	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2014			2013			2015			2014
	(In thousands)						(In thousands)
Cash Flows from Operating Activities:
Net income	$	671		$	588
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization (accretion) of securities premiums and discounts, net		(18	)		37
Provision (credit) for loan losses		(217	)		(363	)
Net (loss) income							$	(156	)	$	215
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net accretion of securities discounts, net								(36	)		(10	)
Provision for loan losses								667			—
Depreciation		370			389			159			184
Net amortization of deferred loan fees and costs		75			73			28			46
Amortization of intangible assets		31			31			15			16
Deferred income tax expense		(105	)		770
Impairment loss on goodwill		—			334
Retirement plan expense		—			149
Loss on sale of other real estate owned		—			51
Deferred income tax benefit								(7	)		(96	)
Loss on sale of real estate owned								93			—
Loss provision on real estate owned								142			—
Earnings on bank owned life insurance		(308	)		(319	)		(153	)		(153	)
ESOP compensation expense		94			75			44			47
Increase in accrued interest receivable		(189	)		(88	)		(102	)		(171	)
(Increase) decrease in other assets		2,504			(8	)		(351	)		2,247
Increase in accounts payable and accrued expenses		613			758
Decrease in accounts payable and accrued expenses								(172	)		(165	)
Net Cash Provided by Operating Activities		3,521			2,477			171			2,160
Cash Flows from Investing Activities:
Net (increase) decrease in loans		(14,075	)		1,221
Proceeds from sale of other real estate owned		—			399
Net increase in loans								(9,619	)		(14,581	)
Proceeds from sale of real estate owned								493			—
Principal repayments on securities available-for-sale		21			6			2			6
Principal repayments on securities held-to-maturity		956			1,937			363			491
Proceeds from maturities of certificates of deposit		—			249
Net purchase of FHLB of NY stock		(33	)		481			(108	)		—
Capitalized cost of real estate owned		(29	)		—
Capitalized cost on real estate owned								—			(11	)
Purchases of premises and equipment		(67	)		(22	)		(65	)		(52	)
Net Cash (Used In) Provided by Investing Activities		(13,227	)		4,271
Net Cash Used In Investing Activities								(8,934	)		(14,147	)
Cash Flows from Financing Activities:
Net increase (decrease) in deposits		18,353			(5,635	)
Net increase in deposits								19,866			6,270
Proceeds from FHLB of NY advances		12,934			—			7,380			5,000
Repayment of FHLB of NY advances		(13,000	)		(10,000	)		(5,000	)		(5,000	)
Purchase of treasury stock		(1,390	)		—			(646	)		(833	)
Increase in advance payments by borrowers for taxes and insurance		(786	)		(927	)		922			484
Cash dividends paid		(289	)		(302	)		(142	)		(149	)
Net Cash Provided by (Used in) Financing Activities		15,822			(16,864	)
Net Cash Provided by Financing Activities								22,380			5,772
Net Increase (Decrease) in Cash and Cash Equivalents		6,116			(10,116	)		13,617			(6,215	)
Cash and Cash Equivalents - Beginning		31,531			49,242			34,010			31,531
Cash and Cash Equivalents - Ending	$	37,647		$	39,126		$	47,627		$	25,316
SUPPLEMENTARY CASH FLOWS INFORMATION
Income taxes paid (refunded)	$	(1,806	)	$	4		$	150		$	(1,906	)
Interest paid	$	1,664		$	1,604		$	943		$	819
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES
Dividends declared and not paid	$	144		$	150		$	140		$	146
Loans receivable transferred to loans held-for-sale							$	5,464		$	—
Loans receivable transferred to real estate owned							$	702		$	—

Northeast Community Bancorp, Inc. (the “Company”) is a federally-chartered corporation organized as a mid-tier holding company for Northeast Community Bank (the “Bank”), in conjunction with the Bank’s reorganization from a mutual savings bank to the mutual holding company structure on July 5, 2006. The Bank is a New York State-chartered savings bank and completed its conversion from a federally-chartered savings bank effective as of the close of business on June 29, 2012. The accompanying unaudited consolidated financial statements include the accounts of the Company, the Bank and the Bank’s wholly owned subsidiaries, New England Commercial Properties, LLC (“NECP”) and NECB Financial Services Group, LLC. NECB Financial Services Group was formed by the Bank in the second quarter of 2012 as a complement to the Bank’s existing investment advisory and financial planning services division, Hayden Wealth Management. As of the filing of this Form 10-Q, NECB Financial Services Group has not conducted any business. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements were prepared in accordance with generally accepted accounting principles for interim financial information as well as instructions for Form 10-Q. Accordingly, they do not include all of the information or footnotes necessary for the presentation of financial position, results of operations, changes in stockholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the ~~six-month~~three-month period ended ~~June 30, 2014~~March 31, 2015 are not necessarily indicative of the results that may be expected for the full year or any other interim period. The December 31, ~~2013~~2014 consolidated statement of financial condition data was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP. That data, along with the interim financial information presented in the unaudited consolidated statements of financial condition, income, comprehensive income, stockholders’ equity, and cash flows should be read in conjunction with the consolidated financial statements and notes thereto, included in the Company’s annual report on Form 10-K for the year ended December 31, ~~2013.~~2014.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain recorded amounts and disclosures. Accordingly, actual results could differ from those estimates. The most significant estimate pertains to the allowance for loan losses. In preparing these consolidated financial statements, the Company evaluated the events that occurred after ~~June 30, 2014~~March 31, 2015 and through the date these consolidated financial statements were issued.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at unpaid principal balances plus net deferred loan origination costs less an allowance for loan losses. Interest on loans receivable is recorded on the accrual basis. An allowance for uncollected interest is established on loans where management has determined that the borrowers may be unable to meet contractual principal and/or interest obligations or where interest or principal is 90 days or more past due, unless the loans are well secured and in the process of collection. When a loan is placed on nonaccrual, an allowance for uncollected interest is established and charged against current income. Thereafter, interest income is not recognized unless the financial condition and payment record of the borrower warrant the recognition of interest income. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six consecutive months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. Interest on loans that have been restructured is accrued according to the renegotiated terms, unless on non-accrual. Net loan origination fees and costs are deferred and amortized into income over the contractual lives of the related loans by use of the level yield method. Past due status of loans is based upon the contractual due date.

Loans held-for-sale are carried at the lower of aggregate cost or fair value, based on observable inputs in the secondary market. Changes in fair value of loans held-for-sale are recognized in earnings.

The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the statement of financial condition date and is recorded as a reduction to loans. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions, and other relevant factors.

This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available. Risk characteristics associated with the types of loans the Company underwrites are as follows:

Multi-family, Mixed-use and Non-residential Real Estate Loans. Loans secured by multi-family, mixed-use, and non-residential real estate generally have larger balances and involve a greater degree of risk than one- to four-family residential mortgage loans. Of primary concern in multi-family, mixed-use and non-residential real estate lending is the current and potential cash flow of the property and the borrower’s demonstrated ability to operate that type of property. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject to a greater extent than residential real estate loans to adverse conditions in the real estate market or the economy.

Commercial and Industrial Loans. Unlike residential mortgage loans, which are generally made on the basis of a borrower’s ability to make repayment from the operation and cash flow from the real property whose value tends to be more ascertainable, commercial and industrial loans are of higher risk and tend to be made on the basis of a borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial and industrial loans may depend substantially on the success of the business itself. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

Construction Loans. Construction financing is generally considered to involve a higher degree of risk of loss than long-term loans secured by improved, occupied real estate due to: (1) the increased difficulty at the time the loan is made of estimating the building costs and the selling price of the property to be built; (2) the increased difficulty and costs of monitoring the loan; (3) the higher degree of sensitivity to increases in market rates of interest; and (4) the increased difficulty of working out loan problems. The Company ~~sought~~seeks to minimize these risks by limiting the amount of construction loans outstanding at any time, by limiting our construction loans to borrowers who have in effect pre-sold their construction project, and by limiting our construction loans to multi-family and single family projects.

Consumer Loans. We offer personal loans, loans secured by passbook savings accounts, certificates of deposit accounts or statement savings accounts, and overdraft protection for checking accounts. We do not believe these loans represent a significant risk of loss to the Company.

The allowance for loan losses consists of specific and general reserves. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, a specific allowance is established or a partial charge-off is taken when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. Beginning in the fourth quarter of 2012, the Company discontinued the use of specific allowances. If an impairment is identified, the Company now charges off the impaired portion immediately. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment records, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan ~~basis.~~basis

The Company does not evaluate individual one-to-four family residential real estate and consumer loans for impairment, unless such loans are part of a larger relationship that is impaired, or are classified as a troubled debt restructuring (“TDR”).

The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral or discounted cash flows.

For loans secured by real estate, estimated fair values are determined primarily through in-house or third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values might be discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The ~~discounts~~discount also include estimated costs to sell the property.

For loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable aging or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.

The general component covers pools of loans by loan class including loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate and consumer loans. These pools of loans are evaluated for loss exposure based upon historical loss rates, adjusted for qualitative factors. These qualitative risk factors include:

Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

The allowance for loan losses calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments, for commercial, residential and consumer loans. Credit quality risk ratings include regulatory classifications of pass, special mention, substandard, doubtful and loss. Loans criticized as special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any.

Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass.

The allowance calculation for each pool of loans is also based on the loss factors that reflect the Company’s historical charge-off experience adjusted for current economic conditions applied to loan groups with similar characteristics or classifications in the current portfolio. To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan rating process which allows for a periodic review of its loan portfolio and the early identification of potential impaired loans. Such system takes into consideration, among other things, delinquency status, size of loans, type of collateral and financial condition of the borrowers. The Company’s Chief Executive Officer is ultimately responsible for the timely and accurate risk rating of the loan portfolio.

Loans ~~whose~~the terms of which are modified are classified as TDRs if the Company grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a TDR generally involve a temporary reduction in interest rate or an extension of a loan’s stated maturity date. Adversely classified, non-accrual TDRs may be returned to accrued status if principal and interest payments, under the modified terms, are current for six consecutive months after modification. All TDR loans are classified as impaired.

In addition, banking regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, management believes the allowance for loan losses is adequate as of ~~June 30, 2014.~~March 31, 2015.

Goodwill totaled $749,000 at ~~June 30, 2014~~March 31, 2015 and December 31, ~~2013~~2014 and consists of goodwill acquired in the business combination completed by the Company in November 2007. The Company tests goodwill during the fourth quarter of each year for impairment, or more frequently if certain indicators are present or changes in circumstances suggest that impairment may exist. The Company utilizes a two-step approach. The first step requires a comparison of the carrying value of the reporting unit to the fair value of the unit. The Company estimates the fair value of the reporting unit through internal analyses and external valuation, which utilizes an income approach based on the present value of future cash flows. If the carrying value of the reporting unit exceeds its fair value, impairment exists and the Company will perform the second step of the goodwill impairment test to measure the amount of impairment loss, if any. The second step of the goodwill impairment test, if necessary, compares the implied fair value of a reporting unit’s goodwill with its carrying value.

The implied fair value of goodwill is determined in the same manner that the amount of goodwill recognized in a business combination is determined. The Company allocates the fair value of the reporting unit to all of the assets and liabilities of that unit, including identifiable intangible assets, as if the reporting unit had been acquired in a business combination. Any excess of the value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. No impairment charges were recorded for the ~~three- and six-month~~three-month periods ended ~~June 30,~~March 31, 2015 and 2014. During the second quarter of 2013, the Company determined that an adjustment to the goodwill impairment previously recorded in 2012 was necessary. As a result, an additional impairment charge of $334,000 was recognized during the second quarter of 2013.

Basic earnings per common share is calculated by dividing the net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is computed in a manner similar to basic earnings per common share except that the weighted average number of common shares outstanding is increased to include the incremental common shares (as computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. Common stock equivalents may include restricted stock awards and stock options. Anti-dilutive shares are common stock equivalents with weighted-average exercise prices in excess of the weighted-average market value for the periods presented. The Company has not granted any restricted stock awards or stock options and had no potentially dilutive common stock equivalents during the ~~six-month~~three-month periods ended ~~June 30, 2014~~March 31, 2015 and ~~2013.~~2014. Unallocated common shares held by the Employee Stock Ownership Plan (“ESOP”) are not included in the weighted-average number of common shares outstanding for purposes of calculating both basic and diluted earnings per common share until they are committed to be released.

AsThe following table sets forth the amount of ~~December 31, 2013~~allocated shares, shares committed to be released, unallocated shares, allocated shares distributed to former or retired employees, and ~~June 30, 2014, the ESOP trust held 518,420 shares of the Company’s common stock, which represents all allocated and unallocated~~total shares held by the ~~ESOP. As of December 31, 2013,~~ESOP trust at the Company had allocated 181,447 shares to participants, and an additional 25,921 shares had been committed to be released. As of June 30, 2014, the Company had allocated 207,368 shares to participants, and an additional 12,960 shares had been committed to be released.dates indicated:

The Company recognized compensation expense of ~~$47,000~~$45,000 and ~~$39,000~~$47,000 during the three-month periods ended ~~June 30~~March 31, 2015 and 2014, ~~and 2013, respectively, and $94,000 and $75,000 during the six-month periods ended June 30, 2014 and 2013,~~ respectively, which equals the fair value of the ESOP shares when they became committed to be released.

	Three Months					Six Months					Three Months
	Ended June 30,					Ended June 30,					Ended March 31,
	(In thousands)										(In thousands)

	2014			2013		2014			2013		2015			2014
Service cost	$	18		$	18	$	36		$	36	$	23		$	18
Interest cost		10			11		20			21		11			10
Amortization of prior service cost		5			5		11			11		5			6
Amortization of actuarial (gain) loss		(1	)		9		(2	)		18
Amortization of actuarial gain												(2	)		(1	)
Total	$	32		$	43	$	65		$	86	$	37		$	33

This plan is an unfunded, non-contributory defined benefit pension plan covering all non-employee directors meeting eligibility requirements as specified in the plan document.

The following table sets forth the amortized cost and fair values of our securities portfolio at the dates indicated:

			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
	(In thousands)								(In thousands)
June 30, 2014
March 31, 2015
Securities available-for-sale:
Mortgage-backed securities – residential:
Federal Home Loan Mortgage Corporation	$	44	$	1	$	—	$	45	$	33	$	—	$	—	$	33
Federal National Mortgage Association		45		—		—		45		5		—		—		5
Total	$	89	$	1	$	—	$	90	$	38	$	—	$	—	$	38

Securities held-to-maturity:
Mortgage-backed securities – residential:
Government National Mortgage Association	$	5,727	$	213	$	—	$	5,940	$	4,827	$	145	$	—	$	4,972
Federal Home Loan Mortgage Corporation		224		7		—		231		180		5		—		185
Federal National Mortgage Association		143		2		—		145		122		3		—		125
Collateralized mortgage obligations-GSE		1,412		67		—		1,479		1,139		41		—		1,180
Total	$	7,506	$	289	$	—	$	7,795	$	6,268	$	194	$	—	$	6,462

			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
	(In thousands)
December 31, 2013
									(In thousands)
December 31, 2014
Securities available-for-sale:
Mortgage-backed securities – residential:
Federal Home Loan Mortgage Corporation	$	63	$	2	$	—	$	65	$	34	$	1	$	—	$	35
Federal National Mortgage Association		47		1		—		48		5		—		—		5
Total	$	110	$	3	$	—	$	113	$	39	$	1	$	—	$	40

Securities held-to-maturity:
Mortgage-backed securities – residential:
Government National Mortgage Association	$	6,426	$	215	$	—	$	6,641	$	5,065	$	159	$	—	$	5,224
Federal Home Loan Mortgage Corporation		238		7		—		245		186		6		—		192
Federal National Mortgage Association		155		6		—		161		128		3		—		131
Collateralized mortgage obligations-GSE		1,624		67		—		1,691		1,216		42		—		1,258
Other		1		—		—		1
Total	$	8,444	$	295	$	—	$	8,739	$	6,595	$	210	$	—	$	6,805

Contractual final maturities of mortgage-backed securities available-for-sale were as follows:

	June 30, 2014				March 31, 2015
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)				(In thousands)
Due after five but within ten years	$	7	$	7	$	6	$	6
Due after ten years		82		83		32		32

Total	$	89	$	90	$	38	$	38

Contractual final maturities of mortgage-backed securities held-to-maturity were as follows:

	June 30, 2014				March 31, 2015
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)				(In thousands)
Due after one but within five years	$	77	$	78	$	61	$	62
Due after five but within ten years		136		139		149		152
Due after ten years		7,293		7,578		6,058		6,248

Total	$	7,506	$	7,795	$	6,268	$	6,462

The maturities shown above are based upon contractual final maturity. Actual maturities will differ from contractual maturities due to scheduled monthly repayments and due to the underlying borrowers having the right to prepay their obligations.

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The Company’s securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other assets and liabilities on a non-recurring basis, such as impaired loans and other real estate owned. U.S. GAAP has established a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1

measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. For financial assets measured at fair value on a recurring and nonrecurring basis, the fair value measurements by level within the fair value hierarchy used are as follows:

			(Level 1)		(Level 2)						(Level 1)		(Level 2)
			Quoted Prices		Significant						Quoted Prices		Significant		(Level 3)
			in Active		Other		(Level 3)				in Active		Other		Significant
			Markets for		Observable		Significant				Markets for		Observable		Unobservable
Description	Total		Identical Assets		Inputs		Unobservable Inputs		Total		Identical Assets		Inputs		Inputs
June 30, 2014:	(In thousands)
March 31, 2015:									(In thousands)
Recurring:
Mortgage-backed securities - residential:
Federal Home Loan Mortgage Corporation									$	33	$	—	$	33	$	—
Federal National Mortgage Association										5		—		5		—
Total									$	38	$	—	$	38	$	—

Nonrecurring:
Real estate owned									$	2,111	$	—	$	—	$	2,111
Loans held-for-sale - non-residential									$	5,464	$	—	$	5,464	$	—

December 31, 2014:
Recurring:
Mortgage-backed securities - residential:
Federal Home Loan Mortgage Corporation	$	45	$	—	$	45	$	—	$	35	$	—	$	35	$	—
Federal National Mortgage Association		45		—		45		—		5		—		5		—
Total	$	90	$	—	$	90	$	—	$	40	$	—	$	40	$	—
Nonrecurring:
Impaired loans	$	4,026	$	—	$	—	$	4,026

December 31, 2013:
Recurring:
Mortgage-backed securities - residential:
Federal Home Loan Mortgage Corporation	$	65	$	—	$	65	$	—
Federal National Mortgage Association		48		—		48		—
Total	$	113	$	—	$	113	$	—
Nonrecurring:
Impaired loans	$	789	$	—	$	—	$	789
Real estate owned									$	2,137	$	—	$	—	$	2,137

The following table presents additional quantitative information about assets measured at fair value on a ~~nonrecurring~~non-recurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

The carrying amounts and fair values of the Company’s financial instruments are summarized below:

					Fair Value at										Fair Value at
					June 30, 2014										March 31, 2015
					Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs						Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)		Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash and cash equivalents	$	37,647	$	37,647	$	37,647	$	—	$	—	$	47,627	$	47,627	$	—	$	47,627	$	—
Certificates of deposit		2,142		2,142		—		2,142		—		150		150		—		150		—
Securities available-for-sale		90		90		—		90		—		38		38		—		38		—
Securities held-to-maturity		7,506		7,795		—		7,795		—		6,268		6,462		—		6,462		—
Loans receivable		382,042		389,439		—		—		389,439		426,203		428,219		—		—		428,219
FHLB of New York stock		1,627		1,627		—		1,627		—
Loans held-for-sale												5,464		5,464		—		5,464		—
Investments in restricted stock												2,041		2,041		—		2,041		—
Accrued interest receivable		1,456		1,456		—		1,456		—		1,555		1,555		—		1,555		—

Financial Liabilities
Deposits		343,562		347,233		—		347,233		—		393,918		389,168		—		389,168		—
FHLB of New York advances		20,934		20,936		—		20,936		—		32,380		32,353		—		32,353		—
Accrued interest payable		2		2		—		2		—		4		4		—		4		—

					Fair Value at										Fair Value at
					December 31, 2013										December 31, 2014
					Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs						Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands)	Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)		Carrying Amount		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets
Cash and cash equivalents	$	31,531	$	31,531	$	31,531	$	—	$	—	$	34,010	$	34,010	$	—	$	34,010	$	—
Certificates of deposit		2,142		2,142		—		2,142		—		150		150		—		150		—
Securities available-for-sale		113		113		—		113		—		40		40		—		40		—
Securities held-to-maturity		8,444		8,739		—		8,739		—		6,595		6,805		—		6,805		—
Loans receivable		367,825		374,820		—		—		374,820		423,445		429,467		—		—		429,467
FHLB of New York stock		1,594		1,594		—		1,594		—
Investments in restricted stock												1,933		1,933		—		1,933		—
Accrued interest receivable		1,267		1,267		—		1,267		—		1,453		1,453		—		1,453		—

Financial Liabilities
Deposits		325,209		328,654		—		328,654		—		374,052		377,276		—		377,276		—
FHLB of New York advances		21,000		21,016		—		21,016		—		30,000		29,970		—		29,970		—
Accrued interest payable		2		2		—		2		—		3		3		—		3		—

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at ~~June 30, 2014~~March 31, 2015 and December 31, ~~2013:~~2014:

Cash and Cash Equivalents, Certificates of Deposit and Accrued Interest Receivable and Payable

For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Fair values for securities available-for-sale and held-to-maturity are determined utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayments speeds, credit information and the security’s terms and conditions, among other things.

Fair values are estimated for portfolios of loans with similar financial characteristics. The total loan portfolio is first divided into performing and non-performing categories. Performing loans are then segregated into adjustable and fixed rate interest terms. Fixed rate loans are segmented by type, such as construction, other loans secured by real estate, commercial and industrial loans, and consumer. Certain types, such as commercial loans and consumer loans, are further segmented by maturity and type of collateral.

For performing loans, fair value is calculated by discounting scheduled future cash flows through estimated maturity using a market rate that reflects the credit and interest-rate risks inherent in the loans. The discounted value of the cash flows is reduced by a credit risk adjustment based on internal loan classifications. For non-performing loans, fair value is calculated by discounting the estimated future cash flows from the remaining carrying value at a market rate. For impaired loans which the Company has measured and recorded impairment generally based on the fair value of the loan’s collateral, fair value is generally determined based upon independent third-party appraisal of the properties, or discounted cash flows based upon the expected proceeds. These assets are typically included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Fair value of ~~New York~~loans held-for-sale is determined by utilizing Level 2 inputs based on observable inputs in the secondary market.

The carrying amount of the ~~FHLB~~restricted stock, consisting of Federal Home Loan Bank of New York (“FHLB”) stock and Atlantic Community Bankers Bank (“ACBB”) stock, approximates its fair value, and considers the limited marketability of ~~this security.~~these securities.

The fair value of deposits with no stated maturity, such as non-interest-bearing demand deposits, money market accounts, interest checking accounts, and savings accounts is equal to the amount payable on demand. ~~Time~~Certificates of deposits are segregated by type, size, and remaining maturity. The fair value of ~~time~~certificates of deposits is based on the discounted value of contractual cash flows. The discount rate is based on rates currently offered in the market.

The fair value of the FHLB advances is estimated based on the discounted value of future contractual payments. The discount rate is equivalent to the estimated rate at which the Company could currently obtain similar financing.

The fair value of commitments to extend credit is estimated based on an analysis of the interest rates and fees currently charged to enter into similar transactions, considering the remaining terms of the commitments and the credit-worthiness of the potential borrowers. At ~~June 30, 2014~~March 31, 2015 and December 31, ~~2013,~~2014, the estimated fair values of these off-balance-sheet financial instruments were immaterial.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sale transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end.

The above information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

The following is an analysis of the allowance for loan losses and related information concerning loan balances:

	June 30,			December 31,			March 31,			December 31,
	2014			2013			2015			2014
	(In thousands)						(In thousands)
Residential real estate:
One-to-four family	$	12,100		$	11,752		$	13,720		$	13,314
Multi-family		189,998			188,923			193,628			188,017
Mixed-use		53,972			50,467			62,572			61,546
Total residential real estate		256,070			251,142			269,920			262,877
Non-residential real estate		78,186			81,985			77,861			82,622
Construction		20,964			6,568			44,464			46,607
Commercial and industrial		29,954			31,345			37,179			34,407
Consumer		158			161			139			142

Total Loans		385,332			371,201			429,563			426,655

Allowance for loan losses		(3,930	)		(4,015	)		(3,920	)		(3,816	)
Deferred loan costs, net		640			639			560			606

Net Loans	$	382,042		$	367,825		$	426,203		$	423,445

At and for the ~~Six~~Three Months Ended ~~June 30, 2014~~March 31, 2015 (in thousands)

	Residential Real Estate			Non- residential Real Estate			Construction		Commercial and Industrial			Consumer		Unallocated			Total			Residential Real Estate		Non- residential Real Estate			Construction		Commercial and Industrial		Consumer		Unallocated			Total
Allowance for loan losses:
Beginning balance	$	2,556		$	896		$	97	$	456		$	—	$	10		$	4,015		$	2,023	$	692		$	492	$	494	$	—	$	115		$	3,816
Charge-offs		(392	)		(41	)		—		—			—		—			(433	)		—		(588	)		—		—		—		—			(588	)
Recoveries		—			565			—		—			—		—			565			—		25			—		—		—		—			25
Provision (credit)		459			(632	)		64		(98	)		—		(10	)		(217	)		108		613			18		43		—		(115	)		667
Ending balance	$	2,623		$	788		$	161	$	358		$	—	$	—		$	3,930		$	2,131	$	742		$	510	$	537	$	—	$	—		$	3,920
Ending balance: individually evaluated for impairment	$	—		$	160		$	—	$	—		$	—	$	—		$	160		$	—	$	—		$	—	$	—	$	—	$	—		$	—

Ending balance: collectively evaluated for impairment	$	2,623		$	628		$	161	$	358		$	—	$	—		$	3,770		$	2,131	$	742		$	510	$	537	$	—	$	—		$	3,920

Loans receivable:
Ending balance	$	256,070		$	78,186		$	20,964	$	29,954		$	158	$	—		$	385,332		$	269,920	$	77,861		$	44,464	$	37,179	$	139	$	—		$	429,563

Ending balance: individually
evaluated for impairment	$	9,256		$	10,997		$	—	$	2,511		$	—	$	—		$	22,764
Ending balance: individually evaluated for impairment																				$	4,918	$	2,423		$	—	$	2,567	$	—	$	—		$	9,908

Ending balance: collectively evaluated for impairment	$	246,814		$	67,189		$	20,964	$	27,443		$	158	$	—		$	362,568		$	265,002	$	75,438		$	44,464	$	34,612	$	139	$	—		$	419,655

~~For the Three Months Ended June 30, 2013 (in thousands)~~The following is a summary of impaired loans at March 31, 2015 and December 31, 2014:

~~The following is a summary of impaired loans at June 30, 2014 and December 31, 2013:~~

The following table provides information about delinquencies in our loan portfolio at the dates indicated.

Age Analysis of Past Due Loans as of ~~June 30, 2014~~March 31, 2015 (in thousands)

	30-59 Days Past Due		60 – 89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Recorded Investment > 90 Days and Accruing		30-59 Days Past Due		60 – 89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Recorded Investment > 90 Days and Accruing

Residential real estate:
One- to four-family	$	—	$	—	$	—	$	—	$	12,100	$	12,100	$	—	$	—	$	—	$	—	$	—	$	13,720	$	13,720	$	—
Multi-family		695		—		2,387		3,082		186,916		189,998		—		—		—		708		708		192,920		193,628		—
Mixed-use		226		—		1,928		2,154		51,818		53,972		—		—		—		—		—		62,572		62,572		—
Non-residential real estate		8,034		—		984		9,018		69,168		78,186		—		—		—		468		468		77,393		77,861		—
Construction loans		—		—		—		—		20,964		20,964		—
Commercial and industrial loans		—		—		2,511		2,511		27,443		29,954		—
Construction																—		—		—		—		44,464		44,464		—
Commercial and industrial																425		—		2,567		2,992		34,187		37,179		—
Consumer		—		—		—		—		158		158		—		—		—		—		—		139		139		—
Total loans	$	8,955	$	—	$	7,810	$	16,765	$	368,567	$	385,332	$	—	$	425	$	—	$	3,743	$	4,168	$	425,395	$	429,563	$	—

	30-59 Days Past Due		60 – 89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Recorded Investment > 90 Days and Accruing		30-59 Days Past Due		60 – 89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Recorded Investment > 90 Days and Accruing

Residential real estate:
One- to four-family	$	—	$	—	$	—	$	—	$	11,752	$	11,752	$	—	$	—	$	—	$	—	$	—	$	13,314	$	13,314	$	—
Multi-family		—		—		—		—		188,923		188,923		—		—		—		689		689		187,328		188,017		—
Mixed-use		—		2,210		—		2,210		48,257		50,467		—		—		453		—		453		61,093		61,546		—
Non-residential real estate		—		—		2,372		2,372		79,613		81,985		—		—		—		659		659		81,963		82,622		—
Construction loans		—		—		—		—		6,568		6,568		—
Commercial and industrial loans		—		—		—		—		31,345		31,345		—
Construction																—		—		—		—		46,607		46,607		—
Commercial and industrial																—		—		2,555		2,555		31,852		34,407		—
Consumer		—		—		—		—		161		161		—		—		—		—		—		142		142		—
Total loans	$	—	$	2,210	$	2,372	$	4,582	$	366,619	$	371,201	$	—	$	—	$	453	$	3,903	$	4,356	$	422,299	$	426,655	$	—

The following tables provide certain information related to the credit quality of the loan portfolio.

Credit Risk Profile by Internally Assigned Grade at ~~June 30, 2014~~March 31, 2015 (in thousands)

	Residential Real Estate		Non-residential Real Estate		Construction		Commercial and Industrial		Consumer		Total		Residential Real Estate		Non-residential Real Estate		Construction		Commercial and Industrial		Consumer		Total
Grade:
Pass	$	251,060	$	68,339	$	20,964	$	26,864	$	158	$	367,385	$	268,979	$	76,571	$	44,464	$	34,162	$	139	$	424,315
Special Mention		—		829		—		579		—		1,408		233		—		—		450		—		683
Substandard		5,010		9,018		—		2,511		—		16,539		708		1,290		—		2,567		—		4,565
Total	$	256,070	$	78,186	$	20,964	$	29,954	$	158	$	385,332	$	269,920	$	77,861	$	44,464	$	37,179	$	139	$	429,563

Credit Risk Profile by Internally Assigned Grade at December 31, ~~2013~~2014 (in thousands)

	Residential Real Estate		Non-residential Real Estate		Construction		Commercial and Industrial		Consumer		Total		Residential Real Estate		Non-residential Real Estate		Construction		Commercial and Industrial		Consumer		Total
Grade:
Pass	$	248,932	$	71,659	$	6,568	$	25,733	$	161	$	353,053	$	261,501	$	75,063	$	46,607	$	31,352	$	142	$	414,665
Special Mention		—		—		—		5,612		—		5,612		235		815		—		500		—		1,550
Substandard		2,210		10,326		—		—		—		12,536		1,141		6,744		—		2,555		—		10,440
Total	$	251,142	$	81,985	$	6,568	$	31,345	$	161	$	371,201	$	262,877	$	82,622	$	46,607	$	34,407	$	142	$	426,655

The following table sets forth the composition of our nonaccrual loans at the dates indicated.

Loans Receivable on Nonaccrual Status as of ~~June 30, 2014~~March 31, 2015 and December 31, ~~2013~~2014 (in thousands)

	2014		2013		2015		2014

Residential real estate	$	5,010	$	2,210
Residential real estate:
Multi-family					$	708	$	689
Mixed-use						—		453
Non-residential real estate		3,042		2,372		468		659
Commercial and industrial loans		2,591		84		2,567		2,555
Total	$	10,643	$	4,666	$	3,743	$	4,356

There were no loans modified that were deemed ~~TDRs during the six months ended June 30, 2014.~~

~~The following table shows the breakdown of loans modified in TDRs for the periods indicated:~~

The multi-family mortgage loan had an original interest rate of 6.75% with an amortization of 25 years. We reduced the interest rate and converted the monthly payments to interest only for twenty months and then amortizing for 30 years, with a balloon payment after approximately five and one-half years from the modification date.

Two non-residential mortgage loans had an original interest rate of 6.75% with an amortization of 25 years. We reduced the interest rate and converted the monthly payments to interest only for twenty months and then amortizing for 30 years, with a balloon payment after approximately five and one-half years from the modification date.

One non-residential mortgage loan had an original interest rate of 6.75% with an amortization of 30 years. We reduced the interest rate and converted the monthly payments to interest only for nineteen months and then amortizing for 30 years, with a balloon payment after two years from the modification date.

~~There were no loans modified in~~ troubled debt ~~restructuring~~restructurings during the three ~~and six~~ months ended ~~June 30,~~March 31, 2015 and March 31, 2014. As of ~~June 30,~~March 31, 2015, none of the loans that were modified during the previous twelve months had defaulted in the three month period ended March 31, 2015. As of March 31, 2014, none of the loans that were modified during the previous twelve months had defaulted in the three ~~and six~~ month ~~periods~~period ended ~~June 30,~~March 31, 2014.

We may obtain physical possession of residential real estate collateralizing a consumer mortgage loan via foreclosure on an in-substance repossession. As of ~~June 30, 2013, none of the~~March 31, 2015, we did not have any foreclosed consumer residential real estate property and we did not have any consumer loans ~~that~~collateralized by real estate property for which foreclosure proceedings were ~~modified during the previous twelve months had defaulted~~ in ~~the three and six month periods ended June 30, 2013.~~process.

In ~~July 2013,~~January 2014, the Financial Accounting Standards Board (“FASB”) ~~issued Accounting Standard Update (“ASU”) 2013-11,~~~~Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,~~which provides guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss (NOL) carryforward, a similar tax loss, or a tax credit carryforward exists. The FASB’s objective in issuing this ASU is to eliminate diversity in practice resulting from a lack of guidance on this topic in current U.S. GAAP. This ASU applies to all entities with unrecognized tax benefits that also have tax loss or tax credit carryforwards in the same tax jurisdiction as of the reporting date. For public entities, the guidance is effective for fiscal years beginning after December 15, 2013 and interim periods within those years. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

~~In January 2014, the FASB~~ issued ASU 2014-04,Receivables – Troubled Debt Restructurings by Creditors, which clarifies 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 loans, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. For public entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The ~~Company does not expect the~~ adoption of this guidance todid not have a material impact on the Company’s consolidated financial statements.

OnIn May ~~28,~~ 2014, the FASB and International Accounting Standards Board (“IASB”) issued ASU 2014-09,Revenue from Contracts with Customers. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. The adoption of this standard effective April 1, 2017 is not expected to have a material impact on the Company’s consolidated financial statements.

NorthEast Community Bancorp MHC (the “MHC”) held 7,273,750 shares, or ~~58.8%~~59.4%, of the Company’s issued and outstanding common stock, and the minority public shareholders held ~~41.2%~~40.6% of outstanding stock, at ~~June 30, 2014.~~March 31, 2015. The MHC filed notice with, and received approval from, the Federal Reserve Bank of Philadelphia to waive its right to receive cash dividends for the period from November ~~13, 2013~~25, 2014 through November ~~12, 2014.~~24, 2015.

The MHC has waived receipt of all past dividends paid by the Company through ~~June 30, 2014,~~March 31, 2015, with the exception of the dividend for the quarter ended June 30, 2012. Because the MHC determined not to waive receipt of the dividend for the quarter ended June 30, 2012, the MHC received $218,000 in dividends in August 2012. The dividends waived are considered as a restriction on the retained earnings of the Company. As of ~~June 30, 2014~~March 31, 2015 and December 31, ~~2013,~~2014, the aggregate retained earnings restricted for cash dividends waived were ~~$5,674,000~~$6,328,000 and ~~$5,237,000,~~$6,110,000, respectively.

Amounts reclassified from Accumulated Other Comprehensive ~~Income~~Loss are as follows:

This quarterly report contains forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company include, but are not limited to, changes in interest rates, national and regional economic conditions, legislative and regulatory changes, monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area, changes in real estate market values in the Company’s market area, and changes in relevant accounting principles and guidelines. Additional factors that may affect the Company’s results are discussed in the Company’s Annual Report on Form 10-K under “Item 1A. Risk Factors.” These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, the Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

We consider accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. We consider the allowance for loan losses and valuation of goodwill to be a critical accounting ~~policy.~~policies. There have been no changes to our critical accounting policies and procedures during the ~~six~~three months ended ~~June 30, 2014.~~March 31, 2015.

For additional information on our critical accounting policies, please refer to Note 1 of the consolidated financial statements included in our ~~2013~~2014 Annual Report on Form 10-K.

The ~~Company’s earnings~~Company suffered a net loss of $156,000 for the quarter ended ~~June 30, 2014 increased by $75,000~~March 31, 2015 compared to net income of $215,000 for the same period in ~~2013~~2014 primarily due to increases in the provision for loan losses and non-interest expense and a decrease in non-interest income, partially offset by an increase in net interest income ~~an increase in non-interest income,~~ and a decrease in ~~non-interest expense, partially offset by a credit in provision for loan losses that was less than~~ the ~~same period in 2013 and an increase in~~ provision for income taxes. The ~~Company had a credit of $217,000~~increase in the provision for loan losses was primarily a result of discussions that started during the ~~June 30, 2014~~ quarter ~~compared~~ended March 31, 2015 and the decision in May 2015 by the participating financial institutions, including the Company, sharing participation in a group of related non-residential real estate mortgage loans secured by a single hotel property to market the loans for sale in response to rising concerns regarding the borrower’s continuing ability to service the loans. As a ~~credit~~result of ~~$423,000~~the decision to market the loans for sale, the Company transferred the loans to the held-for-sale category, adjusting the carrying amount of the loans to fair value estimated based on market bids to purchase the loans. The adjustment resulted in additional provision for loan losses ~~during~~of $588,000 recognized upon transfer. On May 12, 2015, the ~~June 30, 2013 quarter.~~participating financial institutions, including the Company, agreed to a sale of the loans to a selected bidder. Upon completion of the sale, the Company expects to receive approximately $5.5 million for its participation interests in the loans, which amount is equal to the carrying value of the loans as of March 31, 2015.

Non-performing loans ~~increased~~(comprised of non-accrual loans) decreased by ~~$6.0 million,~~$613,000, or ~~128.1%~~14.1%, to ~~$10.6~~$3.7 million as of ~~June 30, 2014~~March 31, 2015 from ~~$4.7~~$4.4 million as of December 31, ~~2013.~~2014. The ~~increase~~decrease in non-performing loans was primarily due to the ~~addition~~foreclosure and transition into real estate owned of ~~five non-performing~~one mixed-use mortgage ~~loans~~loan and one non-residential mortgage loan totaling ~~$5.3 million and two non-performing commercial and industrial loans totaling $2.5 million,~~$664,000, partially offset by payments made by the ~~conversion from~~Company for real estate taxes and water and sewer charges totaling $52,000 on properties secured by the non-performing ~~to performing status of one~~ mortgage ~~loan totaling $830,000, the satisfaction of one mortgage loan totaling $789,000, and the partial charge-off of $325,000 for one mortgage loan.~~loans.

Our interest rate spread decreased to ~~3.55%~~3.39% for the three months ended ~~June 30, 2014~~March 31, 2015 from ~~3.92%~~3.59% for the three months ended ~~June 30, 2013~~March 31, 2014 and our net interest margin decreased to ~~3.77%~~3.59% for the three months ended ~~June 30, 2014~~March 31, 2015 from ~~4.16%~~3.81% for the three months ended ~~June 30, 2013.~~March 31, 2014. The decrease in the interest rate spread and the net interest margin in the first quarter of 2015 compared to the same period in 2014 was due to a decrease of 21 basis points in the yield on our interest-earning assets that exceeded a decrease of one basis point in the cost of our interest-bearing liabilities.

Our loans receivable, net, increased by ~~$14.2~~$2.8 million, or ~~3.9%~~0.7%, to ~~$382.0~~$426.2 million as of ~~June 30, 2014~~March 31, 2015 from ~~$367.8~~$423.4 million at December 31, ~~2013~~2014 due primarily to increases of ~~$14.4 million in construction mortgage loans, $3.5 million in mixed-use mortgage loans, $1.1~~$5.6 million in multi-family mortgage loans, ~~and $348,000 in one-to-four family mortgage loans, offset by decreases of $3.8 million in non-residential mortgage loans, $1.4~~$2.8 million in commercial and industrial loans, $1.0 million in mixed-use mortgage loans, and $406,000 in one-to-four family mortgage loans, partially offset by decreases of $4.8 million in non-residential mortgage loans, $2.1 million in construction mortgage loans and $3,000 in consumer loans. The decrease in non-residential mortgage loans was largely due to the transfer of the participation loans discussed above, totaling $5.5 million, to loans held-for-sale from loans receivable, net.

Comparison of Financial Condition at ~~June 30, 2014~~March 31, 2015 and December 31, ~~2013~~2014

Total assets increased by ~~$17.2~~$22.1 million, or ~~3.7%~~4.3%, to ~~$475.4~~$537.5 million at ~~June 30, 2014~~March 31, 2015 from ~~$458.2~~$515.4 million at December 31, ~~2013.~~2014. The increase in total assets was due primarily to increases of ~~$14.2 million in loans receivable, net, $6.1~~$13.6 million in cash and cash equivalents, ~~$309,000~~$2.8 million in loans receivable, net, $5.5 million in loans held-for-sale, $354,000 in other assets, $153,000 in bank owned life insurance, $108,000 in restricted stock, and ~~$189,000~~$102,000 in accrued interest receivable, partially offset by decreases of ~~$2.4 million in other assets, $938,000~~$327,000 in securities held-to-maturity, ~~and $303,000~~$94,000 in premises and ~~equipment.~~equipment, and $26,000 in real estate owned. The increase in total assets was funded primarily from increases of ~~$18.4~~$19.9 million in deposits, $2.4 million in FHLB advances, and ~~$570,000 in accounts payable and accrued expenses, partially offset by a decrease of $786,000~~$922,000 in advance payments by borrowers for taxes and insurance.

Loans receivable, net, increased by ~~$14.2~~$2.8 million, or ~~3.9%~~0.7%, to ~~$382.0~~$426.2 million at ~~June 30, 2014~~March 31, 2015 from ~~$367.8~~$423.4 million at December 31, ~~2013~~2014 due primarily to loan originations totaling ~~$66.1~~$17.1 million which exceeded loan repayments ~~and charge-offs~~ totaling ~~$51.9 million.~~$8.2 million, partially offset by the transfer of $5.5 million in non-residential mortgage loans to loans held-for-sale. The increase in the mortgage loan portfolio was due to increases of ~~$14.4~~$5.6 million, or ~~219.2%~~3.0%, in the ~~construction~~multi-family mortgage loan portfolio to ~~$21.0~~$193.6 million at ~~June 30, 2014~~March 31, 2015 from ~~$6.6~~$188.0 million at December 31, ~~2013, $3.5~~2014, $2.8 million, or ~~7.0%~~8.1%, in the commercial and industrial loan portfolio to $37.2 million at March 31, 2015 from $34.4 million at December 31, 2014, $1.0 million, or 1.7%, in the mixed-use mortgage loan portfolio to ~~$53.0~~$62.6 million at ~~June 30, 2014~~March 31, 2015 from ~~$50.5~~$61.5 million at December 31, ~~2013, $1.1 million,~~2014, and $406,000, or ~~0.6%, in the multi-family mortgage loan portfolio to $190.0 million at June 30, 2014 from $188.9 million at December 31, 2013, and $348,000, or 3.0%~~3.1%, in the one-to-four family mortgage loan portfolio to ~~$12.1~~$13.7 million at ~~June 30, 2014~~March 31, 2015 from ~~$11.8~~$13.3 million at December 31, ~~2013,~~2014, partially offset by decreases of ~~$3.8~~$4.8 million, or ~~4.6%~~5.8%, in the non-residential mortgage loan portfolio to ~~$78.2~~$77.9 million at ~~June 30, 2014~~March 31, 2015 from ~~$82.0~~$82.6 million at December 31, ~~2013, $1.4~~2014, $2.1 million, or ~~4.4%~~4.6%, in the ~~commercial and industrial~~construction mortgage loan portfolio to ~~$30.0~~$44.5 million at ~~June 30, 2014~~March 31, 2015 from ~~$31.3~~$46.6 million at December 31, ~~2013,~~2014 and $3,000, or ~~1.6%~~2.1%, in the consumer loan portfolio to ~~$158,000~~$139,000 at ~~June 30, 2014~~March 31, 2015 from ~~$161,000~~$142,000 at December 31, ~~2013.~~2014.

The ~~increase~~increases in the multi-family and mixed-use mortgage loan portfolio and the commercial and industrial loan portfolio were due to the Company’s more aggressive origination activities in our two lending regions in the New York City metropolitan area for purposes of increasing interest income. The decrease in the non-residential mortgage loan portfolio was due to the transfer of $5.5 million in non-residential mortgage loans to loans held-for-sale. The decrease in the construction mortgage loan portfolio was due to the ~~Company’s entry in 2012 in the Massachusetts construction market through the origination~~satisfaction of construction mortgage loans ~~secured by the construction of multi-family~~as builders completed and single family properties and the Company’s entry during the latter part of 2013 into the New York State construction market through the origination of construction loans secured by the construction of multi-family properties located in New York State.sold projects to buyers.

Cash and cash equivalents increased by ~~$6.1~~$13.6 million, or ~~19.4%~~40.0%, to ~~$37.6~~$47.6 million at ~~June 30, 2014~~March 31, 2015 from ~~$31.5~~$34.0 million at December 31, ~~2013~~2014 due primarily to increases in ~~deposits.~~deposits and FHLB advances, offset by an increase in the loan portfolio. Bank owned life insurance increased by ~~$309,000,~~$153,000, or ~~1.5%~~0.7%, to ~~$20.8~~$21.3 million at ~~June 30, 2014~~March 31, 2015 from ~~$20.5~~$21.1 million at December 31, ~~2013~~2014 due to accrued earnings during ~~2014.~~ 2015. Other assets increased by $354,000, or 6.8%, to $5.6 million at March 31, 2015 from $5.2 million at December 31, 2014 due to an increase in miscellaneous assets. Investments in restricted stocks increased by $108,000, or 5.6%, to $2.0 million at March 31, 2015 from $1.9 million at December 31, 2014 due to increases in mortgage-related assets and borrowings from the FHLB that triggered an increase in the required amount of FHLB restricted stock.

Real estate owned decreased by $26,000, or 0.3%, to $8.7 million at March 31, 2015 from $8.7 million at December 31, 2014 due to the foreclosure and transition into real estate owned of one mixed-use mortgage loan totaling $471,000 and one non-residential mortgage loan totaling $231,000, partially offset by the sale of one mixed-use real estate owned totaling $471,000 and one multi-family real estate owned totaling $115,000 and the establishment of valuation allowances of $122,000 for one mixed-use real estate owned and $20,000 for one non-residential real estate owned.

Accrued interest receivable increased by ~~$189,000,~~$102,000, or ~~14.9%~~7.0%, to ~~$1.5~~$1.6 million at ~~June 30, 2014~~March 31, 2015 from ~~$1.3~~$1.4 million at December 31, ~~2013~~2014 due primarily to an increase in the mortgage loan portfolio.

~~Other assets~~ Securities held-to-maturity decreased by ~~$2.4 million,~~$327,000, or ~~32.2%~~5.0%, to ~~$5.1~~$6.3 million at ~~June 30, 2014~~March 31, 2015 from ~~$7.5~~$6.6 million at December 31, ~~2013 due to a $1.9 million income tax refund from the Internal Revenue Service that reduced current tax assets. Securities held-to-maturity decreased by $938,000, or 11.1%, to $7.5 million at June 30,~~ 2014 ~~from $8.4 million at December 31, 2013~~ due primarily to ~~repayments of $956,000.~~repayments. Premises and equipment decreased by ~~$303,000,~~$94,000, or ~~2.5%~~0.8%, to ~~$11.9~~$11.6 million at ~~June 30, 2014~~March 31, 2015 from ~~$12.2~~$11.7 million at December 31, ~~2013~~2014 due primarily to depreciation.

Deposits increased by ~~$18.4~~$19.9 million, or ~~5.6%~~5.3%, to ~~$343.6~~$393.9 million at ~~June 30, 2014~~March 31, 2015 from ~~$325.2~~$374.0 million at December 31, ~~2013.~~2014. The increase in deposits was primarily attributable to increases of ~~$17.8~~$17.2 million in certificates of deposit, ~~and $733,000~~$2.1 million in regular savings accounts, ~~partially offset by decreases of $99,000~~$426,000 in non-interest bearing accounts, and $113,000 in NOW and money market ~~accounts and $32,000 in non-interest bearing~~ accounts. The increase in certificates of deposit was due to the offering of competitive interest rates for non-broker certificates of deposit gathered through a non-broker nationwide certificate of deposit listing service from banks and credit unions in amounts greater than $75,000 and less than $250,000. ~~In this regard,~~The increase in certificates of deposit was also due to the offering of competitive interest rates by our Massachusetts branch offices. As a result, we obtained ~~$17.1~~an additional $9.2 million in non-broker certificates of deposit through the listing service and $8.0 million in non-broker certificates of deposit through our Massachusetts branch offices since December 31, ~~2013.~~2014. The increase in regular savings accounts was due to the successful marketing efforts by our New York branch offices.

FHLB advances increased by $2.4 million, or 7.9%, to $32.4 million at March 31, 2015 from $30.0 million at December 31, 2014. The increase in deposits and FHLB advances was primarily attributable to efforts by the Company to increase liquidity, fund loan originations, ~~and~~ increase reliance on long term certificates of ~~deposit.~~

deposit, and diversify sources of funds. Advance payments by borrowers for taxes and insurance ~~decreased~~increased by ~~$786,000,~~$922,000, or ~~19.7%~~27.6%, to ~~$3.2~~$4.3 million at ~~June 30, 2014~~March 31, 2015 from ~~$4.0~~$3.3 million at December 31, ~~2013~~2014 due primarily to remittances of taxes for our borrowers. Accounts payable and accrued expenses increased by $570,000, or 14.8%, to $4.4 million at June 30, 2014 from $3.9 million at December 31, 2013 due primarily to preparation of remittances of taxes for our borrowers throughan increase in the ~~accounts payable process.~~mortgage loan portfolio.

Stockholders’ equity decreased by $892,000, or 0.9%, to ~~$103.3~~$102.9 million at ~~June 30, 2014,~~March 31, 2015, from ~~$104.2~~$103.8 million at December 31, ~~2013.~~2014. This decrease was primarily the result of stock repurchases of ~~$1.4 million, and~~$646,000, cash dividends declared and paid of ~~$289,000,~~$140,000, and comprehensive loss of $150,000, partially offset by ~~comprehensive income of $693,000 and~~ the amortization of ~~$94,000~~$44,000 for the ESOP for the period.

Comparison of Operating Results for the Three Months Ended ~~June 30,~~March 31, 2015 and 2014 ~~and 2013~~

General. Net income ~~increased~~decreased by ~~$75,000,~~$371,000, or ~~19.7%~~172.6%, to ~~$456,000~~a net loss of $156,000 for the quarter ended ~~June 30, 2014~~March 31, 2015 from net income of ~~$381,000~~$215,000 for the quarter ended ~~June 30, 2013.~~March 31, 2014. The ~~increase~~decrease was primarily the result of ~~an increase~~increases of ~~$35,000 in net interest income, an increase of $21,000 in non-interest income, and a decrease of $296,000 in non-interest expenses, partially offset by a decrease of $206,000~~$667,000 in provision for loan losses and $139,000 in non-interest expenses and a decrease of $9,000 in non-interest income, partially offset by an increase of ~~$71,000~~$305,000 in net interest income and a decrease of $139,000 in the provision for income taxes.

Net Interest Income. Net interest income increased by ~~$35,000,~~$305,000, or ~~0.9%~~7.7%, to ~~$4.02~~$4.3 million for the three months ended ~~June 30, 2014~~March 31, 2015 from ~~$3.99~~$3.9 million for the three months ended ~~June 30, 2013.~~March 31, 2014. The increase in net interest income resulted primarily from an increase of ~~$105,000~~$430,000 in interest income, partially offset by an increase of ~~$70,000~~$125,000 in interest expense.

The net interest spread decreased by 3720 basis points to ~~3.55%~~3.39% for the three months ended ~~June 30, 2014~~March 31, 2015 from ~~3.92%~~3.59% for the three months ended ~~June 30, 2013.~~March 31, 2014. The net interest margin decreased by 3922 basis points between these periods from ~~4.16%~~3.81% for the quarter ended ~~June 30, 2013~~March 31, 2014 to ~~3.77%~~3.59% for the quarter ended ~~June 30, 2014.~~March 31, 2015. The decrease in the interest rate spread and the net interest margin in the ~~second~~first quarter of ~~2014~~2015 compared to the same period in ~~2013~~2014 was due to a decrease of 4021 basis points in the yield on our interest-earning assets that exceeded a decrease of ~~three~~one basis ~~points~~point in the cost of our interest-bearing liabilities.

The average yield on our interest-earning assets decreased by 4021 basis points to ~~4.57%~~4.39% for the three months ended ~~June 30, 2014~~March 31, 2015 from ~~4.97%~~4.60% for the three months ended ~~June 30, 2013~~March 31, 2014 and the cost of our interest-bearing liabilities decreased by ~~three~~one basis ~~points~~point to 1.02% for the three months ended June 30, 2014 from 1.05% for the three months ended June 30, 2013. The decrease in the yield on our interest-earning assets was due to a decrease in the yield on loans receivable, offset by increases in the yield on securities and other interest-earning assets. The decrease in the cost of our interest-bearing liabilities was due to a decrease in the cost of borrowed money, offset by an increase in the cost of interest-bearing deposits.

~~The following table summarizes average balances and average yields and costs of interest-earning assets and interest-bearing liabilities for the three months ended June 30, 2014 and 2013.~~

Total interest income increased by $105,000, or 2.2%, to $4.9 million for the three months ended June 30, 2014 from $4.8 million for the three months ended June 30, 2013. Interest income on loans increased by $112,000, or 2.4%, to $4.8 million for the three months ended June 30, 2014 from $4.7 million for the three months ended June 30, 2013. The increase was primarily the result of an increase of $45.1 million, or 13.1%, in the average balance of the loan portfolio to $388.6 million for the three months ended June 30, 2014 from $343.5 million for the three months ended June 30, 2013 as originations outpaced repayments and charge-offs, net of recoveries. The increase in the average balance of the loan portfolio was offset by a decrease of 52 basis points in the average yield on loans to 4.93% for the three months ended June 30, 2014 from 5.45% for the three months ended June 30, 2013. The decrease in the average yield on loans was due to the pay-off of numerous higher yielding mortgage loans and the refinancing and/or re-pricing to lower interest rates of numerous mortgage loans in our loan portfolio.

Interest income on securities decreased by $10,000, or 11.9%, to $74,000 for the three months ended June 30, 2014 from $84,000 for the three months ended June 30, 2013. The decrease was primarily due to a decrease of $2.3 million, or 19.9%, in the average balance of securities to $9.4 million for the three months ended June 30, 2014 from $11.7 million for the three months ended June 30, 2013, offset by an increase of 28 basis points in the average yield on securities to 3.15% for the three months ended June 30, 2014 from 2.87% for the three months ended June 30, 2013. The decrease in the average balance was due to the principal repayments on investment securities, offset by an increase in FHLB New York stock. The increase in the yield was due to dividends from FHLB New York stock that yielded approximately 4.0% and an increase in FHLB New York stock as a percentage of total investment securities.

Interest income on other interest-earning assets (consisting solely of interest-earning deposits) increased by $3,000, or 150.0% to $5,000 for the three months ended June 30, 2014 from $2,000 for the three months ended June 30, 2013. The increase was primarily due to an increase of four basis points in the average yield on other interest-earning assets to 0.07% for the three months ended June 30, 2014 from 0.03% for the three months ended June 30, 2013, offset by a decrease of $125,000, or 0.4%, in the average balance of interest-earning assets to $28.4 million for the three months ended June 30, 2014 from $28.5 million for the three months ended June 30, 2013. The increase in interest income on interest-earnings deposits was due to an increase in the average balance of higher yielding certificates of deposit at other financial institutions, offset by a decrease in the average balance of interest-earning deposits maintained at the FHLB and Federal Reserve Bank of New York.

Total interest expense increased by $70,000, or 9.0%, to $845,000 for the three months ended June 30, 2014 from $775,000 for the three months ended June 30, 2013. Interest expense on deposits increased by $82,000, or 11.2%, to $812,000 for the three months ended June 30, 2014 from $730,000 for the three months ended June 30, 2013. The increase in the interest expense on deposits was a result of an increase of $24.8 million, or 8.5%, in the average balance of interest bearing deposits to $315.3 million for the three months ended June 30, 2014 from $290.6 million for the three months ended June 30, 2013. The increase in the interest expense on deposits was also a result of an increase of three basis points in the average cost of interest-bearing deposits to 1.03% for the three months ended June 30, 2014 from 1.00% for the three months ended ~~June 30, 2013.~~

~~The interest expense of our interest-bearing demand deposits increased by $2,000, or 3.8%, to $54,000~~March 31, 2015 from 1.01% for the three months ended June 30, 2014 from $52,000 for the three months ended June 30, 2013. The increase in interest expense in our interest-bearing demand deposits was due to an increase of two basis points in the average interest cost to 0.36% for the three months ended June 30, 2014 from 0.34% for the three months ended June 30, 2013 as we offered competitive interest rates to generate deposits, offset by a decrease of $1.5 million, or 2.4%, in the average balance of our interest-bearing demand deposits to $59.6 million for the three months ended June 30, 2014 from $61.1 million for the three months ended June 30, 2013.

The interest expense of our interest-bearing savings and club deposits increased by $8,000, or 7.2%, to $118,000 for the three months ended June 30, 2014 from $110,000 for the three months ended June 30, 2013. The increase in interest expense in our interest-bearing savings and club deposits was due to an increase of $4.3 million, or 5.2%, in the average balance of our interest-bearing savings and club deposits to $86.3 million for the three months ended June 30, 2014 from $82.0 million for the three months ended June 30, 2013. The increase in interest expense in our interest-bearing savings and club deposits was also due to a one basis point increase in the average interest cost to 0.55% for the three months ended June 30, 2014 from 0.54% for the three months ended June 30, 2013 as we continued to offer competitive interest rates to generate deposits.

The interest expense of our interest-bearing certificates of deposit increased by $72,000, or 12.7%, to $640,000 for the three months ended June 30, 2014 from $568,000 for the three months ended June 30, 2013. The increase in interest expense in our interest-bearing certificates of deposit was due to an increase of $22.0 million, or 14.9%, in the average balance of our interest-bearing certificates of deposit to $169.4 million for the three months ended June 30, 2014 from $147.4 million for the three months ended June 30, 2013. The increase in our interest-bearing certificates was due to management’s decision to continue offering competitive interest rates to generate deposits through a nationwide certificate of deposit listing service. The increase in interest expense of our interest-bearing certificates of deposit was offset by a three basis point decrease in the average interest cost on such certificates to 1.51% for the three months ended June 30, 2014 from 1.54% for the three months ended June 30, 2013. The decrease in the average interest cost of our interest-bearing certificates of deposit was due to the re-pricing of maturing certificates of deposit and the acquisition of competitively priced interest-bearing certificates of deposit through a non-broker nationwide certificate of deposit listing service.

Interest expense on borrowings decreased by $12,000, or 26.7%, to $33,000 for the three months ended June 30, 2014 from $45,000 for the three months ended June 30, 2013. The decrease in interest expense on borrowings was due to a decrease of 283 basis points in the cost of borrowed money to 0.77% for the three months ended June 30, 2014 from 3.60% for the three months ended June 30, 2013 due primarily to the maturity and repayment of higher costing FHLB advances during the quarter ended June 30, 2014 and new lower cost FHLB advances obtained during the first six months ofMarch 31, 2014. The decrease in interest expense on borrowings was partially offset by an increase of $12.1 million, or 241.0%, in the average balance of borrowed money to $17.1 million for the three months ended June 30, 2014 from $5.0 million for the three months ended June 30, 2013.

~~Provision for Loan Losses.~~ ~~The following table summarizes the activity in the allowance for loan losses and provision for loan losses for the three months ended June 30, 2014 and 2013.~~

The allowance to non-performing loans ratio decreased to 36.93% at June 30, 2014 from 195.40% at June 30, 2013 due primarily to an increase in non-performing loans to $10.6 million at June 30, 2014 from $2.2 million at June 30, 2013 and a decrease in the allowance for loan losses. The increase in non-performing loans was due to the addition of seven mortgage loans totaling $7.6 million and four commercial and industrial loans totaling $2.5 million, partially offset by the conversion from non-performing to performing status of three mortgage loans totaling $1.0 million and the satisfaction of one mortgage loan totaling $727,000.

The allowance for loan losses was $3.93 million at June 30, 2014, $4.02 million at December 31, 2013, and $4.21 million at June 30, 2013. We recorded a credit provision for loan losses of ($217,000) for the three months ended June 30, 2014 compared to a credit provision for loan losses of ($423,000) for the three month period ended June 30, 2013. The reduction in the allowance for loan losses was due to the Company’s assessment that there are no losses anticipated in connection with the increase in non-performing loans beyond the amounts already charged-off, that there has been an improvement in the Company’s historical charge-offs, and that the level of allowance for loan losses was adequate due to improvements in the economy and the multi-family, mixed-use and non-residential real estate market.

We had charge-offs of $398,000 during the three months ended June 30, 2014 compared to charge-offs of $105,000 during the three months ended June 30, 2013. We recorded recoveries of $340,000 during the three months ended June 30, 2014 compared to recoveries of $27,000 during the three months ended June 30, 2013.

~~Non-interest Income.~~ Non-interest income increased by $21,000, or 4.5%, to $487,000 for the three months ended June 30, 2014 from $466,000 for the three months ended June 30, 2013. The increase was primarily due to increases of $20,000 in advisory fee income generated by our wealth management division, and $8,000 in other loan fees and service charges, offset by a decrease of $7,000 in earnings on bank owned life insurance. The increase in advisory fee income from our wealth management division was due to an increase in assets under management. The increase in other loan fees and service charges was due to an increase in loan fees as our loan portfolio increased. The decrease in earnings on bank owned life insurance was due to a decrease in the effective yield of the underlying investments.

~~Non-interest Expense.~~ Non-interest expense decreased by $296,000, or 6.8%, to $4.1 million for the three months ended June 30, 2014 from $4.4 million for the three months ended June 30, 2013. The decrease resulted primarily from decreases of $334,000 in impairment loss on goodwill, $136,000 in real estate owned expenses, $14,000 in equipment expense, and $10,000 in advertising expense, partially offset by increases of $105,000 in salaries and employee benefits, $38,000 in FDIC insurance expense, $37,000 in other non-interest expense, $10,000 in occupancy expense, and $8,000 in outside data processing expense.

The Company did not have any impairment loss on goodwill in the quarter ended June 30, 2014 compared to a $334,000 impairment loss on goodwill recognized in the quarter ended June 30, 2013. The impairment loss on goodwill during the second quarter of 2013 was due to the Company’s determination that an adjustment to the goodwill impairment of $227,000 previously recorded in 2012 was necessary. The goodwill was recorded in connection with the Hayden Financial Group acquisition in 2007. The impairment was caused primarily by the expected decrease in other revenue from this division resulting from a reduction in personnel.

Real estate owned expense decreased by $136,000, or 78.6%, to $37,000 in 2014 from $173,000 in 2013 due to operating expenses related to one foreclosed property during the quarter ended June 30, 2014 compared to two foreclosed properties during the quarter ended June 30, 2013 and a loss of $51,000 on the sale of a real estate owned during the quarter ended June 30, 2013.

Equipment expense decreased by $14,000, or 9.3%, to $136,000 in 2014 from $150,000 in 2013 due to decreases in the purchases of additional equipment and continued efforts to contain expenses. Advertising expense decreased by $10,000, or 50.0%, to $10,000 in 2014 from $20,000 in 2013 due to continued efforts to contain expenses.

Salaries and employee benefits, which represented 51.6% of the Company’s non-interest expense during the quarter ended June 30, 2014, increased by $105,000, or 5.3%, to $2.1 million in 2014 from $2.0 million in 2013 due to the staffing of the Rockland County, New York loan production office, offset by a reduction in the number of full time equivalent employees to 99 at June 30, 2014 from 104 at June 30, 2013. The reduction in staff occurred in the wealth management department and branch operations.

FDIC insurance expense increased by $38,000, or 45.8%, to $121,000 in 2014 from $83,000 in 2013 due to increases in the Company’s assessment base and quarterly assessment multiplier from 2013 to 2014.

Other non-interest expense increased by $37,000, or 3.8%, to $1.02 million in 2014 from $978,000 in 2013 due mainly to increases of $85,000 in miscellaneous other non-interest expenses, $54,000 in audit and accounting fees, $29,000 in service contracts, $10,000 in directors, officers and employee expenses, and $9,000 in telephone expenses, offset by decreases of $113,000 in legal fees, $23,000 in directors compensation, and $14,000 in office supplies and stationery. The decrease in legal fees from the quarter ended June 30, 2013 compared to the quarter ended June 30, 2014 was due primarily to the Company’s decision to capitalize certain legal fees.

Occupancy expense increased by $10,000, or 2.9%, to $356,000 in 2014 from $346,000 in 2013 and outside data processing expense increased by $8,000, or 2.8%, to $291,000 in 2014 from $283,000 in 2013 due to the addition of the Rockland County, New York loan production office in January 2014.

~~Income Taxes~~.Income tax expense increased by $71,000, or 51.1%, to $210,000 for the three months ended June 30, 2014 from $139,000 for the three months ended June 30, 2013. The increase resulted primarily from a $146,000 increase in pre-tax income in 2014 compared to 2013. The effective tax rate was 31.5% for the three months ended June 30, 2014 and 26.7% for the three months ended June 30, 2013. The increase in the effective tax rate between periods was due to a higher percentage of our pre-tax income being tax-exempt, specifically the earnings on bank-owned life insurance, in 2013 compared to 2014.

~~Comparison of Operating Results For The Six Months Ended June 30, 2014 and 2013~~

~~General.~~Net income increased by $83,000, or 14.1%, to $671,000 for the six months ended June 30, 2014 from $588,000 for the six months ended June 30, 2013. The increase was primarily the result of an increase of $64,000 in net interest income and a decrease of $343,000 in non-interest expenses, offset by a decrease of $146,000 in credit to the provision for loan losses, a decrease of $69,000 in non-interest income, and an increase of $109,000 in the provision for income taxes.

~~Net Interest Income~~. Net interest income increased by $64,000, or 0.8%, to $7.97 million for the six months ended June 30, 2014 from $7.91 million for the six months ended June 30, 2013. The increase in net interest income resulted primarily from an increase of $124,000 in interest income that exceeded an increase of $60,000 in interest expense.

The net interest spread decreased by 25 basis points to 3.57% for the six months ended June 30, 2014 from 3.82% for the six months ended June 30, 2013. The net interest margin decreased by 27 basis points between these periods from 4.06% for the six months ended June 30, 2013 to 3.79% for the six months ended June 30, 2014. The decrease in the interest rate spread and the net interest margin in 2014 compared to the same period in 2013 was due to a decrease of 31 basis points in the yield on our interest-earning assets that exceeded a decrease of six basis points in the cost of our interest-bearing liabilities.

The average yield on our interest-earning assets decreased by 31 basis points to 4.58% for the six months ended June 30, 2014 from 4.89% for the six months ended June 30, 2013 and the cost of our interest-bearing liabilities decreased by six basis points to 1.01% for the six months ended June 30, 2014 from 1.07% for the six months ended June 30, 2013. The decrease in the yield on our interest-earning assets was due to a decrease in the yield on loans receivable, offset by increases in the yield on securities and other interest-earning assets. The decrease in the cost of our interest-bearing liabilities was due to a decrease in the cost of borrowed money, offset by an increase in the cost of interest-bearing deposits.

The following table summarizes average balances and average yields and costs of interest-earning assets and interest-bearing liabilities for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 and ~~2013.~~2014.

	Six Months Ended June 30,																Three Months Ended March 31,
	2014								2013								2015								2014
				Interest								Interest								Interest								Interest
	Average			and		Yield/			Average			and		Yield/			Average			and		Yield/			Average			and		Yield/
	Balance			Dividends		Cost			Balance			Dividends		Cost			Balance			Dividends		Cost			Balance			Dividends		Cost

	(Dollars in thousands)																(Dollars in thousands)
Assets:
Interest-earning assets:
Loans(1)	$	383,111		$	9,480		4.95	%	$	344,039		$	9,323		5.42	%	$	432,907		$	5,123		4.73	%	$	377,558		$	4,691		4.97	%
Securities		9,684			147		3.04			12,353			183		2.96
Securities (including restricted stock)																		8,539			64		3.00			9,988			73		2.92
Other interest-earning assets		27,556			9		0.07			32,960			6		0.04			32,619			11		0.13			26,751			4		0.06
Total interest-earning assets		420,351			9,636		4.58			389,352			9,512		4.89			474,065			5,198		4.39			414,297			4,768		4.60
Allowance for loan losses		(4,165	)							(4,504	)							(3,824	)							(4,129	)
Non-interest-earning assets		48,386								50,017								52,675								49,363
Total assets	$	464,572							$	434,865							$	522,916							$	459,531

Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing demand	$	61,418		$	109		0.35	%	$	61,480		$	102		0.33	%	$	72,172		$	85		0.47	%	$	63,210		$	55		0.35	%
Savings and club accounts		85,849			233		0.54			82,642			219		0.53			83,514			116		0.56			85,383			115		0.54
Certificates of deposit		162,238			1,224		1.51			147,701			1,137		1.54			190,588			706		1.48			155,010			584		1.51
Total interest-bearing deposits		309,505			1,566		1.01			291,823			1,458		1.00			346,274			907		1.05			303,603			754		0.99

Borrowings		19,015			98		1.03			8,122			146		3.60			31,751			37		0.47			21,000			65		1.24
Total interest-bearing liabilities		328,520			1,664		1.01			299,945			1,604		1.07			378,025			944		1.00			324,603			819		1.01

Noninterest-bearing demand		23,954								22,108								33,430								23,262
Other liabilities		8,446								7,856								7,532								7,742
Total liabilities		360,920								329,909								418,987								355,607

Stockholders’ equity		103,652								104,956								103,929								103,924
Total liabilities and
Stockholders’ equity	$	464,572							$	434,865

Total liabilities and stockholders' equity																	$	522,916							$	459,531
Net interest income				$	7,972							$	7,908							$	4,254							$	3,949
Interest rate spread							3.57	%							3.82	%							3.39	%							3.59	%
Net interest margin							3.79	%							4.06	%							3.59	%							3.81	%
Net interest-earning assets	$	91,831							$	89,407							$	96,040							$	89,694
Average interest-earning assets to
average interest-bearing liabilities		127.95	%							129.81	%
Interest-earning assets to interest-bearing liabilities																		125.41	%							127.63	%

Total interest income increased by ~~$124,000,~~$430,000, or ~~1.3%~~9.0%, to ~~$9.6~~$5.2 million for the ~~six~~three months ended ~~June 30, 2014,~~March 31, 2015 from ~~$9.5~~$4.8 million for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014. Interest income on loans increased by ~~$157,000,~~$432,000, or ~~1.7%~~9.2%, to ~~$9.5~~$5.1 million for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$9.3~~$4.7 million for the ~~six~~three months ended ~~June 30, 2013 as a~~March 31, 2014. The increase was primarily the result of an increase of ~~$39.1~~$55.3 million, or ~~11.4%~~14.7%, in the average balance of the loan portfolio to ~~$383.1~~$432.9 million for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$344.0~~$377.6 million for the ~~six~~three months ended ~~June 30, 2013~~March 31, 2014 as originations outpaced ~~repayments.~~repayments and charge-offs, net of recoveries. The increase in the average balance of the loan portfolio was offset by a decrease of 4724 basis points in the average yield on loans to ~~4.95%~~4.73% for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~5.42%~~4.97% for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014. The decrease in the average yield on loans was due to the pay-off of numerous higher yielding mortgage loans and the refinancing and/or re-pricing to lower interest rates of numerous mortgage loans in our loan portfolio.

Interest income on securities decreased by ~~$36,000,~~$9,000, or ~~19.7%~~12.3%, to ~~$147,000~~$64,000 for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$183,000~~$73,000 for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014. The decrease was primarily due to a decrease of ~~$2.7~~$1.4 million, or ~~21.6%~~14.5%, in the average balance of securities to ~~$9.7~~$8.5 million for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$12.4~~$10.0 million for the ~~six~~three months ended ~~June 30, 2013,~~March 31, 2014, offset by an increase of eight basis points in the average yield on securities to ~~3.04%~~3.00% for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~2.96%~~2.92% for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014. The decrease in the average balance was due to the principal repayments on investment securities, offset by an increase in ~~FHLB New York~~restricted stock. The increase in the yield was due to dividends from FHLB New York stock that yielded approximately 4.0% and an increase in FHLB New York stock as a percentage of total investment securities.

Interest income on other interest-earning assets (consisting solely of interest-earning deposits) increased by ~~$3,000,~~$7,000, or ~~50.0%~~175.0%, to ~~$9,000~~$11,000 for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$6,000~~$4,000 for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014. The increase was primarily due to an increase of ~~three~~seven basis points in the average yield on other interest-earning assets to ~~0.07%~~0.13% for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~0.04%~~0.06% for the ~~six~~three months ended ~~June 30, 2013, offset by a decrease~~March 31, 2014 and an increase of ~~$5.4~~$5.9 million, or ~~16.4%~~21.9%, in the average balance of interest-earning assets to ~~$27.6~~$32.6 million for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$33.0~~$26.8 million for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014. The increase in ~~interest income on interest-earnings deposits~~the yield was due to the placement of other interest-earning assets in one of our correspondent banks to generate higher yield. The increase in the average balance was due to an increase in ~~the average balance of higher yielding certificates of deposit at other financial institutions, offset by a decrease in the average balance of interest-earning~~ deposits ~~maintained at the FHLB~~ and ~~Federal Reserve Bank of New York.~~borrowings.

Total interest expense increased by ~~$60,000,~~$125,000, or ~~3.7%~~15.3%, to ~~$1.66 million~~$944,000 for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$1.60 million~~$819,000 for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014. Interest expense on deposits increased by ~~$108,000,~~$153,000, or ~~7.4%~~20.3%, to ~~$1.6 million~~$907,000 for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$1.5 million~~$754,000 for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014. The increase in the interest expense on deposits was a result of an increase of ~~$17.7~~$42.7 million, or ~~6.1%~~14.1%, in the average balance of interest bearing deposits to ~~$309.5~~$346.3 million for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$291.8~~$303.6 million for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014. The increase in the interest expense on deposits was also a result of an increase of ~~one~~six basis ~~point~~points in the average cost of interest-bearing deposits to ~~1.01%~~1.05% for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~1.00%~~0.99% for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014.

The interest expense of our interest-bearing demand deposits increased by ~~$7,000,~~$30,000, or ~~6.9%~~54.5%, to ~~$109,000~~$85,000 for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$102,000~~$55,000 for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014. The increase in interest expense in our interest-bearing demand deposits was due to an increase of two basis points in the average interest cost to 0.35% for the six months ended June 30, 2014 from 0.33% for the six months ended June 30, 2013 as we continued to offer competitive interest rates to generate deposits, offset by a decrease of $62,000,$9.0 million, or ~~0.1%~~14.2%, in the average balance of our interest-bearing demand deposits to ~~$61.42~~$72.2 million for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$61.48~~$63.2 million for the ~~six~~three months ended ~~June 30, 2013.~~

~~The interest expense of our interest-bearing savings~~March 31, 2014 and club deposits increased by $14,000, or 6.4%, to $233,000 for the six months ended June 30, 2014 from $219,000 for the six months ended June 30, 2013. The increase in interest expense in our interest-bearing savings and club deposits was due to an increase of $3.2 million, or 3.9%, in the average balance of our interest-bearing savings and club deposits to $85.8 million for the six months ended June 30, 2014 from $82.6 million for the six months ended June 30, 2013. The increase in interest expense in our interest-bearing savings and club deposits was also due to a 112 basis ~~point increase~~points in the average interest cost to ~~0.54%~~0.47% for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~0.53%~~0.35% for the ~~six~~three months ended ~~June 30, 2013~~March 31, 2014 as we offered competitive interest rates to generate deposits.

The interest expense of our interest-bearing savings and club deposits increased by $1,000, or 0.9%, to $116,000 for the three months ended March 31, 2015 from $115,000 for the three months ended March 31, 2014. The increase in interest expense in our interest-bearing savings and club deposits was due to a two basis point increase in the average interest cost to 0.56% for the three months ended March 31, 2015 from 0.54% for the three months ended March 31, 2014 as we continued to offer competitive interest rates to generate deposits. This was offset by a decrease of $1.9 million, or 2.2%, in the average balance of our interest-bearing savings and club deposits to $83.5 million for the three months ended March 31, 2015 from $85.4 million for the three months ended March 31, 2014.

The interest expense of our interest-bearing certificates of deposit increased by ~~$87,000,~~$122,000, or ~~7.7%~~20.9%, to ~~$1.2 million~~$706,000 for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$1.1 million~~$584,000 for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014. The increase in interest expense in our interest-bearing certificates of deposit was due to an increase of ~~$14.5~~$35.6 million, or ~~9.8%~~23.0%, in the average balance of our interest-bearing certificates of deposit to ~~$162.2~~$190.6 million for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$147.7~~$155.0 million for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014. The increase in our interest-bearing certificates was due to management’s decision to continue offering competitive interest rates to generate deposits through our Massachusetts branch offices and through a non-broker nationwide certificate of deposit listing service. The increase in interest expense of our interest-bearing certificates of deposit was offset by a 3three basis point decrease in the average interest cost on such certificates to 1.48% for the three months ended March 31, 2015 from 1.51% for the ~~six~~three months ended ~~June 30, 2014 from 1.54% for the six months ended June 30,~~March 31, 2014. The decrease in the average interest cost of our interest-bearing certificates of deposit was due to the re-pricing of maturing certificates of ~~deposit and the acquisition of competitively priced interest-bearing certificates of deposit through a non-broker nationwide certificate of deposit listing service.~~deposit.

Interest expense on borrowings decreased by ~~$48,000,~~$28,000, or ~~32.9%~~43.1%, to ~~$98,000~~$37,000 for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$146,000~~$65,000 for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014. The decrease in interest expense on borrowings was due to a decrease of ~~257~~77 basis points in the cost of borrowed money to ~~1.03%~~0.47% for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~3.60%~~1.24% for the ~~six~~three months ended ~~June 30, 2013~~March 31, 2014 due primarily to the maturity and repayment of higher costing FHLB advances ~~in June 2014~~ and new lower ~~costing~~cost FHLB advances obtained ~~in December 2013 and~~during the ~~first six~~twelve months ~~of 2014.~~ended March 31, 2015. The decrease in ~~interest expense on~~the cost of borrowings was partially offset by an increase of ~~$10.9~~$10.8 million, or ~~134.1%~~51.2%, in the average balance of borrowed money to ~~$19.0~~$31.8 million for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$8.1~~$21.0 million for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014.

~~Allowance~~Provision for Loan Losses. The following table summarizes the activity in the allowance for loan losses and provision for loan losses for the ~~six~~three months ended ~~June 30,~~March 31, 2015 and 2014.

The allowance to non-performing loans ratio increased to 104.73% at March 31, 2015 from 88.99% at March 31, 2014 due primarily to a decrease in non-performing loans to $3.7 million at March 31, 2015 from $4.7 million at March 31, 2014, offset by a decrease of $285,000 in the allowance for loan losses. The decrease in non-performing loans was due to the foreclosure and transition to real estate owned of two mortgage loans totaling $2.6 million, the conversion from non-performing to performing status of one mortgage loan totaling $859,000 and the satisfaction of one mortgage loan totaling $775,000 and two commercial and industrial loans totaling $81,000, partially offset by the addition of two commercial and industrial loans totaling $3.3 million and one mortgage loan totaling $708,000.

The allowance for loan losses was $3.9 million at March 31, 2015, $3.8 million at December 31, 2014, and ~~2013.~~

$4.2 million at March 31, 2014. We recorded ~~provisions (credit)~~a provision for loan losses of ~~($217,000) and ($363,000)~~$667,000 for the ~~six-month periods~~three month period ended ~~June 30, 2014 and 2013, respectively.~~ March 31, 2015 compared to no provision for loan losses for the three months ended March 31, 2014.

We charged-off ~~$433,000~~$588,000 against ~~two non-performing multi-family~~three related non-residential mortgage loans ~~one mixed-use mortgage loan, and~~during the three months ended March 31, 2015 compared to charge-offs of $34,000 against one non-residential mortgage loan during the ~~six~~three months ended ~~June 30, 2014 compared to charge-offs of $105,000 against two non-performing non-residential mortgage loans during the six months ended June 30, 2013.~~March 31, 2014. We recorded recoveries of ~~$565,000~~$25,000 during the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 compared to recoveries of ~~$27,000~~$224,000 during the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014.

The reduction in the allowance for loan losses was also due to the Company’s decision during the third quarter of 2014 to revise the methodology used to calculate the historical loss factor. In this regard, the Company revised the historical loss look back period from three to two years as a result of the Company’s determination that the Company’s historical loss charge-offs from 2009 to 2012 was a result of the recent economic recession, that the bulk of the loss charge-offs from 2009 to 2012 occurred in 2012, that there has not been a significant amount of loss charge-offs during the past two years, and that the Company’s loan portfolio has weathered the recession with no further anticipated significant loss charge-offs.

Non-interest Income. Non-interest income decreased by ~~$69,000,~~$9,000, or ~~6.7%~~1.9%, to ~~$954,000~~$458,000 for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$1.0 million~~$467,000 for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014. The decrease was primarily due to ~~decreases~~a decrease of ~~$104,000 in other loan fees and service charges and $11,000 in earnings on bank owned life insurance, partially offset by increases of $45,000~~$16,000 in advisory fee income generated by our wealth management division, ~~and $1,000 in other non-interest income. The decrease~~offset by an increase of $7,000 in other loan fees and service ~~charges was due to decreases of $66,000 in mortgage broker fee income and $40,000 in loan fee income.~~charges. The ~~increase~~decrease in advisory fee income from our wealth management division was due to ~~an increase~~a decrease in assets under management. The increase in other loan fees and service charges was due to an increase in loan fees.

Non-interest Expense. Non-interest expense ~~decreased~~increased by ~~$343,000,~~$139,000, or ~~4.0%~~3.4%, to ~~$8.2~~$4.3 million for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$8.6~~$4.1 million for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014. The ~~decrease~~increase resulted primarily from ~~decreases~~increases of ~~$334,000 in impairment loss on goodwill, $147,000~~$346,000 in real estate owned ~~expenses, $35,000~~expense, $47,000 in ~~equipment expenses, $16,000~~other non-interest expense, $32,000 in outside data processing ~~expenses,~~expense, and ~~$9,000~~$7,000 in advertising expense, partially offset by ~~increases~~decreases of ~~$135,000 in FDIC insurance expense, $37,000 in occupancy expense, $18,000~~$219,000 in salaries and employee benefits, $33,000 in FDIC insurance expense, $27,000 in equipment expense and ~~$8,000~~$14,000 in ~~other non-interest~~occupancy expense.

The Company did not have any impairment loss on goodwill for the six months ended June 30, 2014. During the second quarter of 2013, the Company determined that an adjustment to the goodwill impairment of $227,000 previously recorded in 2012 was necessary. As a result, an additional impairment charge of $334,000 was recognized for the six months ended June 30, 2013. The goodwill was recorded in connection with the Hayden Financial Group acquisition in 2007. The impairment was caused primarily by the expected decrease in other revenue from this division resulting from a reduction in personnel.

Real estate owned expense ~~decreased~~increased by ~~$147,000,~~$346,000, or ~~56.8%~~461.3%, to ~~$112,000~~$421,000 in 2015 from $75,000 in 2014 ~~from $259,000 in 2013~~ due to increased operating expenses related to five foreclosed properties during the quarter ended March 31, 2015 compared to one foreclosed property during the ~~six months~~quarter ended ~~June 30, 2014 compared to~~March 31, 2014. In addition, the Company established valuation allowances totaling $142,000 against one mixed-use real estate owned and one non-residential real estate owned and sold two foreclosed properties for a net loss of $93,000 during the ~~six months~~quarter ended June 30, 2013 and a loss of $51,000 on the sale of a real estate owned during the six months ended June 30, 2013. Equipment expense decreased by $35,000, or 10.6%, to $296,000 in 2014 from $331,000 in 2013 due to decreases in the purchases of additional equipment and continued efforts to contain expenses. Outside data processing expense decreased by $16,000, or 2.9%, to $544,000 in 2014 from $560,000 in 2013 and advertising expense decreased by $9,000, or 30.0%, to $21,000 in 2014 from $30,000 in 2013 due to continued efforts to contain expenses.

FDIC insurance expense increased by $135,000, or 119.5%, to $248,000 in 2014 from $113,000 in 2013 due to increases in the Company’s assessment base and quarterly assessment multiplier from 2013 to 2014. Occupancy expense increased by $37,000, or 5.0%, to $777,000 in 2014 from $740,000 in 2013 due to the addition of the Rockland County, New York loan production office in January 2014.

Salaries and employee benefits, which represented 53.1% of the Company’s non-interest expense during the six months ended June 30, 2014, increased by $18,000, or 0.4%, to $4.35 million in 2014 from $4.33 million in 2013 due to the staffing of the Rockland County, New York loan production office, offset by a reduction in the number of full time equivalent employees to 99 at June 30, 2014 from 104 at June 30, 2013. The reduction in staff occurred in the wealth management department and branch operations.March 31, 2015.

Other non-interest expense increased by ~~$8,000,~~$47,000, or ~~0.4%~~5.6%, to ~~$1.85 million~~$886,000 in ~~2014~~2015 from ~~$1.85 million~~$839,000 in ~~2013~~2014 due mainly to increases of ~~$96,000~~$39,000 in miscellaneous other non-interest expenses, ~~$91,000~~$25,000 in legal fees, $3,000 in service contracts, and $1,000 in insurance expenses, partially offset by decreases of $11,000 in audit and accounting fees, $48,000 in service contracts, $45,000 in telephone expenses, $6,000 in insurance expenses, and $4,000 in directors, officers and employee expenses, offset by decreases of $230,000 in legal fees, $37,000$7,000 in directors compensation, and ~~$15,000~~$3,000 in office supplies and ~~stationery.~~stationery expense. The increase in miscellaneous other non-interest expenses was partially due ~~primarily~~ to ~~an increase~~increases of ~~$117,000~~$36,000 in ~~personnel finder’s~~consulting fees, $8,000 in miscellaneous loan underwriting expenses, and $2,000 in dues and subscriptions, partially offset by ~~a decrease~~decreases of ~~$17,000~~$9,000 in ~~consulting expenses.~~donations. The increase in ~~audit and accounting~~legal fees was partially due to an increase in foreclosure expenses.

Outside data processing expense increased by $32,000, or 12.6%, to $286,000 in 2015 from $254,000 in 2014 due to an upgrade in data services. Advertising expense increased by $7,000, or 63.6%, to $18,000 in 2015 from $11,000 in 2014 due to marketing efforts to promote services ~~provided~~and products.

Salaries and employee benefits, which represented 47.6% of the Company’s non-interest expense during the quarter ended March 31, 2015, decreased by ~~our independent~~$219,000, or 9.7%, to $2.0 million in 2015 from $2.3 million in 2014 due to a reduction in the number of full time equivalent employees to 91 at March 31, 2015 from 102 at March 31, 2014, offset by the staffing of the Rockland County, New York loan production office. The reduction in staff occurred in the wealth management department, branch operations, lending operations, and ~~contract internal auditors. The~~headquarters support personnel as part of a continued effort to contain expenses.

FDIC insurance expense decreased by $33,000, or 26.0%, to $94,000 in 2015 from $127,000 in 2014 due to a decrease in ~~legal fees was~~the Company’s quarterly assessment multiplier, offset by an increase in the Company’s assessment base from 2014 to 2015. Equipment expense decreased by $27,000, or 17.0%, to $132,000 in 2015 from $159,000 in 2014 due to decreases in the purchases of additional equipment and continued efforts to contain expenses. Occupancy expense decreased by $14,000, or 3.3%, to $407,000 in 2015 from $421,000 in 2014 due to a reimbursement of rental expense for our First Avenue branch office, offset by an increase in the operating expenses for our Massachusetts branch offices primarily due to the ~~Company’s decision to capitalize certain legal fees.~~severe winter weather.

Provision for Income Taxes.Income ~~tax expense increased~~taxes decreased by ~~$109,000,~~$139,000, or ~~69.0%~~243.9%, to ~~$267,000~~a benefit of $82,000 for the ~~six~~three months ended ~~June 30, 2014~~March 31, 2015 from ~~$158,000~~an expense of $57,000 for the ~~six~~three months ended ~~June 30, 2013.~~March 31, 2014. The ~~increase~~decrease resulted primarily from a ~~$192,000 increase~~$510,000 decrease in pre-tax income in ~~2014~~2015 compared to ~~2013.~~2014. The effective tax rate was ~~28.5%~~a benefit of 34.5% for the ~~six~~three months ended ~~June 30, 2014 compared to 21.2%~~March 31, 2015 and an expense of 21.0% for the ~~six~~three months ended ~~June 30, 2013. The increase in the effective tax rate was primarily due to the decreased portion of pre-tax income during 2014 attributed to tax-exempt earnings on bank-owned life insurance.~~March 31, 2014.

The following table provides information with respect to our non-performing assets at the dates indicated.

	At		At		At		At
	June 30, 2014		December 31, 2013		March 31, 2015		December 31, 2014
	(Dollars in thousands)				(Dollars in thousands)

Non-accrual loans	$	10,643	$	4,666	$	3,743	$	4,356
Loans past due 90 days or more and accruing		—		—		—		—
Total non-performing loans		10,643		4,666		3,743		4,356
Real estate owned		4,014		3,985
Other real estate owned						8,841		8,733
Total non-performing assets		14,657		8,651		12,584		13,089

Accruing troubled debt restructurings		12,201		15,535		12,217		12,263
Nonaccrual troubled debt restructurings		4,693		1,269		468		448
Total troubled debt restructurings		16,894		16,804		12,685		12,711
Less nonaccrual troubled debt restructurings in total nonaccrual loans		4,693		1,269		468		448

Total troubled debt restructurings and non-performing assets	$	26,858	$	24,186	$	24,801	$	25,352
Total non-performing loans to total loans		2.76%		1.26%
Total non-performing loans to total loans (including loans held-for-sale)						0.86%		1.02%
Total non-performing assets to total assets		3.08%		1.89%		2.34%		2.54%
Total non-performing assets and troubled
debt restructurings to total assets		5.65%		5.28%
Total non-performing assets and troubled debt restructurings to total assets						4.61%		4.92%

The non-accrual loans at ~~June 30, 2014~~March 31, 2015 consisted of 12four loans in the aggregate, comprised of ~~three~~one multi-family mortgage ~~loans,~~loan, one ~~mixed-use mortgage loan, four~~ non-residential mortgage loans, and ~~four~~two commercial and industrial loans.

Non-performing loans increased by $6.0 million, or 128.1%, to $10.6 million at June 30, 2014 from $4.7 million at December 31, 2013. The increase in non-performing loans was due to the addition of five mortgage loans totaling $5.3 million and two commercial and industrial loans totaling $2.5 million, offset by the satisfaction of one mortgage loan totaling $789,000, the conversion from non-performing to performing status of one mortgage loan totaling $824,000, and the charge-off of one mortgage loan of $325,000.

~~The three non-accrual multi-family mortgage loans totaled $3.1 million at June 30, 2014 and consisted primarily of the following mortgage loans:~~

Non-performing loans decreased by $613,000, or 14.1%, to $3.7 million as of March 31, 2015 from $4.4 million as of December 31, 2014. The decrease in non-performing loans was primarily due to the foreclosure and transition into real estate owned of one mixed-use mortgage loan and one non-residential mortgage loan totaling $702,000, partially offset by payments totaling $52,000 made by the Company for real estate taxes and similar items to protect the collateral position of the Company.

The one non-accrual ~~mixed-use~~multi-family mortgage loan ~~totaled $1.9 million, net~~had an outstanding balance of ~~charge-off of $325,000,~~$708,000 at ~~June 30, 2014,~~March 31, 2015 and ~~was~~is secured by ~~three separate buildings with 25~~a 23 unit apartment ~~units~~building. This loan was classified as substandard at March 31, 2015. The Company has commenced foreclosure action and ~~office spaces. We classified this loan as substandard. The~~the Court has appointed a receiver ~~who is~~of rent. We are evaluating the options currently managing the property and a forensic accountant who is reviewing the books and records of the borrowing entity and managing partner. Upon the hiring of the forensic accountant, the borrower filed a chapter 7 bankruptcy petition. The receiver is currently marketing the property for sale.available to us.

The ~~four~~one non-accrual non-residential mortgage ~~loans totaled $3.0 million~~loan had an outstanding balance of $468,000, net of charge-off of $400,000, at ~~June 30, 2014~~March 31, 2015 and ~~consisted primarily~~is secured by a strip shopping center and warehouse. This loan was classified as substandard at March 31, 2015. The property was severely damaged by fire and the Company and the borrower are currently suing the insurance company and the borrower’s insurance agent as part of the ~~following mortgage loans:~~Company’s collection efforts. The Court has issued a trial date for July 2015. We are evaluating the options currently available to us.

The ~~four~~two non-accrual commercial and industrial loans ~~totaled~~had an aggregate balance of $2.6 million at ~~June 30, 2014~~March 31, 2015, consisting of a line of credit with an outstanding balance of $1.4 million and ~~consisted primarily~~remaining available line of credit of $76,000 and a term loan with an outstanding balance of $1.1 million. The loans are secured by the ~~following loans:~~assets of a construction company. The Company is working with the borrower and the borrower’s surety bonding company to cure the delinquencies and/or satisfy the loans.

Based on ~~current appraisals and/or~~recent fair value analyses of these properties, the Company does not anticipate any losses beyond the amounts already charged off.

At ~~June 30, 2014,~~March 31, 2015, we ~~ownedone~~ownedfive foreclosed ~~property~~properties with a net balance of ~~$4.0~~$8.8 million consisting of an office building located in Lawrenceville, New ~~Jersey.~~ Jersey, an office building located in Pittsburgh, Pennsylvania, a mixed-use property located in Peabody, Massachusetts, a building housing auto repair and auto rental facilities located in Brockton, Massachusetts, and a building housing a restaurant and fish market located in Milford, New Hampshire.

The Brockton, Massachusetts property ~~was most recently appraised~~has a contract of sale that we expect to be completed in ~~November 2013~~the second quarter of 2015. We have been marketing the remaining four properties for ~~$4.25 million.~~ sale or rental.

The Company ~~plans to renovate~~sold one foreclosed multi-family property and acquired and sold one foreclosed mixed-use property during the ~~property shortly to attract more tenants. Upon completion~~quarter ended March 31, 2015 resulting in a net loss of the renovation, the Company will order an updated appraisal. The Company’s managing agent is operating and marketing the building for additional tenants and sale. The Company won a $1.7 million judgment in July 2014 against the former borrower whereby the judgment protects the Company in the event of a loss on the sale of the property.$93,000.

There were no loans modified that were deemed to be TDRs during the three ~~and six~~ months ended ~~June 30,~~March 31, 2015. As of March 31, 2015, none of the loans that were modified during the previous twelve months had defaulted in the twelve month period ended March 31, 2015. There were no charge-offs of loans classified as TDRs in the three months ended March 31, 2015.

There were no loans modified that were deemed to be TDRs during the three months ended March 31, 2014. As of ~~June 30,~~March 31, 2014, none of the loans that were modified during the previous twelve months had defaulted in the ~~three and six~~twelve month period ended ~~June 30,~~March 31, 2014. There were no charge-offs of loans classified as TDRs in the three months ended March 31, 2014. Additions for the period consist of real estate taxes and similar items paid to protect the collateral position of the Company.

There were no charge-offs of loans classified as TDRs in the three and six months ended June 30, 2014. Additions for the period consist of real estate taxes and similar items paid to protect the collateral position of the Company.

~~There were four loans modified during the three and six months ended June 30, 2013.~~

One multi-family mortgage loan had an original interest rate of 6.75% with an amortization of 25 years. We reduced the interest rate and converted the monthly payments to interest only for twenty months and then amortizing for 30 years, with a balloon payment after approximately five and one-half years from the modification date.

~~As of June 30, 2013, none of the loans that were modified during the previous twelve months had defaulted in the three and six month periods ended June 30, 2013.~~

~~The following tables show the activity in TDR loans for the period indicated:~~

There were no charge offs against loans classified as TDRs in the three and six months ended June 30, 2013. Additions for the period consist of four non-residential mortgage loans and one residential mortgage loans that were modified and real estate taxes and similar items paid to protect the collateral position of the Company.

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

We regularly adjust our investments in liquid assets based upon our assessment of: (1) expected loan demands; (2) expected deposit flows; (3) yields available on interest-earning deposits and securities; and (4) the objectives of our asset/liability management policy.

Our most liquid assets are cash and cash equivalents. The levels of these assets depend on our operating, financing, lending, and investing activities during any given period. Cash and cash equivalents totaled ~~$37.6~~$47.6 million at ~~June 30, 2014~~March 31, 2015 and consisted primarily of interest-bearing deposits at other financial institutions ~~and miscellaneous cash items. The Company can also borrow an additional $80.8 million from~~(predominantly ACBB, the FHLB of New York, toand the Federal Reserve Bank of New York) and miscellaneous cash items. Securities classified as available-for-sale provide an additional source of liquidity. Total securities classified as available-for-sale were $38,000 at March 31, 2015.

At ~~June 30, 2014,~~March 31, 2015, we had ~~$97.3~~$112.9 million in loan commitments outstanding, consisting of ~~$38.6 million of real estate loan commitments, $26.9~~$50.1 million in unused commercial and industrial loan lines of credit, ~~$25.2~~$30.0 million in unused loans in process, ~~$3.8~~$28.7 million in loan commitments, $4.0 million in unused real estate equity lines of credit, ~~$2.7 million in commercial~~ and ~~industrial loan commitments, and $158,000~~$117,000 in consumer lines of credit. We also had $1.7 million in stand-by letters of credit at March 31, 2015.

Certificates of deposit due within one year of ~~June 30, 2014~~March 31, 2015 totaled ~~$62.2~~$68.8 million. This represented ~~36.8%~~34.7% of certificates of deposit at ~~June 30, 2014.~~March 31, 2015. We believe a large percentage of certificates of deposit that mature within one year reflects customers’ hesitancy to invest their funds for long periods in the current interest rate environment. If these maturing deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit and borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we paid on the certificates of deposit due on or before ~~June 30, 2014.~~March 31, 2015. We believe, however, based on past experience, a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Our primary investing activities are the origination of loans and the purchase of securities. Our primary financing activities consist of deposit accounts and FHLB advances. At ~~June 30, 2014,~~March 31, 2015, we had the ability to borrow ~~$80.8~~$83.7 million, net of ~~$20.9~~$32.4 million in outstanding advances, from the FHLB of New York. We also have the ability to borrow $8.0 million from the ACBB via a line of credit, although the Company has thus far not utilized this line of credit.

At ~~June 30, 2014,~~March 31, 2015, we had no overnight advances outstanding. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors. We generally manage the pricing of our deposits to be competitive and to maintain or increase our core deposit relationships depending on our level of real estate loan commitments outstanding. Occasionally, we offer promotional rates on certain deposit products to attract deposits or to lengthen repricing time frames.

The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its shareholders and for the repurchase, if any, of its shares of common stock. At ~~June 30, 2014,~~March 31, 2015, the Company had liquid assets of ~~$11.7 million.~~$7.2 million and $2.2 million in loan participations originated by the Bank which are held by the Company.

Capital Management.The Bank is subject to various regulatory capital requirements administered by the FDIC, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At ~~June 30, 2014,~~March 31, 2015, the Bank exceeded all regulatory capital requirements. The Bank is considered “well capitalized” under regulatory guidelines.

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, letters of credit and lines of credit.

For the three ~~and six~~ months ended ~~June 30, 2014~~March 31, 2015 and the year ended December 31, ~~2013,~~2014, we engaged in no off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Qualitative Aspects of Market Risk.The Company’s most significant form of market risk is interest rate risk. We manage the interest rate sensitivity of our interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment. Deposit accounts typically react more quickly to changes in market interest rates than mortgage loans because of the shorter maturities of deposits. As a result, sharp increases in interest rates may adversely affect our earnings while decreases in interest rates may beneficially affect our earnings. To reduce the potential volatility of our earnings, we have sought to improve the match between asset and liability maturities and rates, while maintaining an acceptable interest rate spread.

Our strategy for managing interest rate risk emphasizes: originating mortgage real estate loans that re-price to market interest rates in three to five years; purchasing securities that typically re-price within a three year time frame to limit exposure to market fluctuations; and, where appropriate, offering higher rates on long term certificates of deposit to lengthen the re-pricing time frame of our liabilities. We currently do not participate in hedging programs, interest rate swaps or other activities involving the use of derivative financial instruments.

We have an Asset/Liability Committee, comprised of our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Retail Banking Officer, and three Chief Lending Officers, whose function is to communicate, coordinate and control all aspects involving asset/liability management. The committee establishes and monitors the volume, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals.

Our goal is to manage asset and liability positions to moderate the effects of interest rate fluctuations on net interest income and net income.

Quantitative Aspects of Market Risk. We use an interest rate sensitivity analysis prepared by an independent third party to review our level of interest rate risk. This analysis measures interest rate risk by computing changes in the net portfolio value of our cash flows from assets, liabilities and off-balance sheet items in the event of a range of assumed changes in market interest rates. Net portfolio value represents the market value of portfolio equity and is equal to the market value of assets minus the market value of liabilities, with adjustments made for off-balance sheet items. These analyses assess the risk of loss in market risk-sensitive instruments in the event of a sudden and sustained 100 to 400 basis point increase or 100 basis point decrease in market interest rates with no effect given to any steps that we might take to counter the effect of that interest rate movement.

The following table presents the change in our net portfolio value at ~~June 30, 2014~~March 31, 2015 that would occur in the event of an immediate change in interest rates based on the independent third party assumptions, with no effect given to any steps that we might take to counteract that change.

									Net Portfolio Value												Net Portfolio Value
									as % of												as % of
	Net Portfolio Value								Portfolio Value of						Net Portfolio Value						Portfolio Value of
	(Dollars in thousands)								Assets						(Dollars in thousands)						Assets
Basis Point (“bp”)	$		$			%			NPV						$		$		%		NPV
Change in Rates	Amount		Change			Change			Ratio		Change				Amount		Change		Change		Ratio	Change
400	$	103,670	$	(12,318	)		(10.62	)%		23.23%		(63	)	bp	$	100,844	$	(14,718)	(12.74)	%	20.04%	(115) bp
300		106,392		(9,596	)		(8.27	)%		23.38%		(48	)	bp		104,203		(11,359)	(9.83)	%	20.33%	(86) bp
200		110,725		(5,263	)		(4.54	)%		23.83%		(3	)	bp		109,825		(5,737)	(4.96)	%	20.95%	(24) bp
100		114,423		(1,565	)		(1.35	)%		24.07%		21		bp		112,807		(2,755)	(2.38)	%	21.10%	( 9) bp
0		115,988								23.86%						115,562					21.19%
(100)		122,875		6,887			5.94%			24.64%		78		bp		122,920		7,358	6.37	%	22.07%	88 bp

We use various assumptions in assessing interest rate risk. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates and the market values of certain assets under differing interest rate scenarios, among others. As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analyses presented in the foregoing tables. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates.

Additionally, certain assets, such as adjustable-rate mortgage loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from certificates could deviate significantly from those assumed in calculating the table. Prepayment rates can have a significant impact on interest income. Because of the large percentage of loans we hold, rising or falling interest rates have a significant impact on the prepayment speeds of our earning assets that in turn affect the rate sensitivity position. When interest rates rise, prepayments tend to slow. When interest rates fall, prepayments tend to rise. Our asset sensitivity would be reduced if prepayments slow and vice versa. While we believe these assumptions to be reasonable, there can be no assurance that assumed prepayment rates will approximate actual future loan repayment activity.

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.

There were no changes in the Company’s internal control over financial reporting during the three months ended ~~June 30, 2014~~March 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

On October 31, 2011, a complaint was filed by Stilwell Value Partners IV, L.P. in the Supreme Court of New York, New York County (the “Court”), against the MHC and each of the directors of the Company and the MHC as defendants, and against the Company as a nominal defendant. The complaint alleged that the directors had breached their fiduciary duties by not expanding the Company board to allow for disinterested consideration of a “second-step” conversion of the MHC. As relief, the complaint requested, among other things, that the Company’s board of directors be increased by at least three new members, that such new members be given sole responsibility to determine whether the Company should engage in a second-step conversion and that the Court order the Company to engage in a second-step conversion. A motion to dismiss the Complaint was filed on December 14, 2011. On September 27, 2012, the Court granted the Company’s motion to dismiss and dismissed the complaint granting Stilwell leave to file an amended complaint within 20 days. On December 14, 2012 Stilwell filed an amended complaint, alleging that the directors had breached their fiduciary duties by not voting to authorize a second step conversion or permitting disinterested consideration by new, independent board members of a second step conversion. Stilwell also asserted claims against the MHC, as majority shareholder of the ~~Company, for breach of fiduciary duty and for aiding and abetting the directors’ alleged breach of fiduciary duty.~~Company.

The defendants and the Company filed a motion to dismiss on February 1, ~~2013. Stilwell filed his opposition on March 8, 2013, and the defendants and the Company filed their reply brief on March 29, 2013. The Court held a hearing on the motion on June 12,~~ 2013. On October 23, 2013, the Court denied the motion to dismiss, holding the Court could not say that Stilwell had not alleged a viable claim, and thus the Court allowed the lawsuit against the Company’s directors and the MHC to proceed. The defendants and the Company appealed that decision to the Supreme Court of the State of New York’s Appellate Division, First Department, (“Appellate Division”) on November 27, 2013. ~~The defendants and~~On June 12, 2014, the ~~Company filed their opening appeal brief on February 18, 2014. Stilwell filed his response brief on March 26, 2014. The defendants and the Company filed their reply brief on April 4, 2014. The~~ Appellate Division ~~heard oral argument on May 22, 2014.~~ affirmed the Court’s decision.

Additionally, on February 21, 2014, Stilwell moved to disqualify the Company’s counsel, which represents the Company, the individual directors, and MHC in this litigation. ~~Stilwell argued that he was suing~~On December 30, 2014, the ~~directors and MHC on behalf of~~New York Supreme Court Appellate Division, First Department, affirmed the ~~Company and thus that there was a conflict of interest among the defendants that required the Company~~Court’s decision to ~~have separate counsel. The defendants opposed the motion on March 7, 2014. Stilwell filed a reply on March 13, 2014. The Court held oral argument on April 9, 2014, and denied the~~deny Stilwell’s disqualification motion. ~~Plaintiff filed its opening brief on July 1, 2014. Defendant’s opposition was filed on August 6, 2014, and briefing of that appeal is on-going.~~

~~On July 3, 2014, Salvatore Randazzo, a former director of the MHC, the Company and the Bank, retained separate counsel to represent him in the litigation.~~

The parties ~~are continuing~~have completed fact discovery and expert discovery. On January 14, 2015, Stilwell filed a certification of readiness for trial. Motions for summary judgment were filed by both parties on March 3, 2015. Oppositions to ~~conduct discovery, including document production, depositions and third party discovery.~~summary judgment were submitted on March 31, 2015. Replies in support of summary judgment were submitted on April 21, 2015. All summary judgment papers were filed with the Court on April 22, 2015.

The Company and Bank are also subject to claims and litigation that arise primarily in the ordinary course of business. Based on information presently available and advice received from legal counsel representing the Company and Bank in connection with such claims and litigation, it is the opinion of management that the disposition or ultimate determination of such claims and litigation will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2013,~~2014, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or operating results.

On November ~~26, 2013,~~25, 2014, the Company announced that its Board of Directors approved the repurchase for up to ~~268,550~~255,123 shares of the Company’s outstanding common stock held by persons other than the MHC. The following table presents information regarding the Company’s stock repurchases during the three months ended ~~June 30, 2014.~~March 31, 2015:

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.

	United States of America		06-1786701
	(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


	325 Hamilton Avenue, White Plains, New York			10601
	(Address of principal executive offices)			(Zip Code)

Large Accelerated Filer ¨	Accelerated Filer ¨
Non-accelerated Filer ¨	Smaller Reporting Company x
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		Page No.
Part I—Financial Information

Item 1.	Consolidated Financial Statements (Unaudited)

	Consolidated Statements of Financial Condition at ~~June 30, 2014~~March 31, 2015 and December 31, ~~2013~~2014	1

	Consolidated Statements of ~~Income~~Operations for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2015 and 2014 ~~and 2013~~	2

	Consolidated Statements of Comprehensive Income (Loss) for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2015 and 2014 ~~and 2013~~	3

	Consolidated Statements of Stockholders’ Equity for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2015 and 2014 ~~and 2013~~	4

	Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2015 and 2014 ~~and 2013~~	5

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2221

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3530

Item 4.	Controls and Procedures	3631

Part II—Other Information

Item 1.	Legal Proceedings	3731

Item 1A.	Risk Factors	3732

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3832

Item 3.	Defaults Upon Senior Securities	3832

Item 4.	Mine Safety Disclosures	3832

Item 5.	Other Information	3833

Item 6.	Exhibits	3833

	Signatures	3934

	June 30,			December 31,			March 31,			December 31,
	2014			2013			2015			2014
	(In thousands,						(In thousands,
	except share and per share data)						except share and per share data)
ASSETS
Cash and amounts due from depository institutions	$	4,805		$	3,794		$	3,065		$	3,676
Interest-bearing deposits		32,842			27,737			44,562			30,334
Cash and cash equivalents		37,647			31,531			47,627			34,010

Certificates of deposit		2,142			2,142			150			150
Securities available-for-sale		90			113			38			40
Securities held-to-maturity (fair value of $7,795 and $8,739, respectively)		7,506			8,444
Loans receivable, net of allowance for loan losses of $3,930		382,042			367,825
and $4,015, respectively
Securities held-to-maturity (fair value of $6,462 and $6,805, respectively)								6,268			6,595
Loans receivable, net of allowance for loan losses of $3,920 and $3,816 respectively								426,203			423,445
Loans held-for-sale								5,464			—
Premises and equipment, net		11,931			12,234			11,624			11,718
Federal Home Loan Bank of New York stock, at cost		1,627			1,594
Investments in restricted stock, at cost								2,041			1,933
Bank owned life insurance		20,799			20,490			21,266			21,113
Accrued interest receivable		1,456			1,267			1,555			1,453
Goodwill		749			749			749			749
Intangible assets		314			345			269			284
Other real estate owned		4,014			3,985			8,707			8,733
Other assets		5,087			7,506			5,556			5,202
Total assets	$	475,404		$	458,225		$	537,517		$	515,425
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits:
Non-interest bearing	$	28,278		$	28,310		$	37,514		$	37,088
Interest bearing		315,284			296,899			356,404			336,964
Total deposits		343,562			325,209			393,918			374,052

Advance payments by borrowers for taxes and insurance		3,201			3,987			4,260			3,338
Federal Home Loan Bank advances		20,934			21,000			32,380			30,000
Accounts payable and accrued expenses		4,431			3,861			4,041			4,225
Total liabilities		372,128			354,057			434,599			411,615

Stockholders’ equity:

Preferred stock, $0.01 par value; 1,000,000 shares authorized, none issued		—			—			—			—
Common stock, $0.01 par value;
19,000,000 shares authorized; 13,225,000 shares issued;
outstanding: 12,376,202 and 12,566,952 shares, respectively		132			132
Common stock, $0.01 par value; 19,000,000 shares authorized; 13,225,000 shares issued; outstanding: 12,239,302 and 12,331,202 shares, respectively								132			132
Additional paid-in capital		57,047			57,083			56,987			57,007
Unearned Employee Stock Ownership Plan (“ESOP”) shares		(2,981	)		(3,111	)		(2,787	)		(2,851	)
Retained earnings		54,810			54,428			55,252			55,548
Treasury stock – at cost, 848,798 and 658,048 shares, respectively		(5,681	)		(4,291	)
Treasury stock – at cost, 985,698 and 893,798 shares, respectively								(6,645	)		(5,999	)
Accumulated other comprehensive loss		(51	)		(73	)		(21	)		(27	)
Total stockholders’ equity		103,276			104,168			102,918			103,810
Total liabilities and stockholders’ equity	$	475,404		$	458,225		$	537,517		$	515,425

	Common Stock		Additional Paid- in Capital			Unearned ESOP Shares			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Total Equity
Balance at December 31, 2012	$	132	$	57,178		$	(3,370	)	$	53,893		$	(3,712	)	$	(272	)	$	103,849
Net income		—		—			—			588			—			—			588
Other comprehensive income		—		—			—			—			—			99			99
Cash dividend declared ($0.06 per share)		—		—			—			(302	)		—			—			(302	)
ESOP shares earned		—		(55	)		130			—			—			—			75
Balance – June 30, 2013	$	132	$	57,123		$	(3,240	)	$	54,179		$	(3,712	)	$	(173	)	$	104,309

Balance at December 31, 2013	$	132	$	57,083		$	(3,111	)	$	54,428		$	(4,291	)	$	(73	)	$	104,168
Net income		—		—			—			671			—			—			671
Other comprehensive income		—		—			—			—			—			22			22
Purchase of 190,750 shares of treasury stock		—		—			—			—			(1,390	)		—			(1,390	)
Cash dividend declared ($0.06 per share)		—		—			—			(289	)		—			—			(289	)
ESOP shares earned		—		(36	)		130			—			—			—			94
Balance – June 30, 2014	$	132	$	57,047		$	(2,981	)	$	54,810		$	(5,681	)	$	(51	)	$	103,276

	Level 1:	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

	Level 2:	Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

	Level 3:	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

	Quantitative Information about Level 3 Fair Value Measurements

	Fair Value Estimate		Valuation	Unobservable	Range
(in thousands)	Estimate		Techniques	Input	(Weighted Average Rate)
June 30, 2014:
Impaired loans	$	4,026	Appraisal of collateral (1)	Appraisal adjustments (2)	9.22%
				Liquidation expenses (2)	0.52%-11.08% (3.38%)


December 31, 2013:
Impaired loans	$	789	Appraisal of collateral (1)	Appraisal adjustments (2)	0.00%
				Liquidation expenses (2)	3.00% (3.00%)


	Quantitative Information about Level 3 Fair Value Measurements

		Fair Value Estimate	Valuation	Unobservable	Range
(In thousands)		Estimate	Techniques	Input	(Weighted Average Rate)
March 31, 2015:
Impaired real estate owned	$	2,111	Appraisal of collateral (1)	Appraisal adjustments (2)	5.62% - 6.43% (6.36%)
				Liquidation expenses (2)	5.26% - 8.97% (5.63%)


December 31, 2014:
Impaired real estate owned	$	2,137	Appraisal of collateral (1)	Appraisal adjustments (2)	1.34% - 20.00% (10.22%)
				Liquidation expenses (2)	0.25% - 1.29% (0.29%)

	March 31, 2015						December 31, 2014
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance

	(In thousands)
With no related allowance recorded:
Residential real estate-Multi-family	$	4,918	$	5,260	$	—	$	5,367	$	5,709	$	—
Non-residential real estate		2,423		3,193		—		8,697		11,714		—
Commercial and industrial		2,567		2,567		—		2,555		2,555		—
Subtotal	$	9,908	$	11,020	$	—	$	16,619	$	19,978	$	—

With an allowance recorded:		—		—		—		—		—		—

Total:
Residential real estate-Multi-family	$	4,918	$	5,260	$	—	$	5,367	$	5,709	$	—
Non-residential real estate		2,423		3,193		—		8,697		11,714		—
Commercial and industrial		2,567		2,567		—		2,555		2,555		—
Total	$	9,908	$	11,020	$	—	$	16,619	$	19,978	$	—

	Residential Real Estate		Non- residential Real Estate		Construction		Commercial and Industrial		Consumer		Unallocated		Total
Allowance for loan losses:
Ending balance - Total	$	2,556	$	896	$	97	$	456	$	—	$	10	$	4,015

Ending balance: individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Ending balance: collectively evaluated for impairment	$	2,556	$	896	$	97	$	456	$	—	$	10	$	4,015

Loans receivable:
Ending balance - Total	$	251,142	$	81,985	$	6,568	$	31,345	$	161	$	—	$	371,201
Ending balance: individually
evaluated for impairment	$	8,629	$	11,488	$	—	$	—	$	—	$	—	$	20,117

Ending balance: collectively evaluated for impairment	$	242,513	$	70,497	$	6,568	$	31,345	$	161	$	—	$	351,084

	Three Months				Six Months
	Ended June 30, 2014				Ended June 30, 2014

	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized

	(In thousands)
With no related allowance recorded:
Residential real estate-Multi-family	$	8,952	$	46	$	8,845	$	94
Non-residential real estate		9,237		65		9,311		75
Commercial and industrial		1,256		—		837		—
Subtotal	$	19,445	$	111	$	18,993	$	169

With an allowance recorded:
Non-residential real estate	$	2,055	$	6	$	2,046	$	22
Subtotal	$	2,055	$	6	$	2,046	$	22

Total:
Residential real estate-Multi-family	$	8,952	$	46	$	8,845	$	94
Non-residential real estate		11,292		71		11,357		97
Commercial and industrial		1,256		—		837		—
Total	$	21,500	$	117	$	21,039	$	191

	Three Months				Six Months
	Ended June 30, 2013				Ended June 30, 2013

	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized

	(In thousands)
With no related allowance recorded (1):
Residential real estate-Multi-family	$	10,954	$	96	$	10,727	$	260
Non-residential real estate		11,286		39		10,282		39
Commercial and industrial		1,842		20		1,945		49
Total	$	24,082	$	155	$	22,954	$	348

	Three Months				Three Months
	Ended March 31, 2015				Ended March 31, 2014

	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized

	(In thousands)
With no related allowance recorded:
Residential real estate-Multi-family	$	5,142	$	42	$	8,639	$	48
Non-residential real estate		5,560		20		9,498		10
Commercial and industrial		2,561		—		—		—
Subtotal	$	13,263	$	62	$	18,137	$	58

With an allowance recorded:
Non-residential real estate	$	—	$	—	$	2,039	$	16
Subtotal	$	—	$	—	$	2,039	$	16

Total:
Residential real estate-Multi-family	$	5,142	$	42	$	8,639	$	48
Non-residential real estate		5,560		20		11,537		26
Commercial and industrial		2,561		—		—		—
Total	$	13,263	$	62	$	20,176	$	74

	Three and Six Months Ended June 30,
	2013
			Recorded		Recorded
			Investment		Investment
	Number of		Prior to		After
(dollars in thousands)	Modifications		Modification		Modification
Real estate:
Multi-family		1	$	307	$	307
Non-residential		3		3,253		3,253
Total		4	$	3,560	$	3,560

Details about Accumulated Other Comprehensive Income Components	Three Months Ended June 30, 2014				Six Months Ended June 30, 2014				Affected Line Item in the Consolidated Statements of Comprehensive Income (Loss)
	(In thousands)

Amortization of defined benefit pension items:
Prior service costs	$	5		(1)	$	11		(1)	Salary and employee benefits
Actuarial loss		(1	)	(1)		(2	)	(1)	Salary and employee benefits
		4				9			Total before tax
		(1	)			(2	)		Provision for income taxes
Total reclassifications for the period	$	3			$	7			Net of taxes

Details about Accumulated Other Comprehensive Income Components	Three Months Ended March 31, 2015			Three Months Ended March 31, 2014			Affected Line Item in the Consolidated Statements of Comprehensive Income (Loss)
	(In thousands)

Amortization of defined benefit pension items:
Prior service costs	$	5	(1)	$	6	(1)	Salary and employee benefits
Actuarial gain		(2)	(1)		(1)	(1)	Salary and employee benefits
		3			5		Total before tax
		(1)			(1)		Provision for income taxes
Total reclassifications for the period	$	2		$	4		Net of taxes

	Three Months Ended June 30,
	2014								2013
				Interest								Interest
	Average			and		Yield/			Average			and		Yield/
	Balance			Dividends		Cost			Balance			Dividends		Cost

	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	$	388,603		$	4,789		4.93	%	$	343,487		$	4,677		5.45	%
Securities (including FHLB stock)		9,383			74		3.15			11,720			84		2.87
Other interest-earning assets		28,351			5		0.07			28,476			2		0.03
Total interest-earning assets		426,337			4,868		4.57			383,683			4,763		4.97
Allowance for loan losses		(4,200	)							(4,683	)
Non-interest-earning assets		47,420								50,110
Total assets	$	469,557							$	429,110

Liabilities and equity:
Interest-bearing liabilities:
Interest-bearing demand	$	59,646		$	54		0.36	%	$	61,107		$	52		0.34	%
Savings and club accounts		86,310			118		0.55			82,049			110		0.54
Certificates of deposit		169,386			640		1.51			147,395			568		1.54
Total interest-bearing deposits		315,342			812		1.03			290,551			730		1.00

Borrowings		17,051			33		0.77			5,000			45		3.60
Total interest-bearing liabilities		332,393			845		1.02			295,551			775		1.05

Noninterest-bearing demand		24,638								20,567
Other liabilities		9,144								8,572
Total liabilities		366,175								324,690

Stockholders’ equity		103,382								104,420
Total liabilities and
Stockholders’ equity	$	469,557							$	429,110
Net interest income				$	4,023							$	3,988
Interest rate spread							3.55	%							3.92	%
Net interest margin							3.77	%							4.16	%
Net interest-earning assets	$	93,944							$	88,132
Interest-earning assets to interest-bearing liabilities		128.26	%							129.82	%

									Commercial
	Residential			Nonresidential					and
	Real Estate			Real Estate			Construction		Industrial		Consumer		Total
	(in thousands)

Balance at December 31, 2014	$	4,226		$	8,485		$	—	$	—	$	—	$	12,711
Additions		—			—			—		—		—		—
Repayments		(20	)		(478	)		—		—		—		(498	)
Amortization of TDR reserves		4			—			—		—		—		4
Balance - March 31, 2015	$	4,210		$	8,007		$	—	$	—	$	—	$	12,217
Related allowance	$	—		$	—		$	—	$	—	$	—	$	—

					Total Number of		Maximum Number
	Total				Shares Purchased		of Shares that May
	Number of		Average		as Part of Publicly		Yet Be Purchased
	Shares		Price Paid		Announced Plans		Under the Plans or
Period	Purchased		per Share		or Program		Programs

April 1 to
April 30.		47,900	$	7.31		47,900		28,450

May 1 to
May 31.		28,450		7.26		28,450		—

June 1 to
June 30.		—		—		—		—
Total		76,350	$	7.29		76,350		—


Date: ~~August 14, 2014~~May 15, 2015	By:	/s/ Kenneth A. Martinek
		Kenneth A. Martinek
		Chief Executive Officer


Date: ~~August 14, 2014~~May 15, 2015	By:	/s/ Donald S. Hom
		Donald S. Hom
		Executive Vice President and Chief Financial Officer