Quarterly Report (10-q)

Share Name	Share Symbol	Market	Type
(MM)	NASDAQ:PSBH	NASDAQ	Common Stock

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2014

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

For the transition period from ______________ to _____________

Commission file number 0-50970

PSB Holdings, Inc.

(Exact name of registrant as specified in its charter)


United States		42-1597948
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

40 Main Street, Putnam, Connecticut 06260

(Address of principal executive offices)

(Zip Code)

(860) 928-6501

(Issuer’s telephone number)

N/A

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x YES o NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x YES o NO

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


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

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

As of April 30, 2014, there were 6,541,561 shares of the registrant’s common stock outstanding.

PSB Holdings, Inc.

Table of Contents


Part I.	FINANCIAL INFORMATION
		Page No.
Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets at March 31, 2014 and June 30, 2013	1

	Consolidated Statements of Net Income for the Three and Nine Months Ended March 31, 2014 and 2013	2

	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended March 31, 2014 and 2013	3

	Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months March 31, 2014 and 2013	4

	Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2014 and 2013	5

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44

Item 4.	Controls and Procedures	44

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 3.	Defaults Upon Senior Securities	45

Item 4.	Mine Safety Disclosures	45

Item 5.	Other Information	45

Item 6.	Exhibits	45

SIGNATURES		46

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

PSB Holdings, Inc.

Consolidated Balance Sheets

(Unaudited)


	March 31,			June 30,
	2014			2013
	(in thousands except share data)
ASSETS
Cash and due from depository institutions	$	5,766		$	5,306
Interest-bearing demand deposits with other banks		2,588			7,487
Total cash and cash equivalents		8,354			12,793
Securities available-for-sale, at fair value		48,837			38,450
Securities held-to-maturity (fair value of $137,094 as of
March 31, 2014 and $135,418 as of June 30, 2013)		136,742			134,989
Federal Home Loan Bank stock, at cost		6,953			6,953
Loans held-for-sale		144			1,037
Loans		231,121			234,864
Less: Allowance for loan losses		(2,613	)		(2,693	)
Net loans		228,508			232,171
Premises and equipment		4,084			4,237
Accrued interest receivable		1,079			1,013
Other real estate owned		1,677			1,665
Goodwill		6,912			6,912
Bank-owned life insurance		9,080			8,859
Deferred tax asset		2,799			2,903
Other assets		2,563			2,396

Total assets	$	457,732		$	454,378

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits
Non-interest-bearing	$	48,485		$	44,231
Interest-bearing		293,196			297,054
Total deposits		341,681			341,285
Mortgagors’ escrow accounts		1,229			2,120
Federal Home Loan Bank advances		53,515			53,500
Securities sold under agreements to repurchase		7,942			4,849
Other liabilities		2,533			2,543
Total liabilities		406,900			404,297

Stockholders’ Equity
Preferred stock, $0.10 par value, 1,000,000 shares authorized,
no shares issued and outstanding		-			-
Common stock, $0.10 par value, 12,000,000 shares authorized,
6,943,125 shares issued, 6,541,561 shares outstanding
at March 31, 2014 and June 30, 2013		694			694
Additional paid-in capital		30,602			30,602
Retained earnings		25,471			24,836
Accumulated other comprehensive loss		(502	)		(523	)
Unearned ESOP shares		(1,342	)		(1,437	)
Treasury stock, at cost (401,564 shares at
March 31, 2014 and June 30, 2013)		(4,091	)		(4,091	)
Total stockholders’ equity		50,832			50,081

Total liabilities and stockholders’ equity	$	457,732		$	454,378

See notes to consolidated financial statements.

PSB Holdings, Inc.

Consolidated Statements of Net Income

(Unaudited)

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2014		2013			2014			2013
	(in thousands, except per share data)
Interest and dividend income:
Interest and fees on loans	$	2,475	$	2,786		$	7,670		$	8,795
Interest and dividends on investments		999		901			2,752			2,877
Total interest and dividend income		3,474		3,687			10,422			11,672

Interest expense:
Deposits and escrow		581		741			1,859			2,364
Borrowed funds		386		389			1,172			1,327
Total interest expense		967		1,130			3,031			3,691
Net interest and dividend income		2,507		2,557			7,391			7,981

Provision for loan losses		15		135			55			700
Net interest and dividend income after provision
for loan losses		2,492		2,422			7,336			7,281

Non-interest income:
Total other-than-temporary impairment losses on debt securities		-		(238	)		(46	)		(767	)
Portion of losses recognized in other comprehensive income		-		201			39			329
Net impairment losses recognized in earnings		-		(37	)		(7	)		(438	)
Fees for services		430		416			1,321			1,322
Mortgage banking activities		18		59			57			193
Net commissions from brokerage service		12		26			93			89
Income from bank-owned life insurance		69		74			221			412
Gain on sales and calls of available-for-sale securities, net		-		-			-			206
Other income		42		45			122			108
Total non-interest income		571		583			1,807			1,892

Non-interest expense:
Compensation and benefits		1,463		1,433			4,420			4,347
Occupancy and equipment		310		335			900			978
Data processing		207		142			610			422
LAN/WAN network expense		36		37			110			110
Advertising and marketing		40		41			121			126
OCC assessment		48		47			143			140
FDIC deposit insurance		151		150			455			447
Other real estate owned		71		35			134			99
Write-down of other real estate owned		132		-			228			48
Other non-interest expense		411		457			1,283			1,337
Total non-interest expense		2,869		2,677			8,404			8,054
Income before income tax expense		194		328			739			1,119

Income tax expense		7		68			69			175
NET INCOME	$	187	$	260		$	670		$	944

Earnings per common share:
Basic	$	0.03	$	0.04		$	0.10		$	0.15
Diluted	$	0.03	$	0.04		$	0.10		$	0.15

See notes to consolidated financial statements.

PSB Holdings, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)

The components of comprehensive income and related tax effects are as follows:

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2014			2013			2014			2013
	(in thousands)
Net Income	$	187		$	260		$	670		$	944

Other comprehensive income:
Net unrealized holding gains on available-for-sale securities		626			1,648			64			3,185
Reclassification adjustment for losses realized in income on available-for-sale securities (1)		-			37			7			232
Non-credit portion of other-than-temporary losses on available-for-sale securities		-			(201	)		(39	)		(329	)

Other comprehensive income before tax		626			1,484			32			3,088
Income tax expense related to other comprehensive income		(214	)		(504	)		(11	)		(1,049	)
Other comprehensive income net of tax		412			980			21			2,039
Total comprehensive income	$	599		$	1,240		$	691		$	2,983

(1)

Amounts are reported in net impairment losses recognized in earnings and gain on sales of available-for-sale securities, net, included in non-interest income on the consolidated statements of net income. Income tax benefit associated with the reclassification adjustment was $13,000 for the three months ended March 31, 2013. Income tax benefit associated with the reclassification adjustments was $2,000 and $79,000 for the nine months ended March 31, 2014 and 2013, respectively.

See notes to consolidated financial statements.

PSB Holdings, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

For the Nine Months Ended March 31, 2014 and 2013

(Unaudited)

	Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Unearned ESOP Shares			Treasury Stock			Total Stockholders’ Equity
	(dollars in thousands)

Balances at June 30, 2012	$	694	$	30,602	$	23,630		$	(1,013	)	$	(1,565	)	$	(4,213	)	$	48,135

Comprehensive income		-		-		944			2,039			-			-			2,983
ESOP shares committed to be released
(9,585 shares)		-		-		(49	)		-			96			-			47
Shares issued		-		-		(69	)		-			-			122			53

Balances at March 31, 2013	$	694	$	30,602	$	24,456		$	1,026		$	(1,469	)	$	(4,091	)	$	51,218

Balances at June 30, 2013	$	694	$	30,602	$	24,836		$	(523	)	$	(1,437	)	$	(4,091	)	$	50,081

Comprehensive income		-		-		670			21			-			-			691
ESOP shares committed to be released
(3,195 shares)		-		-		(35	)		-			95			-			60

Balances at March 31, 2014	$	694	$	30,602	$	25,471		$	(502	)	$	(1,342	)	$	(4,091	)	$	50,832

See notes to consolidated financial statements.

PSB Holdings, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	For the Nine Months
	Ended March 31,
	2014			2013
	(in thousands)
Cash flows from operating activities
Net income	$	670		$	944
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of securities, net		969			987
Gain on sales and calls of securities, net		-			(206	)
Impairment losses on securities		7			438
Net decrease (increase) in loans held-for-sale		893			(671	)
Amortization of deferred loan costs, net		54			48
Provision for loan losses		55			700
Gain on sale of other real estate owned, net		(50	)		(10	)
Write-down of other real estate owned		228			48
Loss on sale of premises and equipment		1			1
Depreciation and amortization		326			343
(Increase) decrease in accrued interest receivable and other assets		(253	)		701
Increase in cash surrender value of bank-owned life insurance		(221	)		(236	)
Bank-owned life insurance death benefit income		-			(176	)
Decrease in other liabilities		(10	)		(68	)
Deferred tax expense		92			-
Amortization of ESOP expense		60			47
Net cash provided by operating activities		2,821			2,890
Cash flows from investing activities
Purchase of available-for-sale securities		(15,986	)		(1,000	)
Proceeds from sales, calls, pay downs and maturities of available-for-sale securities		5,513			11,539
Purchase of held-to-maturity securities		(23,410	)		(51,247	)
Proceeds from calls, pay downs and maturities of held-to-maturity securities		20,800			29,229
Redemption of Federal Home Loan Stock		-			583
Loan repayments net of originations		2,304			9,579
Recoveries of loans previously charged off		66			173
Proceeds from the surrender of bank-owned life insurance policy		-			386
Proceeds from sale of other real estate owned		1,023			477
Capital expenditures - premises and equipment		(154	)		(67	)
Capital expenditures - other real estate owned		(29	)		-
Net cash used in investing activities		(9,873	)		(348	)
Cash flows from financing activities
Net increase (decrease) in deposit accounts		396			(1,398	)
Net decrease in mortgagors’ escrow accounts		(891	)		(884	)
Proceeds from Federal Home Loan Bank advances		15			-
Net increase in securities sold under agreements to repurchase		3,093			2,799
Shares issued		-			53
Net cash provided by financing activities		2,613			570
Net (decrease) Increase in cash and cash equivalents		(4,439	)		3,112
Cash and cash equivalents at beginning of year		12,793			11,413
Cash and cash equivalents at end of period	$	8,354		$	14,525
Supplemental disclosures
Cash paid during the period for:
Interest	$	3,042		$	3,712
Income taxes paid (refunded), net		1			(146	)
Loans transferred to other real estate owned		1,057			283
Decrease in due from broker		-			2,000

See notes to consolidated financial statements.

PSB Holdings, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1 – Organization

PSB Holdings, Inc. (the “Company”) is a federally chartered holding company formed on May 27, 2003 for the purpose of acquiring all of the common stock of Putnam Bank (the “Bank”) concurrent with the Bank’s reorganization from a mutual savings institution to the mutual holding company form of organization. No shares were offered to the public as part of this reorganization.

On October 4, 2004, the Company issued 6,943,125 shares of common stock, 3,729,846 shares (53.7%) of which were issued to Putnam Bancorp, MHC and 3,089,691 shares (44.5%) of which were sold to eligible depositors of the Bank and others at $10.00 per share. In addition, the Company issued 123,588 shares (1.8%) to a charitable foundation established by the Bank.

NOTE 2 – Basis of Presentation

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and the instructions to Form 10-Q, and accordingly do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments necessary, consisting of only normal recurring accruals and the elimination of all significant intercompany accounts, to present fairly the financial position, results of operations and cash flows of the Company for the periods presented. The interim results of operations are not necessarily indicative of the operating results to be expected for future periods, including the year ending June 30, 2014. These financial statements should be read in conjunction with the 2013 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on September 25, 2013.

NOTE 3 – Recent Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This Update provides that an unrecognized tax benefit (or a portion of an unrecognized tax benefit) should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. In situations where a net operating loss carryforward, a similar tax loss or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. This Update is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013 with retrospective application and early adoption permitted. This Update is not expected to have a significant impact on the Company’s consolidated financial statements.

In January 2014, the FASB issued ASU 2014-04, Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this Update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. This Update is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014, and is not expected to have a significant impact on the Company’s consolidated financial statements.

Note 4 - Critical Accounting Policies

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

Loans . The Company’s loan portfolio includes residential real estate, commercial real estate, construction, commercial and consumer/other segments. Residential real estate loans include one-to four-family owner occupied loans, second mortgage loans and equity lines of credit. Consumer/other loans include personal loans. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

The accrual of interest on all loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual if collection of principal or interest is considered doubtful. All interest accrued but not collected for loans that are placed on non-accrual is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

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

The allowance for loan losses is evaluated on a quarterly basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of general, specific and unallocated components, as further described below.

General component

The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: residential real estate, commercial real estate, construction, commercial and consumer/other. Management uses a rolling average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; trends in volume and terms of loans; concentrations; changes in lending policies and procedures; experience/ability/depth of lending management and staff; loan rating migration; the effect of other external factors; changes in the value of underlying collateral; changes in the loan review system and national and local economic trends and conditions.

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

Residential real estate - The Company does not originate loans with a loan-to-value ratio greater than 100% and does not originate subprime loans. Loans originated with a loan-to-value ratio greater than 80% generally require private mortgage insurance. All loans in this segment are collateralized by owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Commercial real estate - Loans in this segment are primarily income-producing properties throughout New England. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on the credit quality in this segment. Management obtains rent rolls annually and continually monitors the cash flows of these loans.

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

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

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

Specific component

The specific component relates to loans that are classified as impaired. Impairment is measured on a loan by loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent or foreclosure is probable. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer/other and residential real estate loans for impairment disclosures, unless such loans are 90 days or more past due or subject to a troubled debt restructuring (“TDR”) agreement.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

The Company periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a TDR. All TDRs are initially classified as impaired.

Unallocated component

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

Goodwill . The Company’s goodwill was recorded as a result of business acquisitions and combinations. The Company’s goodwill (the amount paid in excess of fair value of acquired net assets) is reviewed at least annually to ensure that there have been no events or circumstances resulting in an impairment of the recorded amount of excess purchase price. Adverse changes in the economic environment, operations of the Company or other factors could result in a decline in projected fair values. If the estimated fair value is less than the carrying amount, a loss would be recognized to reduce the carrying amount to implied fair value.

Other-Than-Temporary Impairment of Securities. Management periodically reviews all investment securities with significant declines in fair value for potential other-than-temporary impairment pursuant to the guidance provided by ASC 320-10 “Investments-Debt and Equity Securities”. The guidance addresses the determination as to when an investment is considered impaired, whether the impairment is other-than-temporary, and the measurement of an impairment loss. It also includes accounting considerations subsequent to the recognition of other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments.

Income Taxes. The Company recognizes income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are established for the temporary differences between the accounting basis and the tax basis of the Company’s assets and liabilities at enacted rates expected to be in effect when the amounts related to such temporary differences are realized or settled. A valuation allowance is established against deferred tax assets when, based upon the available evidence including historical and projected taxable income, it is more likely than not that some or all of the deferred tax assets will not be realized.

Management has discussed the development and selection of these critical accounting policies with the Audit Committee.

NOTE 5 – Earnings Per Share (EPS)

As presented below, basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. If rights to dividends on unvested options/awards are non-forfeitable, these unvested awards/options are considered outstanding in the computation of basic earnings per share. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. For purposes of computing diluted EPS, the treasury stock method is used.

The following information was used in the computation of EPS on both a basic and diluted basis for the three and nine months ended March 31, 2014 and 2013:


	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	March 31, 2014		March 31, 2013		March 31, 2014		March 31, 2013
Net income	$	187,000	$	260,000	$	670,000	$	944,000

Weighted average common shares applicable to EPS		6,404,217		6,391,438		6,400,998		6,381,417
Effect of dilutive potential common shares (1)		-		-		-		-
Weighted average common shares applicable to diluted EPS		6,404,217		6,391,438		6,400,998		6,381,417
Earnings per share:
Basic	$	0.03	$	0.04	$	0.10	$	0.15
Diluted	$	0.03	$	0.04	$	0.10	$	0.15

(1) For the three and nine months ended March 31, 2014 and 2013, options to purchase 199,106 and 222,921 shares of common stock, respectively, were outstanding but not included in the computation of earnings per share because they were anti-dilutive.

NOTE 6 – Investment Securities

The carrying value and estimated fair values of investment securities by maturity are as follows:


	Amortized		Gross Unrealized					Fair
	Cost Basis		Gain		(Loss)			Value
	(in thousands)
March 31, 2014
Available-for-sale:
Debt securities:
U.S. government and government-sponsored securities:
Due from one through five years	$	1,000	$	-	$	(32	)	$	968

Corporate bonds and other securities:
Due after ten years		5,999		-		(1,086	)		4,913

U.S. Government-sponsored and guaranteed
mortgage-backed securities:
Due in one year or less		10		1		-			11
From one through five years		791		43		-			834
From five through ten years		12,107		99		-			12,206
After ten years		12,822		379		(103	)		13,098
		25,730		522		(103	)		26,149

Non-agency mortgage-backed securities:
Due after ten years		6,871		310		(324	)		6,857
Total debt securities		39,600		832		(1,545	)		38,887

Equity securities:
Auction rate preferred		10,000		-		(50	)		9,950

Total available-for-sale securities	$	49,600	$	832	$	(1,595	)	$	48,837

Held-to-maturity:
U.S. government and government-sponsored securities:
Due from one through five years	$	6,258	$	1	$	(57	)	$	6,202
From five through ten years		5,931		87		(57	)		5,961
		12,189		88		(114	)		12,163

U.S. Government-sponsored and guaranteed
mortgage-backed securities:
Due in five through ten years		4,744		156		-			4,900
After ten years		119,809		1,779		(1,557	)		120,031
		124,553		1,935		(1,557	)		124,931
Total held-to-maturity securities	$	136,742	$	2,023	$	(1,671	)	$	137,094


	Amortized		Gross Unrealized					Fair
	Cost Basis		Gain		(Loss)			Value
	(in thousands)
June 30, 2013:
Available-for-sale:
Debt securities:
U.S. government and government-sponsored securities:
Due from five through ten years	$	1,000	$	-	$	(39	)	$	961

Corporate bonds and other securities:
Due after ten years		5,999		-		(1,126	)		4,873

U.S. Government-sponsored and guaranteed
mortgage-backed securities:
Due in one year or less		21		1		-			22
From one through five years		1,217		71		-			1,288
From five through ten years		143		-		-			143
After ten years		13,108		593		(89	)		13,612
		14,489		665		(89	)		15,065

Non-agency mortgage-backed securities:
Due after ten years		7,757		269		(475	)		7,551
Total debt securities		29,245		934		(1,729	)		28,450

Equity securities:
Auction rate preferred		10,000		-		-			10,000

Total available-for-sale securities	$	39,245	$	934	$	(1,729	)	$	38,450

Held-to-maturity:
U.S. government and government-sponsored securities:
Due in one through five years	$	5,259	$	3	$	(76	)	$	5,186
From five through ten years		939		96		-			1,035
		6,198		99		(76	)		6,221

U.S. Government-sponsored and guaranteed
mortgage-backed securities:
Due in five through ten years		4,652		133		-			4,785
After ten years		124,139		2,004		(1,731	)		124,412
		128,791		2,137		(1,731	)		129,197
Total held-to-maturity securities	$	134,989	$	2,236	$	(1,807	)	$	135,418

There were no realized gains or losses on sales of available-for-sale securities for the three months ended March 31, 2014 and March 31, 2013. Gains and losses on the sales of securities are recorded on the trade date and are determined using the specific identification method. There were no other-than-temporary impairment charges on available-for-sale securities realized in income during the three months ended March 31, 2014. There were other-than-temporary impairment charges on available-for-sale securities of $37,000 realized in income during the three months ended March 31, 2013. The write-down included total other-than-temporary impairment losses of $238,000, net of $201,000 recognized in other comprehensive income before taxes.

There were no realized gains or realized losses on sales of available-for-sale securities for the nine months ended March 31, 2014. There were $206,000 in realized gains and no realized losses on sales of available-for-sale securities for the nine months ended March 31, 2013. There were other-than-temporary impairment charges on available-for-sale securities of $7,000 and $438,000 realized in income during the nine months ended March 31, 2014 and 2013, respectively. The write-downs of securities included total other-than-temporary impairment losses of $46,000 and $767,000, net of $39,000 and $329,000 recognized in other comprehensive income for the nine months ended March 31, 2014 and 2013, respectively, before taxes. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Overview.”

The following is a summary of the estimated fair value and related unrealized losses segregated by category and length of time that individual securities have been in a continuous unrealized loss position at:


March 31, 2014:	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Available-for-sale:	(in thousands)
Debt securities:
Corporate bonds and other securities	$	-	$	-	$	4,913	$	1,086	$	4,913	$	1,086
U.S. Government and government-sponsored
securities		968		32		-		-		968		32
U.S. Government-sponsored and guaranteed
mortgage-backed securities		5,671		87		1,229		16		6,900		103
Equity securities		2,950		50		-		-		2,950		50
Total temporarily impaired available-for-sale		9,589		169		6,142		1,102		15,731		1,271

Held-to-maturity:
U.S. Government and government-sponsored
securities		9,130		114		-		-		9,130		114
U.S. Government-sponsored and guaranteed
mortgage-backed securities		56,463		1,303		9,633		254		66,096		1,557
Total temporarily impaired held-to-maturity		65,593		1,417		9,633		254		75,226		1,671

Other-than-temporarily impaired debt
securities (1):
Non-agency mortgage-backed securities		16		-		3,416		324		3,432		324

Total temporarily-impaired and other-
than-temporarily impaired securities	$	75,198	$	1,586	$	19,191	$	1,680	$	94,389	$	3,266


June 30, 2013:	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
Available-for-sale:	(in thousands)
Debt securities:
Corporate bonds and other obligations	$	-	$	-	$	4,873	$	1,126	$	4,873	$	1,126
U.S. Government and government-sponsored
securities		961		39		-		-		961		39
U.S. Government-sponsored and guaranteed
mortgage-backed securities		3,004		77		1,449		12		4,453		89
Total temporarily impaired available-for-sale		3,965		116		6,322		1,138		10,287		1,254

Held-to-maturity:
U.S. Government and government-sponsored
securities		3,183		76		-		-		3,183		76
U.S. Government-sponsored and guaranteed
mortgage-backed securities		68,663		1,731		-		-		68,663		1,731
Total temporarily impaired held-to-maturity		71,846		1,807		-		-		71,846		1,807

Other-than-temporarily impaired debt
securities (1):
Non-agency mortgage-backed securities		2,525		190		1,958		285		4,483		475

Total temporarily-impaired and other-
than-temporarily impaired securities	$	78,336	$	2,113	$	8,280	$	1,423	$	86,616	$	3,536

(1) Includes other-than-temporary impaired available-for-sale debt securities in which a portion of the other-than-temporary impairment loss remains in accumulated other comprehensive income.

Management evaluates securities for other-than-temporary impairment (OTTI) at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.

At March 31, 2014 and June 30, 2013, there were 57 and 36 individual investment securities, respectively, with aggregate depreciation of 3.3% and 3.9%, respectively, from the Company’s amortized cost basis. Management has the intent and ability to hold these securities until cost recovery occurs and considers these declines to be temporary.

The unrealized losses on the Company’s investment in U.S. Government-sponsored agency bonds and U.S. government guaranteed and government-sponsored residential mortgage-backed securities were primarily caused by interest rate fluctuations. These investments are guaranteed or sponsored by the U.S. government or an agency thereof. Accordingly, it is expected that the securities would not be settled at a price less than the par value of the investment. Because the decline in market value is attributable to changes in interest rates and not to credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2014.

The Company’s unrealized losses on investments in corporate bonds and other securities relate to investments in companies within the financial services sector. As of March 31, 2014, the Company had five investments in corporate single-issuer trust preferred securities (TRUPs) with a total book value of $6.0 million and total fair value of $4.9 million, all of which were classified as available-for-sale. Single issuer TRUPs are not considered covered funds under the Volker rule. The single-issuer trust preferred investments are evaluated for other-than-temporary impairment by performing a present value of cash flows each quarter. None of the issuers have deferred interest payments or announced the intention to defer interest payments. The Company believes the decline in fair value is related to the spread over three-month LIBOR, on which the quarterly interest payments are based, as the spread over LIBOR being received is significantly lower than current market spreads. Management concluded the impairment of these investments was considered temporary and asserts that the Company does not have the intent to sell these investments and that it is more likely than not it will not have to sell the investments before recovery of their cost bases which may be at maturity.

At March 31, 2014, our auction-rate trust preferred securities (ARP) portfolio had a total book value of $10.0 million and total fair value of $9.9 million, all of which were classified as available-for-sale. Auction-rate trust preferred securities are a floating rate preferred stock, on which the dividend rate generally resets every 90 days based on an auction process to reflect the yield demand for the instruments by potential purchasers. At March 31, 2014, our investments in auction-rate trust preferred securities consisted of investments in three corporate issuers. These securities were originally purchased by the Company because they represented highly liquid, tax-preferred investments secured, in most cases, by preferred stock issued by high quality, investment grade companies (generally other financial institutions) (“collateral preferred shares”). The ARP shares, or certificates, purchased by the Company are Class A certificates, which, among other rights, entitle the holder to priority claim on dividends paid into the Trust holding the preferred shares. Management concluded the impairment of these investments was considered temporary and asserts that the Company does not have the intent to sell these investments and that it is more likely than not it will not have to sell the investments before recovery of their cost bases which may be at maturity.

For the nine months ended March 31, 2014, securities with other-than-temporary impairment losses recognized in earnings consisted of non-agency mortgage-backed securities. For these debt securities, the Company estimated the portion of loss attributable to credit loss using a discounted cash flow model. Significant inputs included the estimated cash flows of the underlying loans based on key assumptions, such as default rate, loss severity and prepayment rate. Assumptions can vary widely from security to security, and are influenced by such factors as loan interest rate, geographical location of the borrower, borrower characteristics and collateral type. The present value of the expected cash flows was compared to the Company’s amortized cost basis to determine the credit-related impairment loss. Based on the expected cash flows derived from the model, the Company expects to recover the remaining unrealized losses on these securities.

The following table represents a roll-forward of the amount of credit losses on debt securities for which a portion of other-than-temporary impairment was recognized in other comprehensive income (in thousands):


Balance as of June 30, 2012	$	15,271
Credit losses on securities for which other-than-temporary impairment
was not previously recorded		-
Additional credit losses on securities for which an other-than-temporary
impairment charge was previously recorded		462
Reductions for securities sold during the period		-

Balance as of June 30, 2013		15,733

Credit losses on securities for which other-than-temporary impairment
was not previously recorded		-
Additional credit losses on securities for which an other-than-temporary
impairment charge was previously recorded		7
Reductions for securities sold during the period		-

Balance as of March 31, 2014	$	15,740

NOTE 7 – Loans

The following table sets forth the composition of our loan portfolio at March 31, 2014 and June 30, 2013:


	March 31,			June 30,
	2014			2013
	(in thousands)

Real Estate:
Residential (1)	$	182,954		$	187,116
Commercial		43,551			43,423
Residential construction		2,989			2,775
Commercial		1,811			1,980
Consumer and other		624			707

Total loans		231,929			236,001

Unadvanced construction loans		(1,492	)		(1,745	)
		230,437			234,256
Net deferred loan costs		684			608
Allowance for loan losses		(2,613	)		(2,693	)

Loans, net	$	228,508		$	232,171

(1) Residential real estate loans include one-to four-family mortgage loans, second mortgage loans, and home equity lines of credit.

Credit Quality Information

The Company utilizes a nine grade internal loan rating system as follows:

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

Loans rated 6 are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 7 are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

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

Loans rated 9 are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted.

On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate, construction and commercial loans. Annually, the Company engages an independent third-party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process. Credit quality for residential real estate and consumer/other loans is determined by monitoring loan payment history and ongoing communications with the borrower.

The following table presents the Company’s loan classes by internally assigned grades at March 31, 2014 and June 30, 2013:


	Residential		Commercial		Residential				Consumer
March 31, 2014	Real Estate		Real Estate		Construction		Commercial		and other		Total
	(in thousands)
Grade:
Pass	$	179,654	$	32,318	$	2,092	$	1,388	$	624	$	216,076
Special Mention		320		3,401		-		370		-		4,091
Substandard		2,980		5,274		-		53		-		8,307
Doubtful		-		1,963		-		-		-		1,963
Loss		-		-		-		-		-		-
Total	$	182,954	$	42,956	$	2,092	$	1,811	$	624	$	230,437

	Residential		Commercial		Residential				Consumer
June 30, 2013	Real Estate		Real Estate		Construction		Commercial		and other		Total
	(in thousands)
Grade:
Pass	$	183,403	$	30,477	$	1,706	$	1,667	$	707	$	217,960
Special Mention		329		4,784		-		233		-		5,346
Substandard		2,968		5,598		-		80		-		8,646
Doubtful		416		1,888		-		-		-		2,304
Loss		-		-		-		-		-		-
Total	$	187,116	$	42,747	$	1,706	$	1,980	$	707	$	234,256

The following table represents modifications that were deemed to be troubled debt restructures for the nine months ended March 31, 2014. There were no modifications deemed to be troubled debt restructures for the nine months ended March 31, 2013.

Pre-Modifcation

Post-Modification

Outstanding

Number of

Recorded

Contracts

Investment

(Dollars in thousands)

Real Estate:

Commercial

369

410

The modifications on the commercial real estate loans provided additional funding to complete the infrastructure on a two-lot subdivision and provided additional funding to a borrower that had a prior modified loan. Management performs a discounted cash flow calculation to determine the amount of impaired reserve required on troubled debt restructures. Any reserve required is recorded through the provision for loan losses.

The following is a summary of troubled debt restructurings that have subsequently defaulted (defined as 30 or more days past due subsequent to restructuring) within one year of modification during the nine months ended March 31, 2014 and March 31, 2013. No TDRs defaulted within one year of modification during the three months ended March 31, 2014 and 2013, respectively.

Nine months ended

March 31, 2014

March 31, 2013

Number of

Recorded

Number of

Recorded

Contracts

Investment

Contracts

Investment

(Dollars in thousands)

Real Estate:

Residential

The default was the result of the borrower’s delinquent loan payments during the period. The Company evaluates the levels/trends in delinquencies and non-accruals as part of the qualitative factors within the allowance for loan loss framework.

At March 31, 2014, the Company had $139,000 in additional funds committed to be advanced in connection with TDRs.

NOTE 8 – Non-performing Assets, Past Due and Impaired Loans

The table below sets forth the amounts and categories of non-performing assets at the dates indicated:


	At March 31,			At June 30,
	2014			2013
	(Dollars in thousands)
Non-accrual loans:
Real Estate:
Residential	$	2,973		$	2,865
Commercial		3,133			3,365
Total non-accrual loans		6,106			6,230

Accruing loans past due 90 days or more:		-			112

Total non-performing loans		6,106			6,342

Other real estate owned		1,677			1,665
Total non-performing assets	$	7,783		$	8,007

Total non-performing loans to total loans		2.65	%		2.71	%
Total non-performing assets to total assets		1.70	%		1.76	%

The balance in non-performing loans is a direct correlation to the deterioration experienced in the real estate climate over the past several years. Management is focused on working with borrowers and guarantors to resolve these trends by restructuring or liquidating assets when prudent. Many of our commercial relationships are secured by development loans, in particular condominiums which have experienced a significant reduction in demand. The Bank reviews the strength of the guarantors; requires face to face discussions and offers restructuring suggestions that provide the borrowers with short term relief and exit strategies. Overall, we expect to see improvement as solutions are identified and executed. The Bank obtains a current appraisal on all real estate secured loans that are 180 days or more past due if the appraisal on file is older than one year. If the determination is made that there is the potential for collateral shortfall, an allocated reserve will be assigned to the loan for the expected deficiency. It is the policy of the Bank to charge off or write down loans or other assets when, in the opinion of the Credit Committee and Loan Review, the ultimate amount recoverable is less than the carrying value, or the collection of the amount is expected to be unduly prolonged. The level of non-performing assets is expected to fluctuate in response to changing economic and market conditions, and the relative sizes of the respective loan portfolios, along with management’s degree of success in resolving problem assets. Management takes a proactive approach with respect to the identification and resolution of problem loans.

The following table sets forth information regarding past due loans at March 31, 2014 and June 30, 2013:


					90 days
	30–59 Days		60–89 Days		or greater		Total
At March 31, 2014	Past Due		Past Due		Past Due		Past Due
	(in thousands)
Real Estate:
Residential	$	1,794	$	1,007	$	988	$	3,789
Commercial		477		139		2,363		2,979
Total	$	2,271	$	1,146	$	3,351	$	6,768

At June 30, 2013

Real Estate:
Residential	$	447	$	195	$	1,844	$	2,486
Commercial		-		-		2,876		2,876
Commercial		9		-		-		9
Consumer and other		4		-		-		4
Total	$	460	$	195	$	4,720	$	5,375

The following is a summary of information pertaining to impaired loans at March 31, 2014 and June 30, 2013:


	At March 31, 2014						At June 30, 2013
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
Impaired loans without a valuation allowance:	(in thousands)
Real Estate:
Residential	$	1,267	$	1,395			$	1,497	$	1,630
Commercial		1,652		1,733				3,297		3,800
Consumer and other		-		-				17		17
Total impaired with no valuation allowance		2,919		3,128				4,811		5,447

Impaired loans with a valuation allowance:
Real Estate:
Residential		1,818		1,877	$	90		2,515		2,663	$	156
Commercial		1,718		1,978		111		180		180		2
Total impaired with a valuation allowance		3,536		3,855		201		2,695		2,843		158

Total Impaired Loans:
Real Estate:
Residential		3,085		3,272		90		4,012		4,293		156
Commercial		3,370		3,711		111		3,477		3,980		2
Consumer and other		-		-		-		17		17		-
Total impaired loans	$	6,455	$	6,983	$	201	$	7,506	$	8,290	$	158

The following is a summary of additional information pertaining to impaired loans:

	Three months ended						Three months ended
	March 31, 2014						March 31, 2013
	Average		Interest		Interest Income		Average		Interest		Interest Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		on Cash Basis		Investment		Recognized		on Cash Basis
	(in thousands)
Real Estate:
Residential	$	3,274	$	15	$	4	$	4,576	$	29	$	16
Commercial		3,278		2		-		4,661		32		5
Residential Construction		-		-		-		214		-		-
Consumer and other		-		-		-		21		-		-
Total impaired loans	$	6,552	$	17	$	4	$	9,472	$	61	$	21

	Nine months ended						Nine months ended
	March 31, 2014						March 31, 2013
	Average		Interest		Interest Income		Average		Interest		Interest Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		on Cash Basis		Investment		Recognized		on Cash Basis
	(in thousands)
Real Estate:
Residential	$	3,559	$	48	$	13	$	4,701	$	77	$	36
Commercial		3,385		40		33		5,983		123		22
Residential Construction		-		-		-		320		-		-
Consumer and other		8		-		-		23		1		-
Total impaired loans	$	6,952	$	88	$	46	$	11,027	$	201	$	58

NOTE 9 – Allowance for Loan Losses

An analysis of the allowance for loan losses for the three and nine months ended March 31, 2014 and 2013 is as follows:


Three months ended
March 31, 2014	Residential			Commercial			Residential						Consumer
	Real Estate			Real Estate			Construction			Commercial			and Other			Unallocated		Total
Allowance for loan losses:	(in thousands)
Beginning balance	$	1,247		$	1,167		$	14		$	14		$	25		$	142	$	2,609
Charge-offs		(22	)		-			-			-			(14	)		-		(36	)
Recoveries		10			-			1			3			11			-		25
Provision (credit)		(45	)		2			4			(1	)		1			54		15
Ending Balance	$	1,190		$	1,169		$	19		$	16		$	23		$	196	$	2,613

Three months ended
March 31, 2013	Residential			Commercial			Residential						Consumer
	Real Estate			Real Estate			Construction			Commercial			and Other			Unallocated		Total
Allowance for loan losses:	(in thousands)
Beginning balance	$	1,402		$	1,320		$	16		$	21		$	37		$	139	$	2,935
Charge-offs		(65	)		(148	)		(9	)		-			(12	)		-		(234	)
Recoveries		21			65			2			2			4			-		94
Provision (credit)		(75	)		170			17			-			-			23		135
Ending Balance	$	1,283		$	1,407		$	26		$	23		$	29		$	162	$	2,930

Nine months ended
March 31, 2014	Residential			Commercial			Residential						Consumer
	Real Estate			Real Estate			Construction			Commercial			and other			Unallocated		Total
Allowance for loan losses:	(in thousands)
Beginning balance	$	1,201		$	1,315		$	22		$	17		$	36		$	102	$	2,693
Charge-offs		(163	)		-			-			-			(38	)		-		(201	)
Recoveries		25			-			6			11			24			-		66
Provision (credit)		127			(146	)		(9	)		(12	)		1			94		55
Ending Balance	$	1,190		$	1,169		$	19		$	16		$	23		$	196	$	2,613

Nine months ended
March 31, 2013	Residential			Commercial			Residential						Consumer
	Real Estate			Real Estate			Construction			Commercial			and other			Unallocated		Total
Allowance for loan losses:	(in thousands)
Beginning balance	$	1,485		$	1,347		$	20		$	17		$	37		$	7	$	2,913
Charge-offs		(238	)		(564	)		(9	)		-			(45	)		-		(856	)
Recoveries		71			84			2			3			13			-		173
Provision (credit)		(35	)		540			13			3			24			155		700
Ending Balance	$	1,283		$	1,407		$	26		$	23		$	29		$	162	$	2,930

Further information pertaining to the allowance for loan losses at March 31, 2014 and June 30, 2013 is as follows:


At March 31, 2014	Residential		Commercial		Residential				Consumer
	Real Estate		Real Estate		Construction		Commercial		and Other		Unallocated		Total
(in thousands)
Ending balance: Amount of allowance for loan losses for impaired loans	$	90	$	111	$	-	$	-	$	-	$	-	$	201

Ending balance: Amount of allowance for loan
losses for non-impaired loans	$	1,100	$	1,058	$	19	$	16	$	23	$	196	$	2,412

Ending balance: Impaired loans	$	3,085	$	3,370	$	-	$	-	$	-	$	-	$	6,455

Ending balance: Non-impaired loans	$	179,869	$	39,586	$	2,092	$	1,811	$	624	$	-	$	223,982

At June 30, 2013	Residential		Commercial		Residential				Consumer
	Real Estate		Real Estate		Construction		Commercial		and Other		Unallocated		Total
(in thousands)
Ending balance: Amount of allowance for loan losses for impaired loans	$	156	$	2	$	-	$	-	$	-	$	-	$	158

Ending balance: Amount of allowance for loan losses for non-impaired loans	$	1,045	$	1,313	$	22	$	17	$	36	$	102	$	2,535

Ending balance: Impaired loans	$	4,012	$	3,477	$	-	$	-	$	17	$	-	$	7,506

Ending balance: Non-impaired loans	$	183,104	$	39,270	$	1,706	$	1,980	$	690	$	-	$	226,750

NOTE 10 – Accumulated Other Comprehensive Income (Loss)

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities are reported as a separate component of the equity section of the consolidated balance sheets, such items are components of accumulated other comprehensive income (loss).

The components of accumulated other comprehensive loss and related tax effects are as follows:

	March 31,			June 30,
	2014			2013
	(in thousands)
Net unrealized loss on securities available-for-sale	$	(763	)	$	(795	)
Tax effect		261			272
Accumulated other comprehensive loss	$	(502	)	$	(523	)

NOTE 11 – FAIR VALUE MEASUREMENTS

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

Level 1 – Valuations for assets traded in active exchange markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

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

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

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

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s assets carried at fair value for March 31, 2014.

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

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

The Company’s impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based upon appraisals of similar properties obtained from a third party and adjusted by management as needed.

The Company did not have any transfers of assets between Levels 1 and 2 of the fair value hierarchy during the nine months ended March 31, 2014.

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


			Quoted Prices in			Significant		Significant
			Active Markets for			Other Observable		Unobservable
At March 31, 2014	Total Fair		Identical Assets			Inputs		Inputs
(in thousands)	Value		Level 1			Level 2		Level 3
Securities available-for-sale:
U.S. government and government-sponsored securities	$	968	$	-		$	968	$	-
Corporate bonds and other securities		4,913		-			4,913		-
U.S. Government-sponsored and guaranteed mortgage-backed securities		26,149		-			26,149		-
Non-agency mortgage-backed securities		6,857		-			6,857		-
Equity securities		9,950		-			-		9,950
Total	$	48,837	$	-		$	38,887	$	9,950


			Quoted Prices in			Significant		Significant
			Active Markets for			Other Observable		Unobservable
At June 30, 2013	Total Fair		Identical Assets			Inputs		Inputs
(in thousands)	Value		Level 1			Level 2		Level 3
Securities available-for-sale:
U.S. government and government-sponsored securities	$	961	$	-		$	961	$	-
Corporate bonds and other securities		4,873		-			4,873		-
U.S. Government-sponsored and guaranteed mortgage-backed securities		15,065		-			15,065		-
Non-agency mortgage-backed securities		7,551		-			7,551		-
Equity securities		10,000		-			-		10,000
Total	$	38,450	$	-		$	28,450	$	10,000

The table below represents the changes in level 3 assets measured at fair value for the nine months ended March 31, 2014.

(in thousands)
Beginning balance, June 30, 2013			$	10,000
Unrealized losses included in other comprehensive income				(50	)
Ending balance, March 31, 2014			$	9,950

The following summarizes assets measured at fair value on a non-recurring basis and the adjustments to the carrying value at and for the three and nine months ended March 31, 2014 and 2013:


			Quoted Prices in						Total Losses			Total Losses
			Active Markets for		Significant Other		Significant		for the three			for the nine
At March 31, 2014	Total Fair		Identical Assets		Observable Inputs		Unobservable Inputs		months ended			months ended
	Value		Level 1		Level 2		Level 3		March 31, 2014			March 31, 2014
	(in thousands)
Impaired loans	$	121	$	-	$	-	$	121	$	(31	)	$	(31	)
Other real estate owned		869		-		-		869		(132	)		(228	)
	$	990	$	-	$	-	$	990	$	(163	)	$	(259	)


			Quoted Prices in						Total Losses			Total Losses
			Active Markets for		Significant Other		Significant		for the three			for the nine
At March 31, 2013	Total Fair		Identical Assets		Observable Inputs		Unobservable Inputs		months ended			months ended
	Value		Level 1		Level 2		Level 3		March 31, 2013			March 31, 2013
	(in thousands)

Other real estate owned	$	290	$	-	$	-	$	290	$	-		$	(48	)

The amount of loans represents the carrying value of impaired loans net of related write-downs and valuation allowances for which adjustments are based on the estimated fair value of the underlying collateral. The other real estate owned amount represents the carrying value for which write-downs are based on the estimated fair value of the property.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because a market may not readily exist for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

There were no liabilities measured at fair value on a recurring or non-recurring basis at March 31, 2014 and 2013 or June 30, 2013.

The following methods and assumptions were used by the Company in estimating fair values of its financial instruments:

Cash and Cash Equivalents. The carrying amounts of cash and cash equivalents approximate fair values based on the short-term nature of the assets.

Investment Securities and FHLBB Stock. The fair value of securities held-to-maturity and available-for-sale is estimated based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. Ownership of Federal Home Loan Bank of Boston (“FHLBB”) stock is restricted to member banks; therefore, the stock is not traded. The estimated fair value of FHLBB stock is equal to its carrying value, which represents the price at which the FHLBB is obligated to redeem its stock.

Loans. For valuation purposes, the loan portfolio was segregated into its significant categories, which are residential, commercial real estate, residential construction, commercial and consumer and other loans. These categories were further segregated, where appropriate, into components based on significant financial characteristics such as type of interest rate (fixed or adjustable). Fair values were estimated for each component using assumptions developed by management and a valuation model provided by a third party specialist.

The fair values of residential, commercial real estate, residential construction, commercial and consumer and other loans were estimated by discounting the anticipated cash flows from the respective portfolios. Estimates of the timing and amount of these cash flows considered factors such as future loan prepayments. The discount rates reflected current market rates for loans with similar terms to borrowers of similar credit quality. The fair value of home equity lines of credit was based on the outstanding loan balances. Fair values for non-performing loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Loans held-for-sale: Loans held-for-sale are accounted for at the lower of cost or market and the fair value of loans held for sale based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted as required for changes in loan characteristics.

Deposits and Mortgagors’ Escrow. The fair value of deposits with no stated maturity such as demand deposits, NOW, regular savings, and money market deposit accounts and mortgagors’ escrow accounts, is equal to the amount payable on demand. The fair value estimates do not include the benefit that results from the generally lower cost of funding provided by the deposit liabilities compared to the cost of borrowing funds in the market. The fair value estimate of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits having similar remaining maturities.

Federal Home Loan Bank Advances. The fair values of the Company’s Federal Home Loan Bank advances are estimated using discounted cash flow analyses based on the current incremental borrowing rates in the market for similar types of borrowing arrangements.

Securities Sold Under Agreements to Repurchase. The Company enters into overnight repurchase agreements with its customers. Since these agreements are short-term instruments, the fair value of these agreements approximates their recorded balance. The Company also secures term repurchase agreements through other financial institutions. The fair value of these agreements are determined by discounting the anticipated future cash payments using rates currently available to the Bank for debt with similar terms and remaining maturities.

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

Off-Balance Sheet Instruments. The fair value of off-balance-sheet mortgage lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. In the case of the commitments discussed in Note 14, the fair value equals the carrying amounts which are not significant.

Summary of Fair Values of Financial Instruments. The estimated fair values, and related carrying amounts, of the Company’s financial instruments are as follows. Certain financial instruments and all nonfinancial instruments are exempt from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein do not represent the underlying fair value of the Company.

The following table presents the carrying amount and estimated fair values of the Company’s financial instruments, all of which are held or issued for purposes other than trading, as of March 31, 2014 and June 30, 2013:


	March 31, 2014
	Carrying		Fair Value Hierarchy						Fair
	Amount		Level 1		Level 2		Level 3		Value
	(in thousands)
Financial assets:
Cash and cash equivalents	$	8,354	$	8,354	$	-	$	-	$	8,354
Securities available-for-sale		48,837		-		38,887		9,950		48,837
Securities held-to-maturity		136,742		-		-		137,094		137,094
Federal Home Loan Bank stock		6,953		-		-		6,953		6,953
Loans held-for-sale		144		-		-		144		144
Loans, net		228,508		-		-		230,139		230,139
Accrued interest receivable		1,079		-		-		1,079		1,079

Financial liabilities:
Deposits		341,681		-		-		343,700		343,700
Mortgagors’ escrow accounts		1,229		-		-		1,229		1,229
Federal Home Loan Bank advances		53,515		-		55,249		-		55,249
Securities sold under agreements to repurchase		7,942		-		7,942		-		7,942
Accrued interest payable		132		-		-		132		132

	June 30, 2013
	Carrying		Fair Value Hierarchy						Fair
	Amount		Level 1		Level 2		Level 3		Value
	(in thousands)
Financial assets:
Cash and cash equivalents	$	12,793	$	12,793	$	-	$	-	$	12,793
Securities available-for-sale		38,450		-		28,450		10,000		38,450
Securities held-to-maturity		134,989		-		135,418		-		135,418
Federal Home Loan Bank stock		6,953		-		-		6,953		6,953
Loans held-for-sale		1,037		-		-		1,006		1,006
Loans, net		232,171		-		-		234,923		234,923
Accrued interest receivable		1,013		-		-		1,013		1,013

Financial liabilities:
Deposits		341,285		-		-		343,492		343,492
Mortgagors’ escrow accounts		2,120		-		-		2,120		2,120
Federal Home Loan Bank advances		53,500		-		55,260		-		55,260
Securities sold under agreements to repurchase		4,849		-		4,849		-		4,849
Accrued interest payable		143		-		-		143		143

NOTE 12 – Stock-Based Incentive Plan

At the annual meeting of stockholders on October 21, 2005, stockholders of the Company approved the PSB Holdings, Inc. 2005 Stock-Based Incentive Plan (the “Incentive Plan”). Under the Incentive Plan, the Company may grant up to 340,213 stock options and 136,085 shares of restricted stock to its employees, officers and directors for an aggregate amount of up to 476,298 shares of the Company’s common stock for issuance upon the grant or exercise of awards. Both incentive stock options and non-statutory stock options may be granted under the Incentive Plan.

At March 31, 2014 and June 30, 2013, 117,292 options and 15,717 restricted shares were available to be issued under the Incentive Plan.

Both stock option and restricted stock awards granted to date vest at 20% per year beginning on the first anniversary of the date of the grant.

Stock options and restricted stock awards are considered common stock equivalents for the purpose of computing earnings per share on a diluted basis.

The Company has recorded share-based compensation expense related to outstanding stock option and restricted stock awards based upon the fair value at the date of grant over the vesting period of such awards on a straight-line basis. The fair value of each restricted stock allocation, based on the market price at the date of grant, is recorded in Unearned stock awards. Compensation expense related to unearned restricted shares is amortized to compensation and benefits expense over the vesting period of the restricted stock awards. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing method which includes several assumptions such as volatility, expected dividends, expected term and risk-free rate for each stock option award. There were no unvested stock awards/options outstanding at or during the three or nine months ended March 31, 2014 and 2013, respectively.

NOTE 13 – Dividends

The Company did not declare a dividend during the nine months ended March 31, 2014 and 2013.

NOTE 14 – Commitments to Extend Credit

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

The contractual amounts of outstanding commitments were as follows:

	March 31,		June 30,
	2014		2013
	(in thousands)
Commitments to extend credit:
Loan commitments	$	2,339	$	3,537
Unadvanced construction loans		1,492		1,745
Unadvanced lines of credit		11,681		11,912
Standby letters of credit		488		746
Outstanding commitments	$	16,000	$	17,940

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

The following analysis discusses changes in the financial condition at March 31, 2014 and June 30, 2013 and results of operations for the three and nine months ended March 31, 2014 and 2013, and should be read in conjunction with the Company’s Consolidated Financial Statements and the notes thereto, appearing in Part I, Item 1 of this quarterly report. These financial statements should be read in conjunction with the 2013 Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on September 25, 2013.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, 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 and its subsidiary include, but are not limited to, changes in: interest rates, general economic conditions, legislation and regulations, effect of shutdown of the federal government, real estate values, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Further information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s filings with the Securities and Exchange Commission.

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

Overview

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

Net income amounted to $187,000 or $0.03 per basic and diluted share for the quarter ended March 31, 2014 compared to net income of $260,000 or $0.04 per basic and diluted share for the quarter ended March 31, 2013. During the quarter ended March 31, 2014, the Company did not record any non-cash OTTI charges. During the quarter ended March 31, 2013, the Company recorded non-cash OTTI charges of $37,000 on non-agency mortgage-backed securities. Non-interest income decreased $12,000 during the quarter ended March 31, 2014 compared to the quarter ended March 31, 2013. Net interest income decreased $50,000 during the quarter ended March 31, 2014 compared to the quarter ended March 31, 2013. The net interest margin decreased from 2.45% for the quarter ended March 31, 2013 to 2.38% for the quarter ended March 31, 2014. In addition, non-interest expense increased $192,000 during the quarter ended March 31, 2014 compared to the quarter ended March 31, 2013. The provision for loan losses decreased $120,000 during the quarter ended March 31, 2014 as compared to the quarter ended March 31, 2013.

Net income amounted to $670,000 or $0.10 per basic and diluted share for the nine months ended March 31, 2014 compared to net income of $944,000 or $0.15 per basic and diluted share for the nine months ended March 31, 2013. During the nine months ended March 31, 2014 and 2013, the Company recorded non-cash OTTI charges of $7,000 and $438,000, respectively, on non-agency mortgage-backed securities. Non-interest income decreased $85,000 during the nine months ended March 31, 2014 compared to the nine months ended March 31, 2013, due primarily to a $176,000 non-taxable death benefit from bank-owned life insurance received during the period and a $206,000 decrease in gains on securities available-for-sale offset by the aforementioned decline in OTTI charges. Net interest income decreased $590,000 during the nine months ended March 31, 2014 compared to the nine months ended March 31, 2013. The net interest margin decreased from 2.53% for the nine months ended March 31, 2013 to 2.32% for the nine months ended March 31, 2014. In addition, non-interest expense increased $350,000 during the nine months ended March 31, 2014 compared to the nine months ended March 31, 2013. The provision for loan losses decreased $645,000 during the nine months ended March 31, 2014 as compared to the nine months ended March 31, 2013.

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

Assets

Total assets increased to $457.7 million at March 31, 2014 from $454.4 million at June 30, 2013. Cash and cash equivalents decreased $4.4 million and totaled $8.4 million or 1.8% of total assets at March 31, 2014. Investments in available-for-sale securities increased $10.4 million and totaled $48.8 million or 10.7% of total assets at March 31, 2014. Investments in held-to-maturity securities increased $1.8 million and totaled $136.7 million or 29.9% of total assets at March 31, 2014. Net loans decreased $3.7 million and totaled $228.5 million or 49.9% of total assets at March 31, 2014.

Allowance for Loan Losses

The table below indicates the relationships between the allowance for loan losses, total loans outstanding and non-performing loans at March 31, 2014 and June 30, 2013. For additional information, see “Comparison of Operating Results for the three and nine months ended March 31, 2014 and 2013 – Provision for loan losses.”

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

Allowance for loan losses	$	2,613		$	2,693
Gross loans outstanding		231,121			234,864
Non-performing loans		6,106			6,342
Allowance/gross loans outstanding		1.13	%		1.15	%
Allowance/non-performing loans		42.8	%		42.5	%

Liabilities

Total liabilities increased to $406.9 million at March 31, 2014 from $404.3 million at June 30, 2013. Total deposits increased to $341.7 million at March 31, 2014 from $341.3 million at June 30, 2013, an increase of $396,000 or 0.12%. Federal Home Loan Bank advances totaled $53.5 million at March 31, 2014 and June 30, 2013. Securities sold under agreements to repurchase increased to $7.9 million at March 31, 2014 from $4.8 million at June 30, 2013, an increase of $3.1 million or 63.8%.

Stockholders’ Equity

Stockholders’ equity increased to $50.8 million at March 31, 2014 from $50.1 million at June 30, 2013, primarily due to net income of $670,000 for the nine months ended March 31, 2014.

Comparison of Operating Results for the Three and Nine months ended March 31, 2014 and 2013

Interest and Dividend Income

Interest and dividend income amounted to $3.5 million for the quarter ended March 31, 2014 compared to $3.7 million for the quarter ended March 31, 2013, a decrease of $213,000 or 5.8%. This was primarily due to a decrease in yield on earning assets of 25 basis points to 3.29% for the quarter ended March 31, 2014 compared to 3.54% for the quarter ended March 31, 2013. Average investment securities increased $21.0 million to $191.1 million for the quarter ended March 31, 2014 compared to $170.1 million for the quarter ended March 31, 2013. The yield on investment securities decreased two basis points to 2.12% for the quarter ended March 31, 2014 compared to 2.14% for the quarter ended March 31, 2013. Average loans decreased by $12.1 million to $231.6 million for the quarter ended March 31, 2014 compared to $243.7 million for the quarter ended March 31, 2013. The yield on loans decreased 31 basis points to 4.33% for the quarter ended March 31, 2014 compared to 4.64% for the quarter ended March 31, 2013.

Interest and dividend income amounted to $10.4 million for the nine months ended March 31, 2014 compared to $11.7 million for the nine months ended March 31, 2013, a decrease of $1.3 million or 10.7%. This was primarily due to a decrease in yield on earning assets of 42 basis points to 3.27% for the nine months ended March 31, 2014 compared to 3.69% for the nine months ended March 31, 2013. Average investment securities increased $20.5 million to $187.2 million for the nine months ended March 31, 2014 compared to $166.7 million for the nine months ended March 31, 2013. The yield on investment securities decreased 34 basis points to 1.95% for the nine months ended March 31, 2014 compared to 2.29% for the nine months ended March 31, 2013. Average loans decreased by $14.7 million to $233.0 million for the nine months ended March 31, 2014 compared to $247.7 million for the nine months ended March 31, 2013. The yield on loans decreased 34 basis points to 4.39% for the nine months ended March 31, 2014 compared to 4.73% for the nine months ended March 31, 2013.

Interest Expense

Interest expense amounted to $967,000 for the quarter ended March 31, 2014 compared to $1.1 million for the quarter ended March 31, 2013, a decrease of $163,000 or 14.4%. The decrease was primarily due to changes in rates of interest-bearing liabilities. The cost of average interest-bearing liabilities decreased 18 basis points to 1.10% for the quarter ended March 31, 2014 from 1.28% for the quarter ended March 31, 2013. The average rate on interest-bearing deposits decreased by 21 basis points to 0.81% for the quarter ended March 31, 2014 compared to 1.02% for the quarter ended March 31, 2013. The average rate on borrowed money decreased by six basis points to 2.41% for the quarter ended March 31, 2014 compared to 2.47% for the quarter ended March 31, 2013.

Interest expense amounted to $3.0 million for the nine months ended March 31, 2014 compared to $3.7 million for the nine months ended March 31, 2013, a decrease of $660,000 or 17.9%. The decrease was primarily due to changes in rates of interest-bearing liabilities. The cost of average interest-bearing liabilities decreased 24 basis points to 1.14% for the nine months ended March 31, 2014 from 1.38% for the nine months ended March 31, 2013. The average rate on interest-bearing deposits decreased by 22 basis points to 0.85% for the nine months ended March 31, 2014 compared to 1.07% for the nine months ended March 31, 2013. The average rate on borrowed money decreased by 40 basis points to 2.49% for the nine months ended March 31, 2014 compared to 2.89% for the nine months ended March 31, 2013.

Net Interest and Dividend Income

Net interest and dividend income amounted to $2.5 million for the quarter ended March 31, 2014 compared to $2.6 million for the quarter ended March 31, 2013, a decrease of $50,000 or 2.0%. Net interest rate spread decreased by 7 basis points to 2.19% for the quarter ended March 31, 2014 from 2.26% for the quarter ended March 31, 2013. Net interest margin decreased seven basis points to 2.38% from 2.45% when comparing the quarters ended March 31, 2014 and 2013, respectively. Net interest-earning assets increased $6.9 million to $71.4 million for the quarter ended March 31, 2014 compared to $64.5 million for the quarter ended March 31, 2013.

Net interest and dividend income amounted to $7.4 million for the nine months ended March 31, 2014 compared to $8.0 million for the nine months ended March 31, 2013, a decrease of $590,000 or 7.4%. Net interest rate spread decreased by 18 basis points to 2.13% for the nine months ended March 31, 2014 from 2.31% for the nine months ended March 31, 2013. Net interest margin decreased 21 basis points to 2.32% from 2.53% when comparing the nine months ended March 31, 2014 and 2013, respectively. Net interest-earning assets increased $5.9 million to $70.8 million for the nine months ended March 31, 2014 compared to $64.9 million for the nine months ended March 31, 2013.

Due to the large portion of fixed rate loans and securities in the Company’s asset portfolio, interest rate risk is a concern and the Company continues to monitor and adjust the asset and liability mix as much as possible to take advantage of the benefits and reduce the risks or potential negative effects of a rising rate environment. Management attempts to mitigate the interest rate risk through balance sheet composition. See “Market Risk, Liquidity and Capital Resources – Market Risk.”

Provision for Loan Losses

The provision for loan losses amounted to $15,000 for the quarter ended March 31, 2014 compared to $135,000 for the quarter ended March 31, 2013, a decrease of $120,000 or 88.9%. This was primarily due to a reduction in non-performing loans and an improvement in delinquencies and charge-offs Past due (thirty or more days) and nonaccrual loans totaled $8.1 million at March 31, 2014 compared to $9.1 million at March 31, 2013. Net charge-offs were $11,000 for the quarter ended March 31, 2014 compared to net charge-offs of $140,000 for the quarter ended March 31, 2013. The ratio of the allowance to gross loans outstanding was 1.13% as of March 31, 2014 and 1.15% as of June 30, 2013.

The provision for loan losses amounted to $55,000 for the nine months ended March 31, 2014 compared to $700,000 for the nine months ended March 31, 2013, a decrease of $645,000 or 92.1%. This was primarily due to a reduction in non-performing loans and an improvement in delinquencies and charge-offs. Net charge-offs were $135,000 for the nine months ended March 31, 2014 compared to net charge-offs of $683,000 for the nine months ended March 31, 2013.

For more information, see “Note 7 – Loans” of the Notes to the Consolidated Financial Statements.

Non-interest Income

Non-interest income totaled $571,000 for the quarter ended March 31, 2014 compared to $583,000 for the quarter ended March 31, 2013, a decrease of $12,000 or 2.1%. This was primarily due to a decrease in mortgage banking activities of $41,000 to $18,000 for the quarter ended March 31, 2014 compared to $59,000 for the quarter ended March 31, 2013, partially offset by a decrease in other-than-temporary impairment charges on available-for-sale securities of $37,000. The impairment charges for the three months ended March 31, 2013 were the result of credit losses on non-agency mortgage-backed securities. There were no gains or losses on sales of available-for-sale securities for the quarter ended March 31, 2014 and March 31, 2013.

Non-interest income totaled $1.8 million for the nine months ended March 31, 2014 compared to $1.9 million for the nine months ended March 31, 2013, a decrease of $85,000 or 4.5%. This was primarily due to a decrease in income from bank-owned life insurance of $191,000. This decrease included a $176,000 non-taxable death benefit realized during the nine months ended March 31, 2013. There were no gains or losses on sales of available-for-sale securities for the nine months ended March 31, 2014 compared to a net gain of $206,000 for the nine months ended March 31, 2013. This was partially offset by a decrease in other-than-temporary impairment charges on available-for-sale securities of $431,000 to $7,000 for the nine months ended March 31, 2014 compared to $438,000 for the nine months ended March 31, 2013. The impairment charges for the nine months ended March 31, 2014 and March 31, 2013 were the result of credit losses on non-agency mortgage-backed securities. Mortgage banking activities income decreased $136,000 to $57,000 for the nine months ended March 31, 2014 compared to $193,000 for the nine months ended March 31, 2013.

Non-interest Expense

Non-interest expense increased $192,000 to $2.9 million for the quarter ended March 31, 2014 compared to $2.7 million for the quarter ended March 31, 2013. Compensation and benefits expense increased $30,000 or 2.1%. Occupancy and equipment expense decreased $25,000 or 7.5%. Data processing expense increased by $65,000 or 45.8% and write-down of other real estate owned increased by $132,000.

Non-interest expense increased $350,000 to $8.4 million for the nine months ended March 31, 2014 compared to $8.1 million for the nine months ended March 31, 2013. Compensation and benefits expense increased $73,000 or 1.7%. Occupancy and equipment expense decreased $78,000 or 8.0%. Data processing expense increased by $188,000 or 44.5% and write-down of other real estate owned increased by $180,000.

Provision for Income Taxes

Income tax expense amounted to $7,000 for the quarter ended March 31, 2014 compared to $68,000 for the quarter ended March 31, 2013. The effective tax rate was 3.6% for the quarter ended March 31, 2014 and 20.7% for the quarter ended March 31, 2013. The effective tax rates differed from the statutory tax rate of 34% primarily due to the dividends-received deduction applicable to certain securities in our investment portfolio, tax-exempt municipal income and non-taxable bank-owned life insurance income.

Income tax expense amounted to $69,000 for the nine months ended March 31, 2014 compared to $175,000 for the nine months ended March 31, 2013. The effective tax rate was 9.3% for the nine months ended March 31, 2014 and 15.6% for the nine months ended March 31, 2013. The effective tax rates differed from the statutory tax rate of 34% primarily due to the dividends-received deduction applicable to certain securities in our investment portfolio, tax-exempt municipal income and non-taxable bank-owned life insurance income.

Average Balances and Yields

The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense. Yields and costs are annualized.

	For the Three Months Ended March 31,
	2014							2013
	(Dollars in thousands)

	Average		Interest		Yield/			Average		Interest		Yield/
Interest-earning assets:	Balance		Income/Expense		Cost			Balance		Income/Expense		Cost
Investment securities	$	191,149	$	997		2.12	%	$	170,094	$	896		2.14	%
Loans		231,631		2,475		4.33	%		243,705		2,786		4.64	%
Other earning assets		4,894		2		0.17	%		9,184		5		0.22	%
Total interest-earning assets		427,674		3,474		3.29	%		422,983		3,687		3.54	%
Non-interest-earning assets		30,691							30,126
Total assets	$	458,365						$	453,109

Interest-bearing liabilities:
NOW accounts	$	88,283		108		0.50	%	$	92,709		118		0.52	%
Savings accounts		61,287		22		0.15	%		56,950		27		0.19	%
Money market accounts		16,317		15		0.37	%		13,713		13		0.38	%
Time deposits		125,325		436		1.41	%		131,321		583		1.80	%
Borrowed money		65,084		386		2.41	%		63,767		389		2.47	%
Total interest-bearing liabilities		356,296		967		1.10	%		358,460		1,130		1.28	%
Non-interest-bearing demand deposits		47,802							40,035
Other non-interest-bearing liabilities		3,620							4,093
Capital accounts		50,647							50,521
Total liabilities and capital accounts	$	458,365						$	453,109

Net interest income			$	2,507						$	2,557
Interest rate spread						2.19	%						2.26	%
Net interest-earning assets	$	71,378						$	64,523
Net interest margin						2.38	%						2.45	%
Average earning assets to average interest-bearing liabilities						120.03	%						118.00	%

	For the Nine Months Ended March 31,
	2014							2013
	(Dollars in thousands)

	Average		Interest/		Yield/			Average		Interest/		Yield/
Interest-earning assets:	Balance		Dividends		Cost			Balance		Dividends		Cost
Investment securities	$	187,198	$	2,745		1.95	%	$	166,686	$	2,867		2.29	%
Loans		232,987		7,670		4.39	%		247,705		8,795		4.73	%
Other earning assets		4,718		7		0.20	%		6,620		10		0.20	%
Total interest-earning assets		424,903		10,422		3.27	%		421,011		11,672		3.69	%
Non-interest-earning assets		29,132							29,454
Total assets	$	454,035						$	450,465

Interest-bearing liabilities:
NOW accounts	$	89,611		332		0.49	%	$	92,868		396		0.57	%
Savings accounts		59,965		66		0.15	%		55,378		80		0.19	%
Money market accounts		15,631		44		0.37	%		14,286		43		0.40	%
Time deposits		126,158		1,417		1.50	%		132,427		1,845		1.86	%
Borrowed money		62,741		1,172		2.49	%		61,175		1,327		2.89	%
Total interest-bearing liabilities		354,106		3,031		1.14	%		356,134		3,691		1.38	%
Non-interest-bearing demand deposits		47,024							42,054
Other non-interest-bearing liabilities		2,458							2,506
Capital accounts		50,447							49,771
Total liabilities and capital accounts	$	454,035						$	450,465

Net interest income			$	7,391						$	7,981
Interest rate spread						2.13	%						2.31	%
Net interest-earning assets	$	70,797						$	64,877
Net interest margin						2.32	%						2.53	%
Average earning assets to average interest-bearing liabilities						119.99	%						118.22	%

The following tables set forth the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of these tables, changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionately based on the changes due to rate and the changes due to volume.

	For the Three Months Ended March 31, 2014
	Compared to the Three Months Ended March 31, 2013
	Increase (Decrease) Due to change in
INTEREST INCOME	Rate			Volume			Net
	(In thousands)

Investment securities	$	(59	)	$	160		$	101
Loans		(177	)		(134	)		(311	)
Other interest-earning assets		(1	)		(2	)		(3	)
TOTAL INTEREST INCOME		(237	)		24			(213	)

INTEREST EXPENSE

NOW accounts		(4	)		(6	)		(10	)
Savings accounts		(17	)		12			(5	)
Money Market accounts		(2	)		4			2
Time deposits		(121	)		(26	)		(147	)
Borrowed money		(39	)		36			(3	)
TOTAL INTEREST EXPENSE		(183	)		20			(163	)
CHANGE IN NET INTEREST INCOME	$	(54	)	$	4		$	(50	)


	For the Nine Months Ended March 31, 2014
	Compared to the Nine Months Ended March 31, 2013
	Increase (Decrease) Due to change in
INTEREST INCOME	Rate			Volume			Net
	(In thousands)

Investment securities	$	(579	)	$	457		$	(122	)
Loans		(620	)		(505	)		(1,125	)
Other interest-earning assets		-			(3	)		(3	)
TOTAL INTEREST INCOME		(1,199	)		(51	)		(1,250	)

INTEREST EXPENSE

NOW accounts		(50	)		(14	)		(64	)
Savings accounts		(23	)		9			(14	)
Money Market accounts		(4	)		5			1
Time deposits		(344	)		(84	)		(428	)
Borrowed money		(207	)		52			(155	)
TOTAL INTEREST EXPENSE		(628	)		(32	)		(660	)
CHANGE IN NET INTEREST INCOME	$	(571	)	$	(19	)	$	(590	)

Market Risk, Liquidity and Capital Resources

Market Risk

The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk (“IRR”). Our assets, consisting primarily of mortgage loans, have longer maturities than our liabilities, consisting primarily of deposits and other borrowings. As a result, a principal part of our business strategy is to manage IRR and reduce the exposure of our net interest income (“NII”) to changes in market interest rates. Accordingly, our Board of Directors has established an Asset/Liability Management Committee which is responsible for evaluating the IRR inherent in our assets and liabilities, for determining the level of risk that is appropriate given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors. With the assistance of an IRR management consultant, the committee monitors the level of IRR on a regular basis and generally meets at least on a quarterly basis to review our asset/liability policies and IRR position.

We have sought to manage our IRR in order to minimize the exposure of our earnings and capital to changes in interest rates. As part of our ongoing asset/liability management, we currently use the following strategies to manage our IRR: (i) using alternative funding sources, such as advances from the Federal Home Loan Bank of Boston, to “match fund” certain investments and/or loans; (ii) continued emphasis on increasing core deposits; (iii) offering adjustable rate and shorter-term home equity loans, commercial real estate loans, construction loans and commercial and industrial loans; (iv) offering a variety of consumer loans, which typically have shorter-terms; (v) investing in mortgage-backed securities with variable rates or fixed rates with shorter durations. Shortening the average maturity of our interest-earning assets by increasing our investments in shorter-term loans and securities, as well as loans and securities with variable rates of interest, helps to better match the maturities and interest rates of our assets and liabilities, thereby reducing the exposure of our NII to changes in market interest rates.

Net interest income at-risk measures the risk of a decline in earnings due to potential short-term and long- term changes in interest rates. The table below represents an analysis of our IRR as measured by the estimated changes in NII, resulting from an instantaneous and sustained parallel shift in the yield curve (+100 and +200 basis points) at March 31, 2014 and June 30, 2013.


Net Interest Income At-Risk

	Estimated Increase (Decrease)	Estimated Increase (Decrease)
Change in Interest Rates	in NII	in NII
(Basis Points)	March 31, 2014	June 30, 2013

Stable
+ 100	0.48%	0.29%
+ 200	-2.60%	-2.99%

The preceding income simulation analysis does not represent a forecast of NII and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions, which are subject to change, including: the nature and timing of interest rate levels including the yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and others. Also, as market conditions vary prepayment/refinancing levels will likely deviate from those assumed, the varying impact of interest rate changes on caps and floors embedded in adjustable rate loans, early withdrawal of deposits, changes in product preferences, and other internal/external variables.

Net Portfolio Value Simulation Analysis. We compute the amounts by which the net present value of our cash flow from assets, liabilities and off-balance sheet items (the institution’s net portfolio value or “NPV”) would change in the event of a range of assumed changes in market interest rates. Given the current low level of market interest rates, we do not prepare a net portfolio value calculation for an interest rate decrease of greater than 100 basis points. A basis point equals one-hundredth of one percent, and 200 basis points equals two percent, an increase in interest rates from 3% to 5% would mean, for example, a 200 basis point increase in the “Change in Interest Rates” column below.

The tables below set forth, at March 31, 2014, the estimated changes in our net portfolio value that would result from the designated instantaneous changes in the United States Treasury yield curve based on information produced by an external consultant. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results. This data is for Putnam Bank only and does not include any yield curve changes in the assets of PSB Holdings, Inc.

									NPV as a Percentage of Present
									Value of Assets (3)
			Estimated Increase (Decrease) in
Change in			NPV									Increase
Interest Rates	Estimated											(Decrease)
(basis points) (1)	NPV (2)		Amount			Percent			NPV Ratio (4)			(basis points)
(Dollars in thousands)

+300	$	24,095	$	(22,746	)		-48.56	%		5.92	%		-446
+200	$	34,673	$	(12,168	)		-25.98	%		8.20	%		-218
+100	$	42,159	$	(4,682	)		-10.00	%		9.64	%		-74
0	$	46,841	$	-			0.00	%		10.38	%		0
-100	$	50,950	$	4,109			8.77	%		11.03	%		65

(1)	Assumes an instantaneous uniform change in interest rates at all maturities.

(2)	NPV is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.

(3)	Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

(4)	NPV ratio represents NPV divided by the present value of assets.

Liquidity

The term liquidity refers to the ability of the Company and the Bank to meet current and future short-term financial obligations. The Company and the Bank further define liquidity as the ability to generate adequate amounts of cash to fund loan originations, deposit withdrawals and operating expenses. Liquidity management is both a daily and long-term function of business management. The Bank’s primary sources of liquidity are deposits, scheduled amortization and prepayments of loan principal and mortgage-related securities, and Federal Home Loan Bank of Boston borrowings. The Bank can borrow funds from the Federal Home Loan Bank of Boston based on eligible collateral of loans and securities. The Bank had Federal Home Loan Bank of Boston borrowings as of March 31, 2014 of $53.5 million, with unused borrowing capacity of $53.4 million. The Bank has an internal limit of wholesale borrowings to total assets ratio of 30.0%. As of March 31, 2014, the ratio of wholesale borrowings to total assets was 11.7%.

The Bank’s primary investing activities are the origination of loans and the purchase of investment securities. During the nine months ended March 31, 2014 and 2013, the Bank’s principal collections net of loan originations were $2.3 million and $9.6 million, respectively. Purchases of securities totaled $39.4 million and $52.2 million, for the nine months ended March 31, 2014 and 2013, respectively.

Loan repayments and maturing investment securities are a relatively predictable source of funds. However, deposit flows, calls of investment securities and prepayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and economic conditions and competition in the marketplace. These factors reduce the predictability of the timing of these sources of funds. Deposit flows are affected by the level of interest rates, by the interest rates and products offered by competitors and by other factors. The Bank monitors its liquidity position frequently and anticipates that it will have sufficient funds to meet its current funding commitments.

Certificates of deposit totaled $124.7 million at March 31, 2014. The Bank relies on competitive rates, customer service and long-standing relationships with customers to retain deposits. Based on the Bank’s experience with deposit retention and current retention strategies, management believes that, although it is not possible to predict with certainty future terms and conditions upon renewal, a significant portion of such deposits will remain with the Bank.

The Bank was well capitalized at March 31, 2014 and exceeded each of the applicable regulatory capital requirements at such date. The following table shows the Bank’s required minimum and actual capital ratios at March 31, 2014.


	Required			Actual

Ratio of Tier 1 Capital to total assets		4	%		8.80	%
Ratio of Total Risk Based Capital to risk-weighted assets		8	%		18.55	%
Ratio of Tier 1 Risk Based Capital to risk-weighted assets		4	%		17.39	%

In July 2013, the federal banking agencies approved a new rule that will substantially amend the regulatory risk-based capital rules applicable to the Company and the Bank. The final rule implements the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act. The final rule includes new minimum risk-based capital and leverage ratios, which will be effective for the Company and the Bank on January 1, 2015, and refines the definition of what constitutes “capital” for purposes of calculating these ratios. The new minimum capital requirements will be: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4%. The final rule also requires unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital requirements unless a one-time opt-out is exercised. The final rule also establishes a “capital conservation buffer” of 2.5%, and will result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 to risk-based assets capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. The new capital conservation buffer requirement would be phased in beginning in January 2016 at 0.625% of risk-weighted assets and would increase each year until fully implemented in January 2019. An institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations will establish a maximum percentage of eligible retained income that can be utilized for such actions.

Management is not aware of any known trends, events or uncertainties that will have or are reasonably likely to have a material effect on the Company’s or the Bank’s liquidity, capital or operations, nor is management aware of any current recommendations by regulatory authorities which, if implemented, would have a material effect on the Company’s or the Bank’s liquidity, capital or operations.

Off-Balance Sheet Arrangements

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

For the nine months ended March 31, 2014, we engaged in no off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

Under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15(d)-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

There has been no change in the Company’s internal control over financial reporting in connection with the quarterly evaluation that occurred during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. – OTHER INFORMATION

Item 1. Legal Proceedings – Not applicable

Item 1A. Risk Factors – Not applicable to smaller reporting companies

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

a) Not applicable

b) Not applicable

c) Not applicable

Item 3. Defaults Upon Senior Securities – Not applicable

Item 4. Mine Safety Disclosures – Not Applicable

Item 5. Other Information

a.	Not applicable.

Item 6. Exhibits

Exhibits

31.1	Chief Executive Officer Certification pursuant to 17 CFR 240.13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Chief Financial Officer Certification pursuant to 17 CFR 240.13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350.

32.2	Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350.

101

The following materials from the Company’s Quarterly Report on Form 10-Q for the three and nine months ended March 31, 2014, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Net Income, (iii) the Consolidated Statements of Changes in Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to Consolidated Financial Statements.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		PSB HOLDINGS, INC. (Registrant)

Date	May 14, 2014		/s/ Thomas A. Borner
			Thomas A. Borner
			President and Chief Executive Officer

Date	May 14, 2014		/s/ Robert J. Halloran, Jr.
			Robert J. Halloran, Jr.
			Executive Vice-President, Chief Financial Officer and Treasurer

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