Poage Bankshares, Inc. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - Poage Bankshares, Inc.	Financial_Report.xls
EX-32 - EXHIBIT 32 - Poage Bankshares, Inc.	v409853_ex32.htm
EX-31.2 - EXHIBIT 31.2 - Poage Bankshares, Inc.	v409853_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - Poage Bankshares, Inc.	v409853_ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the Quarterly Period ended March 31, 2015

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

For transition period from ______________________ to___________________

Commission File Number 001-35295

Poage Bankshares, Inc.

(Exact Name of Registrant as Specified in Charter)

Maryland		45-3204393
(State of Other Jurisdiction		(I.R.S Employer
Of Incorporation		Identification Number)

1500 Carter Avenue, Ashland, KY 41101		41101
(Address of Principal Executive Officer)		(Zip Code)

606-324-7196

Registrant’s telephone number, including area code

Not Applicable

(Former name or former address, 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 ¨

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

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

Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer	¨	Smaller reporting company	x

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

As of May 6, 2015 3,786,723 shares of the Registrant’s common stock, par value $.01 per share, were outstanding.

POAGE BANKSHARES, INC.

Form 10-Q Quarterly Report

Table of Contents

	PART I. FINANCIAL INFORMATION

ITEM 1.	CONSOLIDATED FINANCIAL STATEMENTS – POAGE BANKSHARES, INC.	3

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34

ITEM 4.	CONTROLS AND PROCEDURES	34

	PART II. OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	35

ITEM 1A.	RISK FACTORS	35

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	35

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	35

ITEM 4.	MINE SAFETY DISCLOSURES

ITEM 5.	OTHER INFORMATION	35

ITEM 6.	EXHIBITS	35

SIGNATURES		36

PART I

ITEM 1. FINANCIAL STATEMENTS

POAGE BANKSHARES, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2015			2014
	(in thousands)
ASSETS
Cash and due from financial institutions	$	16,696		$	16,967
Securities available for sale		70,067			65,262
Loans held for sale		590			712
Loans, net of allowance of $2,013 and $1,911		300,292			302,012
Restricted stock, at cost		2,921			2,921
Other real estate owned, net		1,699			1,858
Premises and equipment, net		9,514			9,257
Company owned life insurance		6,805			6,760
Accrued interest receivable		1,414			1,347
Goodwill		1,277			1,082
Other intangible assets, net		1,389			1,470
Deferred tax asset		2,135			2,341
Other assets		1,812			2,713
Total Assets	$	416,611		$	414,702

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest bearing	$	43,540		$	49,646
Interest bearing		282,890			273,492
Total deposits		326,430			323,138
Federal Home Loan Bank advances		16,173			17,952
Subordinated debenture		2,713			2,697
Accrued interest payable		89			47
Other liabilities		3,561			2,717
Total liabilities		348,966			346,551

Commitments and contingent liabilities		-			-

Shareholders' equity
Common stock, $.01 par value, 30,000,000 shares authorized,
3,793,483 and 3,876,455 issued and outstanding at
March 31, 2015 and December 31, 2014 respectively		38			39
Additional paid-in-capital		36,892			37,978
Retained earnings		32,326			31,933
Unearned Employee Stock Ownership Plan (ESOP) shares		(2,225	)		(2,259	)
Accumulated other comprehensive income		614			460
Total shareholders' equity		67,645			68,151
Total liabilities and shareholders' equity	$	416,611		$	414,702

See notes to unaudited consolidated financial statements.

POAGE BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three months ended
	March 31,
	2015		2014
	(in thousands)
Interest and dividend income
Loans, including fees	$	4,210	$	2,569
Taxable securities		261		391
Tax exempt securities		102		125
Federal funds sold and other		33		26
		4,606		3,111
Interest expense
Deposits		447		358
Federal Home Loan Bank advances and other		103		97
		550		455

Net interest income		4,056		2,656

Provision for loan losses		91		-

Net interest income after provision for loan losses		3,965		2,656

Non-interest income
Service charges on deposits		441		210
Other service charges		10		6
Gains on mortgage banking activity		159		94
Income from company owned life insurance		45		67
Gains on insurance settlements/claims		41		-
Other		4		3
		700		380
Non-interest expense
Salaries and employee benefits		1,843		1,274
Occupancy and equipment		397		300
Data processing		549		332
Federal deposit insurance		64		29
Loan processing and collection		71		29
Foreclosed assets, net		106		29
Advertising		38		41
Professional Fees		187		371
Other taxes		95		59
Director fees and expenses		54		58
Amortization of intangible assets		81		-
Early Termination Fee		-		877
Other		270		216
		3,755		3,615

Income (loss) before income taxes		910		(579	)

Income tax expense (benefit)		324		(154	)

Net income (loss)	$	586	$	(425	)
Earnings (loss) per share:
Basic	$	0.16	$	(0.13	)
Diluted	$	0.16	$	(0.13	)
Dividend per share	$	0.05	$	0.05

See notes to unaudited consolidated financial statements.

POAGE BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three months ended
	March 31,
	2015			2014
	(in thousands)

Net income (loss)	$	586		$	(425	)

Other comprehensive income:
Unrealized holding gains on available for sale securities		233			756
Reclassification adjustments for (gains) losses recognized in income		-			-
Net unrealized holding gains on available for sale securities		233			756
Tax effect		(79	)		(256	)
Other comprehensive income:		154			500

Comprehensive income	$	740		$	75

See notes to unaudited consolidated financial statements.

POAGE BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

													Accumulated
				Additional						Unearned			Other		Total
	Common			Paid-In			Retained			ESOP			Comprehensive		Shareholders'
	Stock			Capital			Earnings			Shares			Income (Loss)		Equity
							(in thousands)

Balances, January 1, 2015	$	39		$	37,978		$	31,933		$	(2,259	)	$	460	$	68,151

Net income		-			-			586			-			-		586
Stock repurchasing, 82,434 shares repurchased		(1	)		(1,233	)		-			-			-		(1,234	)
Dividends paid ($0.05/share)		-			-			(193	)		-			-		(193	)
ESOP compensation earned		-			17			-			34			-		51
Stock based compensation expense, net of 539 forfeited restricted shares		-			130			-			-			-		130
Other comprehensive income		-			-			-			-			154		154

Balances, March 31, 2015	$	38		$	36,892		$	32,326		$	(2,225	)	$	614	$	67,645

See notes to unaudited consolidated financial statements.

POAGE BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three months ended
	March 31,
	2015			2014
	(in thousands)
CASH FLOW FORM OPERATING ACTIVITIES:
Net income (loss)	$	586		$	(425	)
Adjustments to reconcile net income (loss) to net cash from
operating activities:
Depreciation		150			117
Provision for loan losses		91			-
ESOP compensation expense		51			48
Stock based compensation expense		130			131
Loss on sale of other real estate owned		51			10
Gain on sale of repossessed assets		(1	)		-
Amortization of core deposit intangible		81			-
Accretion of fair value adjustments related to loans		(339	)		-
Accretion of fair value adjustments related to deposits		(16	)		-
Amortization of fair value related to subordinated debenture		16			-
Net amortization on securities		116			108
Deferred income tax benefit		(69	)		(58	)
Net gain on mortgage banking activities		(159	)		(94	)
Origination of loans held for sale		(2,078	)		(707	)
Proceeds from loans held for sale		2,359			744
Increase in cash value of life insurance		(45	)		(67	)
Change in asset and liabilities, net assets and liabilities acquired:
Accrued interest receivable		(67	)		5
Other assets		920			105
Accrued interest payable		42			71
Other liabilities		844			874
Net cash from operating activities		2,663			862

CASH FLOW FROM INVESTING ACTIVITIES:
Securities available for sale:
Proceeds from sales		-			-
Proceeds from calls		1,000			7,000
Proceeds from maturities		405			120
Purchases		(7,632	)		-
Principal payments received		1,540			1,408
Cash paid for acquisition, net of cash acquired		-			1,445
Loan originations and principal payments on loans, net		1,916			(2,828	)
Proceeds from the sale of other real estate owned		108			-
Proceeds from the sale of repossessed assets		34			-
Purchase of properties and equipment		(407	)		(92	)
Net cash from (used in) investing activities		(3,036	)		7,053


CASH FLOW FROM FINANCING ACTIVITIES
Net change in deposits		3,308			3,761
Proceeds from Federal Home Loan Bank borrowings		14,000			26,000
Payments on Federal Home Loan Bank borrowings		(15,779	)		(27,448	)
Cash dividend paid		(193	)		(167	)
Stock repurchases		(1,234	)		-
Net cash used in financing activities		102			2,146

DECREASE IN CASH AND CASH EQUIVALENTS		(271	)		10,061

Cash and cash equivalents at beginning of year		16,967			6,684

CASH AND CASH EQUIVALENTS AT END OF YEAR	$	16,696		$	16,745

Additional cash flows and supplementary information:
Cash paid during the year for:
Interest on deposits and advances	$	508		$	351
Income taxes		250			-

See notes to unaudited consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements of Poage Bankshares, Inc. (the “Company”) and its wholly owned subsidiary Town Square Bank (which was formerly operated under the name “Home Federal Savings and Loan Association”) (the “Bank”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates used in the preparation of the financial statements are based on various factors including the current interest rate environment and the general strength of the local economy. Changes in the overall interest rate environment can significantly affect the Company’s net interest income and the value of its recorded assets and liabilities. Actual results could differ from those estimates used in the preparation of the financial statements.

In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the Company’s financial position as of March 31, 2015 and December 31, 2014 and the results of operations and cash flows for the interim periods ended March 31, 2015 and 2014. All interim amounts have not been audited, and the results of operations for the interim periods herein are not necessarily indicative of the results of operations to be expected for the year. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto filed as part of the Company’s 2014 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

On September 9, 2014, the Company and Commonwealth Bank, FSB (“Commonwealth”) issued a joint press release announcing that they had entered into a definitive agreement for the Company to acquire Commonwealth in a conversion merger transaction. Under the terms of the definitive agreement, which has been approved by the Boards of Directors of both institutions, Commonwealth will convert from a federally-chartered mutual savings association to a federally-chartered stock savings association and issue all of its outstanding shares of common stock to the Company.

In connection with the acquisition and in accordance with a related Plan of Conversion Merger (the “Plan”), the Company will offer newly issued shares of its common stock in a subscription offering, on a priority basis, first to eligible depositors of Commonwealth as of the close of business on July 31, 2013, and then to other eligible members of Commonwealth. If any shares remain unsold in the subscription offering, the Company will offer those shares in a community offering and, if necessary, in a syndicated community offering. The amount of stock that the Company will issue and sell will be based on an independent appraisal of Commonwealth. Following the completion of the stock offering, Commonwealth will merge with and into Town Square Bank, with Town Square Bank as the surviving institution. The transaction is expected to close in the second quarter of 2015, subject to the approval of Commonwealth’s members and the satisfaction of other customary closing conditions.

NOTE 2- ACCOUNTING STANDARDS NEWLY ISSUED NOT YET EFFECTIVE

In May 2014 the FASB amended existing guidance related to revenue from contracts with customers. This amendment supersedes and replaces nearly all existing revenue recognition guidance, including industry-specific guidance, establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics and expands and improves disclosures about revenue. In addition, this amendment specifies the accounting for some costs to obtain or fulfill a contract with a customer.

These amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. There is a proposal to defer adoption for 1 year. The amendments should be applied retrospectively to all periods presented or retrospectively with the cumulative effect recognized at the date of initial application. The Company is currently evaluating the impact of this new accounting standard on the consolidated financial statements.

In January 2014, the FASB amended existing guidance to clarify 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 should be derecognized and the real estate recognized. These amendments 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. Additional disclosures are required.

These amendments are effective for public business entities for annual periods and interim periods within those annual periods beginning after December 15, 2014. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

NOTE 3 - SECURITIES AVAILABLE FOR SALE

The amortized cost and fair value of securities available for sale at March 31, 2015 and December 31, 2014 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
March 31, 2015
States and political subdivisions	$	16,679	$	720	$	9		$	17,390
U.S. Government agencies and sponsored entities		13,247		33		(91	)		13,189
Government sponsored entities residential mortgage-backed:
FHLMC		13,663		239		(5	)		13,897
FNMA		13,637		163		(13	)		13,787
Collateralized mortgage obligations		7,996		1		(71	)		7,926
SBA loan pools		3,914		-		(36	)		3,878
Total securities	$	69,136	$	1,156	$	(225	)	$	70,067

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
December 31, 2014
States and political subdivisions	$	17,121	$	633	$	(8	)	$	17,746
U.S. Government agencies and sponsored entities		14,247		6		(267	)		13,986
Government sponsored entities residential mortgage-backed:
FHLMC		14,346		251		(7	)		14,590
FNMA		14,207		177		(9	)		14,375
Collateralized mortgage obligations		4,644		-		(79	)		4,565
Total securities	$	64,565	$	1,067	$	(370	)	$	65,262

The amortized cost and fair value of the securities portfolio at March 31, 2015 are shown in the following table by expected maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately (in thousands).

	March 31,
	2015
	Amortized		Fair
	Cost		Value

Within one year	$	250	$	253
One to five years		10,347		10,555
Five to ten years		16,559		16,835
Beyond ten years		2,770		2,936
Mortgage-backed securities and collateralized mortgage obligations		35,296		35,610
SBA loan pools		3,914		3,878
Total	$	69,136	$	70,067

The following table summarizes the securities with unrealized losses at March 31, 2015 and December 31, 2014, aggregated by major security type and length of time in a continuous unrealized loss position (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, 2015
States and political subdivisions	$	1,060	$	(9	)	$	-	$	-		$	1,060	$	(9	)
U.S. Government agencies and sponsored entities		-		-			8,659		(91	)		8,659		(91	)
Government sponsored entities residential mortgage backed:
FHLMC		1,094		(5	)		-		-			1,094		(5	)
FNMA		2,893		(13	)		-		-			2,893		(13	)
Collateralized mortgage obligations		4,498		(12	)		2,738		(59	)		7,236		(71	)
SBA loan pools		1,863		(36	)		-		-			1,863		(36	)
Total available-for-sale securities	$	11,408	$	(75	)	$	11,397	$	(150	)	$	22,805	$	(225	)

December 31, 2014
States and political subdivisions	$	1,072	$	(8	)	$	-	$	-		$	1,072	$	(8	)
U.S. Government agencies and sponsored entities		-		-			12,482		(267	)		12,482		(267	)
Government sponsored entities residential mortgage backed:
FHLMC		-		-			1,131		(7	)		1,131		(7	)
FNMA		2,063		(3	)		946		(6	)		3,009		(9	)
Collateralized mortgage obligations		1,652		(13	)		2,913		(66	)		4,565		(79	)
Total available-for-sale securities	$	4,787	$	(24	)	$	17,472	$	(346	)	$	22,259	$	(370	)

Unrealized losses on bonds have not been recognized into income because the issuers of the bonds are of high credit quality, management does not intend to sell and it is not more likely than not that management would be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates. The fair value is expected to recover as the bonds approach maturity.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement, and 2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

NOTE 4 – LOANS

Loans at March 31, 2015 and December 31, 2014 were as follows (in thousands):

	March 31,		December 31,
	2015		2014

Real estate:
One to four family	$	176,650	$	179,480
Multi-family		5,882		5,916
Commercial Real Estate		63,485		62,979
Construction and land		4,514		5,142
		250,531		253,517

Commercial and Industrial		27,740		25,523

Consumer
Home equity loans and lines of credit		7,861		7,973
Motor vehicle		10,067		10,337
Other		6,349		6,774
		24,277		25,084

Total		302,548		304,124
Less: Net deferred loan fees		243		201
Allowance for loan losses		2,013		1,911

	$	300,292	$	302,012

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of March 31, 2015 and December 31, 2014. Accrued interest receivable and net deferred loans fees are not considered significant and therefore are not included in the loan balances presented in the table below (in thousands):

March 31, 2015
	Allowance for Loan Losses								Loan Balances
	Individually		Purchased		Collectively				Individually		Purchased		Collectively
	Evaluated for		Credit-Impaired		Evaluated for				Evaluated for		Credit-Impaired		Evaluated for
Loan Segment	Impairment		Loans		Impairment		Total		Impairment		Loans		Impairment		Total

Real estate	$	70	$	-	$	1,808	$	1,878	$	1723	$	3,276	$	245,532	$	250,531
Commercial and industrial		-		-		72		72		199		436		27,105		27,740
Consumer		-		-		63		63		-		9		24,268		24,277
Unallocated		-		-		-		-		-		-		-		-

Total	$	70	$	-	$	1,943	$	2,013	$	1,922	$	3,721	$	296,905	$	302,548

December 31, 2014
	Allowance for Loan Losses								Loan Balances
	Individually		Purchased		Collectively				Individually		Purchased		Collectively
	Evaluated for		Credit-Impaired		Evaluated for				Evaluated for		Credit-Impaired		Evaluated for
Loan Segment	Impairment		Loans		Impairment		Total		Impairment		Loans		Impairment		Total

Real estate	$	-	$	-	$	1,786	$	1,786	$	324	$	3,633	$	249,560	$	253,517
Commercial and industrial		-		-		62		62		19		439		25,065		25,523
Consumer		-		-		63		63		-		10		25,074		25,084
Unallocated		-		-		-		-		-		-		-		-

Total	$	-	$	-	$	1,911	$	1,911	$	343	$	4,082	$	299,699	$	304,124

The following table presents information related to impaired loans by class of loans as of March 31, 2015 and December 31, 2014.

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
March 31, 2015
With no related allowance recorded:
Commercial	$	199	$	199	$	-	$	109	$	-	$	-
Commercial real estate:
Construction		-		-		-		-		-		-
Other		520		520				422		-		-
Residential real estate:
Nontraditional		-		-		-		-		-		-
Other		453		453		-		-		-		-
Subtotal		1,172		1,172		-		531		-		-

With an allowance recorded:
Commercial	$	-	$	-	$	-	$	-	$	-	$	-
Commercial real estate:
Construction		-		-		-		-		-		-
Other		496		462		34		231		-		-
Residential real estate:
Nontraditional		-		-				-		-		-
Other		254		218		36		109		-		-
Subtotal		750		680		70		340		-		-

Total	$	1,922	$	1,852	$	70	$	871	$	-	$	-

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
December 31, 2014
With no related allowance recorded:
Commercial	$	19	$	-	$	19	$	19	$	-	$	-
Commercial real estate:
Construction		-		-		-		-		-		-
Other		199		-		199		199		-		-
Residential real estate
Nontraditional		-		-		-		-		-		-
Other		125		125		-		31		-		-
Subtotal		343		125		218		249		-		-

With an allowance recorded:
Commercial		-		-		-		-		-		-
Commercial real estate:
Construction		-		-		-		-		-		-
Other		-		-		-		-		-		-
Residential real estate:
Nontraditional		-		-		-		-		-		-
Other		-		-		-		-		-		-
Subtotal		-		-		-		-		-		-

Total	$	343	$	125	$	218	$	249	$	-	$	-

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality. For purposes of this disclosure, the unpaid balance is not reduced for partial charge-offs.

The following table sets forth an analysis of our allowance for loan losses for the three months ended March 31, 2015 and 2014 (in thousands):

Three Months Ended				Commercial
March 31, 2015	Real Estate			and Industrial			Consumer			Unallocated		Total

Allowance for loan losses:
Beginning balance	$	1,806		$	43		$	62		$	-	$	1,911
Provision for loan losses		(1	)		54			38			-		91
Loans charged-off		(52	)		(52	)		(47	)		-		(151	)
Recoveries		125			27			10			-		162

Total ending allowance balance	$	1,878		$	72		$	63		$	-	$	2,013

Three Months Ended				Commercial
March 31, 2014	Real Estate			and Industrial			Consumer			Unallocated		Total

Allowance for loan losses:
Beginning balance	$	1,818		$	8		$	52		$	30	$	1,908
Provision for loan losses		3			(15	)		(6	)		18		-
Loans charged-off		(56	)		-			(5	)		-		(61	)
Recoveries		2			18			-			-		20

Total ending allowance balance	$	1,767		$	11		$	41		$	48	$	1,867

There were $3.7 million and $5.4 million of purchased credit impaired loans which were acquired in a business combination completed on March 18, 2014 at March 31, 2015 and 2014, respectively. Impaired loans averaged $834,000 and $24,000 for the three months ended March 31, 2015 and 2014, respectively.

Nonaccrual loans and loans past due 90 days still on accrual consist of smaller balance homogeneous loans that are collectively evaluated for impairment.

The following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of March 31, 2015 and December 31, 2014 (in thousands):

	March 31, 2015				December 31, 2014
			Loans Past Due				Loans Past Due
			Over 90 Days				Over 90 Days
	Nonaccrual		Still Accruing		Nonaccrual		Still Accruing
Real estate:
One to four family	$	2,499	$	-	$	2,223	$	-
Multi-family		-		-		-		-
Commercial real estate		1,069		-		578		-
Construction and land		49		-		103		-
Commercial and industrial		255		-		396		-
Consumer:		-		-		-		-
Home equity loans and lines of credit		1		-		-		-
Motor vehicle		9		-		21		-
Other		30		-		31		-

Total	$	3,912	$	-	$	3,353	$	-

The following table presents the aging of the recorded investment in past due loans as of March 31, 2015 and December 31, 2014 by class of loans. Non-accrual loans of $3.9 million as of March 31, 2015 and $3.4 million at December 31, 2014 are included in the tables below and have been categorized based on their payment status (in thousands).

	30 - 59		60 - 89		Greater than				Purchased
	Days		Days		90 Days		Total		Credit-Impaired		Loans Not
	Past Due		Past Due		Past Due		Past Due		Loans		Past Due		Total
March 31, 2015
Real estate:
One to four family	$	1,648	$	343	$	1,589	$	3,580	$	1,211	$	171,859	$	176,650
Multi-family		-		-		-		-		-		5,882		5,882
Commercial real estate		18		-		750		768		1,796		60,921		63,485
Construction and land		24		-		49		73		269		4,172		4,514
Commercial and industrial		-		1		226		227		436		27,077		27,740
Consumer:
Home equity loans and lines of credit		59		-		-		59		7		7,795		7,861
Motor vehicle		46		-		9		55		-		10,012		10,067
Other		53		3		18		74		2		6,273		6,349

Total	$	1,848	$	347	$	2,641	$	4,836	$	3,721	$	293,991	$	302,548

	30 - 59		60 - 89		Greater than				Purchased
	Days		Days		90 Days		Total		Credit-Impaired		Loans Not
	Past Due		Past Due		Past Due		Past Due		Loans		Past Due		Total
December 31, 2014
Real estate:
One to four family	$	2,028	$	488	$	1,259	$	3,775	$	1,262	$	174,443	$	179,480
Multi-family		-		-		-		-		-		5,916		5,916
Commercial real estate		1,102		124		38		1,264		2,031		59,684		62,979
Construction and land		-		-		103		103		340		4,699		5,142
Commercial and industrial		245		46		257		548		439		24,536		25,523
Consumer:
Home equity loans and lines of credit		86		23		-		109		7		7,857		7,973
Motor vehicle		102		4		20		126		-		10,211		10,337
Other		33		20		16		69		3		6,702		6,774

Total	$	3,596	$	705	$	1,693	$	5,994	$	4,082	$	294,048	$	304,124

Troubled Debt Restructurings:

As of March 31, 2015 and December 31, 2014, the Company has a recorded investment in two troubled debt restructurings which totaled $218,000. A less than market rate and extended term was granted as concessions for both troubled debt restructurings. No additional charge-off or provision has been made for the loan relationships. No additional commitments to lend have been made to the borrower.

CREDIT QUALITY INDICATORS:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes all non-homogeneous loans, such as commercial and commercial real estate loans. The analysis for residential real estate and consumer loans primarily includes review of past due status. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands):

	Pass		Special Mention		Substandard		Doubtful		Not Rated
March 31, 2015
One to four family	$	168,104	$	3,764	$	4,782	$	-	$	-
Multi family		5,882		-		-		-		-
Commercial real estate		60,722		161		2,602		-		-
Construction and land		3,811		-		703		-		-
Commercial and industrial		25,805		1,208		727		-		-
Home equity loans and lines of credit		7,832		-		29		-		-
Motor vehicle		10,042		8		17		-		-
Other		6,315		-		34		-		-

Total	$	288,513	$	5,141	$	8,894	$	-	$	-

	Pass		Special Mention		Substandard		Doubtful		Not Rated
December 31, 2014
One to four family	$	171,324	$	3,794	$	4,362	$	-	$	-
Multi family		5,916		-		-		-		-
Commercial real estate		60,250		54		2,675		-		-
Construction and land		4,402		52		688		-		-
Commercial and industrial		22,162		2,332		1,029		-		-
Home equity loans and lines of credit		7,935		30		8		-		-
Motor vehicle		10,299		22		16		-		-
Other		6,740		-		34		-		-

Total	$	289,028	$	6,284	$	8,812	$	-	$	-

The Company holds purchased loans without evidence of credit quality deterioration and purchased loans for which there was, at their acquisition date, evidence of deterioration of credit quality since their origination and it was probable, at acquisition, that all contractually required payments would not be collected. A summary of non-impaired purchased loans and credit-impaired purchased loans with the carrying amount of those loans is as follows at March 31, 2015.

	Non-impaired		Credit-impaired
	Purchased		Purchased
(in thousands)	Loans		Loans
Real estate mortgage loans:
Residential:
1-4 Family	$	32,042	$	1,211
Multi-family		3,224		-
Construction & Land		2,088		269
Farm		6,180		19
Nonresidential		25,342		1,777
Commercial non-mortgage loans		10,450		436
Consumer loans		3,735		9

Total loans	$	83,061	$	3,721

For those purchased loans disclosed above, the Company did not increase the allowance for loan losses for the three months ended March 31, 2015. There were $4.1 million purchased credit impaired loans as of December 31, 2014.

The following table presents the composition of the acquired loans at March 31, 2015:

	Contractual		Unaccreted			Amortized
(in thousands)	Amount		Discount			Book Value
Real estate mortgage loans:
Residential:
1-4 Family	$	34,527	$	(1,274	)	$	33,253
Multi-family		3,250		(26	)		3,224
Construction & Land		2,382		(25	)		2,357
Farm		6,233		(34	)		6,199
Nonresidential		27,980		861			27,119
Commercial non-mortgage loans		13,803		(2,917	)		10,886
Consumer loans		3,859		(115	)		3,744

Total loans	$	92,034	$	(5,252	)	$	86,782

The following table presents the purchased loans that are included within the scope of ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality as of March 31, 2015.

(in thousands)

Contractually-required principal and interest payments	$	7,651
Non-Accretable difference		(3,416	)
Accretable yield		(514	)

Amortized book value of loans	$	3,721

The Company adjusted interest income to recognize $110,000 for the three months ended March 31, 2015 of accretable yield on credit-impaired purchased loans.

NOTE 5: FEDERAL HOME LOAN BANK ADVANCES

Advances from the FHLB at March 31, 2015 and December 31, 2014 were as follows (in thousands):

	March 31,		December 31,
	2015		2014

Maturities April 2015 through June 2025, fixed rate at
rates from 0.17% to 6.70%, weighted average rate of 1.59%
at March 31, 2015 and 1.55% at December 31, 2014	$	16,173	$	17,952

Payments contractually required over the next five years are as follows (in thousands):

March 31,
2016	$	10,855
2017		2,160
2018		1,734
2019		1,153
2020		170
Thereafter		101
Total	$	16,173

NOTE 6: FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate fair value:

Securities: The fair values for securities are determined by quoted market prices, if available (Level 1). If quoted market prices are not available, fair values are based on quoted market prices of similar securities (Level 2). This includes the use of “matrix pricing” used to value debt securities absent the exclusive use of quoted prices. For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows (Level 3).

Impaired Loans: The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying such loans. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy.

Other Real Estate Owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned (OREO) are measured at the lower of carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisals of the property resulting in a Level 3 classification. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized.

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

	Fair Value Measurements at
	March 31, 2015 Using:
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)

Financial Assets
Securities:
States and political subdivisions	$	17,390	$	-	$	17,390	$	-
U.S. Government agencies and sponsored entities		13,189		-		13,189		-
Mortgage backed securities: residential		27,684		-		27,684		-
Collateralized mortgage obligations		7,926		-		7,926		-
SBA loan pools		3,878		-		3,878		-
Total securities	$	70,067	$	-	$	70,067	$	-

	Fair Value Measurements at
	December 31, 2014 Using:
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)

Financial Assets
Securities:
States and political subdivisions	$	17,746	$	-	$	17,746	$	-
U.S. Government agencies and sponsored entities		13,986		-		13,986		-
Mortgage backed securities: residential		28,965		-		28,965		-
Collateralized mortgage obligations		4,565		-		4,565		-
Total securities	$	65,262	$	-	$	65,262	$	-

For the periods ended March 31, 2015 and December 31, 2014, there were no transfers between Level 1 and Level 2.

Assets measured at fair value on a non-recurring basis are summarized below (in thousands):

	Fair Value Measurements at
	March 31, 2015 Using:
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	Carrying		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)

Impaired loans
One to four family, net	$	462	$	-	$	-	$	462
Commercial real estate, net		218		-		-		218

Other real estate owned
One to four family, net	$	72	$	-	$	-	$	72
Commercial real estate, net		115		-		-		115

Fair Value Measurements at

December 31, 2014 Using:

Significant

Quoted Prices in

Other

Significant

Active Markets for

Observable

Unobservable

Carrying

Identical Assets

Inputs

Value

(Level 1)

(Level 2)

(Level 3)

Other real estate owned

One to four family, net

Commercial real estate, net

115

Commercial and residential real estate properties classified as OREO are measured at fair value, less costs to sell. Fair values are based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Appraisals for real estate properties classified as other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Bank’s management. The appraisal values are discounted to allow for selling expenses and fees, and the discounts range from 5% to 10%.

At March 31, 2015, OREO recorded at fair value had a net carrying amount of $187,000 made up of the outstanding balance of $244,000 net of a valuation allowance of $57,000. There were no write-downs for the three months ended March 31, 2015. At December 31, 2014, OREO recorded at fair value had a net carrying amount of $187,000 made up of the outstanding balance of $244,000, net of a valuation allowance of $57,000. At March 31, 2014, OREO recorded at fair value had a net carrying amount of $286,000 made up of the outstanding balance of $454,000 net of a valuation allowance of $168,000, which resulted in a write-down of $10,000 for the three months ended March 31, 2014.

At March 31, 2015, impaired loans recorded at fair value had a net carrying amount of $680,000 made up of outstanding balance of $750,000 net of a valuation allowance of $70,000. There were no write-downs for the three months ended March 31, 2015. There were no impaired loans recorded at fair value at December 31, 2014 or March 31, 2014. There were no write-downs for the year ended December 31, 2014 or the three months ended March 31, 2014.

The carrying amounts and estimated fair values of financial instruments at March 31, 2015 and December 31, 2014 are as follows (in thousands):

			Fair Value Measurements
	Carrying
March 31, 2015	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	16,696	$	16,696	$	-	$	-	$	16,696
Securities		70,067		-		70,067		-		70,067
Restricted stock		2,921		N/A		N/A		N/A		N/A
Loans held for sale		590		-		590		-		590
Loans, net		300,292		-		-		315,307		315,307
Accrued interest receivable		1,414		-		383		1,031		1,414

Financial liabilities
Deposits	$	326,430	$	167,769	$	160,052	$	-	$	327,821
Federal Home Loan Bank advances		16,173		8,000		8,373		-		16,373
Subordinated debenture		2,713		-		2,713		-		2,713
Accrued interest payable		89		-		89		-		89

			Fair Value Measurements
	Carrying
December 31, 2014	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	16,967	$	16,967	$	-	$	-	$	16,967
Securities		65,262		-		65,262		-		65,262
Restricted stock		2,921		N/A		N/A		N/A		N/A
Loans held for sale		712		-		712		-		712
Loans, net		302,012		-		-		316,493		316,493
Accrued interest receivable		1,347		-		293		1,054		1,347

Financial liabilities
Deposits	$	323,138	$	159,384	$	165,190	$	-	$	324,574
Federal Home Loan Bank advances		17,952		9,000		9,171		-		18,171
Subordinated debenture		2,697		-		2,697		-		2,697
Accrued interest payable		47		-		47		-		47

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

Cash and Cash Equivalents:

The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1.

Restricted Stock:

It is not practical to determine the fair value of FHLB and Bankers Bank of Kentucky stock due to restrictions placed on its transferability.

Loans:

Fair values of loans, excluding loans held for sale, are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

Deposits:

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are by definition equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. The carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date resulting in a Level 1 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Federal Home Loan Bank advances and subordinate debenture:

The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Accrued Interest Receivable/Payable:

The carrying amounts of accrued interest approximate fair value and are classified by level consistent with the level of the related assets or liabilities.

NOTE 7 - ESOP PLAN

Employees participate in an Employee Stock Option Plan (“ESOP”). The ESOP borrowed from the Company to purchase 269,790 shares of the Company’s common stock at $10 per share. The Company makes discretionary contributions to the ESOP, and pays dividends on unallocated shares to the ESOP, and the ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation and expense is recorded. Dividends on allocated shares increase participant accounts. Participants receive the shares at the end of employment.

There were no contributions to the ESOP for the three months ended March 31, 2015 or 2014.

Shares held by the ESOP at March 31, 2015 and December 31, 2014 were as follows (dollars in thousands) :

	March 31,		December 31,
	2015		2014
Allocated to participants		29,967		29,967
Released, but unallocated		-		-
Unearned		239,442		239,442

Total ESOP shares		269,409		269,409

Fair value of unearned shares	$	3,675	$	3,561

NOTE 8 – EARNINGS PER SHARE

The factors used in the earnings per share computation for the three months ended March 31, 2015 and 2014, were as follows (in thousands):

	Three months ended
	March 31,
Basic	2015			2014
Net income (loss)	$	586		$	(425	)
Less: Net income (loss) attributable to participating securities		14			(17	)
Net income (loss) available to common shareholders		572			(408	)

Weighted average common shares outstanding		3,848,948			3,427,808
Less: Average unallocated ESOP shares		(239,439	)		(239,439	)
Average participating shares		(91,589	)		(134,895	)
Average shares		3,517,920			3,053,474

Basic earnings (loss) per common share	$	0.16		$	(0.13	)

Diluted
Net income (loss)	$	572		$	(408	)

Weighted average common shares outstanding
for basic earnings (loss) per common share		3,517,920			3,053,474
Add: Dilutive effects of assumed exercises of stock options		-			-

Average shares and dilutive potential common shares		3,517,920			3,053,474

Diluted earnings (loss) per common share	$	0.16		$	(0.13	)

Stock options of 295,500 and 320,000 shares of common stock were not considered in computing diluted earnings per common share for 2015 or 2014 because they were antidilutive.

NOTE 9 – STOCK BASED COMPENSATION

On January 8, 2013, the shareholders of Poage Bankshares, Inc. approved the Poage Bankshares, Inc. 2013 Equity Incentive Plan (the “Plan”) for employees and directors of the Company. The Plan authorizes the issuance of up to 472,132 shares of the Company’s common stock, with no more than 134,895 of shares as restricted stock awards and 337,237 as stock options, either incentive stock options or non-qualified stock options. The exercise price of options granted under the Plan may not be less than the fair market value on the date the stock option is granted. The compensation committee of the board of directors has sole discretion to determine the amount and to whom equity incentive awards are granted.

On April 16, 2013, the compensation committee of the board of directors approved the issuance of 134,895 shares of restricted stock to its directors and officers. In addition, on May 10, 2013, the compensation committee of the board of directors approved the issuance of 300,000 stock options to its directors and officers. An additional 20,000 stock option shares were issued on March 19, 2014 as a result of the acquisition of Town Square Financial Corporation by Poage Bankshares, Inc. All stock options and restricted stock awards vest ratably over five years. Stock options expire ten years after issuance. Apart from the vesting schedule for both stock options and restricted stock, there are no performance-based conditions or any other material conditions applicable to the awards issued.

The following table summarizes stock option activity for the three months ended March 31, 2015:

				Weighted Average
	Options			Exercise Price

Outstanding - December 31, 2014		299,500		$	14.94
Granted		-			-
Exercised		-			-
Forfeited		(4,000	)		14.86
Outstanding - March 31, 2015		295,500		$	14.94


Fully vested and exercisable at March 31, 2015		71,550
Fully vested and exercisable at December 31, 2014		57,950
Expected to vest in future periods		223,950

Stock options are assumed to be earned ratably over their respective vesting periods and charged to compensation expense based upon their grant date fair value and the number of options assumed to be earned. No options were vested during the three months ended March 31, 2015. Stock-based compensation expense for stock options included in salaries and benefits for the three months ended March 31, 2015 and 2014 was $30,000 and $29,000, respectively. Total unrecognized compensation cost related to non-vested stock options was $355,000 at March 31, 2015 and $386,000 at December 31, 2014 and is expected to be recognized over a period of 4-5 years.

The following table summarizes non-vested restricted stock activity for the three months ended March 31, 2015:

Balance - December 31, 2014	100,624
Granted	-
Forfeited	(539	)
Vested	(8,903	)
Balance - March 31, 2015	91,182

The fair value of the restricted stock awards is amortized to compensation expense over the vesting period (generally five years) and is based on the market price of the Company’s common stock at the date of the grant multiplied by the number of shares granted that are expected to vest. Stock-based compensation expense for the restricted stock included in salaries and benefits for the three months ended March 31, 2015 and 2014 was $100,000 and $102,000, respectively. Unrecognized compensation expense for non-vested restricted stock awards was $1.2 million at March 31, 2015 and $1.3 million at December 31, 2014 and is expected to be recognized over a weighted-average period of 4-5 years.

NOTE 10 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table is changes in Accumulated Other Comprehensive Income (Loss) by component, net of tax for the three months ended March 31, 2015.

	Unrealized Gains and Losses on Available-for-Sale Securities
	Three months ended
	March 31, 2015
Beginning balance	$	460

Other comprehensive income, net of tax before reclassification		154

Amounts reclassified from accumulated to other comprehensive income for gains on sale of securities, net of tax expense of $0 for the three months ended March 31, 2015.		-

Net current period other comprehensive income		154

Ending Balance	$	614

NOTE 11 – PENDING BANK ACQUISITION

On September 9, 2014, Poage Bankshares, Inc. (“Poage”) and Commonwealth Bank, FSB (“Commonwealth”) issued a joint press release announcing that they have entered into a definitive agreement for Poage to acquire Commonwealth in a conversion merger transaction. Under the terms of the definitive agreement, which has been approved by the Boards of Directors of both institutions, Commonwealth will convert from a federally-chartered mutual savings association to a federally-chartered stock savings association and issue all of its outstanding shares of common stock to Poage. As of March 31, 2015, Commonwealth had total assets of $19.5 million and equity of $1.5 million with $15.1 million in net loans and $15.4 million in deposits (unaudited).

In connection with the acquisition and in accordance with a related Plan of Conversion Merger (the “Plan”), Poage will offer newly issued shares of its common stock in a subscription offering, on a priority basis, first to eligible depositors of Commonwealth as of the close of business on July 31, 2013, and then to other eligible members of Commonwealth. If any shares remain unsold in the subscription offering, Poage will offer those shares in a community offering and, if necessary, in a syndicated community offering. The amount of stock that Poage will issue and sell will be based on an independent appraisal of Commonwealth. Following the completion of the stock offering, Commonwealth will merge with and into Town Square Bank, with Town Square Bank as the surviving institution. The transaction is expected to close in the second quarter of 2015, subject to the approval of Commonwealth’s members and the satisfaction of other customary closing conditions.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies

There are no material changes to the critical accounting policies disclosed in the Annual Report on Form 10-K for Poage Bankshares, Inc. for the year ended December 31, 2014, as filed with the Securities and Exchange Commission.

This Quarterly Report contains forward-looking statements, which can be identified by the use of such words as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “may,” and similar expressions. These forward-looking statements include, but are not limited to:

statements of our goals, intentions and expectations;

statements regarding our business plans and prospects and growth and operating strategies;

statements regarding the asset quality of our loan and investment portfolios;

estimates of our risks and future costs and benefits;

statements about the benefits of the acquisition of Town Square Financial Corporation and Town Square Bank and the acquisition of Commonwealth Bank, including future financial and operating results, cost savings, enhancements to revenue and accretion to reported earnings that may be realized from the acquisition; and

statements about the financial condition, results of operations and business of Poage Bankshares.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this Quarterly Report.

The following factors, among others, could cause the actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

our ability to manage our operations under the current adverse economic conditions (including real estate values, loan demand, inflation, commodity prices and unemployment levels) nationally and in our market area;

adverse changes in the financial industry, securities, credit and national local real estate markets (including real estate values);

significant increases in our loan losses, including as a result of our inability to resolve classified assets, and management’s assumptions in determining the adequacy of the allowance for loan losses;

credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and in our allowance for loan losses and provision for loan losses;

our ability to successfully enhance internal controls;

our business may not be combined successfully with the business of Town Square Financial Corporation and Commonwealth Bank, or such combination may take longer to accomplish than expected;

the growth opportunities and cost savings from the acquisitions of Town Square Financial Corporation and Commonwealth Bank may not be fully realized or may take longer to realize than expected;

our ability to manage increased expenses following the acquisitions of Town Square Financial Corporation and Commonwealth Bank, including salary and employee benefit expenses and occupation expenses;

operating costs, customer losses and business disruption following the acquisitions of Town Square Financial Corporation and Commonwealth Bank, including adverse effects of relationships with employees, may be greater than expected;

competition among depository and other financial institutions;

our success in increasing our originations of adjustable-rate mortgage loans;

our success in increasing our commercial business and commercial real estate;

our ability to improve our asset quality even as we increase our commercial business, commercial real estate and multi-family lending, including as a result of the acquisitions of Town Square Financial Corporation and Commonwealth Bank;

our ability to retain customers and name recognition in the communities we serve as a result of changing our name to “Town Square Bank”;

our success in introducing new financial products;

our ability to attract and maintain deposits, including depositors of the former Town Square Bank and former depositors of Commonwealth Bank;

decreases in our asset quality;

changes in interest rates generally, including changes in the relative differences between short term and long term interest rates and in deposit interest rates, that may affect our net interest margin and funding sources;

fluctuations in the demand for loans, which may be affected by the number of unsold homes, land and other properties in our market areas and by declines in the value of real estate in our market area;

changes in consumer spending, borrowing and savings habits;

declines in the yield on our assets resulting from the current low interest rate environment;

risks related to a high concentration of loans secured by real estate located in our market area;

the results of examinations by our regulators, including the possibility that our regulators may, among other things, require us to increase our reserve for loan losses, write down assets, change our regulatory capital position, limit our ability to borrow funds or maintain or increase deposits, or prohibit us from paying dividends, which could adversely affect our dividends and earnings;

changes in laws or government regulations or policies affecting financial institutions, including the Dodd-Frank Act and the JOBS Act, which could result in, among other things, increased deposit insurance premiums and assessments, capital requirements (particularly the new capital regulations), regulatory fees and compliance costs and the resources we have available to address such changes;

changes in the level of government support of housing finance;

our ability to enter new markets successfully and capitalize on growth opportunities

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission and the Public Company Accounting Oversight Board;

changes in our organization, compensation and benefit plans and our ability to retain key members of our senior management team;

loan delinquencies and changes in the underlying cash flows of our borrowers;

the failure or security breaches of computer systems on which we depend;

the ability of key third-party providers to perform their obligations to us; and

changes in the financial condition or future prospects of issuers of securities that we own.

Comparison of Financial Condition at March 31, 2015 and December 31, 2014

At March 31, 2015, the Company’s assets totaled $416.6 million, an increase of 1.9% million, or 0.5%, from $414.7 million at December 31, 2014. The increase was primarily attributed to growth in deposit accounts resulting from the migration of customers from a competitor in the Louisa, Kentucky market following their acquisition and new accounts and increased balances for city governments in Flatwoods and Ashland, Kentucky.

Cash and Cash equivalents decreased by $271,000, or 1.6%, to $16.7 million at March 31, 2015 from $17.0 million at December 31, 2014. The decrease was attributable to the purchase of $7.6 million in available for sale securities, offset by the increase in deposits and reduction in net loans.

Loans held for sale decreased $122,000, or 17.1%, to $590,000 at March 31, 2015 from $712,000 at December 31, 2014.

Loans receivable, net, decreased $1.7 million, or 0.6%, to $300.3 million at March 31, 2015 from $302.0 million at December 31, 2014. The decrease was primarily attributable to a $3.0 million decrease in loans secured by real estate and $807,000 decrease in consumer loans, offset by an increase of $2.2 million in commercial loans. Non-performing loans increased $559,000, or 16.7%, to $3.9 million at March 31, 2015 from $3.4 million at December 31, 2014.

Securities available for sale increased by $4.8 million, or 7.4%, to $70.1 million at March 31, 2015 from $65.3 million at December 31, 2014. This increase is due to $7.6 million in purchases, offset by $2.9 million in sales, calls, regular maturities and principal payments.

Deposits increased $3.3 million, or 1.0%, to $326.4 million at March 31, 2015 from $323.1 million at December 31, 2014. The increase was primarily attributable to new accounts and increased balances for city governments in two markets we serve.

Federal Home Loan Bank advances decreased $1.8 million, or 9.9%, to $16.2 million at March 31, 2015 from $18.0 million at December 31, 2014. This decrease in borrowings was primarily due to regular principal payments and maturities.

Other borrowings increased by $16,000 to $2.7 million at March 31, 2015 from $2.7 million at December 31, 2014 due to the amortization of the fair value related to the subordinated debenture assumed in conjunction with acquisition of Town Square Financial Corporation. In December 2006, Town Square Statutory Trust I, a trust formed by Town Square Financial Corporation, closed a pooled private offering of 4,124 trust preferred securities with a liquidation amount of $1,000 per security. The subordinated debt of $2.7 million is shown as a liability because the Company is not considered the primary beneficiary of the Trust. The investment in common stock of the trust is $124,000 and is included in other assets. The subordinated debt has a variable rate of interest equal to the three month London Interbank Offered Rate (LIBOR) plus 1.83%, which was 2.10% at March 31, 2015.

Total shareholders’ equity decreased by $506,000 to $67.7 million at March 31, 2015, compared to $68.2 million at December 31, 2014. The decrease resulted primarily from the repurchase of common stock totaling $1.2 million and the payment of a cash dividends totaling $193,000, offset by net income of $586,000 for the three months ended March 31, 2015 and an increase in other comprehensive income of $154,000.

Average Balance and Yields

The following tables set forth average balance sheets, average yields and costs, and certain other information at the dates and for the periods indicated. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the tables as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income. Interest income and rates exclude the effects of a tax equivalent adjustment to adjust tax exempt investment income on tax exempt investment securities to a fully taxable basis due to immateriality.

The average balance, interest and dividends paid and received, and yield/cost of assets and liabilities include assets and liabilities acquired through the Town Square acquisition. Because the Town Square acquisition was consummated on March 18, 2014, the information for the three months ended March 31, 2015 reflects the accretive benefits and costs from the transaction, but the information for the three months ended March 31, 2014 only partially reflects the benefits and costs from the transactions.

	For the Three Months Ended March 31,
	2015								2014
	Average Balance		Interest and Dividends			Yield/Cost			Average Balance		Interest and Dividends			Yield/Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	$	302,024	$	4,210			5.58	%	$	196,464	$	2,569			5.23	%
Investment securities		67,018		363			2.17	%		85,000		516			2.43	%
FHLB stock		2,681		27			4.03	%		2,093		22			4.20	%
Other interest-earning assets		16,066		6			0.15	%		8,473		4			0.19	%
Total interest-earning assets		387,789		4,606			4.75	%		292,030		3,111			4.26	%

Noninterest-earning assets		26,365								20,666
Total assets		414,154								312,696

Liabilities and equity:
Interest bearing liabilities:
Interest bearing deposits:
NOW, savings, money market, and other		118,053		57			0.19	%		89,011		38			0.17	%
Certificates of deposit		161,047		390			0.97	%		127,449		320			1.00	%
Total interest bearing deposits		279,100		447			0.64	%		216,460		358			0.66	%

FHLB advances		17,074		67			1.57	%		25,314		94			1.49	%
Subordinated Debenture		2,708		36			5.32	%		353		3			3.40	%
Total interest bearing liabilities		298,882		550			0.74	%		242,127		455			0.75	%

Non-interest bearing liabilities:
Non-interest bearing deposits		45,070								9,771
Accrued interest payable		150								145
Other liabilities		1,986								2,823
Total non-interest bearing liabilities		47,206								12,739
Total liabilities		346,088								254,866

Total equity		68,066								57,830
Total liabilities and equity		414,154								312,696

Net interest income				4,056								2,656
Interest rate spread							4.01	%							3.51	%
Net interest margin							4.18	%							3.64	%
Average interest-earning assets to average
interest-bearing liabilities				129.75	%							120.61	%

Liquidity and Capital Resources

Our primary sources of funds are deposits and the proceeds from principal and interest payments on loans and investment securities. We also utilize Federal Home Loan Bank advances. While maturities and scheduled amortization of loans and securities are predicable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. We generally manage the pricing of our deposits to be competitive within our market and to increase core deposit relationships.

Liquidity management is both a daily and long-term responsibility of management. We adjust our investments in liquid assets based upon management’s assessment of (i) expected loan demand, (ii) expected deposit flows, (iii) yields available on interest-earning deposits and investment securities, and (iv) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning overnight deposits, federal funds sold, and short and intermediate-term investment securities. If we require funds beyond our ability to generate them internally we have additional borrowing capacity with the Federal Home Loan Bank of Cincinnati. At March 31, 2015, we had $16.2 million in advances from the Federal Home Loan Bank of Cincinnati and an additional borrowing capacity of $93.2 million.

The Bank is subject to various regulatory capital requirements administered by its primary federal regulator, the Office of the Comptroller of the Currency (“OCC”). Failure to meet the minimum regulatory capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that if undertaken, could have a direct material effect on the Bank and the consolidated financial statements. Under the regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines involving 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 under the prompt corrective action guidelines are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

On July 9, 2013, the Federal Reserve and the FDIC approved rules that implement the “Basel III” regulatory capital reforms, as well as certain changes required by the Dodd-Frank Act. The rules include a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets, which is in addition to the Tier 1 and Tier 2 risk-based capital requirements. The capital conservation buffer will be phased in over four years beginning on January 1, 2016, with a maximum buffer of 0.625% of risk-weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter. Failure to maintain the required capital conservation buffer will result in limitations on capital distributions and on discretionary bonuses to executive officers. Based on the Company’s current capital composition and levels, management does not presently anticipate that the rules present a material risk to the Company’s financial condition or results of operations.

As of March 31, 2015, the capital of the Company exceeded all required regulatory guidelines.

The following table reflects the current regulatory capital levels in more detail, including comparisons to the regulatory minimums at March 31, 2015 and December 31, 2014.

(in thousands)	Actual					Required					Excess
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of March 31, 2015:

Risk-based capital:
Common equity tier 1 capital	$	63,707		24.24	%	$	11,826		4.50	%	$	51,881		19.74	%
Tier 1 capital		63,707		24.24	%		15,768		6.00	%		47,939		18.24	%
Total capital		65,744		25.02	%		21,024		8.00	%		44,720		17.02	%
Tier 1 leverage ratio		63,707		15.49	%		16,446		4.00	%		47,261		11.49	%

(in thousands)	Actual					Required					Excess
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2014:

Risk-based capital:
Common equity tier 1 capital	$	62,068		23.61	%	$	11,832		4.50	%	$	50,236		19.11	%
Tier 1 capital		62,068		23.61	%		15,776		6.00	%		46,292		17.61	%
Total capital		64,002		24.34	%		21,034		8.00	%		42,968		16.34	%
Tier 1 leverage ratio		62,068		15.07	%		16,477		4.00	%		45,591		11.07	%

Off-Balance Sheet Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with U.S. 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. These arrangements are not expected to have a material impact on the Company’s financial condition or results of operations.

Comparison of Operating Results for the Three Months Ended March 31, 2015 and March 31, 2014

Net income increased $1.0 million to $586,000 for the three months ended March 31, 2015 from a loss of $425,000 for the three months ended March 31, 2014. The increase in net income reflected an increase in net interest income of $1.4 million to $4.1 million for the three months ended March 31, 2015 from $2.7 million for the three months ended March 31, 2014 and an increase in non-interest income of $320,000 to $700,000 for the three months ended March 31, 2015 from $380,000, offset by an increase in provision for loan losses of $91,000 to $91,000 for the three months ended March 31, 2015 from no provision for the three months ended March 31, 2014, an increase in non-interest expense of $140,000 to $3.8 million for the three months ended March 31, 2015 from $3.6 million for the three months ended March 31, 2014 and an increase in income tax expense of $478,000 to $324,000 for the three months ended March 31, 2015 from an income tax benefit of $154,000 for the three months ended March 31, 2014.

Interest Income. Interest income increased $1.5 million, or 48.1%, to $4.6 million for the three months ended March 31, 2015 from $3.1 million for the three months ended March 31, 2014. Because the Town Square Financial Corporation acquisition was consummated on March 18, 2014, the information for the three months ended March 31, 2015 reflects the accretive benefits from the transaction, but the information for the three months ended March 31, 2014 only partially reflects the benefits from the transactions.

Interest income on loans increased $1.6 million, or 63.9%, to $4.2 million for the three months ended March 31, 2015 from $2.6 million for the three months ended March 31, 2014. The average yields on loans increased 35 basis points to 5.58% for the three months ended March 31, 2015, compared to 5.23% for the three months ended March 31, 2014. The average balance of loans increased $105.6 million, or 53.7%, to $302.0 million for the three months ended March 31, 2015 from $196.5 million for the three months ended March 31, 2014. The increase in interest income is attributable to the acquisition of Town Square Financial Corporation on March 18, 2014. Interest income on investment securities decreased $153,000, or 29.7%, to $363,000 for the three months ended March 31, 2015 from $516,000 for the three months ended March 31, 2014. The average yield on securities decreased 26 basis points to 2.17% for the three months ended March 31, 2015, compared to 2.43% for the three months ended March 31, 2014. The average balance of investment securities decreased $18.0 million, or 21.2%, to $67.0 million for the three months ended March 31, 2015 from $85.0 million for the three months ended March 31, 2014 due to the sale of $19.7 million in investment securities during the three months ended June 30, 2014.

Interest Expense. Interest expense increased $95,000, or 20.9%, to $550,000 for the three months ended March 31, 2015 from $455,000 for the three months ended March 31, 2014. The increase reflected an increase of $62.6 million, or 28.9%, in the average balance of interest bearing deposits to $279.1 million for the three months ended March 31, 2015 from $216.5 million for the three months ended March 31, 2014, offset by a decrease of 2 basis points in the average interest rate paid on interest bearing deposits to 0.64% from 0.66% for the same periods. Interest expense on Federal Home Loan Bank advances and subordinated debentures increased $6,000, or 6.3%, to $103,000 for the three months ended March 31, 2015 from $97,000 for the three months ended March 31, 2014. This increase was due to an 8 basis point increase in the average rate paid on these Federal Home Loan Bank advances to 1.57% from 1.49% as short-term borrowings with lower interest rates matured and a 192 basis point increase in the average rate paid on subordinated debentures to 5.32% from 3.40% resulting from the amortization of fair value, offset by a decrease of $8.2 million in the average balance of Federal Home Loan Bank advances.

Interest expense on certificates of deposit increased $70,000, or 21.9%, to $390,000 for the three months ended March 31, 2015 from $320,000 for the three months ended March 31, 2014. Despite the increase in the average balance on certificates to $161.0 million from $127.4 million, the average rate paid on certificates of deposits decreased to 0.97% for the three months ended March 31, 2015 from 1.00% for the three months ended March 31, 2014. Interest expense on money market deposits, savings, and NOW and demand deposits increased $19,000, or 50.0%, to $57,000 for the three months ended March 31, 2015 from $38,000 for the three months ended March 31, 2014. The increase was due to an increase in the average balance on money market deposits, savings, and NOW and demand deposits to $118.1 million from $89.0 million for the same periods. The increase in deposits is primarily attributable to the acquisition of Town Square Financial Corporation and deposit growth in the Louisa, Flatwoods and Ashland markets.

Net Interest Income. Net interest income increased $1.4 million, or 51.9%, to $4.1 million for the three months ended March 31, 2015 from $2.7 million for the three months ended March 31, 2014. The increase in net interest income was due to an increase in our interest rate spread to 4.01% from 3.51%, combined with an increase in the ratio of our average interest earning assets to average interest bearing liabilities to 129.75% from 120.61%. Our net interest margin increased to 4.18% from 3.64%. The increase in the interest rate spread and net interest margin for the three months ended March 31, 2015 increased due to the higher yields on loans assumed in the acquisition of Town Square Financial Corporation.

Provision for Loan Losses. We recorded $91,000 for the provision for loan losses for the three months ended March 31, 2015 and no provision for loan losses for the three months ended March 31, 2014. The provisions for each period were based on management’s quarterly calculations and reflect the minimal levels of nonperforming loans and charge-offs, net of recoveries, during the periods.

Noninterest Income. Noninterest income increased $320,000, or 84.2%, to $700,000 for the three months ended March 31, 2015 from $380,000 for the three months ended March 31, 2014. The increase in noninterest income was primarily attributable to an increase in service charges on deposits of $231,000, or 110.0%, to $441,000 for the three months ended March 31, 2015 from $210,000 for the three months ended March 31, 2014. The increase in service charge income reflects the monthly account service fees, overdraft charges and cardholder activity fees collected on deposit accounts attributable to the acquisition of Town Square Financial Corporation. In addition, mortgage banking activities increased $65,000, or 69.1%, to $159,000 for the three months ended March 31, 2015 from $94,000 for the three months ended March 31, 2014. This increase is attributable to the addition of two loan originators from the acquisition of Town Square Financial Corporation. Income from company owned life insurance decreased $22,000, or 32.8%, for the three months ended March 31, 2015 from $67,000 for the three months ended March 31, 2014 due to redemptions made on two life insurance policies as a result of the death of Director J. Thomas Rupert in November 2014. Insurance claims received of $41,000 represents a reimbursement of $30,000 for a settlement related to Town Square Financial Corporation and a $10,000 claim for a bank vehicle totaled during icy weather.

Noninterest Expense. Noninterest expense increased $140,000, or 3.9%, to $3.8 million for the three months ended March 31, 2015 from $3.6 million for the three months ended March 31, 2014. This increase was due largely to an increase in salaries and employee benefits primarily attributable to an increase in the number of employees due to the acquisition of Town Square Financial Corporation, as well as the expense related to the grants of options and stock awards under our stock based compensation plans established in April and May of 2013, an increase in occupancy expense associated with the additional banking locations acquired, an increase in data processing due to conversion related costs and the amortization of intangibles attributable to the acquisition of Town Square Financial Corporation, offset by a reduction in professional fees and early termination fee of $877,000 paid during the three months ended March 31, 2014 attributable to the acquisition of Town Square Financial Corporation.

Income Tax Expense. The provision for income taxes was $324,000 for the three months ended March 31, 2015 compared to a $154,000 tax benefit for the three months ended March 31, 2014. Our effective tax rate for the three months ended March 31, 2015 was 35.6%.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Disclosures of quantitative and qualitative market risk are not required by smaller reporting companies, such as the Company.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by the report, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities and Exchange Act of 1934, as amended). Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

During the quarter ended March 31, 2015, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company and its subsidiaries are subject to various legal actions that are considered ordinary routine litigation incidental to the business of the Company, and no claim for money damages exceeds ten percent of the Company’s consolidated assets. In the opinion of management, based on currently available information, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s results of operations.

ITEM 1A. RISK FACTORS

Disclosures of risk factors are not required by smaller reporting companies, such as the Company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)

None.

(b)

Not applicable.

(c)

Issuer repurchases. The following table sets forth information in connection with repurchases of the Company’s common stock for the period January 1, 2015 through March 31, 2015. On May 30, 2014, the Board of Directors authorized the repurchase of up to 195,244 shares of Poage Bankshares common stock.

All shares indicated below were purchased pursuant to this repurchase authorization. The Company’s stock repurchases pursuant to the repurchase program are dependent on certain factors, including but not limited to, market conditions and prices, available funds and alternative uses of capital. The repurchase program may be carried out through open-market purchases, block trades, negotiated private transactions and pursuant to a trading plan adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934.

Maximum

Total

Number of

Shares That

May Yet be

Purchased

Total

as Part of

Under

Number of

Average

Publicly

Price Paid

Announced

Purchased

Per Share

Plan

January 1 - January 31, 2015

20,000

14.80

20,000

155,244

February 1 - February 28, 2015

11,301

14.95

11,301

143,943

March 1 - March 31, 2015

50,522

15.03

50,522

93,421

Total

81,823

14.96

81,823

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The exhibits required by Item 601 of Regulation S-K are included with this Form 10-Q and are listed on the “Index to Exhibits” immediately following the Signatures.

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.

Poage Bankshares, Inc.

Date: May 15, 2015

	/s/ R. E. Coffman, Jr.
	R. E. Coffman, Jr.
	President & Chief Executive Officer

	/s/ Jane Gilkerson
	Jane Gilkerson
	Chief Financial Officer

INDEX TO EXHIBITS

Exhibit
number		Description

31.1		Certification of R. E. Coffman, Jr., President, and Chief Executive Officer, Pursuant to Rule 13a-14(a) and Rule 15-d-14(a).

31.2		Certification of Jane Gilkerson, Chief Financial Officer, Pursuant to Rule 13a-14(a) and Rule 15d-14(a).

32.1		Certification of R. E. Coffman, Jr., President and Chief Executive Officer, and Jane Gilkerson, Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following material from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, formatted in XBRL (Extensible Business Reporting Language): (i) Unaudited Consolidated Balance Sheets, (ii) Unaudited Consolidated Statements of Operations, (iii) Unaudited Consolidated Statements of Comprehensive Income, (iv) Unaudited Consolidated Statement of Shareholders’ Equity, (v) Unaudited Consolidated Statements of Cash Flows, and (vi) Notes to the Consolidated Financial Statements.

Poage Bankshares, Inc. - FORM 10-Q - May 15, 2015

Attached files

Poage Bankshares, Inc. Reports