Meetinghouse Bancorp, Inc. - FORM 10-Q

Attached files

file	filename
EX-32.0 - EX-32.0 - Meetinghouse Bancorp, Inc.	a15-12172_1ex32d0.htm
EX-31.1 - EX-31.1 - Meetinghouse Bancorp, Inc.	a15-12172_1ex31d1.htm
EX-31.2 - EX-31.2 - Meetinghouse Bancorp, Inc.	a15-12172_1ex31d2.htm

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended June 30, 2015

¨ TRANSITION 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 668,919 shares of common stock, par value $0.01 per share, outstanding as of August 14, 2015.

Table of Contents

MEETINGHOUSE BANCORP, INC.

FORM 10-Q

Table of Contents

		Page No.
PART I. CONDENSED FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements - June 30, 2015 (unaudited) and September 30, 2014

	Consolidated Balance Sheets as of June 30, 2015 (unaudited) and September 30, 2014	3

	Consolidated Statements of Income (Loss) for the Three and Nine Months Ended June 30, 2015 and 2014 (unaudited)	4

	Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended June 30, 2015 and 2014 (unaudited)	5

	Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended June 30, 2015 and 2014 (unaudited)	6

	Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2015 and 2014 (unaudited)	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	31

Part II. OTHER INFORMATION

Item 1.	Legal Proceedings	32

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

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

MEETINGHOUSE BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	June 30,			September 30,
	2015			2014
	(Unaudited)
ASSETS

Cash and due from banks	$	3,847		$	4,943
Federal funds sold	398			942
Interest-bearing demand deposits with other banks	58			53
Cash and cash equivalents	4,303			5,938
Interest-bearing time deposits in other banks	1,733			1,985
Investments in available-for-sale securities (at fair value)	16,540			16,638
Federal Home Loan Bank stock, at cost	958			754
Loans held-for-sale	7,278			2,727
Loans, net of allowance for loan losses of $550 as of June 30, 2015 and $506 as of September 30, 2014	82,108			77,015
Premises and equipment	1,718			1,772
Investment in real estate	1,131			1,090
Cooperative Central Bank deposit	427			427
Accrued interest receivable	301			273
Other assets	461			544
Total assets	$	116,958		$	109,163

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	18,137		$	14,355
Interest-bearing	78,470			73,128
Total deposits	96,607			87,483
Federal Home Loan Bank advances	9,524			10,953
Deferred income tax liability, net	66			58
Other liabilities	287			219
Total liabilities	106,484			98,713
Stockholders’ equity:
Preferred stock, 500,000 shares authorized; none outstanding	—			—
Common stock, $.01 par value; 5,000,000 shares authorized; 668,919 and 679,769 shares issued and outstanding at June 30, 2015 and September 30, 2014, respectively	7			7
Additional paid-in capital	5,784			5,903
Retained earnings	5,144			5,035
Unearned compensation - ESOP (26,715 shares unallocated at June 30, 2015 and 32,439 shares at September 30, 2014)	(281		)	(341		)
Unearned compensation - restricted stock awards	(261		)	(221		)
Accumulated other comprehensive income	81			67
Total stockholders’ equity	10,474			10,450
Total liabilities and stockholders’ equity	$	116,958		$	109,163

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

Table of Contents

MEETINGHOUSE BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands, except share data)

	Three months ended June 30,					Nine months ended June 30,
	2015		2014			2015		2014
	(Unaudited)					(Unaudited)
Interest and dividend income:
Interest and fees on loans	$	910	$	738		$	2,681	$	2,113
Interest and dividends on securities	102		89			311		189
Other interest	5		7			16		23
Total interest and dividend income	1,017		834			3,008		2,325
Interest expense:
Interest on deposits	178		149			510		420
Interest on Federal Home Loan Bank advances	28		3			83		10
Total interest expense	206		152			593		430
Net interest and dividend income	811		682			2,415		1,895
Provision for loan losses	28		40			44		19
Net interest and dividend income after provision for loan losses	783		642			2,371		1,876
Noninterest income:
Mortgage banking activities	247		99			626		319
Customer service fees	93		56			281		230
Other income	21		11			52		31
Total noninterest income	361		166			959		580
Noninterest expense:
Salaries and employee benefits	599		494			1,696		1,446
Occupancy and equipment expense	170		120			423		345
Professional fees	101		112			315		298
Data processing	74		70			262		221
Deposit insurance expense	23		18			68		46
Advertising	23		23			60		64
Supplies	16		12			44		32
Other expense	112		81			274		237
Total noninterest expense	1,118		930			3,142		2,689
Income (loss) before income tax expense (benefit)	26		(122		)	188		(233		)
Income tax expense (benefit)	14		(42		)	79		(80		)
Net income (loss)	$	12	$	(80	)	$	109	$	(153	)

Earnings (loss) per share:
Basic	$	0.02	(0.13		)	$	0.18	$	(0.25	)
Diluted	$	0.02	(0.13		)	$	0.18	$	(0.25	)

Weighted average shares outstanding
Basic	613,923		625,016			613,117		621,193
Diluted	614,147		625,016			613,117		621,193

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

Table of Contents

MEETINGHOUSE BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)

	Three months ended June 30,
	2015			2014
	(Unaudited)
Net income (loss)	$	12		$	(80	)
Other comprehensive (loss) income, net of tax:
Net change in unrealized holding gain on available-for-sale securities	(185		)	69
Other comprehensive (loss) income, net of tax	(185		)	69
Comprehensive (loss)	$	(173	)	$	(11	)

	Nine months ended June 30,
	2015		2014
	(Unaudited)
Net income (loss)	$	109	$	(153	)
Other comprehensive income (loss), net of tax:
Net change in unrealized holding gain on available-for-sale securities	14		42
Other comprehensive income, net of tax	14		42
Comprehensive income (loss)	$	123	$	(111	)

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

Table of Contents

MEETINGHOUSE BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Nine Months Ended June 30, 2015 and 2014

(In thousands, except share data)

(Unaudited)

																	Accumulated
					Additional						Unearned			Unearned			Other
	Common Stock				Paid-in			Retained			Compensation			Compensation -			Comprehensive
	Shares		Amount		Capital			Earnings			- ESOP			Restricted Stock Awards			Income		Total
Balance, September 30, 2013	661,250		$	7	$	5,645		$	5,179		$	(482	)	$	—		$	38	$	10,387
Net loss	—		—		—			(153		)	—			—			—		(153		)
Other comprehensive income, net of tax	—		—		—			—			—			—			42		42
Common stock released by ESOP (7,632 shares)	—		—		15			—			80			—			—		95
Common stock committed to be released by ESOP (3,816 shares)	—		—		5			—			41			—			—		46
Balance, June 30, 2014	661,250		$	7	$	5,665		$	5,026		$	(361	)	$	—		$	80	$	10,417

Balance, September 30, 2014	679,769		$	7	$	5,903		$	5,035		$	(341	)	$	(221	)	$	67	$	10,450
Net income	—		—		—			109			—			—			—		109
Other comprehensive income, net of tax	—		—		—			—			—			—			14		14
Issuance of restricted stock awards	7,669		—		104			—			—			(104		)	—		—
Compensation expense - stock options	—		—		4			—			—			—			—		4
Shares repurchased	(18,519	)	—		(243		)	—			—			—			—		(243		)
Compensation expense - restricted stock awards	—		—		—			—			—			64			—		64
Common stock released by ESOP (1,908 shares)	—		—		5			—			20			—			—		25
Common stock committed to be released by ESOP (3,816 shares)	—		—		11			—			40			—			—		51
Balance, June 30, 2015	668,919		$	7	$	5,784		$	5,144		$	(281	)	$	(261	)	$	81	$	10,474

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

Table of Contents

MEETINGHOUSE BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Nine months ended June 30,
	2015			2014
	(Unaudited)
Cash flows from operating activities:
Net income (loss)	$	109		$	(153	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Amortization of securities, net	27			25
Provision for loan losses	44			19
Change in deferred loan costs, net	(2		)	(125		)
Loans originated for sale	(60,258		)	(30,607		)
Proceeds from sale of loans	56,267			26,133
Gain on sales of loans	(560		)	(314		)
Depreciation and amortization	131			131
Increase in accrued interest receivable	(28		)	(34		)
(Increase) decrease in mortgage servicing asset	(13		)	—
Decrease (increase) in other assets	96			(121		)
Compensation expense - restricted stock awards	64			—
Compensation expense - ESOP	76			141
Compensation expense - stock options	4			—
Increase (decrease) in accrued expenses and other liabilities	68			(210		)

Net cash used in operating activities	(3,975		)	(5,115		)

Cash flows from investing activities:
Purchases of interest-bearing time deposits in other banks	(1,485		)	(1,738		)
Proceeds from maturities of interest-bearing time deposits in other banks	1,737			2,901
Purchases of available-for-sale securities	(1,402		)	(10,146		)
Proceeds from maturities of available-for-sale securities	1,495			1,033
Loan originations and principal collections, net	(5,135		)	(11,985		)
Recoveries of loans previously charged off	—			3
Purchase of Federal Home Loan Bank stock	(204		)	(279		)
Capital expenditures	(118		)	(145		)

Net cash used in investing activities	(5,112		)	(20,356		)

Cash flows from financing activities:
Net increase in demand deposits, NOW and savings accounts	4,940			4,383
Net increase in time deposits	4,184			11,320
Net change in short-term advances from Federal Home Loan Bank	(1,429		)	8,760
Common stock acquired - repurchase plan	(243		)	—

Net cash provided by financing activities	7,452			24,463

Net decrease in cash and cash equivalents	(1,635		)	(1,008		)
Cash and cash equivalents at beginning of period	5,938			4,713
Cash and cash equivalents at end of period	$	4,303		$	3,705

Supplemental disclosures:
Interest paid	$	594		$	430
Income taxes received	(4		)	—

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

Table of Contents

Meetinghouse Bancorp, Inc. and Subsidiary

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended June 30, 2015 and 2014

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 69 Richmond Street Realty Trust. All significant intercompany accounts and transactions have been eliminated in the consolidation.

The condensed 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 Rule 10-01 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 condensed consolidated financial statements reflect all adjustments (consisting solely of normal recurring adjustments) that are necessary for a fair presentation. The results shown for the interim periods ended June 30, 2015 and June 30, 2014 are not necessarily indicative of the results to be obtained for a 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, 2014 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 May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, “Revenue from Contracts with Customers (Topic 606).” The objective of this ASU is to clarify principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. The guidance in this ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principal of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For public entities the amendments in this update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. However, in July 2015, the FASB voted to approve deferring the effective date by one year (i.e., interim and annual reporting period beginning after December 15, 2017). Early adoption is permitted, but not before the original effective date (i.e., interim and annual reporting periods beginning after December 15, 2016). The Company is currently reviewing this ASU to determine if it will have an impact on its consolidated financial statements.

Table of Contents

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis.” The amendments in this ASU affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments: (1) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities; (2) eliminate the presumption that a general partner should consolidate a limited partnership; (3) affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and (4) provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. ASU 2015-02 is effective for interim and annual reporting periods beginning after December 15, 2015. The Company anticipates that the adoption of this ASU will not have a material impact on its consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The standard is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. The guidance should be applied on a retrospective basis. The Company anticipates that the adoption of this ASU will not have a material impact on its consolidated financial statements.

In April 2015, the FASB issued ASU 2015-05, “Intangibles — Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” This ASU provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new guidance does not change the accounting for a customer’s accounting for service contracts. ASU 2015-05 is effective for interim and annual reporting periods beginning after December 15, 2015. The Company anticipates that the adoption of this ASU will not have a material impact on its consolidated financial statements.

In May 2015, the FASB issued ASU 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” The amendments in this ASU remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. ASU 2015-07 is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. The guidance shall be applied on a retrospective basis. The Company anticipates that the adoption of this ASU will not have a material impact on its consolidated financial statements.

NOTE 4 - EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share (“EPS”) excludes dilution and is calculated by dividing net income (loss) 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 Company’s Employee Stock Ownership Plan (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.

Table of Contents

EPS for the three and nine months ended June 30, 2015 and 2014 have been computed as follows (in thousands, except share data):

	Three months ended June 30,
	2015			2014
	(unaudited)

Net income (loss) applicable to common stock	$	12		$	(80	)

Average number of shares issued	664,914			661,250
Average unallocated ESOP shares	(28,602		)	(36,234		)
Average unvested restricted stock awards	(22,389		)	—
Average number of common shares outstanding used to calculate basic earnings (loss) per share	613,923			625,016
Effect of dilutive shares	224			—
Average number of common shares outstanding used to calculate diluted earnings (loss) per share	614,147			625,016

Basic earnings (loss) per share	$	0.02		$	(0.13	)
Diluted earnings (loss) per share	$	0.02		$	(0.13	)

	Nine months ended June 30,
	2015			2014
	(unaudited)

Net income (loss) applicable to common stock	$	109		$	(153	)

Average number of shares issued	663,361			661,250
Average unallocated ESOP shares	(30,517		)	(40,057		)
Average unvested restricted stock awards	(19,727		)	—
Average number of common shares outstanding used to calculate basic earnings (loss) per share	613,117			621,193
Effect of dilutive shares	—			—
Average number of common shares outstanding used to calculate diluted earnings (loss) per share	613,117			621,193

Basic earnings (loss) per share	$	0.18		$	(0.25	)
Diluted earnings (loss) per share	$	0.18		$	(0.25	)

Options to purchase 59,509 shares were included in the computation of diluted earnings per share for the three-month period ending June 30, 2015. There were no options to purchase shares included in the computation of diluted earnings per share for the nine-month period ending June 30, 2015 because to do so would have been antidilutive. There were no outstanding options or awards during the nine-month period ending June 30, 2014.

Table of Contents

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):

	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized		Fair
	Basis		Gains		Losses		Value
June 30, 2015 (unaudited):
U.S. Government and federal agency obligations	$	3,413	$	27	$	8	$	3,432
Taxable municipal securities	298		—		3		295
Asset-backed securities	845		18		—		863
Mortgage-backed securities	11,852		142		44		11,950
	$	16,408	$	187	$	55	$	16,540

September 30, 2014:
U.S. Government and federal agency obligations	$	3,403	$	10	$	28	$	3,385
Taxable municipal securities	301		—		2		299
Asset-backed securities	911		5		—		916
Mortgage-backed securities	11,913		158		33		12,038
	$	16,528	$	173	$	63	$	16,638

The amortized cost and estimated fair value of available-for-sale securities, segregated by contractual maturity at June 30, 2015, are presented below (in thousands):

	Amortized		Fair
(Unaudited)	Cost Basis		Value
Due within one year	$	—	$	—
Due after one year through five years	750		750
Due after five years through ten years	2,961		2,977
Due after ten years	—		—
Asset-backed securities	845		863
Mortgage-backed securities	11,852		11,950
	$	16,408	$	16,540

There were no sales of available-for-sale securities during the nine months ended June 30, 2015 and 2014.

Table of Contents

Information pertaining to securities with gross unrealized losses at June 30, 2015, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is 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
June 30, 2015 (unaudited):
U.S. Government and federal agency obligations	$	841	$	8	$	—	$	—	$	841	$	8
Taxable municipal securities	294		3		—		—		294		3
Mortgage-backed securities	3,700		37		431		7		4,131		44
Total temporarily impaired securities	$	4,835	$	48	$	431	$	7	$	5,266	$	55

September 30, 2014:
U.S. Government and federal agency obligations	$	1,445	$	22	$	744	$	6	$	2,189	$	28
Taxable municipal securities	299		2		—		—		299		2
Mortgage-backed securities	3,254		20		734		13		3,988		33
Total temporarily impaired securities	$	4,998	$	44	$	1,478	$	19	$	6,476	$	63

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 June 30, 2015 consist of sixteen mortgage-backed securities, three debt securities issued by a U.S. Government federal agency and one taxable municipal security. The unrealized losses at June 30, 2015 are 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.

Table of Contents

NOTE 6 - LOANS

Loans consist of the following:

	June 30,					September 30,
	2015					2014
	(Unaudited)
	(Dollars in thousands)
Real estate loans:
Residential	$	50,300		61.27	%	$	48,654		63.21	%
Commercial	12,768			15.55		12,473			16.20
Construction	4,074			4.96		1,736			2.26
Multi-family	2,781			3.39		2,837			3.69
Total real estate	69,923			85.17		65,700			85.36

Commercial	3,014			3.67		2,940			3.82

Consumer loans:
Home equity	7,705			9.38		6,989			9.08
Other	1,461			1.78		1,339			1.74
Total consumer	9,166			11.16		8,328			10.82
				100.00	%				100.00	%
Total loans	82,103					76,968
Allowance for loan losses	(550		)			(506		)
Deferred loan costs, net	555					553
Net loans	$	82,108				$	77,015

The following table sets forth information regarding the allowance for loan losses by portfolio segment as of and for the nine months ended June 30, 2015 (unaudited):

	Real Estate												Consumer
	1-4 Family		1-4 Family
	Owner		Non-Owner
(In thousands)	Occupied		Occupied		Commercial		Construction		Multi-family		Commercial		Home Equity		Other		Total
Allowance for loan losses:
Beginning balance	$	165	$	101	$	86	$	17	$	28	$	25	$	41	$	43	$	506
Charge-offs	—		—		—		—		—		—		—		—		—
Recoveries	—		—		—		—		—		—		—		—		—
Provision (benefit)	8		1		3		24		—		1		3		4		44
Ending balance	$	173	$	102	$	89	$	41	$	28	$	26	$	44	$	47	$	550

Allowance for loan losses:
Ending balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Ending balance:
Collectively evaluated for impairment	173		102		89		41		28		26		44		47		550
Total allowance for loan losses ending balance	$	173	$	102	$	89	$	41	$	28	$	26	$	44	$	47	$	550

Loans:
Ending balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Ending balance:
Collectively evaluated for impairment	34,534		15,766		12,768		4,074		2,781		3,014		7,705		1,461		82,103
Total loans ending balance	$	34,534	$	15,766	$	12,768	$	4,074	$	2,781	$	3,014	$	7,705	$	1,461	$	82,103

Table of Contents

The following table sets forth information regarding the allowance for loan losses by portfolio segment as of and for the nine months ended June 30, 2014 (unaudited):

	Real Estate														Consumer
	1-4 Family			1-4 Family
	Owner			Non-Owner
(In thousands)	Occupied			Occupied		Commercial			Construction		Multi-family		Commercial		Home Equity		Other		Total

Allowance for loan losses:
Beginning balance	$	178		$	75	$	81		$	8	$	17	$	16	$	31	$	29	$	435
Charge-offs	—			—		—			—		—		—		—		—		—
Recoveries	—			—		—			—		—		—		—		3		3
(Benefit) provision	(15		)	12		(10		)	2		12		6		4		8		19
Ending balance	$	163		$	87	$	71		$	10	$	29	$	22	$	35	$	40	$	457

The following table sets forth information regarding the allowance for loan losses by portfolio segment as of September 30, 2014:

	Real Estate												Consumer
	1-4 Family		1-4 Family
	Owner		Non-Owner
(In thousands)	Occupied		Occupied		Commercial		Construction		Multi-family		Commercial		Home Equity		Other		Total

Allowance for loan losses:
Ending balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Ending balance:
Collectively evaluated for impairment	165		101		86		17		28		25		41		43		506
Total allowance for loan losses ending balance	$	165	$	101	$	86	$	17	$	28	$	25	$	41	$	43	$	506

Loans:
Ending balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Ending balance:
Collectively evaluated for impairment	33,179		15,475		12,473		1,736		2,837		2,940		6,989		1,339		76,968
Total loans ending balance	$	33,179	$	15,475	$	12,473	$	1,736	$	2,837	$	2,940	$	6,989	$	1,339	$	76,968

The following table sets forth information regarding nonaccrual loans and past-due loans as of June 30, 2015 (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

June 30, 2015:
Real estate:
Residential	$	184	$	—	$	148	$	332	$	49,968	$	50,300	$	—	$	332
Commercial	—		—		—		—		12,768		12,768		—		—
Construction	—		—		—		—		4,074		4,074		—		—
Multi-family	—		—		—		—		2,781		2,781		—		—
Commercial	59		—		—		59		2,955		3,014		—		—
Home equity	—		221		—		221		7,484		7,705		—		19
Other consumer	—		—		—		—		1,461		1,461		—		—
Total	$	243	$	221	$	148	$	612	$	81,491	$	82,103	$	—	$	351

Table of Contents

The following table sets forth information regarding nonaccrual loans and past-due loans as of September 30, 2014:

					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, 2014:
Real estate:
Residential	$	386	$	34	$	—	$	420	$	48,234	$	48,654	$	—	$	—
Commercial	—		—		—		—		12,473		12,473		—		—
Construction	—		—		—		—		1,736		1,736		—		—
Multi-family	—		191		—		191		2,646		2,837		—		—
Commercial	—		—		—		—		2,940		2,940		—		—
Home equity	216		—		—		216		6,773		6,989		—		20
Other consumer	—		8		—		8		1,331		1,339		—		—
Total	$	602	$	233	$	—	$	835	$	76,133	$	76,968	$	—	$	20

As of June 30, 2015 (unaudited) and September 30, 2014, and during the nine months and year then ended, respectively, the Company had no loans categorized as impaired.

There were no loans modified during the nine months ended June 30, 2015 (unaudited) or during the year ended September 30, 2014 that met the definition of a troubled debt restructured loan as described in ASC 310-40.

As of June 30, 2015 (unaudited) there were no residential real estate loans in the process of foreclosure.

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 or 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 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.

Table of Contents

The following table presents the Company’s loans by risk rating as of June 30, 2015 (unaudited):

	Real Estate										Consumer
(In thousands)	Residential		Commercial		Construction		Multi-family		Commercial		Home Equity		Other		Total
June 30, 2015:
Grade:
Pass	$	—	$	12,768	$	4,074	$	2,781	$	2,604	$	—	$	—	$	22,227
Special mention	361		—		—		—		410		22		—		793
Substandard	—		—		—		—		—		19		—		19
Not formally rated	49,939		—		—		—		—		7,664		1,461		59,064
Total	$	50,300	$	12,768	$	4,074	$	2,781	$	3,014	$	7,705	$	1,461	$	82,103

The following table presents the Company’s loans by risk rating as of September 30, 2014:

	Real Estate										Consumer
(In thousands)	Residential		Commercial		Construction		Multi-family		Commercial		Home Equity		Other		Total
September 30, 2014:
Grade:
Pass	$	—	$	12,473	$	1,736	$	2,837	$	2,761	$	—	$	—	$	19,807
Special mention	225		—		—		—		179		28		—		432
Substandard	—		—		—		—		—		20		—		20
Not formally rated	48,429		—		—		—		—		6,941		1,339		56,709
Total	$	48,654	$	12,473	$	1,736	$	2,837	$	2,940	$	6,989	$	1,339	$	76,968

NOTE 7 - FAIR VALUE MEASUREMENTS

ASC 820-10, “Fair Value Measurement — Overall,” provides a framework for measuring fair value under GAAP. 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 June 30, 2015 (unaudited) and September 30, 2014. The Company did not have any significant transfers of assets between Levels 1 and 2 of the fair value hierarchy during the nine months ended June 30, 2015 (unaudited) and the year ended September 30, 2014.

Table of Contents

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.

Level 3 is for assets and liabilities 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.

The following summarizes assets measured at fair value on a recurring basis at June 30, 2015 (unaudited) and September 30, 2014:

(In thousands)	Total		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
June 30, 2015:
Securities available-for-sale:
U.S. Government and federal agency obligations	$	3,432	$	—	$	3,432	$	—
Taxable municipal securities	295		—		295		—
Asset-backed securities	863		—		863		—
Mortgage-backed securities	11,950		—		11,950		—
	$	16,540	$	—	$	16,540	$	—

September 30, 2014:
Securities available-for-sale:
U.S. Government and federal agency obligations	$	3,385	$	—	$	3,385	$	—
Taxable municipal securities	299		—		299		—
Asset-backed securities	916		—		916		—
Mortgage-backed securities	12,038		—		12,038		—
	$	16,638	$	—	$	16,638	$	—

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 June 30, 2015 (unaudited) and September 30, 2014.

Table of Contents

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:

	June 30, 2015 (unaudited)
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	4,303	$	4,303	$	—	$	—	$	4,303
Interest-bearing time deposits with other banks	1,733		—		—		1,749		1,749
Available-for-sale securities	16,540		—		16,540		—		16,540
Federal Home Loan Bank stock	958		958		—		—		958
Loans held-for-sale	7,278		7,360		—		—		7,360
Loans, net	82,108		—		—		83,193		83,193
Corporate Central Bank deposit	427		427		—		—		427
Accrued interest receivable	301		301		—		—		301

Financial liabilities:
Deposits	96,607		—		—		96,890		96,890
Federal Home Loan Bank advances	9,524		—		—		9,508		9,508

	September 30, 2014
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	5,938	$	5,938	$	—	$	—	$	5,938
Interest-bearing time deposits with other banks	1,985		—		—		1,986		1,986
Available-for-sale securities	16,638		—		16,638		—		16,638
Federal Home Loan Bank stock	754		754		—		—		754
Loans held-for-sale	2,727		2,753		—		—		2,753
Loans, net	77,015		—		—		77,749		77,749
Corporate Central Bank deposit	427		427		—		—		427
Accrued interest receivable	273		273		—		—		273

Financial liabilities:
Deposits	87,483		—		—		87,769		87,769
Federal Home Loan Bank advances	10,953		—		—		10,933		10,933

Table of Contents

The carrying amounts of financial instruments shown in the above tables are included in the consolidated balance sheets as of June 30, 2015 (unaudited) and September 30, 2014 under the indicated captions. Accounting policies related to financial instruments are described below.

ASC 825, “Financial Instruments,” requires that the Company disclose estimated fair value for its financial instruments. Fair value methods and assumptions used by the Company in estimating its fair value disclosures are as follows:

Cash and cash equivalents: The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents approximate those assets’ fair values.

Interest-bearing time deposits with other banks: Fair values of interest-bearing time deposits with other banks are estimated using discounted cash flow analyses based on current rates for similar types of deposits.

Securities: Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

Loans held-for-sale: Fair values of loans held-for-sale are estimated based on outstanding investor commitments or, in the absence of such commitments, are based on current investor yield requirements.

Loans receivable: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The 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.

Accrued interest receivable: The carrying amounts of accrued interest receivable approximate their fair values.

Deposit liabilities: The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificate accounts 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 certificate accounts.

Federal Home Loan Bank advances: Fair values for Federal Home Loan Bank of Boston (FHLB) 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 FHLB advances.

Off-balance sheet instruments: The fair value of commitments to originate loans is estimated using the fees currently charged to enter similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments and the unadvanced portion of loans, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligation with the counterparties at the reporting date.

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.

Table of Contents

Effective January 1, 2015 (with a phase-in period of two to four years for certain components), the Bank became subject to new capital regulations adopted by the Board of Governors of the Federal Reserve System (“FRB”) and the FDIC, which implement the Basel III regulatory capital reforms and the changes required by the Dodd-Frank Act. The new regulations require a new common equity Tier 1 (“CETI”) capital ratio of 4.5%, increase the minimum Tier 1 capital to risk-weighted assets ratio to 6.0% from 4.0%, require a minimum total capital to risk-weighted assets ratio of 8.0% and require a minimum Tier 1 leverage ratio of 4.0%. CETI generally consists of common stock and retained earnings, subject to applicable adjustments and deductions. Under new prompt corrective action regulations, in order to be considered “well capitalized,” the Bank must maintain a CETI capital ratio of 6.5% (new) and a Tier 1 ratio of 8.0% (increased from 6.0%), a total risk based capital ratio of 10.0% (unchanged) and a Tier 1 leverage ratio of 5.0% (unchanged). In addition, the regulations establish a capital conservation buffer above the required capital ratios that phases in beginning January 1, 2016 at 0.625% of risk-weighted assets and increases each year by 0.625% until it is fully phased in at 2.5% effective January 1, 2019. Beginning January 1, 2016, failure to maintain the capital conservation buffer will limit the ability of the Bank and the Company to pay dividends, repurchase shares or pay discretionary bonuses.

The new regulations implemented changes to what constitutes regulatory capital. Certain instruments will no longer constitute qualifying capital, subject to phase-out periods. In addition, Tier 2 capital is no longer limited to the amount of Tier 1 capital included in total capital. Mortgage servicing rights, certain deferred tax assets and investments in unconsolidated subsidiaries over designated percentages of CETI will be deducted from capital. The Bank has elected to permanently opt out of the inclusion of accumulated other comprehensive income in capital calculations, as permitted by the regulations. This opt-out will reduce the impact of market volatility on our regulatory capital ratios.

The new regulations also changed the risk weights of certain assets, including an increase in the risk weight of certain high volatility commercial real estate acquisition, development and construction loans and non-residential mortgage loans that are 90 days past due or on non-accrual status to 150% from 100%, a credit conversion factor for the unused portion of commitments with maturities of less than one year that are not cancellable to 20% from 0%, an increase in the risk weight for mortgage servicing and deferred tax assets that are not deducted from capital to 250% from 100%, and an increase in the risk weight for equity exposures to 600% from 0%.

As of June 30, 2015 (unaudited), the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

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 June 30, 2015 (unaudited):
Common Equity Tier 1 Capital	$	8,981	12.1	%		$	3,328	4.5	%	$	4,806	6.5	%
Total Capital (to risk weighted assets)	9,531		12.9			5,915		8.0		7,394		10.0
Tier 1 Capital (to risk weighted assets)	8,981		12.1			4,437		6.0		5,915		8.0
Tier 1 Capital (to average assets)	8,981		7.9			4,552		4.0		5,690		5.0

As of September 30, 2014:
Total Capital (to risk weighted assets)	$	8,172	13.3	%		$	4,901	8.0	%	$	6,126	10.0	%
Tier 1 Capital (to risk weighted assets)	7,667		12.5			2,451		4.0		3,676		6.0
Tier 1 Capital (to average assets)	7,667		8.1			3,787		4.0		4,733		5.0

Table of Contents

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 (loss), are components of comprehensive income (loss).

The components of other comprehensive income (loss), included in stockholders’ equity, are as follows during the three and nine months ended June 30, 2015 and 2014 (unaudited):

	Three months ended June 30,
	2015			2014
	(In Thousands)
Unrealized (losses) gains on securities:
Net unrealized holding (loss) gain on available-for-sale securities	$	(298	)	$	110
Reclassification adjustment for realized (gains) losses in net income	—			—
	(298		)	110
Income tax expense (benefit)	113			(41		)
Other comprehensive (loss) income, net of tax	$	(185	)	$	69

	Nine months ended June 30,
	2015			2014
	(In Thousands)
Unrealized gains on securities:
Net unrealized holding gain on available-for-sale securities	$	22		$	67
Reclassification adjustment for realized (gains) losses in net income	—			—
	22			67
Income tax expense	(8		)	(25		)
Other comprehensive income, net of tax	$	14		$	42

At June 30, 2015 (unaudited) and September 30, 2014, the components of accumulated other comprehensive income, included in stockholders’ equity, are as follows:

	June 30,		September 30,
	2015		2014
	(In Thousands)
Net unrealized gain on securities available-for-sale	$	81	$	67
Total accumulated other comprehensive income	$	81	$	67

NOTE 10 — SHARE BASED COMPENSATION

Shareholders of Meetinghouse Bancorp Inc. approved the 2014 Equity Incentive Plan (“Plan”) on February 9, 2014, and the Board of Directors ratified the vote on April 15, 2014. Under the Plan, the Company may grant restricted stock awards and options to employees, officers and directors. On May 19, 2015, the Board of Directors issued 59,509 options to its officers and directors, all of which remained outstanding at June 30, 2015. Under the 2014 Plan, option grants generally vest over a seven-year period and expire ten years from the date of grant. Compensation cost is based on the grant-date fair value of the award. The fair value of awards that grant the employee the right to purchase the underlying shares once the vesting conditions are met is measured using a Black-Scholes model. The assumptions for the Black-Scholes model used to calculate the fair value of the options granted are as follows:

Table of Contents

Weighted average fair value of stock options granted:	$	4.79
Assumptions used to determine fair value:
Dividend yield:	0		%
Risk free rate of return:	2.26		%
Expected life of options (years):	10
Expected volatility:	21.57		%

The total compensation expense related to options granted for the nine month period ended June 30, 2015 was $4,000. As of June 30, 2015, there is $281,000 of unrecognized compensation expense related to options granted which is to be recognized over the remaining vesting period of 6.89 years.

On May 19, 2015, the Board of Directors granted stock awards in the amount of 7,669 shares to its management and employees. The awards vest over a three-year period. The total compensation expense related to stock awards granted for the nine-month period ended June 30, 2015 was $64,000. As of June 30, 2015, there is $261,000 of unrecognized compensation expense related to stock awards granted which is to be recognized over the remaining weighted-average vesting period of 2.4 years.

The Bank has adopted a tax-qualified 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 June 30, 2015 (unaudited), the remaining principal balance on the ESOP debt is $332,000 and the number of shares held by the ESOP is 46,287.

Total compensation expense recognized in connection with the ESOP was $26,000 and $22,000 for the three months ended June 30, 2015 and 2014, respectively (unaudited), and $76,000 and $69,000 for the nine months ended June 30, 2015 and 2014, respectively (unaudited).

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.

Table of Contents

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 2014 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.

Comparison of Financial Condition at June 30, 2015 (unaudited) and September 30, 2014

Total Assets. Total assets increased by $7.8 million, from $109.2 million at September 30, 2014 to $117.0 million at June 30, 2015, primarily due to an increase in loans held-for-sale of $4.6 million and an increase in loans, net, of $5.1 million. These increases were primarily offset by a decrease in cash and cash equivalents of $1.6 million.

Cash and Cash Equivalents. Cash and cash equivalents decreased by $1.6 million, from $5.9 million at September 30, 2014 to $4.3 million at June 30, 2015, in order to fund new loan originations.

Interest-Bearing Time Deposits in Other Banks. These deposits decreased by $300,000, from $2.0 million at September 30, 2014 to $1.7 million at June 30, 2015. 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 decreased by $98,000, from $16.6 million at September 30, 2014 to $16.5 million at June 30, 2015. The decrease is primarily due to repayments, net of purchases, of mortgage-backed securities.

Loans Held-for-Sale. Loans held-for-sale increased by $4.6 million, from $2.7 million at September 30, 2014 to $7.3 million at June 30, 2015, primarily due to the timing of loan closings and fundings.

Loans, Net. Loans, net, increased by $5.1 million, from $77.0 million at September 30, 2014 to $82.1 million at June 30, 2015. This increase was primarily due to new loans originated, net of repayments.

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 $9.1 million, from $87.5 million at September 30, 2014 to $96.6 million at June 30, 2015, primarily due to a $4.2 million increase in certificates of deposit and a $3.8 million increase in noninterest-bearing demand deposit accounts due to growth in business checking accounts.

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

	June 30,				September 30,
	2015				2014
(Dollars in thousands)	(unaudited)
Noninterest-bearing demand deposits	$	18,137	18.78	%	$	14,355	16.41	%
Interest bearing deposits:
Money market	12,774		13.22		11,905		13.61
Regular and other savings	11,634		12.04		11,345		12.97
Certificates of deposit	54,062		55.96		49,878		57.01
Total	$	96,607	100.00	%	$	87,483	100.00	%

Table of Contents

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. Federal Home Loan Bank of Boston borrowings outstanding at June 30, 2015 were $9.5 million. Total borrowings outstanding at September 30, 2014 were $11.0 million.

Comparison of Results of Operations for the Three and Nine Months Ended June 30, 2015 and 2014 (unaudited)

Net Income (Loss). Net income (loss) went from a net loss of ($80,000) for the three months ended June 30, 2014 to net income of $12,000 for the three months ended June 30, 2015, primarily due to an increase in total noninterest income of $195,000 and an increase in interest income of $183,000, offset by an increase in noninterest expense of $188,000 and an increase in interest expense of $54,000.

Net income (loss) went from a net loss of ($153,000) for the nine months ended June 30, 2014 to net income of $109,000 for the nine months ended June 30, 2015, due to an increase in noninterest income of $379,000 and an increase in interest income of $683,000, offset by an increase in noninterest expense of $453,000, an increase in interest expense of $163,000 and an increase in provision for loan losses of $25,000.

Net Interest and Dividend Income. Net interest and dividend income increased by $129,000, from $682,000 for the three months ended June 30, 2014 to $811,000 for the three months ended June 30, 2015, primarily due to the increase in loans, net and investment securities. The average outstanding balance of loans, net, increased by $17.0 million from $69.4 million for the three months ended June 30, 2014 to $86.4 million for the three months ended June 30, 2015, and the average balance of investment securities increased by $3.6 million, from $14.3 million for the three months ended June 30, 2014 to $17.9 million for the three months ended June 30, 2015. The average yield on interest-earning assets decreased from 3.81% for the three months ended June 30, 2014 to 3.78% for the three months ended June 30, 2015, while the average balance of interest-earning assets increased from $87.5 million to $107.7 million. The average rate paid on interest-bearing liabilities increased from 0.85% for the three months ended June 30, 2014 to 0.95% for the three months ended June 30, 2015. The interest rate spread decreased from 2.96% for the three months ended June 30, 2014 to 2.83% for the three months ended June 30, 2015. Interest expense on FHLB advances increased by $25,000, from $3,000 for the three months ended June 30, 2014, to $28,000 for the three months ended June 30, 2015, primarily due to increased borrowings as a part of the Company’s growth strategy to fund loans.

Net interest and dividend income increased by $520,000, from $1.9 million for the nine months ended June 30, 2014 to $2.4 million for the nine months ended June 30, 2015, primarily due to the increase in loans, net and investment securities. The average outstanding balance of loans, net increased by $19.3 million, from $65.8 million for the nine months ended June 30, 2014 to $85.1 million for the nine months ended June 30, 2015, and the average balance of investment securities increased by $7.2 million, from $10.6 million for the nine months ended June 30, 2014 to $17.8 million for the nine months ended June 30, 2015. The average yield on interest-earning assets decreased from 3.84% for the nine months ended June 30, 2014 to 3.78% for the nine months ended June 30, 2015, offset by an increase in the average balance of interest-earning assets from $80.8 million to $106.0 million. The average rate paid on interest-bearing liabilities increased from 0.88% for the nine months ended June 30, 2014 to 0.91% for the nine months ended June 30, 2015. The interest rate spread decreased from 2.96% for the nine months ended June 30, 2014 to 2.87% for the nine months ended June 30, 2015. Interest expense on FHLB advances increased by $73,000, from $10,000 for the nine months ended June 30, 2014, to $83,000 for the nine months ended June 30, 2015, primarily due to increased borrowings as a part of the Company’s growth strategy to fund loans.

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.

Table of Contents

	Three months ended June 30,
	2015						2014
	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)	$	17,948	$	102	2.27	%	$	14,297	$	89	2.49	%
Loans, net (2)	86,438		910		4.21	%	69,408		738		4.25	%
Other interest earning assets (3)	3,279		5		0.61	%	3,821		7		0.73	%
Total interest-earning assets	107,665		1,017		3.78	%	87,526		834		3.81	%

Non-interest earning assets	10,658						9,075
Total assets	$	118,323					$	96,601

Interest bearing liabilities:
Regular savings accounts	$	11,609	4		0.14	%	$	10,348	4		0.15	%
Money market accounts	12,119		17		0.56	%	10,751		15		0.56	%
Time deposits	52,980		157		1.19	%	44,960		130		1.16	%
Total interest bearing deposits	76,708		178		0.93	%	66,059		149		0.90	%

Federal Home Loan Bank advances	10,077		28		1.11	%	5,198		3		0.23	%
Total interest-bearing liabilities	86,785		206		0.95	%	71,257		152		0.85	%

Demand deposits	16,872						11,835
Other liabilities	195						195
Stockholders’ equity	14,471						13,314
Total liabilities and stockholders’ equity	$	118,323					$	96,601

Net interest income			$	811					$	682

Interest rate spread					2.83	%					2.96	%
Net yield on earning assets					3.01	%					3.12	%

(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 June 30, 2015 and 2014 are annualized.

Table of Contents

	Nine months ended June 30,
	2015						2014
	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)	$	17,834	$	311	2.33	%	$	10,587	$	189	2.38	%
Loans, net (2)	85,052		2,681		4.20	%	65,785		2,113		4.28	%
Other interest earning assets (3)	3,149		16		0.68	%	4,391		23		0.70	%
Total interest-earning assets	106,035		3,008		3.78	%	80,763		2,325		3.84	%

Non-interest earning assets	10,437						9,099
Total assets	$	116,472					$	89,862

Interest bearing liabilities:
Regular savings accounts	$	11,544	13		0.15	%	$	9,895	$	12	0.16	%
Money market accounts	11,916		50		0.56	%	10,193		42		0.55	%
Time deposits	51,363		447		1.16	%	40,700		366		1.20	%
Total interest bearing deposits	74,823		510		0.91	%	60,788		420		0.92	%

Federal Home Loan Bank advances	11,953		83		0.93	%	4,217		10		0.32	%
Total interest-bearing liabilities	86,776		593		0.91	%	65,005		430		0.88	%

Demand deposits	15,787						11,318
Other liabilities	206						270
Stockholders’ equity	13,703						13,269
Total liabilities and stockholders’ equity	$	116,472					$	89,862

Net interest income			$	2,415					$	1,895

Interest rate spread					2.87	%					2.96	%
Net yield on earning assets					3.04	%					3.13	%

(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 nine month periods ended June 30, 2015 and 2014 are annualized.

Table of Contents

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									Nine Months Ended
	June 30, 2015									June 30, 2015
	Compared to									Compared to
	Three Months Ended									Nine Months Ended
	June 30, 2014									June 30, 2014
	Increase (Decrease)									Increase (Decrease)
	Due to									Due to
(In thousands)	Volume			Rate			Net			Volume			Rate			Net

Interest income:
Securities (1)	$	20		$	(7	)	$	13		$	126		$	(4	)	$	122
Loans, net (2)	179			(7		)	172			607			(39		)	568
Other interest-earning assets (3)	(1		)	(1		)	(2		)	(6		)	(1		)	(7		)
Total interest-earning assets	198			(15		)	183			727			(44		)	683

Interest expense:
Deposits	$	26		$	3		$	29		$	101		$	(11	)	$	90
Federal Home Loan Bank advances	5			20			25			36			37			73
Total interest-bearing liabilities	31			23			54			137			26			163
Increase (decrease) in net interest income	$	167		$	(38	)	$	129		$	590		$	(70	)	$	520

(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 (Benefit) for Loan Losses. The provision for loan losses decreased by $12,000, from $40,000 for the three months ended June 30, 2014 to $28,000 for the three months ended June 30, 2015. The decrease in the provision was due to the slower growth of the loan portfolio.

The provision for loan losses increased by $25,000, from $19,000 for the nine months ended June 30, 2014 to $44,000 for the nine months ended June 30, 2015. The increase in the provision was due to the growth of the loan portfolio.

Table of Contents

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

	At or						At or
	For the						For the
	Three Months Ended						Nine Months Ended
	June 30,						June 30,
(Dollars in thousands)	2015			2014			2015			2014

Allowance beginning of period	$	522		$	417		$	506		$	435
Provision for loan losses	28			40			44			19
Charge-offs	—			—			—			—
Recoveries	—			—			—			3
Allowance at end of period	$	550		$	457		$	550		$	457

Allowance for loan losses as a percent of non- performing loans	156.7		%	2,176.2		%	156.7		%	2,176.2		%
Allowance for loan losses as a percent of total loans	0.67		%	0.65		%	0.67		%	0.65		%
Net (charge-offs) recoveries to average loans outstanding during the period	—		%	—		%	—		%	—		%

Noninterest Income. Noninterest income increased by $195,000, from $166,000 for the three months ended June 30, 2014 to $361,000 for the three months ended June 30, 2015, primarily due to an increase in mortgage banking activities from $99,000 to $247,000. The increase in mortgage banking activities was primarily due to increased volume of loans sold in the secondary market.

Noninterest income increased by $379,000, from $580,000 for the nine months ended June 30, 2014 to $959,000 for the nine months ended June 30, 2015, primarily due to an increase in mortgage banking activities from $319,000 to $626,000. The increase in mortgage banking activities was primarily due to increased volume of loans sold in the secondary market.

Noninterest Expense. Noninterest expense increased by $188,000, from $930,000 for the three months ended June 30, 2014 to $1.1 million for the three months ended June 30, 2015, primarily due to increases in salaries and employee benefit expense of $105,000 for salary adjustments and increased costs of employee benefits and compensation expense associated with restricted stock awards. Occupancy and equipment expense increased $50,000, primarily due to increased snow removal expenses.

Noninterest expense increased by $453,000, from $2.7 million for the nine months ended June 30, 2014 to $3.1 million for the nine months ended June 30, 2015, primarily due to increases in salaries and employee benefit expense of $250,000 for salary adjustments, increased costs of employee benefits and compensation expense associated with restricted stock awards. Occupancy and equipment expense increased $78,000 primarily due to increased snow removal expenses. Data processing increased $41,000 primarily due to increase utilization of check processing services by business customers.

Income Tax Expense (Benefit). Income tax expense increased by $56,000, from ($42,000) for the three months ended June 30, 2014 to $14,000 for the three months ended June 30, 2015, due to the increase in pre-tax income for the three months ended June 30, 2015. The effective tax rate was (34.4%) for the three months ended June 30, 2014 and 53.8% for the three months ended June 30, 2015.

Income tax expense increased by $159,000, from ($80,000) for the nine months ended June 30, 2014 to $79,000 for the nine months ended June 30, 2015, due to the increase in pre-tax income for the nine months ended June 30, 2015. The effective tax rate was (34.3%) for the nine months ended June 30, 2014 and the effective tax rate was 42.0% for the nine months ended June 30, 2015.

Table of Contents

Analysis of Nonperforming and Classified Assets. We consider repossessed assets and loans that are 90 days or more past due or on nonaccrual 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 income. 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 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.

	June 30,			September 30,
(Dollars in thousands)	2015			2014
	(unaudited)
Nonaccrual loans:
Real estate loans:
Residential	$	332		$	—
Commercial	—			—
Total real estate	332			—
Consumer loans	19			20
Total	351			20
Accruing loans past due 90 days or more	—			—
Total nonaccrual loans and accruing loans past due 90 days	351			20
Other real estate owned	—			—
Total nonperforming assets	351			20
Troubled debt restructurings	—			—
Total nonperforming assets and troubled debt restructurings	$	351		$	20

Total nonperforming loans to total loans	0.42		%	0.03		%
Total nonperforming loans to total assets	0.30		%	0.02		%
Total nonperforming assets and troubled debt restructurings to total assets	0.30		%	0.02		%

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.

Table of Contents

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 June 30, 2015, cash and cash equivalents totaled $4.3 million. Securities classified as available-for-sale provide additional sources of liquidity and had a market value of $16.5 million at June 30, 2015. In addition, at June 30, 2015, the Bank had the ability to borrow a total of approximately $26.4 million from the Federal Home Loan Bank of Boston. At June 30, 2015, the Bank had borrowings outstanding of $9.5 million. At June 30, 2015, the Bank also had the ability to borrow $4.8 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 June 30, 2015, the Bank had no borrowings outstanding under this credit facility.

At June 30, 2015, the Bank had $9.6 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 June 30, 2015 totaled $37.4 million, or 69.1% 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 June 30, 2015, the Company (unconsolidated basis) had liquid assets of $964,000.

Contractual Obligations. The Company has entered into a non-cancellable lease agreement pertaining to the Roslindale branch facility. The term of the lease commenced on February 1, 2013 and expires on January 31, 2018.

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 June 30, 2015, the Bank exceeded all of its regulatory capital requirements to be considered “well capitalized” under regulatory guidelines. See note 8 of the notes to condensed unaudited 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.

Table of Contents

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 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):

	June 30,		September 30,
	2015		2014
	(unaudited)
Commitments to originate loans	$	3,466	$	1,114
Unadvanced funds on lines of credit	5,423		5,259
Unadvanced funds on construction loans	571		527
Standby letters of credit	149		149
	$	9,609	$	7,049

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 June 30, 2015 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Table of Contents

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.

Item 1A. Risk Factors

There have been no material changes in the Company’s risk factors during the nine months ended June 30, 2015. 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, 2014.

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

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

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

3.3		Bylaws of Meetinghouse Bancorp, Inc. (1)

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

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

32.0		Section 1350 Certification

101.1		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income (Loss), (iii) the Consolidated Statements of Comprehensive (Loss) Income, (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements.

(1) Incorporated herein by reference to the exhibits to the Company’s Registration Statement on Form S-1 (File No. 333-180026), filed with the Securities and Exchange Commission on March 9, 2012.

Table of Contents

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:	August 14, 2015	By:	/s/ Anthony A. Paciulli
			Anthony A. Paciulli
			President and Chief Executive Officer


Dated:	August 14, 2015	By:	/s/ Wayne Gove
			Wayne Gove
			Senior Vice President and Chief Financial Officer

Meetinghouse Bancorp, Inc. - FORM 10-Q - August 14, 2015

Attached files

Meetinghouse Bancorp, Inc. Reports