Meetinghouse Bancorp (MTGB) 10-Q 2014 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 March 31, 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:  0-54779

MEETINGHOUSE BANCORP, INC.

(Exact name of registrant as specified in its charter)

Maryland	45-4640630
(State or other jurisdiction of incorporation or	(I.R.S. Employer Identification No.)
organization)
2250 Dorchester Avenue, Dorchester, Massachusetts	02124
(Address of principal executive offices)	(Zip Code)

(617) 298-2250

(Registrant’s telephone number, including area code)

Not Applicable

(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 Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  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 (§ 232.405 of this chapter) 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 definition of  “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer  o	Accelerated filer  o
Non-accelerated filer  o	Smaller reporting company  x
(Do not check if a smaller reporting company)

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

The Registrant had 661,250 shares of common stock, par value $0.01 per share, outstanding as of May 14, 2014.

MEETINGHOUSE BANCORP, INC.

FORM 10-Q

Table of Contents

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements March 31, 2014 (unaudited) and September 30, 2013
	Consolidated Balance Sheets as of March 31, 2014 (unaudited) and September 30, 2013	3
	Consolidated Statements of (Loss) Income for the Three and Six Months Ended March 31, 2014 and 2013 (unaudited)	4
	Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended March 31, 2014 and 2013 (unaudited)	5
	Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended March 31, 2014 and 2013 (unaudited)	6
	Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2014 and 2013 (unaudited)	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	32
Signatures		33

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PART I.  FINANCIAL INFORMATION

Item 1.   Consolidated Financial Statements (Unaudited)

MEETINGHOUSE BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	March 31,			September 30,
	2014			2013
	(Unaudited)
ASSETS
Cash and due from banks	$	2,609		$	3,182
Federal funds sold	2			1,485
Interest-bearing demand deposits with other banks	28			46
Cash and cash equivalents	2,639			4,713
Interest-bearing time deposits in other banks	4,223			4,147
Investments in available-for-sale securities (at fair value)	11,764			5,309
Federal Home Loan Bank stock, at cost	433			282
Loans held-for-sale	1,683			749
Loans, net of allowance for loan losses of $416,000 as of March 31, 2014 and $435,000 as of September 30, 2013	64,392			57,939
Premises and equipment	1,858			1,865
Investment in real estate	943			952
Cooperative Central Bank deposit	427			427
Accrued interest receivable	209			197
Other assets	508			481
Total assets	$	89,079		$	77,061
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	11,447		$	11,015
Interest-bearing	64,095			55,177
Total deposits	75,542			66,192
Deferred income tax liability, net	91			107
Federal Home Loan Bank advances	2,935			—
Other liabilities	105			375
Total liabilities	78,673			66,674
Stockholders’ Equity:
Preferred stock, 500,000 shares authorized; none outstanding				—
Common stock, $.01 par value; 5,000,000 shares authorized; 661,250 shares issued and outstanding at March 31, 2014 and September 30, 2013	7			7
Additional paid-in capital	5,663			5,645
Retained earnings	5,106			5,179
Unearned compensation - ESOP (36,255 shares unallocated at March 31, 2014 and 45,795 shares at September 30, 2013)	(382		)	(482		)
Accumulated other comprehensive income	12			38
Total stockholders’ equity	10,406			10,387
Total liabilities and stockholders’ equity	$	89,079		$	77,061

The accompanying notes are an integral part of these consolidated financial statements.

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MEETINGHOUSE BANCORP, INC.

CONSOLIDATED STATEMENTS OF (LOSS) INCOME

(In thousands, except share data)

	Three months ended March 31,					Six months ended March 31,
	2014			2013		2014			2013
	(Unaudited)					(Unaudited)
Interest and dividend income:
Interest and fees on loans	$	701		$	612	$	1,375		$	1,174
Interest and dividends on securities	66			39		100			81
Other interest	8			12		16			27
Total interest and dividend income	775			663		1,491			1,282
Interest expense:
Interest on deposits	138			132		271			265
Interest on Federal Home Loan Bank advances	4			—		7			—
Total interest expense	142			132		278			265
Net interest and dividend income	633			531		1,213			1,017
(Benefit) provision for loan losses	(10		)	41		(21		)	45
Net interest and dividend income after (benefit) provision for loan losses	643			490		1,234			972
Noninterest income:
Gain on secondary market activities	72			264		102			524
Customer service fees	85			77		174			150
Other income	15			11		28			33
Total noninterest income	172			352		304			707
Noninterest expense:
Salaries and employee benefits	418			431		842			869
Occupancy and equipment expense	114			80		225			157
Professional fees	81			95		186			173
Data processing	70			68		151			141
Deposit insurance expense	15			3		28			4
Advertising	20			22		41			36
Supplies	10			12		20			28
Other expense	83			84		156			171
Total noninterest expense	811			795		1,649			1,579
Income (loss) before income tax expense (benefit)	4			47		(111		)	100
Income tax expense (benefit)	9			13		(38		)	32
Net (loss) income	$	(5	)	$	34	$	(73	)	$	68
(Loss) earnings per share:
Basic	$	(0.01	)	0.06		$	(0.12	)	0.11
Diluted	$	(0.01	)	0.06		$	(0.12	)	0.11
Weighted average shares outstanding
Basic	623,108			615,455		619,261			615,300
Diluted	623,108			615,455		619,261			615,300

The accompanying notes are an integral part of these consolidated financial statements.

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MEETINGHOUSE BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)

	Three months ended March 31,
	2014			2013
	(Unaudited)
Net (loss) income	$	(5	)	$	34
Other comprehensive income (loss), net of tax:
Net change in unrealized holding gain on available-for-sale securities	14			(15		)
Other comprehensive income (loss), net of tax	14			(15		)
Comprehensive income	$	9		$	19

	Six months ended March 31,
	2014			2013
	(Unaudited)
Net (loss) income	$	(73	)	$	68
Other comprehensive loss, net of tax:
Net change in unrealized holding gain on available-for-sale securities	(26		)	(58		)
Other comprehensive loss, net of tax	(26		)	(58		)
Comprehensive (loss) income	$	(99	)	$	10

The accompanying notes are an integral part of these consolidated financial statements.

5

MEETINGHOUSE BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Six Months Ended March 31, 2014 and 2013

(Dollars in thousands)

(Unaudited)

												Accumulated
				Additional					Unearned			Other
	Common Stock			paid-in		Retained			compensation			Comprehensive
	Shares	Amount		capital		Earnings			- ESOP			Income			Total
Balance, September 30, 2012	—	—		—		$	5,256		—			$	162		$	5,418
Net income						68									68
Other comprehensive loss, net of tax	—	—		—		—			—			(58		)	(58		)
Issuance of common stock for initial public offering, net of offering costs of $961	661,250	$	7	$	5,645	—			—			—			5,652
Common stock acquired by ESOP (46,287 shares)	—	—		—		—			$	(487	)	—			(487		)
Common stock released by ESOP (492 shares)	—	—		—		—			5			—			5
Balance, March 31, 2013	661,250	$	7	$	5,645	$	5,324		$	(482	)	$	104		$	10,598
Balance, September 30, 2013	661,250	7		5,645		$	5,179		$	(482	)	$	38		$	10,387
Net loss						(73		)							(73		)
Other comprehensive loss, net of tax	—	—		—		—			—			(26		)	(26		)
Common stock released by ESOP (7,632 shares)	—	—		15		—			80			—			95
Common stock committed to be released by ESOP (1,908 shares)	—	—		3		—			20			—			23
Balance, March 31, 2014	661,250	$	7	$	5,663	$	5,106		$	(382	)	$	12		$	10,406

The accompanying notes are an integral part of these consolidated financial statements.

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MEETINGHOUSE BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

	Six Months Ended March 31,
	2014			2013
	(Unaudited)
Cash flows from operating activities:
Net (loss) income	$	(73	)	$	68
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Amortization of securities, net	20			25
(Benefit) provision for loan losses	(21		)	45
Change in deferred loan costs, net	(66		)	(100		)
Loans originated for sale	(19,502		)	(72,954		)
Proceeds from sales of loans	18,670			71,098
Gain on sales of loans	(102		)	(524		)
Depreciation and amortization	87			54
Increase in accrued interest receivable	(12		)	(5		)
Decrease in mortgage servicing asset	13			—
(Decrease) increase in other assets	(42		)	444
Deferred tax expense	1			1
ESOP shares released	118			—
(Decrease) increase in accrued expenses and other liabilities	(270		)	26
Net cash used in operating activities	(1,179		)	(1,822		)
Cash flows from investing activities:
Purchases of interest-bearing time deposits in other banks	(1,489		)	(1,496		)
Proceeds from maturities of interest-bearing time deposits in other banks	1,413			753
Purchases of available-for-sale securities	(7,183		)	(1,355		)
Proceeds from maturities of available-for-sale securities	665			988
Loan originations and principal collections, net	(6,368		)	(5,789		)
Recoveries of loans previously charged off	2			—
(Purchase) redemption of Federal Home Loan Bank stock	(151		)	119
Capital expenditures	(69		)	(252		)
Net cash used in investing activities	(13,180		)	(7,032		)
Cash flows from financing activities:
Net increase (decrease) in demand deposits, NOW and savings accounts	1,041			(2,891		)
Net increase (decrease) in time deposits	8,309			(523		)
Net change in short-term advances from Federal Home Loan Bank	2,935			700
Proceeds from common stock offering	—			6,613
Costs of common stock offering	—			(961		)
Common stock acquired by ESOP	—			(487		)
Net cash provided by financing activities	12,285			2,451
Net decrease in cash and cash equivalents	(2,074		)	(6,403		)
Cash and cash equivalents at beginning of period	4,713			10,177
Cash and cash equivalents at end of period	$	2,639		$	3,774
Supplemental disclosures:
Interest paid	$	271		$	265
Income taxes received	(30		)	(23		)

The accompanying notes are an integral part of these consolidated financial statements.

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Meetinghouse Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

NOTE 1 - BASIS OF PRESENTATION

The consolidated condensed interim financial statements include the accounts of Meetinghouse Bancorp, Inc. (the “Company”) and its wholly-owned subsidiary, Meetinghouse Bank (the “Bank”), and the Bank’s wholly-owned subsidiaries, Meetinghouse Securities Corporation and Richmond Realty Trust.  All significant intercompany accounts and transactions have been eliminated in the consolidation.

On January 17, 2012, the Board of Directors of the Bank adopted a plan of conversion under which the Bank would convert from a Massachusetts-chartered mutual co-operative bank to a Massachusetts-chartered stock co-operative bank and become the wholly-owned subsidiary of a newly chartered stock holding company, Meetinghouse Bancorp, Inc. (“the Company”). The conversion was subject to approval by the Federal Reserve Board and the Massachusetts Division of Banks, non-objection by the Federal Deposit Insurance Corporation, and approval by the depositors of the Bank, and included the filing of a registration statement with the U.S. Securities and Exchange Commission. Such approvals and non-objections were obtained and, effective November 19, 2012, the Company completed its initial public offering in connection with the conversion transaction by selling a total of 661,250 shares of common stock at a purchase price of $10.00 per share in a subscription offering, of which 27,700 shares were purchased by the Company’s employee stock ownership plan (the “ESOP”).  An additional 18,587 shares were purchased by the ESOP in the open market subsequent to the initial public offering.

The cost of conversion and issuing the capital stock has been deducted from the proceeds of the offering. The Company incurred $961,000 in conversion costs which were netted against the proceeds of the initial public offering.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and the instructions for Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  In the opinion of management, the information reflects all adjustments (consisting solely of normal recurring adjustments) that are necessary for a fair presentation.  The results shown for the interim period ended March 31, 2014 are not necessarily indicative of the results to be obtained for the full year.  These consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended September 30, 2013 included in the Company’s Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission (“SEC”).

In preparing the consolidated condensed interim financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, as of the date of the statement of financial condition and reported amounts of revenues and expenses for the periods presented.  Actual results could differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and deferred income taxes.

NOTE 2 - NATURE OF OPERATIONS

The Company is the registered bank holding company for the Bank.  The Bank, a Massachusetts co-operative bank, is headquartered in Dorchester, Massachusetts.  The Bank is engaged principally in the business of attracting deposits from the general public and investing those deposits in residential and commercial real estate loans, construction loans, and in consumer and small business loans.

NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS

In July 2013, the FASB issued ASU 2013-11, “Income Taxes (Topic 740) — Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.”  The amendments in this ASU provide guidance for the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists.  The amendments in this ASU are expected to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits and will better reflect the manner in which an entity would settle at the reporting date any additional income

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taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist.  The amendments apply to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013.  The adoption of this guidance did not have an impact on the Company’s results of operations or financial position.

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 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 does not expect that the adoption of this ASU will have an impact on the Company’s 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 (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) 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 (1) the amount of foreclosed residential real estate property held by the creditor and (2) 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.  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 does not expect that the adoption of this ASU will have a material impact on the Company’s 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 adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

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NOTE 4 — (LOSS) EARNINGS PER SHARE

Basic (loss) earnings per share (“EPS”) excludes dilution and is calculated by dividing net (loss) income applicable to common stock by the weighted-average number of shares of common stock outstanding during the period. Diluted EPS is computed in a manner similar to that of basic EPS except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. Unallocated common shares held by the ESOP are shown as a reduction in stockholders’ equity and are included in the weighted-average number of common shares outstanding for both basic and diluted EPS calculations as they are committed to be released.

EPS for the three and six months ended March 31, 2014 and 2013 have been computed as follows (in thousands, except share data):

	Three months ended March 31,
	2014			2013
	(unaudited)
Net (loss) income applicable to common stock	$	(5	)	$	34
Average number of shares issued	661,250			661,250
Less: average unallocated ESOP shares	38,142			45,795
Average number of common shares outstanding used to calculate basic and diluted (loss) earnings per share	623,108			615,455
Basic (loss) earnings per share	$	(0.01	)	$	0.06
Diluted (loss) earnings per share	$	(0.01	)	$	0.06

	Six months ended March 31,
	2014			2013
	(unaudited)
Net (loss) income applicable to common stock	$	(73	)	$	68
Average number of shares issued	661,250			661,250
Less: average unallocated ESOP shares	41,989			45,950
Average number of common shares outstanding used to calculate basic and diluted (loss) earnings per share	619,261			615,300
Basic (loss) earnings per share	$	(0.12	)	$	0.11
Diluted (loss) earnings per share	$	(0.12	)	$	0.11

NOTE 5 - INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES

The amortized cost and estimated fair value of securities available-for-sale, with gross unrealized gains and losses, are as follows (in thousands):

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	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized		Fair
	Basis		Gains		Losses		Value
March 31, 2014 (unaudited):
U.S. Government and federal agency obligations	$	1,933	$	—	$	22	$	1,911
Mortgage-backed securities	9,810		97		54		9,853
	$	11,743	$	97	$	76	$	11,764
September 30, 2013:
U.S. Government and federal agency obligations	$	800	$	—	$	10	$	790
Mortgage-backed securities	4,445		101		27		4,519
	$	5,245	$	101	$	37	$	5,309

The amortized cost and estimated fair value of available-for-sale securities, segregated by contractual maturity at March 31, 2014, are presented below (in thousands):

	Amortized		Fair
(unaudited)	Cost Basis		Value
Due after one year through five years	749		739
Due after five years through ten years	1,184		1,172
Mortgage-backed securities	9,810		9,853
	$	11,743	$	11,764

There were no sales of available-for-sale securities for the six months ended March 31, 2014 and 2013.

Information pertaining to securities with gross unrealized losses at March 31, 2014, aggregated by investment category and length of time that individual securities have been in a continuous loss position, are as follows (in thousands):

	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
March 31, 2014 (unaudited):
U.S. Government and federal agency obligations	$	1,911	$	22	$	—	$	—	$	1,911	$	22
Mortgage-backed securities	5,053		42		649		12		5,702		54
Total temporarily impaired securities	$	6,964	$	64	$	649	$	12	$	7,613	$	76
September 30, 2013
U.S. Government and federal agency obligations	$	739	$	10	$	—	$	—	$	739	$	10
Mortgage-backed securities	2,050		27		—		—		2,050		27
Total temporarily impaired securities	$	2,789	$	37	$	—	$	—	$	2,789	$	37

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Management conducts, at least on a quarterly basis, a review of the Company’s investment securities to determine if the value of any security has declined below its cost or amortized cost and whether such decline represents other-than-temporary impairment.  The investments in the Company’s investment portfolio that are temporarily impaired as of March 31, 2014 consist of four debt securities issued by U.S. Government federal agencies and seventeen mortgage-backed securities. The unrealized loss at March 31, 2014 is attributable to changes in market interest rates since the Company acquired the securities.  As management has the ability and the intent to hold debt securities until maturity, the declines are deemed to be not other-than-temporary.

NOTE 6 - LOANS

Loans consist of the following:

	March 31,					September 30,
	2014					2013
	(unaudited)
	(Dollars in thousands)
Real estate loans:
Residential	$	40,876		63.51	%	$	38,630		66.62	%
Commercial	10,007			15.55		9,023			15.56
Construction	933			1.45		824			1.42
Multi-family	2,871			4.46		1,712			2.95
Total real estate	54,687			84.97		50,189			86.55
Commercial	2,419			3.76		1,862			3.21
Consumer loans:
Home equity	6,052			9.40		5,179			8.93
Other	1,202			1.87		762			1.31
Total consumer	7,254			11.27		5,941			10.24
				100.00	%				100.00	%
Total loans	64,360					57,992
Allowance for loan losses	(416		)			(435		)
Deferred loan costs, net	448					382
Net loans	$	64,392				$	57,939

The following table sets forth information regarding the allowance for loan losses by portfolio segment as of and for the six months ended March 31, 2014 (unaudited):

	Real Estate														Consumer
	1-4 Family			1-4 Family
	Owner			Non-Owner
(In thousands)	Occupied			Occupied		Multifamily		Commercial			Construction		Commercial		Home Equity		Other		Total
Allowance for loan losses:
Beginning balance	$	178		$	75	$	17	$	81		$	8	$	16	$	31	$	29	$	435
Charge-offs	—			—		—		—			—		—		—		—		—
Recoveries	—			—		—		—			—		—		—		2		2
(Benefit) provision	(34		)	4		12		(13		)	1		5		3		1		(21		)
Ending balance	$	144		$	79	$	29	$	68		$	9	$	21	$	34	$	32	$	416
Allowance for loan losses:
Ending balance:
Individually evaluated for impairment	$	—		$	—	$	—	$	—		$	—	$	—	$	—	$	—	$	—
Ending balance:
Collectively evaluated for impairment	144			79		29		68			9		21		34		32		416
Total allowance for loan losses ending balance	$	144		$	79	$	29	$	68		$	9	$	21	$	34	$	32	$	416
Loans:
Ending balance:
Individually evaluated for impairment	$	—		$	—	$	—	$	—		$	—	$	—	$	—	$	—	$	—
Ending balance:
Collectively evaluated for impairment	28,790			12,086		2,871		10,007			933		2,419		6,052		1,202		64,360
Total loans ending balance	$	28,790		$	12,086	$	2,871	$	10,007		$	933	$	2,419	$	6,052	$	1,202	$	64,360

12

The following table sets forth information regarding the allowance for loan losses by portfolio segment as of and for the six months ended March 31, 2013 (unaudited):

March 31, 2013

	Real Estate												Consumer
	1-4 Family		1-4 Family
	Owner		Non-Owner
(In thousands)	Occupied		Occupied		Multifamily		Commercial		Construction		Commercial		Home Equity			Other			Total
Allowance for loan losses:
Beginning balance	$	135	$	55	$	12	$	67	$	3	$	14	$	33		$	15		$	334
Charge-offs	—		—		—		—		—		—		—			(3		)	(3		)
Recoveries	—		—		—		—		—		—		—			—			—
Provision (benefit)	20		6		—		8		—		2		(1		)	10			45
Ending Balance	$	155	$	61	$	12	$	75	$	3	$	16	$	32		$	22		$	376
Allowance for loan losses:
Ending balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—		$	—		$	—
Ending balance:
Collectively evaluated for impairment	155		61		12		75		3		16		32			22			376
Total allowance for loan losses ending balance	$	155	$	61	$	12	$	75	$	3	$	16	$	32		$	22		$	376
Loans:
Ending balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—		$	—		$	—
Ending balance:
Collectively evaluated for impairment	23,170		9,327		1,154		7,924		349		1,802		4,882			736			49,344
Total loans ending balance	$	23,170	$	9,327	$	1,154	$	7,924	$	349	$	1,802	$	4,882		$	736		$	49,344

The following table sets forth information regarding the allowance for loan losses by portfolio segment as of September 30, 2013:

	Real Estate												Consumer
	1-4 Family		1-4 Family
	Owner		Non-Owner
(In thousands)	Occupied		Occupied		Multifamily		Commercial		Construction		Commercial		Home Equity		Other		Total
Allowance for loan losses:
Ending balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Ending balance:
Collectively evaluated for impairment	178		75		17		81		8		16		31		29		435
Total allowance for loan losses ending balance	$	178	$	75	$	17	$	81	$	8	$	16	$	31	$	29	$	435
Loans:
Ending balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Ending balance:
Collectively evaluated for impairment	27,155		11,475		1,712		9,023		824		1,862		5,179		762		57,992
Total loans ending balance	$	27,155	$	11,475	$	1,712	$	9,023	$	824	$	1,862	$	5,179	$	762	$	57,992

The following table sets forth information regarding nonaccrual loans and past-due loans as of March 31, 2014 (unaudited):

					90 Days								90 Days or
	30—59 Days		60—89 Days		or More		Total		Total		Total		More Past Due
(In thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans		and Accruing		Nonaccrual
March 31, 2014:
Real estate:
Residential	$	—	$	195	$	—	$	195	$	40,681	$	40,876	$	—	$	—
Commercial	—		—		—		—		10,007		10,007		—		—
Construction	—		—		—		—		933		933		—		—
Multi-family	—		—		—		—		2,871		2,871		—		—
Commercial	—		—		—		—		2,419		2,419		—		—
Home equity	639		—		—		639		5,413		6,052		—		—
Other consumer	—		—		—		—		1,202		1,202		—		—
Total	$	639	$	195	$	—	$	834	$	63,526	$	64,360	$	—	$	—

13

The following table sets forth information regarding nonaccrual loans and past-due loans as of September 30, 2013:

					90 Days								90 Days or
	30—59 Days		60—89 Days		or More		Total		Total		Total		More Past Due
(In thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans		and Accruing		Nonaccrual
September 30, 2013:
Real estate:
Residential	$	457	$	—	$	46	$	503	$	38,127	$	38,630	$	—	$	46
Commercial	243		—		—		243		8,780		9,023		—		—
Construction	—		—		—		—		824		824		—		—
Multi-family	—		—		—		—		1,712		1,712		—		—
Commercial	—		—		—		—		1,862		1,862		—		—
Home equity	39		—		—		39		5,140		5,179		—		—
Other consumer	—		—		—		—		762		762		—		—
Total	$	739	$	—	$	46	$	785	$	57,207	$	57,992	$	—	$	46

As of March 31, 2014 (unaudited) and September 30, 2013, and during the periods then ended, the Company had no loans categorized as impaired.

There were no loans modified during the six months ended March 31, 2014 (unaudited) or during the year ended September 30, 2013 that met the definition of a troubled debt restructured loan as described in ASC 310-10-50.

Credit Quality Information

The Company utilizes an eight grade internal loan rating system for commercial real estate, construction and commercial loans as follows:

Loans rated 1 - 4:  Loans in these categories are considered “pass” rated loans and conform in all respects to Company and regulatory requirements.  These are also loans for which no repayment risk has been identified.  Credit or collateral exceptions are minimal, are in the process of correction and do not represent significant risk.

Loans rated 5:  Loans in this category are considered “special mention” and are fundamentally sound, but exhibit potentially unwarranted credit risk or other unsatisfactory characteristics.  The likelihood of loss to the Company is remote.

Loans rated 6:  Loans in this category are considered “substandard” and are inadequately protected by current sound net worth, paying capacity of the obligor, or the value of pledged collateral. Loans in this category also include those loans with unsatisfactory characteristics indicating higher levels of risk.  The combination of one or more of these characteristics increases the possibility of loss to the Company.

Loans rated 7:  Loans in this category are considered “doubtful.”  Loans in this category exhibit weaknesses inherent in the substandard classification and, in addition, collection or liquidation in full is highly questionable.

Loans rated 8:  Loans in this category are considered uncollectible (“loss”) and of such little value that their continuance as an active asset is not warranted.

On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate, construction and commercial loans.  For all residential real estate and consumer loans, the Company initially assesses credit quality based upon the borrower’s ability to service the debt and subsequently monitors these loans based upon the borrower’s payment activity.

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The following table presents the Company’s loans by risk rating as of March 31, 2014 (unaudited):

	Real Estate										Consumer
(In thousands)	Residential		Multi Family		Commercial		Construction		Commercial		Home Equity		Other		Total
March 31, 2014:
Grade:
Pass	$	—	$	2,871	$	10,007	$	933	$	2,230	$	—	$	—	$	16,041
Special mention	676		—		—		—		189		32		—		897
Substandard	—		—		—		—		—		21		—		21
Not formally rated	40,200		—		—		—		—		5,999		1,202		47,401
Total	$	40,876	$	2,871	$	10,007	$	933	$	2,419	$	6,052	$	1,202	$	64,360

The following table presents the Company’s loans by risk rating as of September 30, 2013:

	Real Estate										Consumer
(In thousands)	Residential		Multi Family		Commercial		Construction		Commercial		Home Equity		Other		Total
September 30, 2013:
Grade:
Pass	$	—	$	1,712	$	8,259	$	824	$	1,673	$	—	$	—	$	12,468
Special mention	244		—		511		—		189		35		—		979
Substandard	450		—		253		—		—		22		—		725
Not formally rated	37,936		—		—		—		—		5,122		762		43,820
Total	$	38,630	$	1,712	$	9,023	$	824	$	1,862	$	5,179	$	762	$	57,992

NOTE 7 - FAIR VALUE MEASUREMENTS

ASC 820-10, “Fair Value Measurements and Disclosures,” provides a framework for measuring fair value under generally accepted accounting principles.  This guidance also allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis.

In accordance with ASC 820-10, 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.

Level 1 - Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange.  Level 1 also includes U.S. Treasury, other U.S. Government and agency mortgage-backed securities that are traded by dealers or brokers in active markets.  Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 - Valuations for assets and liabilities traded in less active dealer or broker markets.  Valuations are obtained from third party pricing services for identical or comparable assets or liabilities.

Level 3 - Valuations for assets and liabilities that are derived from other methodologies, including option pricing models, discounted cash flow models and similar techniques, are not based on market exchange, dealer, or broker traded transactions.  Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets and liabilities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.  These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value at March 31, 2014 (unaudited) and September 30, 2013.  The Company did not have any significant transfers of assets between Levels 1 and 2 of the fair value hierarchy during the six months ended March 31, 2014 (unaudited) and the year ended September 30, 2013.

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Cash and cash equivalents - The Company’s cash instruments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

Interest-bearing time deposits with other banks — The fair value of interest-bearing time deposits in other banks is determined by discounting the cash flows associated with these instruments using current market rates for deposits with similar characteristics.

Securities available-for-sale - The Company’s investment in mortgage-backed securities and other debt securities available-for-sale is generally classified within Level 2 of the fair value hierarchy.  For these securities, we obtain fair value measurements from independent pricing services.  The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. treasury yield curve, trading levels, market consensus prepayment speeds, credit information and the instrument’s terms and conditions.

Federal Home Loan Bank stock — The carrying amount of Federal Home Loan Bank (“FHLB”) of Boston stock approximates fair value based upon the redemption provisions of the FHLB of Boston.

Loans held-for-sale — Loans originated and held-for-sale are carried at the lower of aggregate cost or market value.  No fair value adjustments were recorded on loans held-for-sale during the six months ended March 31, 2014 and 2013 (unaudited).

Loans — Fair values for 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 non-performing loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Accrued interest receivable — Carrying value approximates fair value.

Deposits — The fair values disclosed for demand deposits, regular savings, NOW accounts and money market accounts are equal to the amount payable on demand at the reporting date (i.e., their carrying amounts).  Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Federal Home Loan Bank advances — Fair values for Federal Home Loan Bank advances are estimated using a discounted cash flow technique that applies interest rates currently being offered on advances to a schedule of aggregated expected monthly maturities on Federal Home Loan Bank advances.

Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence.  In the absence of such evidence, management’s best estimate is used.  Subsequent to inception, management only changes Level 3 inputs and assumptions when corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalization and other transactions across the capital structure, offerings in the equity or debt markets, and changes in financial ratios or cash flows.

16

The following summarizes assets measured at fair value on a recurring basis at March 31, 2014 (unaudited) and September 30, 2013:

(In thousands)	Total		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobserable Inputs Level 3
March 31, 2014:
Securities available-for-sale:
U.S. Government and federal agency obligations	$	1,911	$	—	$	1,911	$	—
Mortgage-backed securities	9,853		—		9,853		—
	$	11,764	$	—	$	11,764	$	—
September 30, 2013:
U.S. Government and federal agency obligations	$	790	$	—	$	790	$	—
Mortgage-backed securities	4,519		—		4,519		—
	$	5,309	$	—	$	5,309	$	—

The estimated fair values of the Company’s financial instruments, all of which are held or issued for purposes other than trading, are as follows:

	March 31, 2014 (unaudited)
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	2,639	$	2,639	$	—	$	—	$	2,639
Interest-bearing time deposits with other banks	4,223		—		4,227		—		4,227
Available-for-sale securities	11,764		—		11,764		—		11,764
Federal Home Loan Bank stock	433		433		—		—		433
Loans held-for-sale	1,683		1,712		—		—		1,712
Loans, net	64,392		—		—		64,204		64,204
Accrued interest receivable	209		209		—		—		209
Financial liabilities:
Deposits	75,542		—		75,865		—		75,865
Federal Home Loan Bank advances	2,935		—		2,935		—		2,935

17

	September 30, 2013
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	4,713	$	4,713	$	—	$	—	$	4,713
Interest-bearing time deposits with other banks	4,147		—		4,152		—		4,152
Available-for-sale securities	5,309		—		5,309		—		5,309
Federal Home Loan Bank stock	282		282		—		—		282
Loans held-for-sale	749		768		—		—		768
Loans, net	57,939		—		—		57,640		57,640
Accrued interest receivable	197		197		—		—		197
Financial liabilities:
Deposits	66,192		—		66,429		—		66,429

The Company may be required, from time to time, to measure certain other assets at fair value on a non-recurring basis in accordance with GAAP.  There were no Level 1, Level 2 or Level 3 nonrecurring fair value measurements at March 31, 2014 (unaudited) and September 30, 2013.

NOTE 8 - REGULATORY CAPITAL

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

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined).  As of March 31, 2014 (unaudited) and September 30, 2013, the Bank met all capital adequacy requirements to which it was subject.

As of March 31, 2014 (unaudited), the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.  To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table.  There are no known conditions or events since that notification that management believes have changed the institution’s category.

18

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

										To Be Well
					Minimum					Capitalized Under
					For Capital					Prompt Corrective
	Actual				Adequacy Purposes					Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio			Amount		Ratio
As of March 31, 2014 (unaudited):
Total Capital (to Risk Weighted Assets)	$	8,055	15.7	%	$	4,112	>	8.0	%	$	5,139	>	10.0	%
Tier 1 Capital (to Risk Weighted Assets)	7,639		14.9		2,056		>	4.0		3,084		>	6.0
Tier 1 Capital (to Average Assets)	7,639		9.0		3,395		>	4.0		4,244		>	5.0
As of September 30, 2013:
Total Capital (to Risk Weighted Assets)	$	8,014	17.9	%	$	3,576	>	8.0	%	$	4,469	>	10.0	%
Tier 1 Capital (to Risk Weighted Assets)	7,579		17.0		1,788		>	4.0		2,682		>	6.0
Tier 1 Capital (to Average Assets)	7,579		10.0		3,040		>	4.0		3,800		>	5.0

NOTE 9 — OTHER COMPREHENSIVE INCOME (LOSS)

GAAP generally requires that recognized revenue, expenses, gains and losses be included in net income.  Although certain changes in assets and liabilities are reported as a separate component of the stockholders’ equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income (loss).

The components of other comprehensive income (loss), included in stockholders’ equity are as follows during the three and six months ended March 31, 2014 and 2013 (unaudited):

	Three months ended March 31,
	2014			2013
	(In Thousands)
Unrealized gains (losses) on securities:
Net change in unrealized holding gain on available-for-sale securities	$	20		$	(25	)
Reclassification adjustment for realized (gains) losses in net income	—			—
	20			(25		)
Income tax (expense) benefit	(6		)	10
Other comprehensive income (loss), net of tax	$	14		$	(15	)

	Six months ended March 31,
	2014			2013
	(In Thousands)
Unrealized losses on securities:
Net change in unrealized holding gain on available-for-sale securities	$	(43	)	$	(95	)
Reclassification adjustment for realized (gains) losses in net income	—			—
	(43		)	(95		)
Income tax benefit	17			37
Other comprehensive (loss) income, net of tax	$	(26	)	$	(58	)

At March 31, 2014 (unaudited) and September 2013, the components of accumulated other comprehensive income, included in stockholders’ equity, are as follows:

19

	2014		2013
	(In Thousands)
Net unrealized gain on securities available-for-sale	$	12	$	38
Total accumulated other comprehensive income	$	12	$	38

NOTE 10 — EMPLOYEE STOCK OWNERSHIP PLAN

The Bank has adopted a tax-qualified employee stock ownership plan (“ESOP) for the benefit of eligible employees.  Effective November 19, 2012, the Bank converted from a Massachusetts-chartered mutual co-operative bank to a Massachusetts-chartered stock co-operative bank and become the wholly-owned subsidiary of the Company.  The Company completed its initial public offering in connection with the conversion transaction by selling a total of 661,250 shares of common stock at a purchase price of $10.00 per share in a subscription offering, of which 27,700 shares were purchased by the Bank’s ESOP.  The ESOP acquired an additional 18,587 shares in the open market subsequent to the conversion.

The ESOP funded its stock purchase through a loan from the Company equal to 100% of the aggregate purchase price of the common stock. The ESOP trustee will repay the loan principally through the Bank’s contributions to the ESOP and, possibly, dividends paid on common stock held by the plan over a 6-year loan term.

The trustee holds the shares purchased in a loan suspense account and will release the shares from the suspense account on a pro rata basis as it repays the loan. The trustee will allocate the shares released among active participants on the basis of each active participant’s proportional share of compensation for the plan year. Generally, participants will receive distributions from the ESOP upon separation from service. The trustee will reallocate any unvested shares of common stock forfeited by participants upon their separation from service among the remaining participants in the plan.

Under applicable accounting requirements, the Company will record a compensation expense for the ESOP at the fair market value of the shares when they are committed to be released from the suspense account to participants’ accounts under the plan.

At March 31, 2014 (unaudited), the remaining principal balance on the ESOP debt is $409,000 and the number of shares held by the ESOP is 46,287.

Total compensation expense recognized in connection with the ESOP was $23,000 and $19,000 for the three months ended March 31, 2014 and 2013, respectively (unaudited), and $46,000 and $24,000 for the six months ended March 31, 2014 and 2013, respectively (unaudited).

NOTE 11 — SUBSEQUENT EVENTS

Shareholders of Meetinghouse Bancorp, Inc. approved the 2014 Equity Incentive Plan on February 19, 2014, and the Board of Directors ratified the vote on April 15, 2014.

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

This discussion is intended to assist in understanding the consolidated financial condition and results of operations of the Company.  This should be read in conjunction with the consolidated financial statements and accompanying notes contained in this report.

Forward-Looking Statements

This report may contain forward-looking statements within the meaning of the federal securities laws.  These statements are not historical facts; rather they are statements based on the Company’s current expectations regarding its business strategies and their intended results and its future performance.  Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions.

20

Forward-looking statements are not guarantees of future performance.  Numerous risks and uncertainties could cause or contribute to the Bank’s actual results, performance and achievements being materially different from those expressed or implied by the forward-looking statements.  Factors that may cause or contribute to these differences include, without limitation, general economic conditions, including changes in market interest rates and changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; the quality and composition of the loan and investment securities portfolio; loan demand; deposit flows; competition; and changes in accounting principles and guidelines.  Additional factors that may affect our results are discussed in the Company’s 2013 Annual Report on Form 10-K under the section titled “Item 1A.- Risk Factors.”  These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements.  Except as required by applicable law or regulation, the Company assumes no obligation and disclaims any obligation to update any forward-looking statements.

Critical Accounting Policies

We consider accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies.

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 regular basis, at least quarterly, by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, 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. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: owner and non-owner occupied residential real estate, home equity, multi-family commercial real estate, construction, commercial and consumer. Management uses a rolling average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; trends in volume and terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; experience/ability/depth of lending management and staff; and national and local economic trends and conditions. There were no changes in the Company’s policies or methodology pertaining to the general component of the allowance for loan losses for the six months ended March 31, 2014.

The qualitative factors are determined based on the various risk characteristics of each loan segment. Risk characteristics relevant to each portfolio segment are as follows:

Residential real estate:Residential real estate includes owner and non-owner occupied real estate loans and home equity loans. The Company originates most of the loans in this segment according to FNMA/FHLMC underwriting guidelines. Most loans in this segment are collateralized by residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment. There are some non-owner occupied residential real estate loans with multiple investment properties that are evaluated as commercial real estate property.

Commercial real estate:Commercial real estate includes multi-family and certain non-owner occupied residential real estate. Loans in this segment are primarily income-producing properties throughout Massachusetts. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy as evidenced by increased vacancy rates which, in turn, will have an effect on the credit quality in this segment. Management periodically obtains rent rolls and continually monitors the cash flows of these loans.

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Construction loans:Loans in this segment primarily include speculative real estate development loans for which payment is derived from sale of the property. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.

Commercial loans:Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.

Consumer loans:Loans in this segment are generally unsecured and repayment is dependent on the credit quality of the individual borrower.

The allocated component relates to loans that are classified as impaired. Impairment is measured on a loan by loan basis for commercial, commercial real estate and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential real estate loans for impairment disclosures, unless such loans are subject to a troubled debt restructuring agreement.

A loan is considered impaired when, based on current information and events, it is probable that the Company 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. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

The Company 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 (“TDR”). All TDRs are classified as impaired.

An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio.

Deferred Taxes.Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. Management reviews deferred tax assets on a quarterly basis to identify any uncertainties pertaining to realization of such assets. In determining whether a valuation allowance is required against deferred tax assets, management assesses historical and forecasted operating results, including a review of eligible carryforward periods, tax planning opportunities and other relevant considerations. We believe the accounting estimate related to the valuation allowance is a critical estimate because the underlying assumptions can change from period to period. For example, tax law changes or variances in future projected operating performance could result in a change in the valuation allowance. Should actual factors and conditions differ materially from those used by management, the actual realization of net deferred tax assets could differ materially from the amounts recorded in the financial statements. If we were not able to realize all or part of our deferred tax assets in the future, an adjustment to the related valuation allowance would be charged to income tax expense in the period such determination was made and could have a negative impact on earnings. In addition, if actual factors and conditions differ materially from those used by management, we could incur penalties and interest imposed by taxing authorities.

Comparison of Financial Condition at March 31, 2014 (unaudited) and September 30, 2013

Total Assets. Total assets increased by $12.0 million, from $77.1 million at September 30, 2013 to $89.1 million at March 31, 2014, primarily due to an increase in loans held-for-sale of $934,000, an increase in loans, net,

22

of $6.5 million, and an increase in investments in available-for-sale securities of $6.5 million. This increase was primarily offset by a decrease in cash and cash equivalents of $2.1 million.

Cash and Cash Equivalents. Cash and cash equivalents decreased by $2.1 million, from $4.7 million at September 30, 2013 to $2.6 million at March 31, 2014, in order to fund new loan originations and the purchase of available-for-sale securities.

Interest-Bearing Time Deposits in Other Banks. These deposits increased by $100,000, from $4.1 million at September 30, 2013 to $4.2 million at March 31, 2014.  We maintain funds in these accounts in order to improve the yield earned on excess liquidity.

Securities. Our securities portfolio consists primarily of residential mortgage-backed securities issued by U.S. government agencies and government sponsored enterprises. Investments in available-for-sale securities increased by $6.5 million, from $5.3 million at September 30, 2013 to $11.8 million at March 31, 2014.  The increase is primarily due to purchases, net of repayments, of mortgage-backed securities.

Loans, Net. Loans, net, increased by $6.5 million, from $57.9 million at September 30, 2013 to $64.4 million at March 31, 2014. This increase was primarily due to new loans originated, net of repayments.

Loans Held-for-Sale. Loans held-for-sale increased by $934,000, from $749,000 at September 30, 2013 to $1.7 million at March 31, 2014, primarily due to the timing of loan closings and fundings.

Deposits. Our primary sources of funds are retail deposit accounts held primarily by individuals and businesses within our primary market area. Total deposits increased by $9.3 million, from $66.2 million at September 30, 2013 to $75.5 million at March 31, 2014, primarily due to a $8.3 million increase in certificates of deposit and a $511,000 increase in regular and other saving accounts.

The following table sets forth the balances of our deposit products at the dates indicated.

	March 31,				September 30,
(Dollars in thousands)	2014				2013
	(unaudited)
Noninterest-bearing demand deposits	$	11,447	15.15	%	$	11,015	16.64	%
Interest-bearing deposits:
Money market	9,897		13.10		9,799		14.80
Regular and other savings	10,080		13.34		9,569		14.46
Certificates of deposit	44,118		58.41		35,809		54.10
Total	$	75,542	100.00	%	$	66,192	100.00	%

Borrowings. We generally use borrowings from the Federal Home Loan Bank of Boston to supplement our supply of funds for originating loans and purchasing securities. No Federal Home Loan Bank of Boston borrowings were outstanding at September 30, 2013.  Total borrowings outstanding at March 31, 2014 were $2.9 million.

Comparison of Results of Operations for the Three and Six Months Ended March 31, 2014 and 2013 (unaudited)

Net (Loss) Income. Net (loss) income went from net income of $34,000 in the three months ended March 31, 2013 to a net loss of ($5,000) in the three months ended March 31, 2014, primarily due to a decrease in total noninterest income of $180,000 and an increase in noninterest expense of $16,000, offset by an increase in interest income of $112,000 and a decrease in provision for loan loss of $51,000.

Net (loss) income went from net income of $68,000 in the six months ended March 31, 2013 to a net loss of ($73,000) in the six months ended March 31, 2014, primarily due to a decrease in non-interest income of $403,000

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and an increase in noninterest expense of $70,000, offset by an increase in net interest and dividend income of $196,000, a decrease in income tax expense of $70,000 and a decrease in provision for loan losses of $66,000.

Non-Interest Income. Non-interest income decreased by $180,000 from $352,000 in the three months ended March 31, 2013 to $172,000 in the three months ended March 31, 2014, primarily due to a decrease in gains on secondary market activities of $192,000, from $264,000 in the three months ended March 31, 2013 to $72,000 in the three months ended March 31, 2014.  This decrease is attributed to a reduction in gains on loans sold due to a reduced volume of loans sold.

Non-interest income decreased by $403,000 from $707,000 in the six months ended March 31, 2013 to $304,000 in the six months ended March 31, 2014, primarily due to a decrease in gains on secondary market activities of $422,000, from $524,000 in the six months ended March 31, 2013 to $102,000 in the six months ended March 31, 2014.  This decrease is attributed to a reduction in gains on loans sold due to a reduced volume of loans sold.

Net Interest and Dividend Income. Net interest and dividend income increased by $102,000, from $531,000 in the three months ended March 31, 2013 to $633,000 in the three months ended March 31, 2014, primarily due to the increase in loans, net. The average outstanding balance of loans, net increased by $10.2 million, from $55.2 million in the three months ended March 31, 2013 to $65.4 million in the three months ended March 31, 2014. The average yield on interest-earning assets increased from 3.80% in the three months ended March 31, 2013 to 3.85% in the three months ended March 31, 2014, along with an increase in the average balance of interest-earning assets from $69.9 million to $80.6 million. The average rate paid on interest-bearing liabilities decreased from 0.96% in the three months ended March 31, 2013 to 0.92% in the three months ended March 31, 2014. The interest rate spread increased from 2.84% in the three months ended March 31, 2013 to 2.98% in the three months ended March 31, 2014.

Net interest and dividend income increased by $200,000, from $1.0 million in the six months ended March 31, 2013 to $1.2 million in the six months ended March 31, 2014 primarily due to the increase in loans, net. The average outstanding balance of loans, net increased by $10.8 million, from $53.2 million in the six months ended March 31, 2013 to $64.0 million in the six months ended March 31, 2014.  The average yield on interest-earning assets increased from 3.68% in the six months ended March 31, 2013 to 3.85% in the six months ended March 31, 2014, along with an increase in the average balance of interest-earning assets from $69.6 million to $77.4 million. The average rate paid on interest-bearing liabilities decreased from 0.97% in the six months ended March 31, 2013 to 0.90% in the six months ended March 31, 2014. The interest rate spread increased from 2.71% in the six months ended March 31, 2013 to 2.95% in the six months ended March 31, 2014.

Average Balances and Yields.  The following tables (unaudited) present information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Average balances have been calculated using daily balances. Loan fees are included in interest income on loans and are insignificant.

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	Three months ended March 31,
	2014						2013
	Average		Interest		Average		Average		Interest		Average
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
(Dollars in thousands)	Balance		Paid		Rate (4)		Balance		Paid		Rate (4)
Interest-earning assets:
Securities (1)	$	10,619	$	66	2.49	%	$	5,857	$	39	2.66	%
Loans, net (2)	65,450		701		4.28	%	55,156		612		4.44	%
Other interest-earning assets (3)	4,530		8		0.71	%	8,837		12		0.54	%
Total interest-earning assets	80,599		775		3.85	%	69,850		663		3.80	%
Non-interest earning assets	8,999						9,565
Total assets	$	89,598					$	79,415
Interest-bearing liabilities:
Regular savings accounts	$	9,642	$	4	0.17	%	$	9,417	$	6	0.25	%
Money market accounts	10,012		13		0.52	%	9,160		12		0.52	%
Time deposits	40,336		121		1.20	%	36,324		114		1.26	%
Total interest-bearing deposits	59,990		138		0.92	%	54,901		132		0.96	%
Federal Home Loan Bank advances	5,081		4		0.31	%	241		—		—
Total interest-bearing liabilities	65,071		142		0.87	%	55,142		132		0.96	%
Demand deposits	11,144						10,672
Other liabilities	101						129
Stockholders’ equity	13,282						13,472
Total liabilities and stockholders’ equity	$	89,598					$	79,415
Net interest income			$	633					$	531
Interest rate spread					2.98	%					2.84	%
Net yield on earning assets					3.14	%					3.04	%

(1) Includes Federal Home Loan Bank stock, deposits with Co-operative Central Bank, and available-for-sale securities.

(2) Includes non-accrual loans and interest received on such loans, and loans held-for-sale.

(3) Includes short-term investments.

(4) Yields and rates for the three month periods ended March 31, 2014 and 2013 are annualized.

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	Six months ended March 31,
	2014						2013
	Average		Interest		Average		Average		Interest		Average
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
(Dollars in thousands)	Balance		Paid		Rate (4)		Balance		Paid		Rate (4)
Interest-earning assets:
Securities (1)	$	8,732	$	100	2.29	%	$	5,938	$	81	2.73	%
Loans, net (2)	63,974		1,375		4.30	%	53,217		1,174		4.41	%
Other interest-earning assets (3)	4,676		16		0.68	%	10,464		27		0.52	%
Total interest-earning assets	77,382		1,491		3.85	%	69,619		1,282		3.68	%
Non-interest earning assets	9,009						8,780
Total assets	$	86,391					$	78,399
Interest-bearing liabilities:
Regular savings accounts	$	9,668	$	8	0.17	%	$	9,214	$	12	0.26	%
Money market accounts	9,914		27		0.54	%	8,970		23		0.51	%
Time deposits	38,570		236		1.22	%	36,248		230		1.27	%
Total interest-bearing deposits	58,152		271		0.93	%	54,432		265		0.97	%
Federal Home Loan Bank advances	3,726		7		0.37	%	119		—		—
Total interest-bearing liabilities	61,878		278		0.90	%	54,551		265		0.97	%
Demand deposits	11,059						14,245
Other liabilities	207						122
Stockholders’ equity	13,247						9,481
Total liabilities and stockholders’ equity	$	86,391					$	78,399
Net interest income			$	1,213					$	1,017
Interest rate spread					2.95	%					2.71	%
Net yield on earning assets					3.14	%					2.92	%

(1) Includes Federal Home Loan Bank stock, deposits with Co-operative Central Bank, and available-for-sale securities.

(2) Includes non-accrual loans and interest received on such loans, and loans held-for-sale.

(3) Includes short-term investments.

(4) Yields and rates for the six month periods ended March 31, 2014 and 2013 are annualized.

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Rate/Volume Analysis.  The following tables (unaudited) set forth the effects of changing rates and volumes on our net interest and dividend income. 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 total increase (decrease) column represents the sum of the prior columns. For purposes of this table, changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.

	Three Months Ended									Six Months Ended
	March 31, 2014									March 31, 2014
	Compared to									Compared to
	Three Months Ended									Six Months Ended
	March 31, 2013									March 31, 2013
	Increase (Decrease)									Increase (Decrease)
	Due to									Due to
(In thousands)	Volume			Rate			Net			Volume			Rate			Net
Interest income:
Securities (1)	$	29		$	(3	)	$	26		$	27		$	(10	)	$	17
Loans, net (2)	114			2			116			238			6			244
Other interest-earning assets (3)	(60		)	57			(3		)	(81		)	72			(9		)
Total interest-earning assets	83			56			139			184			68			252
Interest expense:
Deposits	$	13		$	(7	)	$	6		18			$	(12	)	$	6
Federal Home Loan Bank advances	4			—			4			7			—			7
Total interest-bearing liabilities	17			(7		)	10			25			(12		)	13
Increase (decrease) in net interest income	$	66		$	63		$	129		159			$	80		$	239

(1)Includes Federal Home Loan Bank of Boston stock, deposits with the Cooperative Central Bank, and available-for-sale securities.

(2)Includes non accruing loan balances and interest received on such loans, and loans held-for-sale.

(3)Includes short-term investments.

Provision (Credit) for Loan Losses. The provision for loan losses decreased by $51,000, from $41,000 for the three months ended March 31, 2013 to $(10,000) for the three months ended March 31, 2014.  The decrease in the provision was due to the annual review of the loan portfolio resulting in several classification upgrades.

The provision for loan losses decreased by $66,000, from $45,000 for the six months ended March 31, 2013 to $(21,000) for the six months ended March 31, 2014.  The decrease in the provision was due to the annual review of the loan portfolio resulting in several classification upgrades and a reduction in the reserve percentage for some loan categories, primarily the 1-4 family owner occupied category.

Analysis of Loan Loss Experience. The following tables set forth an analysis of the allowance for loan losses for the periods indicated (unaudited).

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	For the						For the
	Three Months Ended						Six Months Ended
	March 31,						March 31,
(Dollars in thousands)	2014			2013			2014			2013
Allowance at beginning of period	$	424		$	335		$	435		$	334
(Benefit) provision for loan losses	(10		)	41			(21		)	45
Charge-offs	—			—			—			(3		)
Recoveries	2			—			2			—
Allowance at end of period	$	416		$	376		$	416		$	376
Allowance for loan losses as a percent of non- performing loans	N/A			N/A			N/A			N/A
Allowance for loan losses as a percent of total loans	0.65		%	0.76		%	0.65		%	0.76		%
Net (charge-offs) recoveries to average loans outstanding during the period	—		%	—		%	—		%	—		%

Noninterest Income. Noninterest income decreased by $180,000, from $352,000 in the three months ended March 31, 2013 to $172,000 in the three months ended March 31, 2014, primarily due to a decrease in gain on secondary market activities from $264,000 to $72,000. The decrease in gain on secondary market activities was primarily due to decreased volume of loans sold in the secondary market due to an increase in market interest rates.

Noninterest income decreased by $403,000, from $707,000 in the six months ended March 31, 2013 to $304,000 in the six months ended March 31, 2014, primarily due to a decrease in gain on secondary market activities from $524,000 to $102,000. The decrease in gain on secondary market activities was primarily due to decreased volume of loans sold in the secondary market due to an increase in market interest rates.

Noninterest Expense. Noninterest expense increased by $16,000, from $795,000 in the three months ended March 31, 2013 to $811,000 in the three months ended March 31, 2014 primarily due to increases in occupancy and equipment expense.  Occupancy and equipment expenses increased $34,000, primarily due to increased expenses related to the opening of a branch in Roslindale.

Noninterest expense increased by $70,000, from $1.6 million in the six months ended March 31, 2013 to $1.6 million in the six months ended March 31, 2014 primarily due to increases in occupancy and equipment expense.  Occupancy and equipment expenses increased $68,000, primarily due to increased expenses related to the opening of a branch in Roslindale.

Income Tax (Benefit) Expense. Income tax expense decreased by $4,000, from $13,000 in the three months ended March 31, 2013 to $9,000 in the three months ended March 31, 2014, due to the pre-tax loss for the three months ended March 31, 2014. The effective tax rate was 27.7% for the three months ended March 31, 2013 and 225.0% for the three months ended March 31, 2014.

Income tax expense decreased by $70,000, from $32,000 in the six months ended March 31, 2013 to $(38,000) in the six months ended March 31, 2014, due to the pre-tax loss for the six months ended March 31, 2014. The effective tax rate was 32.0% for the six months ended March 31, 2013 and the income tax benefit rate was 34.2% for the six months ended March 31, 2014.

Analysis of Nonperforming and Classified Assets. We consider repossessed assets and loans that are 90 days or more past due to be non-performing assets. Residential real estate loans are generally placed on nonaccrual status when they become 90 days past due or are in the process of foreclosure, at which time the accrual of interest ceases and the allowance for any uncollectible accrued interest is established and charged against interest revenue. All closed-end consumer loans 90 days or more past due and equity lines in the process of foreclosure are placed on nonaccrual status. Secured consumer loans are written down to realizable value and unsecured consumer loans are charged-off upon reaching 120 or 180 days past due depending on the type of loan. Commercial real estate loans and commercial business loans and leases which are 90 days or more past due are placed on nonaccrual status, unless secured by sufficient cash or other assets immediately convertible to cash. Typically, when a loan has been

28

placed on nonaccrual status, previously accrued and uncollected interest is reversed against interest on loans. A loan can be returned to accrual status when collectability of principal is reasonably assured based on our determination that the event of delinquency was a one-time incident.

Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned until it is sold. When property is acquired it is recorded at fair market value at the date of foreclosure. Any holding costs and changes in fair value after acquisition of the property are reflected in income.

The following table provides information with respect to our nonperforming assets, including troubled debt restructurings, at the dates indicated.

	March 31,			September 30,
(Dollars in thousands)	2014			2013
	(unaudited)
Nonaccrual loans:
Real estate loans:
Residential	$	—		$	46
Commercial	—			—
Total real estate	—			46
Consumer loans	—			—
Total	—			46
Accruing loans past due 90 days or more	—			—
Total nonaccrual loans and accruing loans past due 90 days or more	—			46
Other real estate owned	—			—
Total nonperforming assets	—			46
Troubled debt restructurings	—			—
Total nonperforming assets and troubled debt restructurings	$	—		$	46
Total nonperforming loans to total loans	—		%	0.08		%
Total nonperforming loans to total assets	—		%	0.06		%
Total nonperforming assets and troubled debt restructurings to total assets	—		%	0.06		%

Liquidity and Capital Resources

Liquidity Management.  Liquidity is the ability to meet current and future financial obligations of a short-term and long-term nature. The Bank’s primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of securities, and borrowings from the Federal Home Loan Bank of Boston. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and prepayments on loans are greatly influenced by general interest rates, economic conditions and competition.

Management regularly adjusts its investments in liquid assets based upon an assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities, and (4) the objectives of our interest rate risk and investment policies.

The Bank’s most liquid assets are cash and cash equivalents, interest-bearing deposits in other banks, and U.S. government federal agencies and mortgage-backed securities. The levels of these assets depend on the Bank’s operating, financing, lending and investing activities during any given period.  At March 31, 2014, cash and cash equivalents totaled $2.6 million.  Securities classified as available-for-sale provide additional sources of liquidity

29

and had a market value of $11.8 million at March 31, 2014.  In addition, at March 31, 2014, the Bank had the ability to borrow a total of approximately $17.3 million from the Federal Home Loan Bank of Boston.  At March 31, 2014, the Bank had borrowings outstanding of $2.9 million.  At March 31, 2014, the Bank also had the ability to borrow $3.7 million from the Co-operative Central Bank, none of which was outstanding at that date. In addition, the Bank had a $500,000 line of credit available from Bankers’ Bank Northeast. At March 31, 2014, the Bank had no borrowings outstanding under this credit facility.

At March 31, 2014, the Bank had $6.7 million in loan commitments outstanding, which consisted of commitments to originate loans, available lines of credit, standby letters of credit and unadvanced funds on construction loans. Certificates of deposit due within one year after March 31, 2014 totaled $25.0 million, or 57% of total time deposits.  If these maturing deposits are not renewed, the Bank will be required to seek other sources of funds, including other certificates of deposit and borrowings. Depending on market conditions, the Bank may be required to pay higher rates on such deposits or other borrowings than the Bank currently pays on the certificates of deposit. Management believes, however, based on past experience that a significant portion of our certificates of deposit will be renewed.  The Bank has the ability to attract and retain deposits by adjusting the interest rates offered.

The Company is a separate legal entity from the Bank and must provide for its own liquidity to pay its operating expenses and other financial obligations, to pay any dividends and to repurchase any of its outstanding common stock.  The Company’s primary source of income is dividends received from the Bank.  Under Massachusetts banking law, the amount of dividends that the Bank may declare and pay to the Company in any calendar year, without receipt of prior approval from the Commissioner of Banks of Massachusetts, cannot exceed the total of its net profits for that year combined with its retained net profits of the preceding two years, less any required transfer to surplus or a fund for the retirement of any preferred stock.  At March 31, 2014, the Company had liquid assets of $2.2 million.

Contractual Obligations. The Company has entered into a non-cancellable lease agreement pertaining to the Roslindale branch facility.

Capital Management.  The Bank is subject to various regulatory capital requirements administered by the Federal Deposit Insurance Corporation and the Massachusetts Commissioner of Banks, 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 March 31, 2014, the Bank exceeded all of its regulatory capital requirements to be considered “well capitalized” under regulatory guidelines.  See note 8 of the notes to consolidated financial statements.

Off-Balance Sheet Arrangements

In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in our financial statements.  These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit.

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is

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based on management’s credit evaluation of the borrower. Collateral held varies but usually includes income-producing commercial properties or residential real estate.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance by a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.  The Company’s outstanding letters of credit generally have a term of less than one year. If a letter of credit is drawn upon, the Company may seek recourse through the customer’s underlying line of credit. If the customer’s line of credit is also in default, the Company may take possession of the collateral, if any, securing the line of credit.

Notional amounts of financial instrument liabilities with off-balance sheet credit risk are as follows (in thousands):

	March 31,		September 30,
	2014		2013
	(unaudited)
Commitments to originate loans	$	2,607	$	1,880
Unadvanced funds on lines of credit	3,756		2,803
Standby letters of credit	149		149
Unadvanced funds on construction loans	220		307
	$	6,732	$	5,139

There is no material difference between the notional amount and the estimated fair value of the off-balance sheet liabilities.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

This item is not applicable as the Company is a smaller reporting company.

Item 4.  Controls and Procedures

The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”).  Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

In addition, based on that evaluation, no change in the Company’s internal control over financial reporting occurred during the quarter ended March 31, 2014 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

The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business.  The Company’s management believes that such routine legal proceedings, in the aggregate, are immaterial to the Company’s financial condition and results of operations.

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Item 1A.  Risk Factors

There have been no material changes in the Company’s risk factors during the six months ended March 31, 2014. See the discussion and analysis of risk factors, in Item 1A entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended September 30, 2013.

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

Not applicable.

Item 3.  Defaults Upon Senior Securities

Not applicable.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information.

Not applicable.

Item 6.  Exhibits

3.1Articles of Incorporation of Meetinghouse Bancorp, Inc. (1)

3.2Articles of Amendment to Articles of Incorporation of Meetinghouse Bancorp, Inc. (1)

3.3Bylaws of Meetinghouse Bancorp, Inc. (1)

31.1Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32.0Section 1350 Certification

101.1The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of (Loss) Income, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to the Unaudited Consolidated Financial Statements.

(1)Incorporated hereinbyreferencetotheexhibitstoMeetinghouseBancorp,Inc.’sRegistrationStatementonFormS-1(FileNo.333-180026),filedwiththeSecuritiesandExchangeCommissiononMarch9,2012.

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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.

	MEETINGHOUSE BANCORP, INC.
Dated: May 14, 2014	By:	/s/ Anthony A. Paciulli
		Anthony A. Paciulli
		President and Chief Executive Officer
Dated: May 14, 2014	By:	/s/ Wayne Gove
		Wayne Gove
		Senior Vice President and Chief Financial Officer

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