,099		2,126		4,336		4,237
Income before income taxes	595		238		1,030		575
Income tax provision	221		88		381		216
Net income	$	374	$	150	$	649	$	359
Weighted-average number of common shares outstanding:
Basic	1,740,806		1,829,186		1,739,671		1,836,081
Diluted	1,743,531		1,837,453		1,744,107		1,842,220
Earnings per share:
Basic	$	0.21	$	0.08	$	0.37	$	0.19
Diluted	$	0.21	$	0.08	$	0.37	$	0.19

See accompanying notes to consolidated financial statements.

2

GEORGETOWN BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
	(In thousands)
Net income	$	374		$	150		$	649		$	359
Net unrealized gain (loss) on securities available for sale	384			(628		)	657			(657		)
Income tax (provision) benefit	(137		)	226			(235		)	236
Other comprehensive income (loss), net of tax	247			(402		)	422			(421		)
Comprehensive income (loss)	$	621		$	(252	)	$	1,071		$	(62	)

See accompanying notes to consolidated financial statements.

3

GEORGETOWN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

									Accumulated
			Additional						Other			Unearned			Unearned
	Common		Paid-in			Retained			Comprehensive			Compensation-			Compensation-
	Stock		Capital			Earnings			(Loss) Income			ESOP			Restricted Stock			Total
	(In thousands)
Balance at December 31, 2012	$	19	$	20,669		$	10,958		$	183		$	(1,084	)	$	(182	)	$	30,563
Net income	—		—			359			—			—			—			359
Other comprehensive loss	—		—			—			(421		)	—			—			(421		)
Cash dividends paid ($0.08 per share)	—		—			(155		)	—			—			—			(155		)
Repurchased stock related to buyback program (67,912 shares)	—		(933		)	—			—			—			—			(933		)
Common stock held by ESOP allocated or committed to be allocated (3,620 shares)	—		6			—			—			42			—			48
Restricted stock granted in connection with equity incentive plan (22,000 shares)	—		281			—			—			—			(281		)	—
Purchased stock related to vested restricted stock (1,933 shares)	—		(25		)	—			—			—			—			(25		)
Forfeiture of restricted stock (5,769 shares)	—		(60		)	—			—			—			60			—
Cash disposition of stock options	—		(6		)	—			—			—			—			(6		)
Share based compensation - options	—		27			—			—			—			—			27
Share based compensation - restricted stock	—		—			—			—			—			62			62
Balance at June 30, 2013	$	19	$	19,959		$	11,162		$	(238	)	$	(1,042	)	$	(341	)	$	29,519
Balance at December 31, 2013	$	18	$	19,212		$	11,388		$	(389	)	$	(1,001	)	$	(286	)	$	28,942
Net income	—		—			649			—			—			—			649
Other comprehensive income	—		—			—			422			—			—			422
Cash dividends paid ($0.0825 per share)	—		—			(150		)	—			—			—			(150		)
Repurchased stock related to buyback program (17,000 shares)	—		(252		)	—			—			—			—			(252		)
Common stock held by ESOP allocated or committed to be allocated (3,620 shares)	—		14			—			—			41			—			55
Restricted stock granted in connection with equity incentive plan (22,000 shares)	—		329			—			—			—			(329		)	—
Purchased stock related to vested restricted stock (2,417 shares)	—		(36		)	—			—			—			—			(36		)
Forfeiture of restricted stock (7,005 shares)	—		(91		)	—			—			—			91			—
Exercise of stock options (3,263 shares)	—		34			—			—			—			—			34
Purchased shares from cashless exercise of options (2,175 shares)	—		(33		)	—			—			—			—			(33		)
Share based compensation - options	—		17			—			—			—			—			17
Share based compensation - restricted stock	—		—			—			—			—			52			52
Balance at June 30, 2014	$	18	$	19,194		$	11,887		$	33		$	(960	)	$	(472	)	$	29,700

See accompanying notes to consolidated financial statements.

4

GEORGETOWN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Six Months Ended
	June 30,
	2014			2013
	(In thousands)
Cash flows from operating activities:
Net income	$	649		$	359
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	—			163
Amortization of securities, net	62			50
Net change in deferred loan fees and costs	(73		)	40
Depreciation and amortization expense	160			136
Decrease (increase) in accrued interest receivable	4			(47		)
Income from bank-owned life insurance	(50		)	(49		)
Stock-based compensation expense	124			137
Gain on sales of loans	(48		)	(688		)
Loans originated for sale	(10,579		)	(25,319		)
Proceeds from sales of loans, net of repurchases	9,558			27,767
Gain on sale of other real estate owned	(8		)	(22		)
Write down of other real estate owned	—			5
Net change in other assets and liabilities	267			(187		)
Net cash provided by operating activities	66			2,345
Cash flows from investing activities:
Activity in securities available for sale:
Maturities, prepayments and calls	886			1,550
Purchases	(2,558		)	(7,624		)
Maturities, prepayments and calls of securities held to maturity	146			298
Redemption of Federal Home Loan Bank stock	—			232
Loan originations, net	(421		)	(10,484		)
Proceeds from sale of other real estate owned	8			444
Purchase of premises and equipment	(206		)	(137		)
Net cash used in investing activities	(2,145		)	(15,721		)

(continued)

See accompanying notes to consolidated financial statements.

5

GEORGETOWN BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(concluded)

	Six Months Ended
	June 30,
	2014			2013
	(In thousands)
Cash flows from financing activities:
Net change in deposits	4,503			(3,692		)
Net change in Federal Home Loan Bank advances with maturities of three months or less	(6,075		)	21,750
Proceeds from Federal Home Loan Bank advances with maturities greater than three months	2,500			2,000
Repayments of Federal Home Loan Bank advances with maturities greater than three months	(500		)	(6,000		)
Net change in mortgagors’ escrow accounts	94			77
Repurchase of common stock	(321		)	(958		)
Cash dividends paid on common stock	(150		)	(155		)
Exercise of stock options	34			—
Cash disposition of stock options	—			(6		)
Net cash provided by financing activities	85			13,016
Net change in cash and cash equivalents	(1,994		)	(360		)
Cash and cash equivalents at beginning of period	6,295			6,789
Cash and cash equivalents at end of period	$	4,301		$	6,429
Supplementary information:
Interest paid on deposit accounts	$	402		$	272
Interest paid on advances	296			319
Income taxes paid	291			187
Loans transferred to other real estate owned	—			244
Due to broker for investment purchase	—			5,669

See accompanying notes to consolidated financial statements.

6

GEORGETOWN BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)Basis of Presentation

The accompanying unaudited financial statements of Georgetown Bancorp, Inc., a Maryland corporation, (the “Company”) were prepared in accordance with the instructions for Form 10-Q and with Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with generally accepted accounting principles. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three- and six-month period ended June 30, 2014 are not necessarily indicative of the results that may be expected for future periods, including the entire fiscal year. These financial statements should be read in conjunction with the financial statements and notes thereto included in the December 31, 2013 Consolidated Financial Statements presented in the Annual Report on Form 10-K of the Company filed with the Securities and Exchange Commission on March 28, 2014. The consolidated financial statements include the accounts of Georgetown Bank (the “Bank”) and its wholly owned subsidiary, Georgetown Securities Corporation, which engages in the buying, selling and holding of securities. All significant inter-company balances and transactions have been eliminated in consolidation. These consolidated financial statements consider events that occurred through the date the consolidated financial statements were issued.

(2)Corporate Structure

In conjunction with its reorganization into the mutual holding company structure, on January 5, 2005, the Bank (i) converted to a stock savings bank as the successor to the Bank in its mutual form; (ii) organized Georgetown Bancorp, Inc. (“Georgetown Federal”) as a federally-chartered corporation that owned 100% of the common stock of the Bank (in stock form); and (iii) organized Georgetown Bancorp, MHC as a federally-chartered mutual holding company that owned 56.7% of the Common Stock of Georgetown Federal as of June 30, 2012. On November 28, 2011, the Boards of Directors of Georgetown Federal, Georgetown Bancorp, MHC and the Bank each unanimously adopted a Plan of Conversion or Reorganization of the Mutual Holding Company pursuant to which Georgetown Bancorp, MHC undertook a “second-step” conversion and now ceases to exist. Georgetown Bancorp, MHC reorganized from a two-tier mutual holding company structure to a fully public stock holding company structure effective July 11, 2012, and, as a result, the Bank is now the wholly-owned subsidiary of the Company.

7

(3)Earnings Per Common Share

The Company has adopted the Earnings Per Share (“EPS”) guidance included in Accounting Standards Codification (“ASC”) 260-10. As presented below, basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. For purposes of computing diluted EPS, the treasury stock method is used.

Unallocated ESOP shares are not deemed outstanding for earnings per share calculations.

Earnings per common share have been computed based on the following.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
Net income available to common stockholders	$	374,000		$	150,000		$	649,000		$	359,000
Basic common shares:
Weighted average shares outstanding	1,787,851			1,891,109			1,789,851			1,899,812
Less: Weighted average unallocated ESOP shares	(91,680		)	(98,921		)	(92,585		)	(99,826		)
Add: Weighted average unvested restricted shares with non-forfeitable dividend rights	44,635			36,998			42,405			36,095
Basic weighted average common shares outstanding	1,740,806			1,829,186			1,739,671			1,836,081
Dilutive potential common shares	2,725			8,267			4,436			6,139
Diluted weighted average common shares outstanding	1,743,531			1,837,453			1,744,107			1,842,220
Basic earnings per share	$	0.21		$	0.08		$	0.37		$	0.19
Diluted earnings per share	$	0.21		$	0.08		$	0.37		$	0.19

Options to purchase 64,244 shares, representing all outstanding options, were included in the computation of diluted earnings per share for the three and six-month period ended June 30, 2014.  Options to purchase 36,211 shares, representing outstanding options that were granted in 2010, 2011 and 2012, were included in the computation of diluted earnings per share for the three and six-month period ended June 30, 2013. Options to purchase 19,150 shares, representing outstanding options that were granted in 2013, were not included in the computation of diluted earnings per share for the three and six-month period ended June 30, 2013, because to do so would have been antidilutive.

(4)Recent Accounting Pronouncements

In January 2014, the FASB issued ASU 2014-01, “Investments - Equity Method and Joint Ventures (Topic 323):  Accounting for Investments in Qualified Affordable Housing Projects.”  The amendments in this ASU apply to all reporting entities that invest in qualified affordable housing projects through limited liability entities that are flow-through entities for tax purposes as follows:

1.For reporting entities that meet the conditions for and that elect to use the proportional amortization method to account for investments in qualified affordable housing projects, all amendments in this ASU apply.

2.For reporting entities that do not meet the conditions for or that do not elect the proportional amortization method, only the amendments in this ASU that are related to disclosures apply.

The amendments in this ASU permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met.  Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit).  For those investments in qualified affordable housing projects not accounted for using the proportional amortization method, the investment should be accounted for as an equity method investment or a cost method investment in accordance with Subtopic 970-323.  The amendments in this ASU should be applied retrospectively to all periods presented.  A reporting entity that uses the effective yield method to account for its investments in qualified affordable housing projects before the date of adoption may continue to apply the effective yield method for those preexisting investments.  The

8

amendments in this ASU are effective for public business entities for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2014.  Early adoption is permitted.  The Company anticipates that the adoption of this guidance will not have a material impact on its consolidated financial statements.

In January 2014, the FASB issued ASU 2014-04, “Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40):  Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.”  The objective of the amendments in this ASU is to reduce diversity by clarifying when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized.  The amendments in this ASU clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (i) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (ii) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement.  Additionally, the amendments require interim and annual disclosure of both (i) the amount of foreclosed residential real estate property held by the creditor and (ii) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction.  The amendments in this ASU are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014.  For entities other than public business entities, the amendments in this ASU are effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015.  An entity can elect to adopt the amendments in this ASU using either a modified retrospective transition method or a prospective transition method.  The Company anticipates that the adoption of this guidance will not have a material impact on its consolidated financial statements.

In April 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” This ASU changes the criteria for reporting discontinued operations and modifies related disclosure requirements. The new guidance is effective on a prospective basis for fiscal years beginning on or after December 15, 2014, and interim periods within those years. The Company anticipates that the adoption of this guidance will not have a material impact on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).”  The objective of this ASU is to clarify principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards.  The guidance in this ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards.  The core principal of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  For public entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.  Early application is not permitted.  For nonpublic entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.  Early application is permitted, but no earlier than an annual reporting period beginning after December 15, 2016, including interim periods within that reporting period.  The Company is currently reviewing this ASU to determine if it will have an impact on its consolidated financial statements.

In June 2014, the FASB issued ASU 2014-11, “Transfers and Servicing (Topic 860):  Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures.”  The amendments in this ASU require two accounting changes.  First, the amendments in this ASU change the accounting for repurchase-to-maturity transactions to secured borrowing accounting.  Second, for repurchase financing arrangements, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty, which will result in secured borrowing accounting for the repurchase agreement.  This ASU also includes new disclosure requirements.  The accounting changes in this Update are effective for public business entities for the first interim or annual period beginning after December 15, 2014.  For all other entities, the accounting changes are effective for annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015.  An entity is required to present changes in accounting for transactions outstanding on the effective date as a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.  Earlier application for a public business entity is prohibited; however, all other entities may elect to apply the requirements for interim periods beginning after December 15, 2014.  The Company is currently reviewing this ASU to determine if it will have an impact on its consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-12, “Compensation - Stock Compensation (Topic 718):  Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period.”  The amendments in this ASU require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.  A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards.  This ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015.  Earlier adoption is permitted.  ASU 2014-12 may be adopted either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements, and to all new or modified awards

9

thereafter.  If retrospective transition is adopted, the cumulative effect of applying this update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date.  The Company is currently reviewing this ASU to determine if it will have an impact on its consolidated financial statements.

10

(5)Securities

A summary of securities is as follows.

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
At June 30, 2014
Securities available for sale
State and municipal	$	2,481	$	36	$	(27	)	$	2,490
Residential mortgage-backed securities	18,014		173		(130		)	18,057
Total securities available for sale	$	20,495	$	209	$	(157	)	$	20,547
Securities held to maturity
Residential mortgage-backed securities	$	905	$	86	$	—		$	991

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
At December 31, 2013
Securities available for sale
State and municipal	$	2,505	$	4	$	(115	)	$	2,394
Residential mortgage-backed securities	16,381		67		(561		)	15,887
Total securities available for sale	$	18,886	$	71	$	(676	)	$	18,281
Securities held to maturity
Residential mortgage-backed securities	$	1,050	$	86	$	—		$	1,136

All residential mortgage-backed securities have been issued by government-sponsored enterprises.

11

The amortized cost and estimated fair value of debt securities by contractual maturity at June 30, 2014 is as follows. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In thousands)
Over ten years	$	2,481	$	2,490	$	—	$	—
Residential mortgage-backed securities	18,014		18,057		905		991
	$	20,495	$	20,547	$	905	$	991

There were no sales of securities for the three and six months ended June 30, 2014 and 2013.

Information pertaining to securities with gross unrealized losses, aggregated by investment category and length of time that the individual securities have been in a continuous loss position, is as follows.

	Less Than Twelve Months					Twelve Months or Greater
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value
	(In thousands)
At June 30, 2014:
Securities available for sale
State and municipal	$	—		$	—	$	(27	)	$	1,357
Residential mortgage-backed securities	(7		)	2,405		(123		)	5,630
Total temporarily impaired securities	$	(7	)	$	2,405	$	(150	)	$	6,987
At December 31, 2013
Securities available for sale
State and municipal	$	(115	)	$	1,827	$	—		$	—
Residential mortgage-backed securities	(561		)	13,389		—			—
Total temporarily impaired securities	$	(676	)	$	15,216	$	—		$	—

Each reporting period, the Company evaluates all securities classified as available-for-sale or held-to-maturity with a decline in fair value below the amortized cost of the investment to determine whether or not the impairment is deemed to be other-than-temporary (“OTTI”).

At June 30, 2014 nine securities classified as available for sale had an unrealized loss with aggregate depreciation of 1.65% from the securities amortized cost basis.  The unrealized losses on the Company’s investments in state and municipal bonds and residential mortgage backed securities were primarily caused by changes in interest rates and not by credit quality.  Many of these investments are guaranteed by the U.S. Government or its agencies, and as management has not decided to sell these securities, nor is it likely that the Company will be required to sell these securities, no declines are deemed to be other than temporary.

12

(6)Loans and Servicing

Loans

A summary of loans is as follows.

	At					At
	June 30,					December 31,
	2014					2013
	Amount			Percent		Amount			Percent
	(Dollars in thousands)
Residential loans:
One- to four-family	$	90,939		40.23	%	$	92,450		40.93	%
Home equity loans and lines of credit	15,422			6.82		15,399			6.82
Total residential mortgage loans	106,361			47.05		107,849			47.75
Commercial loans:
One- to four-family investment property	9,438			4.17		11,089			4.91
Multi-family real estate	13,729			6.07		14,462			6.40
Commercial real estate	53,884			23.83		54,272			24.02
Commercial business	16,521			7.31		16,681			7.39
Total commercial loans	93,572			41.38		96,504			42.72
Construction loans:
One- to four-family	12,068			5.34		9,848			4.36
Multi-family	9,435			4.18		7,304			3.24
Non-residential	4,251			1.88		3,955			1.75
Total construction loans	25,754			11.40		21,107			9.35
Consumer	378			0.17		408			0.18
Total loans	226,065			100.00	%	225,868			100.00	%
Other items:
Net deferred loan costs	513					440
Allowance for loan losses	(2,172		)			(2,396		)
Total loans, net	$	224,406				$	223,912

13

An analysis of the allowance for loan losses at and for the six months ended June 30, 2014 and 2013 and at December 31, 2013 is below. For additional information please refer to Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

	Residential						Commercial												Construction
	One- to four- family			Home equity loans and lines of credit			One- to four- family investment property			Multi-family real estate			Commercial real estate			Commercial business			One- to four- family			Multi-family		Non- residential		Consumer			Unallocated		Total
	(In thousands)
Allowance for loan losses
Six months ended June 30, 2014
Beginning Balance	$	284		$	274		$	61		$	108		$	1,056		$	291		$	133		$	66	$	63	$	15		$	45	$	2,396
Charge-offs	—			(14		)	—			—			(211		)	—			—			—		—		(1		)	—		(226		)
Recoveries	—			1			—			—			—			—			—			—		—		1			—		2
(Benefit) provision	(2		)	(28		)	(9		)	(5		)	(3		)	(7		)	(23		)	19		5		(5		)	58		—
Ending Balance	$	282		$	233		$	52		$	103		$	842		$	284		$	110		$	85	$	68	$	10		$	103	$	2,172
Six months ended June 30, 2013
Beginning Balance	$	378		$	254		$	62		$	40		$	668		$	159		$	149		$	34	$	25	$	11		$	—	$	1,780
Charge-offs	(130		)	—			—			—			—			—			—			—		—		(2		)	—		(132		)
Recoveries	13			—			—			—			—			—			—			—		—		3			—		16
Provision (benefit)	37			(8		)	14			5			65			13			(28		)	2		64		(1		)	—		163
Ending Balance	$	298		$	246		$	76		$	45		$	733		$	172		$	121		$	36	$	89	$	11		$	—	$	1,827
At June 30, 2014
Allowance for loan losses
Individually evaluated for impairment	$	7		$	—		$	—		$	—		$	37		$	—		$	—		$	—	$	—	$	—		$	—	$	44
Collectively evaluated for impairment	275			233			52			103			805			284			110			85		68		10			103		2,128
	$	282		$	233		$	52		$	103		$	842		$	284		$	110		$	85	$	68	$	10		$	103	$	2,172
Loans
Individually evaluated for impairment	$	319		$	28		$	—		$	—		$	565		$	—		$	—		$	—	$	—	$	—		$	—	$	912
Collectively evaluated for impairment	90,620			15,394			9,438			13,729			53,319			16,521			12,068			9,435		4,251		378			—		225,153
	$	90,939		$	15,422		$	9,438		$	13,729		$	53,884		$	16,521		$	12,068		$	9,435	$	4,251	$	378		$	—	$	226,065
At December 31, 2013
Allowance for loan losses
Individually evaluated for impairment	$	7		$	49		$	—		$	—		$	277		$	—		$	—		$	—	$	—	$	—		$	—	$	333
Collectively evaluated for impairment	277			225			61			108			779			291			133			66		63		15			45		2,063
	$	284		$	274		$	61		$	108		$	1,056		$	291		$	133		$	66	$	63	$	15		$	45	$	2,396
Loans
Individually evaluated for impairment	$	321		$	428		$	—		$	—		$	2,406		$	—		$	—		$	—	$	—	$	—		$	—	$	3,155
Collectively evaluated for impairment	92,129			14,971			11,089			14,462			51,866			16,681			9,848			7,304		3,955		408			—		222,713
	$	92,450		$	15,399		$	11,089		$	14,462		$	54,272		$	16,681		$	9,848		$	7,304	$	3,955	$	408		$	—	$	225,868

14

The following is a summary of past-due and non-accrual loans at June 30, 2014 and December 31, 2013. For additional information please refer to Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

	Loans delinquent for:												90 days
					90 days		Total		Total		Total		or more		Non-accrual
	30 - 59 Days		60 - 89 Days		or more		Past Due		Current		Loans		and accruing		Loans
	(In thousands)
At June 30, 2014:
Residential loans:
One- to four-family	$	—	$	—	$	—	$	—	$	90,939	$	90,939	$	—	$	—
Home equity loans and lines of credit	—		—		74		74		15,348		15,422		—		74
Commercial loans:
One- to four-family investment property	—		—		—		—		9,438		9,438		—		—
Multi-family real estate	—		—		—		—		13,729		13,729		—		—
Commercial real estate	298		—		267		565		53,319		53,884		—		267
Commercial business	—		—		—		—		16,521		16,521		—		—
Construction loans:
One- to four-family	—		—		—		—		12,068		12,068		—		—
Multi-family	—		—		—		—		9,435		9,435		—		—
Non-residential	—		—		—		—		4,251		4,251		—		—
Consumer	1		—		2		3		375		378		—		2
Total	$	299	$	—	$	343	$	642	$	225,423	$	226,065	$	—	$	343
At December 31, 2013:
Residential loans:
One- to four-family	$	—	$	245	$	—	$	245	$	92,205	$	92,450	$	—	$	—
Home equity loans and lines of credit	15		—		399		414		14,985		15,399		—		399
Commercial loans:
One- to four-family investment property	—		—		—		—		11,089		11,089		—		—
Multi-family real estate	—		—		—		—		14,462		14,462		—		—
Commercial real estate	—		267		—		267		54,005		54,272		—		—
Commercial business	—		—		—		—		16,681		16,681		—		—
Construction loans:
One- to four-family	—		—		—		—		9,848		9,848		—		—
Multi-family	—		—		—		—		7,304		7,304		—		—
Non-residential	—		—		—		—		3,955		3,955		—		—
Consumer	1		—		—		1		407		408		—		—
Total	$	16	$	512	$	399	$	927	$	224,941	$	225,868	$	—	$	399

15

The following is an analysis of impaired loans at June 30, 2014 and December 31, 2013.

			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
	(In thousands)
At June 30, 2014
Impaired loans without a valuation allowance
Residential loans:
One- to four-family	$	—	$	—	$	—	$	—	$	—
Home equity loans and lines of credit	28		28		—		29		—
Commercial loans:
One- to four-family investment property	—		—		—		—		—
Multi-family real estate	—		—		—		—		—
Commercial real estate	298		298		—		300		9
Commercial business	—		—		—		—		—
Construction loans:
One- to four-family	—		—		—		—		—
Multi-family	—		—		—		—		—
Non-residential	—		—		—		—		—
Consumer	—		—		—		—		—
Total impaired with no related allowance	$	326	$	326	$	—	$	329	$	9
Impaired loans with a valuation allowance
Residential loans:
One- to four-family	$	319	$	319	$	7	$	320	$	8
Home equity loans and lines of credit	—		—		—		228		—
Commercial loans:
One- to four-family investment property	—		—		—		—		—
Multi-family real estate	—		—		—		—		—
Commercial real estate	267		267		37		754		8
Commercial business	—		—		—		—		—
Construction loans:
One- to four-family	—		—		—		—		—
Multi-family	—		—		—		—		—
Non-residential	—		—		—		—		—
Consumer	—		—		—		—		—
Total with an allowance recorded	$	586	$	586	$	44	$	1,302	$	16
At December 31, 2013
Impaired loans without a valuation allowance
Residential loans:
One- to four-family	$	—	$	—	$	—	$	—	$	—
Home equity loans and lines of credit	29		29		—		31		1
Commercial loans:
One- to four-family investment property	—		—		—		—		—
Multi-family real estate	—		—		—		—		—
Commercial real estate	301		301		—		304		18
Commercial business	—		—		—		—		—
Construction loans:
One- to four-family	—		—		—		—		—
Multi-family	—		—		—		—		—
Non-residential	—		—		—		—		—
Consumer	—		—		—		—		—
Total impaired with no related allowance	$	330	$	330	$	—	$	335	$	19
Impaired loans with a valuation allowance
Residential loans:
One- to four-family	$	321	$	321	$	7	$	379	$	13
Home equity loans and lines of credit	399		399		49		377		2
Commercial loans:
One- to four-family investment property	—		—		—		—		—
Multi-family real estate	—		—		—		—		—
Commercial real estate	2,105		2,208		277		2,105		104
Commercial business	—		—		—		—		—
Construction loans:
One- to four-family	—		—		—		—		—
Multi-family	—		—		—		—		—
Non-residential	—		—		—		—		—
Consumer	—		—		—		—		—
Total with an allowance recorded	$	2,825	$	2,928	$	333	$	2,861	$	119

16

There were no loan modifications made that resulted in the classification of a troubled debt restructure (“TDR”) during the six months ended June 30, 2014 and 2013.

At June 30, 2014 and December 31, 2013 there were no TDRs in default of their modified terms.

17

The following table represents the Company’s loans by risk rating at June 30, 2014 and December 31, 2013. For additional information please refer to Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

	Residential				Commercial								Construction
	One- to four- family		Home equity loans and lines of credit		One- to four- family investment property		Multi-family real estate		Commercial real estate		Commercial business		One- to four- family		Multi-family		Non- residential		Consumer		Total
	(In thousands)
At June 30, 2014
Classification:
Not formally rated	$	90,620	$	15,348	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	376	$	106,344
Pass	—		—		9,438		13,729		53,617		16,521		12,068		9,435		4,251		—		119,059
Special mention	—		—		—		—		—		—		—		—		—		—		—
Substandard	319		74		—		—		267		—		—		—		—		2		662
Doubtful	—		—		—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—		—		—
Total loans	$	90,939	$	15,422	$	9,438	$	13,729	$	53,884	$	16,521	$	12,068	$	9,435	$	4,251	$	378	$	226,065
At December 31, 2013
Classification:
Not formally rated	$	92,129	$	15,000	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	408	$	107,537
Pass	—		—		11,089		14,462		51,900		16,681		9,848		7,304		3,955		—		115,239
Special mention	—		—		—		—		—		—		—		—		—		—		—
Substandard	321		399		—		—		2,372		—		—		—		—		—		3,092
Doubtful	—		—		—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—		—		—
Total loans	$	92,450	$	15,399	$	11,089	$	14,462	$	54,272	$	16,681	$	9,848	$	7,304	$	3,955	$	408	$	225,868

18

Credit Quality Information

The Bank utilizes a nine grade internal loan rating system for all commercial and construction loans as follows:

Loans rated 1 - 5:  Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 6:  Loans in this category are considered “special mention.” These loans have risk profiles that are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 7:  Loans in this category are considered “substandard.” These loans have a well defined weakness that jeopardizes the liquidation of the debt and is inadequately protected by the current sound worth and paying capacity of the borrower or pledged collateral. There is a distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Loans rated 8:  Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 9:  Loans in this category are considered a “loss.” The loan has been determined to be uncollectible and the chance of loss is inevitable. Loans in this category will be charged-off.

On an annual basis, or more often if needed, the Bank formally reviews the ratings on all commercial and construction loans.  For residential real estate and consumer loans, the Bank initially assesses credit quality based on the borrower’s ability to pay and subsequently monitors these loans based on the borrower’s payment activity; however, these loans are not formally risk-rated.

Loans serviced for others and mortgage servicing rights

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of mortgage loans serviced for others were $115.7 million and $117.7 million at June 30, 2014 and December 31, 2013, respectively.

The risks inherent in the mortgage servicing assets relate primarily to changes in prepayments that result from shifts in mortgage interest rates. The fair value of servicing rights was $1.4 million at June 30, 2014 and December 31, 2013, and was determined using the moving average 10-year, U.S. Treasury rate plus 5.0%, adjusted to reflect the current credit spreads and conditions in the market as a discount rate. Prepayment assumptions, which are impacted by loan rates and terms, are calculated using a moving average of prepayment data published by the Securities Industry and Financial Markets Association and an independent third party proprietary analysis of prepayment rates embedded in liquid mortgage securities markets and modeled against the serviced loan portfolio by the independent third party valuation specialist.

The following summarizes mortgage servicing rights capitalized and amortized, along with the aggregate activity-related valuation allowances.

	Six Months Ended
	June 30,
	2014			2013
	(In thousands)
Mortgage servicing rights:
Balance at beginning of period	$	1,084		$	910
Additions	48			375
Amortization	(178		)	(163		)
Balance at end of period	954			1,122
Valuation allowances:
Balance at beginning of period	26			20
Additions	—			3
Recoveries	(22		)	(15		)
Balance at end of period	4			8
Mortgage servicing assets, net	$	950		$	1,114
Fair value of mortgage servicing assets	$	1,386		$	1,429

19

(7)Secured Borrowings and Collateral

Federal Home Loan Bank advances

At June 30, 2014, all Federal Home Loan Bank (“FHLB”) of Boston advances were secured by a blanket security agreement on qualified collateral, principally first mortgage loans on owner-occupied residential property in the amount of $81.8 million, and mortgage-backed securities with a fair value of $19.0 million.

(8)Fair Value Measurements

The Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value as follows:

Level l - Valuation is based on quoted prices in active markets for identical assets or liabilities. Level l assets and liabilities generally include debt and equity securities that are traded in an active exchange market. At June 30, 2014, the Company had no assets or liabilities valued using Level 1 measurements.

Level 2 - Valuation is based on observable inputs other than Level l prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

All of the Company’s securities that are measured at fair value are included in Level 2 and are based on pricing models from independent, third party pricing services that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data. There are no liabilities measured at fair value. All of the Company’s impaired loans and other real estate owned that are measured at fair value are included in Level 3 and are based on the appraised value of the underlying collateral considering discounting factors, if deemed appropriate, and adjusted for selling costs. These appraised values may be discounted based on management’s historical knowledge, expertise or changes in market conditions from time of valuation. The Company did not have any significant transfers of assets or liabilities to or from Levels 1 and 2 of the fair value hierarchy during the six month period ended June 30, 2014.

20

Assets and liabilities measured at fair value on a recurring basis at June 30, 2014 and December 31, 2013 are summarized below.

							Assets
	Level 1		Level 2		Level 3		at Fair Value
	(In thousands)
At June 30, 2014
Assets
Securities available for sale
State and municipal	$	—	$	2,490	$	—	$	2,490
Residential mortgage-backed securities	—		18,057		—		18,057
Total securities available for sale	$	—	$	20,547	$	—	$	20,547
At December 31, 2013
Assets
Securities available for sale
State and municipal	$	—	$	2,394	$	—	$	2,394
Residential mortgage-backed securities	—		15,887		—		15,887
Total securities available for sale	$	—	$	18,281	$	—	$	18,281

The Company may also be required, from time to time, to measure certain other financial assets on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. Assets measured at fair value on a non-recurring basis at June 30, 2014 and December 31, 2013 are summarized below. The fair value adjustments relate to the amount of write-down recorded or related allowance recorded as of June 30, 2014 and December 31, 2013.

							Assets		Adjustments
	Level 1		Level 2		Level 3		at Fair Value		to Fair Value
	(In thousands)
At June 30, 2014
Impaired loans	$	—	$	—	$	542	$	542	$	(44	)
At December 31, 2013
Impaired loans	$	—	$	—	$	2,492	$	2,492	$	(333	)

21

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments.

Cash and cash equivalents: The carrying amounts of cash and short-term investments approximate fair values.

Securities: Fair values for the Company’s debt securities are based on pricing models that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data.

Federal Home Loan Bank stock: Fair value is based on redemption provisions of the FHLB of Boston. The FHLB stock has no quoted market value.

Loans held for sale: Fair value is based on committed secondary market prices.

Loans: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, using market interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for impaired loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Capitalized mortgage servicing rights: Fair value is based on a quarterly, independent third-party valuation model that calculates the present value of estimated future net servicing income. The model utilizes a variety of assumptions, the most significant of which are loan prepayment assumptions and the discount rate used to discount future cash flows. Prepayment assumptions, which are impacted by loan rates and terms, are calculated using a moving average of prepayment data published by the Securities Industry and Financial Markets Association and a third party proprietary analysis of prepayment rates embedded in liquid mortgage securities markets and modeled against the serviced loan portfolio by the independent third party valuation specialist. The discount rate is the moving average 10-year, U.S. Treasury rate plus 5.0% and adjusted to reflect the current credit spreads and conditions in the market. Other assumptions include delinquency rates, foreclosure rates, servicing cost inflation, and annual unit loan cost. All assumptions are adjusted periodically to reflect current circumstances and all are obtained from independent market sources.

Deposits: The fair values for non-certificate accounts are, by definition, equal to the amount payable on demand at the reporting date which is the carrying amount. Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Short-term FHLB advances: The fair value of short-term FHLB advances approximates carrying value, as they generally mature within 90 days.

Long-term FHLB advances: The fair value for long-term FHLB advances is estimated using discounted cash flow analyses based on current market borrowing rates for similar types of borrowing arrangements.

Accrued interest: The carrying amounts of accrued interest approximate fair value.

Off-balance-sheet instruments: Fair values for off-balance-sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. At June 30, 2014 and December 31, 2013, the fair value of commitments outstanding is not significant since fees charged are not material.

22

The estimated fair values and related carrying amounts of the Company’s financial instruments at June 30, 2014 and December 31, 2013 are as follows.

	June 30, 2014
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial assets:
Cash and cash equivalents	$	4,301	$	1,301	$	—	$	—	$	1,301
Securities available for sale	20,547		—		20,547		—		20,547
Securities held to maturity	905		—		991		—		991
FHLB stock	2,907		2,907		—		—		2,907
Loans held for sale	2,070		2,097		—		—		2,097
Loans, net	224,406		—		—		223,234		223,234
Accrued interest receivable	725		725		—		—		725
Capitalized mortgage servicing rights	950		—		1,386		—		1,386		��
Financial liabilities:
Deposits	$	180,464	$	—	$	180,953	$	—	$	180,953
Short-term FHLB advances	26,750		26,750		—		—		26,750
Long-term FHLB advances	24,100		—		24,394		—		24,394
Mortgagors’ escrow accounts	1,324		1,324		—		—		1,324
Accrued interest payable	51		51		—		—		51

	December 31, 2013
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
	(In thousands)
Financial assets:
Cash and cash equivalents	$	6,295	$	6,295	$	—	$	—	$	6,295
Securities available for sale	18,281		—		18,281		—		18,281
Securities held to maturity	1,050		—		1,136		—		1,136
FHLB stock	2,907		2,907		—		—		2,907
Loans held for sale	1,001		1,019		—		—		1,019
Loans, net	223,912		—		—		223,659		223,659
Accrued interest receivable	729		729		—		—		729
Capitalized mortgage servicing rights	1,058		—		1,361		—		1,361
Financial liabilities:
Deposits	$	175,961	$	—	$	176,405	$	—	$	176,405
Short-term FHLB advances	32,825		32,825		—		—		32,825
Long-term FHLB advances	22,100		—		22,405		—		22,405
Mortgagors’ escrow accounts	1,230		1,230		—		—		1,230
Accrued interest payable	45		45		—		—		45

23

(9)Equity Incentive Plan

At June 30, 2014, the Company had two equity incentive plans, the 2009 Equity Plan and the 2014 Equity Plan. The 2009 plan was described more fully in Note 12 of the consolidated financial statements and notes thereto for the year ended December 31, 2013. The 2014 Equity plan was approved by shareholders at the annual meeting on May 20, 2014 and was more fully described in the proxy statement for the annual meeting. No shares have been issued from the 2014 Equity Plan.

The following table presents the activity for the 2009 Equity Plan for the six months ended June 30, 2014.

	Stock Options
	Number of Shares		Weighted Average Exercise Price
Outstanding at beginning of year	52,924		$	11.12
Granted	22,000		$	14.98
Exercised	(3,263	)	$	10.56
Forfeited	(7,417	)	$	13.61
Outstanding at end of period	64,244		$	12.19
Exercisable at end of period	25,163

Options Outstanding				Options Exercisable
Number	Weighted-Average	Weighted		Number	Weighted
Outstanding	Remaining	Average		Exercisable	Average
as of 06/30/2014	Contractual Life	Exercise Price		as of 06/30/2014	Exercise Price
10,062	5.65 Years	$	9.33	8,909	$	9.33
10,651	6.65 Years	$	9.55	8,130	$	9.55
9,196	7.65 Years	$	9.58	4,513	$	9.58
15,550	8.65 Years	$	14.00	3,611	$	14.00
18,785	9.65 Years	$	14.98	—	$	—
64,244	8.00 Years	$	12.26	25,163	$	10.12

	Non-vested
	Restricted Stock
	Number of Shares		Weighted Average Grant Date Value
Outstanding at beginning of year	35,751		$	10.83
Granted	22,000		$	14.98
Vested	(11,246	)	$	10.21
Forfeited	(7,005	)	$	13.00
Outstanding at end of period	39,500		$	12.93

As of June 30, 2014, unrecognized share-based compensation expense related to non-vested options amounted to $183,000 and the unrecognized share-based compensation expense related to non-vested restricted stock amounted to $472,000. The unrecognized expense related to the non-vested options and non-vested restricted stock will be recognized over a weighted average period of 3.4 and 3.5 years, respectively.

24

For the six months ended June 30, 2014, the Company recognized compensation expense for stock options of $17,000 with a related tax benefit of $4,000. The related tax benefit applies only to non-qualified stock options. For the six months ended June 30, 2014, the Company recognized compensation expense for restricted stock awards of $52,000 with a related tax benefit of $21,000.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

This document may contain certain forward-looking statements, such as statements of the Company’s or the Bank’s plans, objectives, expectations, estimates and intentions. Forward-looking statements may be identified by the use of words such as “expects,” “subject,” and “believe”, “will”, “intends”, “will be” or “would”. These statements are subject to change based on various important factors (some of which are beyond the Company’s or the Bank’s control) and actual results may differ materially. Accordingly, readers should not place undue reliance on any forward-looking statements, which reflect management’s analysis of factors only as of the date of which they are given. These factors include general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, the ability of the Company or the Bank to effectively manage its growth, and results of regulatory examinations, among other factors. The foregoing list of important factors is not exclusive. Readers should carefully review the risk factors described in other documents the Company files from time to time with the Securities and Exchange Commission, including Current Reports on Form 8-K.

Except as required by applicable law and regulation, the Company does not undertake — and specifically disclaims any obligation — to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Overview

The Company’s results of operations depend primarily on net interest and dividend income, which is the difference between the interest and dividend income earned on its interest-earning assets, such as loans and securities, and the interest expense on its interest-bearing liabilities, such as deposits and advances. The Company also generates non-interest income, primarily from fees and service charges and mortgage banking income. The Company’s non-interest expense primarily consists of employee compensation and benefits, occupancy and equipment expense, advertising, data processing, professional fees and other operating expenses.

We continued to maintain strong asset quality, as non-performing assets to total assets was 0.13% at June 30, 2014, decreasing slightly from 0.15% at December 31, 2013. Net income for the six months ended June 30, 2014 increased $290,000, or 80.8% compared to the same period in 2013. The increase in net income was driven by the expansion of our net interest margin and no provision for loan losses, partially offset by a decrease in non-interest income. Net interest and dividend income increased primarily due to an increase in loans outstanding. Non-interest income decreased $540,000, or 50.7% primarily due to a decline in mortgage banking income. Mortgage banking income has declined, as the volume of residential loan sales has been negatively affected by lower loan refinancing volumes. The Company continues to focus on generating commercial loans and core deposit growth, the development of our mortgage banking operation and increasing operating efficiencies, which we believe will build long-term shareholder value. To support the continued growth of our commercial loans, we expect to open a Loan Production Office (LPO) in southern New Hampshire during the second half of 2014.

Critical Accounting Policies

Critical accounting policies are those that involve significant judgments and assumptions by management and that have, or could have, a material impact on our income or the carrying value of our assets. Our critical accounting policies are those related to our allowance for loan losses and the valuation of our deferred tax assets.

Allowance for Loan Losses. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a monthly basis by management and is based upon management’s monthly review of the collectability of the loans in light of known and inherent risks in the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. Additionally, as part of the evaluation of the level of the allowance for loan losses, on a quarterly basis management analyzes several qualitative loan portfolio risk factors including, but not limited to, charge-off history, changes in management or underwriting policies, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower and results of internal and external loan reviews. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance for loan losses consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For such loans that are classified as impaired, an allowance for loan losses is established when the discounted cash flows or the fair value of the existing collateral (less costs to sell) of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component may be maintained to cover uncertainties that could affect management’s estimate of probable losses.

25

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.

We periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a troubled debt restructuring. All troubled debt restructurings are initially classified as impaired.

Adjustable-rate mortgage loans decrease the risk associated with changes in market interest rates by periodically repricing, but involve other risks because, as interest rates increase, the underlying payments by the borrower increase, thus increasing the potential for default by the borrower. At the same time, the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustment of the contractual interest rate is also limited by the maximum periodic and lifetime interest rate adjustments permitted by our loan documents and, therefore, the effectiveness of adjustable-rate mortgage loans may be limited during periods of rapidly rising interest rates.

Loans secured by commercial real estate, multi-family and one- to four-family investment properties generally involve larger principal amounts and a greater degree of risk than one- to four-family residential mortgage loans. Because payments on loans secured by commercial real estate, including multi-family and one- to four-family investment properties, are often dependent on successful operation or management of the properties, repayment of such loans may be affected by adverse conditions in the real estate market or the economy.

Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial business loans generally are made on the basis of the borrower’s ability to repay the loan from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business loans may depend substantially on the success of the business itself. Further, any collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

Construction and development financing is generally considered to involve a higher degree of credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost proves to be inaccurate, we may be required to advance funds beyond the amount originally committed in order to protect the value of the property. Additionally, if the estimate of value proves to be inaccurate, we may be confronted with a project, when completed, having a value that is insufficient to assure full repayment.

Income Taxes. Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax basis of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. A valuation allowance is established against deferred tax assets when, based upon the available evidence including historical and projected taxable income, it is more likely than not that some or all of the deferred tax assets will not be realized.

Comparison of Financial Condition at June 30, 2014 and December 31, 2013

Total assets increased $1.5 million, or 0.6%, to $264.6 million at June 30, 2014 from $263.0 million at December 31, 2013. The increase was primarily from increases in securities available for sale and loans held for sale, offset by a decrease in cash and cash equivalents.

Cash and cash equivalents decreased $2.0 million, or 31.7%, to $4.3 million at June 30, 2014 from $6.3 million at December 31, 2013. The decrease in cash and cash equivalents resulted primarily from the purchase of available for sale securities. We expect cash and cash equivalents balances to decrease as they are used to fund loan demand.

Loans, net (excluding loans held for sale) increased $494,000, or 0.2%, to $224.4 million at June 30, 2014 from $223.9 million at December 31, 2013, due primarily to an increase in construction loans, partially offset by decreases in commercial loans and residential mortgage loans. Despite the current competitive market, we have decided to maintain our historically high underwriting standards instead of relaxing these standards and we have not reduced loan rates below levels at which we could not operate profitably.  Construction loans increased $4.6 million, or 22.2%, to $25.8 million at June 30, 2014 from $21.1 million at December 31, 2013, primarily due to a $2.2 million, or 22.5% increase in one- to-four family construction loans and a $2.1 million, or 29.2% increase in multi-family construction loans. The majority of our construction loans remain collateralized by residential real estate (83.5% at June 30, 2014 and 81.3% at December 31, 2013).  One- to four-family investment property loans decreased $1.7 million, or 14.9%, to $9.4 million at June 30, 2014 from $11.1 million at December 31, 2013. Multi-family real estate loans decreased $733,000 or 5.1% to $13.7 million at June 30, 2014 from $14.5 million at December 31, 2013. One- to four-family loans decreased $1.5 million, or 1.63%, to $90.9 million at June 30, 2014 from $92.4 million at December 31, 2013. Home equity loans increased $23,000, or 0.15%, to $15.4 million at June 30, 2014 from $15.4 million at December 31, 2013.

Our total securities portfolio increased $2.1 million, or 11.0%, to $21.4 million at June 30, 2014 from $19.3 million at December 31, 2013, as we invested cash flows in available for sale securities and the fair value of the investment portfolio increased.

26

Deposits increased $4.5 million, or 2.6%, to $180.5 million at June 30, 2014 from $176.0 million at December 31, 2013. The increase was primarily due to increases in money market accounts, NOW accounts and certificates of deposits, partially offset by a decrease in demand deposit and savings accounts. Certificates of deposit increased $1.2 million, or 1.9%, as funds gathered through the use of deposit listing services of $3.2 million were partially offset by declines in retail certificates of deposit. NOW accounts increased $2.0 million, or 6.8%. Money market accounts increased $3.4 million or 7.9%. Demand deposits decreased $1.3 million, or 5.0%. Savings accounts decreased $815,000, or 5.5%. Management continues to focus on the generation of core checking accounts.

Total FHLB advances decreased $4.1 million, or 7.4% to $50.9 million at June 30, 2014 compared to $54.9 million at December 31, 2013. Short-term advances decreased $6.1 million during the six months ended June 30, 2014.  However, management continues to maintain short-term advances as it is taking advantage of the current yield curve and the expectations that short-term rates will not increase in the near-term.

Stockholders’ equity increased $758,000 or 2.6% to $29.7 million at June 30, 2014. The increase resulted primarily from net income of $649,000 for the six months ended June 30, 2014 and other comprehensive income, partially offset by the shares repurchased as part of an announced buyback program and dividend payments. The other comprehensive income, net of taxes, of $422,000 reflects the change in net unrealized gains/losses on securities available for sale from a net unrealized loss of $389,000 at December 31, 2013 to a net unrealized gain of $33,000 at June 30, 2014. There were 21,592 shares repurchased at a cost of $321,000 during the six months ended June 30, 2014. Dividend payments totaled $150,000 for the six months ended June 30, 2014.

27

Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio by type of loan as of the dates indicated.

	At					At
	June 30,					December 31,
	2014					2013
	Amount			Percent		Amount			Percent
	(Dollars in thousands)
Residential loans:
One- to four-family	$	90,939		40.23	%	$	92,450		40.93	%
Home equity loans and lines of credit	15,422			6.82		15,399			6.82
Total residential mortgage loans	106,361			47.05		107,849			47.75
Commercial loans:
One- to four-family investment property	9,438			4.17		11,089			4.91
Multi-family real estate	13,729			6.07		14,462			6.40
Commercial real estate	53,884			23.83		54,272			24.02
Commercial business	16,521			7.31		16,681			7.39
Total commercial loans	93,572			41.38		96,504			42.72
Construction loans:
One- to four-family	12,068			5.34		9,848			4.36
Multi-family	9,435			4.18		7,304			3.24
Non-residential	4,251			1.88		3,955			1.75
Total construction loans	25,754			11.40		21,107			9.35
Consumer	378			0.17		408			0.18
Total loans	226,065			100.00	%	225,868			100.00	%
Other items:
Net deferred loan costs	513					440
Allowance for loan losses	(2,172		)			(2,396		)
Total loans, net	$	224,406				$	223,912

28

Asset Quality. The table below sets forth the amounts and categories of our non-performing assets at the dates indicated. Delinquent loans that are 90 days or more past due are generally considered non-performing assets.

	At June 30,			At December 31,
	2014			2013
	(Dollars in thousands)
Non-accrual loans:
Residential mortgage loans	$	74		$	399
Commercial loans	267			—
Construction loans	—			—
Consumer	2			—
Total non-accrual loans	343			399
Non-performing restructured loans	—			—
Total non-performing loans	343			399
Other real estate owned	—			—
Total non-performing assets	$	343		$	399
Ratios:
Non-performing loans to total loans	0.15		%	0.18		%
Non-performing assets to total assets	0.13		%	0.15		%
Allowance for loan losses to non-performing loans	633.24		%	600.50		%

Total delinquent loans decreased $285,000, from $927,000 at December 31, 2013 to $642,000 at June 30, 2014, primarily due to the foreclosure sale of a home equity loan totaling $399,000.

Non-performing assets decreased $56,000 to $343,000 at June 30, 2014 compared to $399,000 at December 31, 2013. Total non-performing assets represented 0.13% of total assets at June 30, 2014 and 0.15% of total assets at December 31, 2013.

Loans classified as substandard decreased $2.4 million to $662,000 at June 30, 2014 from $3.1 million at December 31, 2013. The decrease in substandard loans was primarily due to the sale of our mortgage on one commercial real estate loan, which had previously been fully reserved for. All of these credits continue to be managed in an effort to minimize loss to the Bank.

The allowance for loan losses decreased $224,000 to $2.2 million at June 30, 2014 due to the charge-off activity during the six-months ended June 30, 2014. Loan charge-offs were $226,000 and recoveries were $2,000 for the six months ended June 30, 2014, as compared to loan charge-offs of $132,000 and loan recoveries of $16,000 for the same period in 2013. The allowance represented 0.96% of total loans at June 30, 2014 and 1.06% of total loans at December 31, 2013. At these levels, the allowance for loan losses as a percentage of non-performing loans was 633.24% at June 30, 2014 and 600.50% at December 31, 2013.

Comparison of Operating Results for the Three Months Ended June 30, 2014 and 2013

General. Net income increased $224,000, or 149.3%, to $374,000 for the three months ended June 30, 2014, compared to net income of $150,000 for the three months ended June 30, 2013. The increase was primarily due to an increase in net interest and dividend income and a decrease in the provision for loan losses, partially offset by a decrease in mortgage banking income.

Interest and Dividend Income. Interest and dividend income increased $501,000, or 22.0%, to $2.8 million for the three months ended June 30, 2014, due to increases in interest income on loans and interest income on investment securities. Interest income on loans increased $434,000, or 19.8%, to $2.6 million for the three months ended June 30, 2014, due to a $41.3 million, or 21.9%, increase in the average balance of loans, partially offset by an eight basis point decrease in yield to 4.56% for the three months ended June 30, 2014 from 4.64% for the three months ended June 30, 2013.

Interest and dividend income on investment securities increased $67,000, or 79.8%, to $151,000 for the three months ended June 30, 2014 from $84,000 for the three months ended June 30, 2013, due to a $7.6 million, or 47.2% increase in the average balance of investment securities for the three months ended June 30, 2014 and by a 46 basis point increase in yield to 2.57% for the three months ended June 30, 2014 from 2.10% for the three months ended June 30, 2013. The increase in investment securities was in residential mortgage-backed securities and state and municipal obligations.

29

Interest Expense. Interest expense increased $82,000, or 29.1%, to $364,000 for the three months ended June 30, 2014 from $282,000 for the three months ended June 30, 2013. Interest expense on deposits increased $77,000, or 57.9%, to $210,000 for the three months ended June 30, 2014 from $133,000 for the three months ended June 30, 2013, due to an increase in the average balance of interest-bearing deposits of $30.1 million, or 24.0%, to $155.7 million for the three months ended June 30, 2014 from $125.6 million for the three months ended June 30, 2013 and by an increase in the average rate we paid on interest-bearing deposits to 0.54% for the three months ended June 30, 2014 compared to 0.42% for the three months ended June 30, 2013.  The increase in the average balance of interest-bearing deposits is due primarily to the increase in certificate of deposit accounts obtained through a listing service. The average balance of these deposits for the three months ended June 30, 2014 totaled $29.2 million and the associated interest expense totaled $74,000.  There were no balances in deposits obtained through a listing service during the three months ended June 30, 2013.

Interest expense on FHLB advances increased $5,000, or 3.4%, to $154,000 for the three months ended June 30, 2014 from $149,000 for the three months ended June 30, 2013. The increase was due to the average balance, which increased $17.8 million, or 48.6%, to $54.6 million for the three months ended June 30, 2014 from $36.7 million for the three months ended June 30, 2013, partially offset by a 49 basis point decrease in the average rate we paid on FHLB advances to 1.13% for the three months ended June 30, 2014 compared to 1.62% for the three months ended June 30, 2013.  The increase in average balances was due primarily to short-term advances, which increased $14.2 million, or 87.9%, to $30.4 million for the three months ended June 30, 2014 from $16.2 million for the same period in 2013.

Net Interest and Dividend Income. Net interest and dividend income increased $419,000, or 21.0%, to $2.4 million for the three months ended June 30, 2014 compared to $2.0 million for the three months ended June 30, 2013. The increase in net interest income was primarily the result of a $1.9 million or 4.4%, increase in net average interest-earning assets to $46.4 million for the three months ended June 30, 2014, from $44.5 million for the same period in 2013, partially offset by a nine basis point decrease in net interest margin to 3.77% for the three months ended June 30, 2014 compared to the same period in 2013. Our net interest margin may compress in the future due to competitive pricing in our market area.

Provision for Loan Losses. We establish provisions for loan losses, which are charged to operations, at a level necessary to absorb known and inherent losses that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses quarterly, management analyzes several qualitative loan portfolio risk factors including but not limited to, charge-off history over a relevant period, changes in management or underwriting policies, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower and results of internal and external loan reviews. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. After an evaluation of these factors, we did not record a provision for loan losses for the three months ended June 30, 2014 compared to $73,000 for the three months ended June 30, 2013. We recorded $15,000 in loan charge-offs and $2,000 in loan recoveries during the three months ended June 30, 2014. The allowance for loan losses was $2.2 million, or 0.96% of total loans and 633.24% of non-performing loans at June 30, 2014, compared to an allowance for loan losses of $2.4 million, or 1.06% of total loans and 600.50% of non-performing loans at December 31, 2013.

Non-interest Income. Non-interest income decreased $162,000, or 36.4%, to $283,000 for the three months ended June 30, 2014 from $445,000 for the three months ended June 30, 2013, primarily due to a decrease in mortgage banking income. Mortgage banking income decreased $153,000, or 65.4%, to $81,000 for the three months ended June 30, 2014 from $234,000 for the three months ended June 30, 2013. Loan sale volume decreased $3.4 million, or 30.8%, to $7.5 million for the three months ended June 30, 2014 from $10.9 million for the three months ended June 30, 2013.The percentage gain on the loans sold decreased 94 basis points to 1.41% for the three months ended June 30, 2014 from 2.35% for the same period in 2013.  In addition, the loan sale volume was negatively affected by a decline in loan refinancing volume. We intend to continue to expand the geographic footprint of our residential loan origination staff as a means to increase revenue from our mortgage banking operations.

Non-interest Expense. Non-interest expense decreased $27,000, or 1.3%, to $2.1 million for the three months ended June 30, 2014 compared to the same period in 2013. Salaries and benefits expense decreased $57,000, or 4.6%, as there was a reduction in costs associated with the staff reorganization that took place in 2013, offset by increases in commercial lending staff salaries. Occupancy and equipment expense increased $32,000, or 15.2% primarily due to depreciation expense associated with a new commercial loan software system and expenses related to the removal of ATM equipment and associated costs to terminate the lease that housed the equipment.

Income Tax Expense. The income before income taxes of $595,000 resulted in income tax expense of $221,000 for the three months ended June 30, 2014, compared to income before income taxes of $238,000 resulting in an income tax expense of $88,000 for the three months ended June 30, 2013. The effective income tax rate was 37.1% for the three months ended June 30, 2014 compared to 37.0% for the three months ended June 30, 2013.

30

Average Balance Sheet. The following table sets forth certain information regarding the Company’s average balance sheet for the periods indicated, including the average yields on its interest-earning assets and the average costs of its interest-bearing liabilities. Average yields are calculated by dividing the interest and dividend income produced by the average balance of interest-bearing assets. Average costs are calculated by dividing the interest expense produced by the average balance of interest-bearing liabilities. The average balances for the period are derived from average balances that are calculated daily. The average yields and costs include fees that are considered adjustments to such average yields and costs.

	Three Months Ended June 30,
	2014							2013
	Average							Average
	Outstanding					Yield/		Outstanding					Yield/
	Balance		Interest (1)			Rate (1)		Balance		Interest (1)			Rate (1)
	(Dollars in thousands)
Interest-earning assets:
Loans (2)	$	229,975	$	2,623		4.56	%	$	188,685	$	2,189		4.64	%
Investment securities (1)	23,544		159			2.70	%	15,993		86			2.15	%
Short-term investments	3,174		1			0.13	%	2,096		1			0.19	%
Total interest-earning assets	256,693		2,783			4.34	%	206,774		2,276			4.40	%
Non-interest-earning assets	9,118		—					8,851		—
Total assets	$	265,811	2,783					$	215,625	2,276
Interest-bearing liabilities:
Savings deposits	$	13,820	1			0.03	%	$	12,473	—			0.00	%
NOW accounts	30,631		14			0.18	%	27,773		9			0.13	%
Money market accounts	45,340		20			0.18	%	45,192		7			0.06	%
Certificates of deposit	65,911		175			1.06	%	40,132		117			1.17	%
Total interest-bearing deposits	155,702		210			0.54	%	125,570		133			0.42	%
FHLB advances	54,581		154			1.13	%	36,735		149			1.62	%
Total interest-bearing liabilities	210,283		364			0.69	%	162,305		282			0.69	%
Non-interest-bearing liabilities:
Demand deposits	23,490							20,017
Other non-interest-bearing liabilities	3,216							3,159
Total liabilities	236,989							185,481
Stockholders’ equity	28,822							30,144
Total liabilities and equity	$	265,811						$	215,625
Net interest-earning assets (4)	$	46,410						$	44,469
Fully tax-equivalent net interest income			2,419							1,994
Less: tax-equivalent adjustments			(8		)					(2		)
Net interest income			$	2,411						$	1,992
Net interest rate spread (1)(3)						3.65	%						3.71	%
Net interest margin (1)(5)						3.77	%						3.86	%
Average of interest-earning assets to interest-bearing liabilities						122.07	%						127.40	%

(1)Interest and yield on investment securities, interest rate spread and net interest margin, are presented on a tax-equivalent basis.  Tax-equivalent adjustments are deducted from tax-equivalent net interest income to agree to amounts reported in the consolidated statements of income.  For the three months ended June 30, 2014 and 2013 the yield on investment securities before tax-equivalent adjustments was 2.57% and 2.10%, respectively, and the yield on total interest-earning assets was 4.32% and 4.40%, respectively. Net interest rate spread before tax-equivalent adjustments for the three months ended June 30, 2014 and 2013 was 3.63% and 3.71%, respectively, while net interest margin before tax-equivalent adjustments was 3.76% and 3.85%, respectively. 

(2)Includes loans held for sale.

(3)Net interest rate spread represents the difference between the tax-equivalent yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4)Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(5)Net interest margin represents net interest income (tax-equivalent basis) divided by average total interest-earning assets.

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Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest and dividend income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.

	For the Three Months Ended June 30, 2014
	Compared to the Three Months Ended
	June 30, 2013
	Increase (Decrease) Due to
	Volume		Rate			Net
	(In thousands)
Interest-earning assets:
Loans	$	479	$	(45	)	$	434
Investment securities (1)	41		32			73
Short-term investments	1		(1		)	—
Total interest-earning assets	521		(14		)	507
Interest-bearing liabilities:
Savings deposits	—		1			1
NOW accounts	1		4			5
Money market accounts	—		13			13
Certificates of deposit	75		(17		)	58
Total interest-bearing deposits	76		1			77
FHLB advances	72		(67		)	5
Total interest-bearing liabilities	148		(66		)	82
Change in net interest income	$	373	$	52		$	425

(1)Municipal securities income and net interest income are presented on a tax-equivalent basis using a tax rate of 34% resulting in an adjustment of $8,000 and $2,000 for the three months ended June 30, 2014 and 2013, respectively.

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Comparison of Operating Results for the Six Months Ended June 30, 2014 and 2013

General. Net income increased $290,000, or 80.8%, to $649,000 for the six months ended June 30, 2014, compared to net income of $359,000 for the six months ended June 30, 2013. The increase was primarily due to an increase in net interest and dividend income and a decrease in the provision for loan losses, partially offset by a decrease in mortgage banking income and an increase in non-interest expenses.

Interest and Dividend Income. Interest and dividend income increased $1.1 million, or 23.6%, to $5.5 million for the six months ended June 30, 2014, due to increases in interest income on loans and interest income on investment securities. Interest income on loans increased $908,000, or 20.9%, to $5.3 million for the six months ended June 30, 2014, due to a $42.2 million, or 22.6%, increase in the average balance of loans, partially offset by a six basis point decrease in yield to 4.59% for the six months ended June 30, 2014 from 4.65% for the six months ended June 30, 2013.

Interest and dividend income on investment securities increased $150,000, or 108.7%, to $288,000 for the six months ended June 30, 2014 from $138,000 for the six months ended June 30, 2013, due to a $8.5 million, or 59.9% increase in the average balance of investment securities for the six months ended June 30, 2014 and by a 59 basis point increase in yield to 2.53% for the six months ended June 30, 2014 from 1.94% for the six months ended June 30, 2013. The increase in investment securities was in residential mortgage-backed securities and state and municipal obligations.

Interest Expense. Interest expense increased $126,000, or 21.8%, to $703,000 for the six months ended June 30, 2014 from $577,000 for the six months ended June 30, 2013. Interest expense on deposits increased $131,000, or 48.0%, to $404,000 for the six months ended June 30, 2014 from $273,000 for the six months ended June 30, 2013, due to an increase in the average balance of interest-bearing deposits of $27.7 million, or 21.8%, to $154.6 million for the six months ended June 30, 2014 from $127.0 million for the six months ended June 30, 2013 and by an increase in the average rate we paid on interest-bearing deposits to 0.52% for the six months ended June 30, 2014 compared to 0.43% for the six months ended June 30, 2013. The increase in the average balance of interest-bearing deposits is due primarily to the increase in certificate of deposit accounts obtained through a listing service. The average balance of these deposits for the six months ended June 30, 2014 totaled $28.6 million and the associated interest expense totaled $138,000.  There were no balances in deposits obtained through a listing service during the six months ended June 30, 2013.

Interest expense on FHLB advances decreased $5,000, or 1.6%, to $299,000 for the six months ended June 30, 2014 from $304,000 for the six months ended June 30, 2013. The decrease was primarily due to a 77 basis point decrease in the average rate we paid on FHLB advances to 1.10% for the six months ended June 30, 2014 compared to 1.87% for the six months ended June 30, 2013, partially offset by an increase in the average balance, which increased $22.0 million, or 67.5%, to $54.6 million for the six months ended June 30, 2014 from $32.6 million for the six months ended June 30, 2013.  The increase in average balances was due primarily to short-term advances, which increased $19.4 million, or 165.6%, to $31.2 million for the six months ended June 30, 2014 from $11.8 million for the same period in 2013.

Net Interest and Dividend Income. Net interest and dividend income increased $931,000, or 23.8%, to $4.8 million for the six months ended June 30, 2014 compared to $3.9 million for the six months ended June 30, 2013. The increase in net interest income was primarily the result of a $2.2 million, or 5.0%, increase in net average interest-earning assets to $46.2 million for the six months ended June 30, 2014, from $44.0 million for the same period in 2013, partially offset by a five basis point decrease in net interest margin to 3.79% for the six months ended June 30, 2014 compared to the same period in 2013. Our net interest margin may compress in the future due to competitive pricing in our market area.

Provision for Loan Losses. We establish provisions for loan losses, which are charged to operations, at a level necessary to absorb known and inherent losses that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses quarterly, management analyzes several qualitative loan portfolio risk factors including but not limited to, charge-off history over a relevant period, changes in management or underwriting policies, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower and results of internal and external loan reviews. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. After an evaluation of these factors, we did not record a provision for loan losses for the six months ended June 30, 2014 compared to $163,000 for the six months ended June 30, 2013. We recorded $226,000 in loan charge-offs and $2,000 in loan recoveries during the six months ended June 30, 2014. The allowance for loan losses was $2.2 million, or 0.96% of total loans and 633.24% of non-performing loans at June 30, 2014, compared to an allowance for loan losses of $2.4 million, or 1.06% of total loans and 600.50% of non-performing loans at December 31, 2013.

Non-interest Income. Non-interest income decreased $540,000, or 50.7%, to $526,000 for the six months ended June 30, 2014 from $1.1 million for the six months ended June 30, 2013, primarily due to a decrease in mortgage banking income. Mortgage banking income decreased $531,000 or 81.1%, to $124,000 for the six months ended June 30, 2014 from $655,000 for the six months ended June 30, 2013. Loan sale volume decreased $16.6 million, or 61.3%, to $10.5 million for the six months ended June 30,2014 from $27.1 million for the six months ended June 30, 2013. The percentage gain on the loans sold decreased 92 basis points to 1.58% for the six months ended June 30, 2014 from 2.50% for the same period in 2013.  The loan sale volume was negatively affected by a decline in loan refinancing volume.  As a result of an FNMA industry wide audit program, we were required to repurchase four loans previously sold to FNMA during 2013. The reduction in income associated with the repurchases was $34,000 during the six months ended June 30, 2014.  As the audit process continues we may be subject to

33

additional repurchases in the future. We intend to continue to expand the geographic footprint of our residential loan origination staff as a means to increase revenue from our mortgage banking operations. Other non-interest income included $55,000 of fees associated with commercial lines of credit facilities for the six months ended June 30, 2014 compared to $45,000 for the six months ended June 30, 2013.

Non-interest Expense. Non-interest expense increased $99,000, or 2.3%, to $4.3 million for the six months ended June 30, 2014 compared to the same period in 2013. Occupancy and equipment expense increased $53,000, or 12.0% primarily due to depreciation expense associated with a new commercial loan software system. Professional fees increased $52,000, or 23.9% primarily due to the implementation of a sub-servicing function for residential loans.  These increases were partially offset by a decrease in data processing expenses of $32,000 or 9.1% due to the reduction of one-time implementation fees incurred during the six-months ended June 30, 2014 compared to the same period in 2013.

Income Tax Expense. The income before income taxes of $1.0 million resulted in income tax expense of $381,000 for the six months ended June 30, 2014, compared to income before income taxes of $575,000 resulting in an income tax expense of $216,000 for the six months ended June 30, 2013. The effective income tax rate was 37.0% for the six months ended June 30, 2014 compared to 37.6% for the six months ended June 30, 2013

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Average Balance Sheet. The following table sets forth certain information regarding the Company’s average balance sheet for the periods indicated, including the average yields on its interest-earning assets and the average costs of its interest-bearing liabilities.

Average yields are calculated by dividing the interest and dividend income produced by the average balance of interest-bearing assets. Average costs are calculated by dividing the interest expense produced by the average balance of interest-bearing liabilities. The average balances for the period are derived from average balances that are calculated daily. The average yields and costs include fees that are considered adjustments to such average yields and costs.

	Six Months Ended June 30,
	2014							2013
	Average							Average
	Outstanding					Yield/		Outstanding					Yield/
	Balance		Interest (1)			Rate (1)		Balance		Interest (1)			Rate (1)
	(Dollars in thousands)
Interest-earning assets:
Loans (2)	$	229,133	$	5,253		4.59	%	$	186,942	$	4,345		4.65	%
Investment securities (1)	22,792		303			2.66	%	14,253		140			1.97	%
Short-term investments	3,483		2			0.11	%	2,324		3			0.26	%
Total interest-earning assets	255,408		5,558			4.35	%	203,519		4,488			4.41	%
Non-interest-earning assets	9,204		—					8,577		—
Total assets	$	264,612	5,558					$	212,096	4,488
Interest-bearing liabilities:
Savings deposits	$	14,066	2			0.03	%	$	12,319	1			0.02	%
NOW accounts	30,722		28			0.18	%	27,836		23			0.17	%
Money market accounts	44,391		31			0.14	%	46,195		13			0.06	%
Certificates of deposit	65,469		343			1.05	%	40,627		236			1.16	%
Total interest-bearing deposits	154,648		404			0.52	%	126,977		273			0.43	%
FHLB advances	54,585		299			1.10	%	32,579		304			1.87	%
Total interest-bearing liabilities	209,233		703			0.67	%	159,556		577			0.72	%
Non-interest-bearing liabilities:
Demand deposits	23,509							19,622
Other non-interest-bearing liabilities	3,011							2,648
Total liabilities	235,753							181,826
Stockholders’ equity	28,859							30,270
Total liabilities and equity	$	264,612						$	212,096
Net interest-earning assets (4)	$	46,175						$	43,963
Fully tax-equivalent net interest income			4,855							3,911
Less: tax-equivalent adjustments			(15		)					(2		)
Net interest income			$	4,840						$	3,909
Net interest rate spread (1)(3)						3.68	%						3.69	%
Net interest margin (1)(5)						3.80	%						3.84	%
Average of interest-earning assets to interest-bearing liabilities						122.07	%						127.55	%

(1)Interest and yield on investment securities, interest rate spread and net interest margin, are presented on a tax-equivalent basis. Tax-equivalent adjustments are deducted from tax-equivalent net interest income to agree to amounts reported in the consolidated statements of income.  For the six months ended June 30, 2014 and 2013 the yield on investment securities before tax-equivalent adjustments was 2.53% and 1.94%, respectively, and the yield on total interest-earning assets was 4.34% and 4.41%, respectively. Net interest rate spread before tax-equivalent adjustments for the six months ended June 30, 2014 and 2013 was 3.67% and 3.69%, respectively, while net interest margin before tax-equivalent adjustments was 3.79% and 3.84%, respectively. 

(2)Includes loans held for sale.

(3)Net interest rate spread represents the difference between the tax-equivalent yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4)Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(5)Net interest margin represents net interest income (tax-equivalent basis) divided by average total interest-earning assets.

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Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest and dividend income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.

	For the Six Months Ended June 30, 2014
	Compared to the Six Months Ended
	June 30, 2013
	Increase (Decrease) Due to
	Volume			Rate			Net
	(In thousands)
Interest-earning assets:
Loans	$	981		$	(73	)	$	908
Investment securities (1)	84			79			163
Short-term investments	1			(2		)	(1		)
Total interest-earning assets	1,066			4			1,070
Interest-bearing liabilities:
Savings deposits	—			1			1
NOW accounts	2			3			5
Money market accounts	(1		)	19			18
Certificates of deposit	144			(37		)	107
Total interest-bearing deposits	145			(14		)	131
FHLB advances	205			(210		)	(5		)
Total interest-bearing liabilities	350			(224		)	126
Change in net interest income	$	716		$	228		$	944

(1)Municipal securities income and net interest income are presented on a tax-equivalent basis using a tax rate of 34% resulting in an adjustment of $15,000 and $2,000 for the six months ended June 30, 2014 and 2013, respectively.

36

Liquidity Management. Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments and maturities and sales of residential loans and investment securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

We regularly adjust our investments in liquid assets based upon our assessment of (i) expected loan demand, (ii) expected deposit flows, (iii) yields available on interest-earning deposits and securities, and (iv) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits and short- and intermediate-term securities. The excess cash and cash equivalent balances are expected to be used to fund increases in loans and securities.

Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At June 30, 2014, cash and cash equivalents totaled $4.3 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $20.5 million at June 30, 2014. Our policies also allow for access to the wholesale funds market for up to 50.0% of total assets, or $132.3 million. At June 30, 2014, we had $50.9 million in FHLB advances outstanding, $29.2 million in certificates of deposit obtained through a listing service and $1.2 million in brokered certificates of deposit, allowing the Company access to an additional $51.0 million in wholesale funds based on policy guidelines.

At June 30, 2014 we had $9.8 million in loan commitments outstanding. In addition to commitments to originate loans, we had $39.1 million in unadvanced funds to borrowers. Related to our secondary market activities, we had $2.5 million of forward loan sale commitments at June 30, 2014. These forward loan sale commitments were used to offset the interest rate risk associated with mortgage loans, which have had their interest rate locked by our customers.

Certificates of deposit due within one year of June 30, 2014 totaled $21.9 million, or 12.1% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit or other wholesale funding options. Depending on market conditions, we may be required to pay higher rates on such deposits or other advances than we currently pay on the certificates of deposit due on or before June 30, 2015. We believe, however, based on past experience that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

We have no material commitments or demands that are likely to affect our liquidity other than set forth below. In the event loan demand were to increase at a pace greater than expected, or any unforeseen demand or commitment were to occur, we would access our borrowing capacity with the FHLB and other wholesale market sources.

Our primary investing activities are the origination and purchase of loans and the purchase of securities. During the six months ended June 30, 2014, we originated $34.5 million in loans and purchased $2.6 million in securities.

Financing activities consist primarily of activity in deposit accounts, FHLB advances and the sale of residential mortgages. We experienced a net increase in total deposits of $4.5 million for the six months ended June 30, 2014. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors. We generally manage the pricing of our deposits to be competitive. FHLB advances reflected a net decrease of $4.1 million during the six months ended June 30, 2014. FHLB advances have primarily been used to fund loan demand and deposit outflows. We sold $10.5 million in conforming residential mortgage loans for the six months ended June 30, 2014.

Capital Management. The Bank is subject to various regulatory capital requirements including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At June 30, 2014, the Bank exceeded all of its regulatory capital requirements and is considered “well capitalized” under regulatory guidelines.

In July 2013, the Office of the Comptroller of the Currency and the other federal bank regulatory agencies issued a final rule that will revise their leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. Among other things, the rule establishes a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increases the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigns a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The final rule also requires unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital requirements unless a one-time opt-in or opt-out is exercised. The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements.

The final rule becomes effective for the Bank on January 1, 2015. The capital conservation buffer requirement will be phased in beginning January 1, 2016 and ending January 1, 2019, when the full capital conservation buffer requirement will be effective. The final rule also implements consolidated capital requirements for savings and loan holding companies, such as the Company, effective January 1, 2015. Management is evaluating what impact, if any, these new rules will have on the operation of the Bank and/or the Company.

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Off-Balance Sheet Arrangements.  For the six months ended June 30, 2014, we engaged in no off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

Not applicable to smaller reporting companies.

Item 4.Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure (i) that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms; and (ii)  that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

Neither the Company nor the Bank is engaged in pending legal proceedings material to the Company’s consolidated financial condition or results of operations.

Item 1A. Risk Factors

Other than as set forth in prior filings with the Securities and Exchange Commission or this Quarterly Report on Form 10-Q, there have been no material changes to the Risk Factors set forth in the Annual Report on Form 10-K of the Company filed with the Securities and Exchange Commission on March 28, 2014.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

a) Not applicable

b) Not applicable

c) The following table presents a summary of the Company’s share repurchases during the quarter ended June 30, 2014.

				Total Number of Shares	Maximum Number of
				Purchased as Part of	Shares That May Yet be
	Total Number of	Average Price Paid		Publicly Announced	Purchased Under the
Period	Shares Purchased	Per Share		Program (1)	Program (1)
April 1 through April 30, 2014	0	$	0.00	0	32,973
May 1 through May 31, 2014	0	$	0.00	0	32,973
June 1 through June 30, 2014	2,175	$	15.00	0	32,973

(1) On July 23, 2013 the Company announced that its Board of Directors had authorized a second stock repurchase program pursuant to which the Company intends to purchase up to approximately 5.0% of its then issued and outstanding shares, or up to 93,765 shares.

Item 3.Defaults Upon Senior Securities

None

Item 4.Mine Safety Disclosures

Not applicable

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Item 5.Other Information

a)  Not applicable

b) There were no material changes to the procedures by which security holders may recommend nominees to the Company’s board of directors during the period covered by this Form 10-Q.

Item 6.Exhibits

31.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act

31.2Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act

32Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

101The following financial statements from Georgetown Bancorp Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, filed on August 12, 2014, formatted in XBRL: (i) Consolidated Statements of Financial Condition, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, (vi) Notes to Consolidated Financial Statements.

101.INS	Interactive datafile	XBRL Instance Document
101.SCH	Interactive datafile	XBRL Taxonomy Extension Schema Document
101.CAL	Interactive datafile	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Interactive datafile	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Interactive datafile	XBRL Taxonomy Extension Label Linkbase
101.PRE	Interactive datafile	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

Pursuant to the requirements 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.

	GEORGETOWN BANCORP, INC.
	(Registrant)
Date: August 12, 2014	/s/ Robert E. Balletto
	Robert E. Balletto
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: August 12, 2014	/s/ Joseph W. Kennedy
	Joseph W. Kennedy
	Senior Vice President, Chief Financial Officer and Treasurer
	(Principal Accounting and Financial Officer)

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