a50263233.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2012

or

[  ]
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: 000-51996

 
CHICOPEE BANCORP, INC.
 (Exact name of registrant as specified in its charter)
 
Massachusetts
 
20-4840562
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
70 Center Street, Chicopee, Massachusetts
 
 
01013
(Address of principal executive offices)
(Zip Code)
 
(413) 594-6692
(Registrant’s telephone number, including area code)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]    No [   ]

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

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

Large Accelerated Filer [  ]
Accelerated Filer [X]
Non-Accelerated Filer [  ]
Smaller Reporting Company [  ]

Indicate be check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [   ]    No [X]

As of May 7, 2012, there were 5,588,224 shares of the Registrant’s Common Stock outstanding.
 
 
 

 

CHICOPEE BANCORP, INC.
FORM 10-Q
INDEX
 
   
   Page
PART I.
FINANCIAL INFORMATION
 
     
 
     
   
 
1
     
   
 
2
     
   
 
3
     
   
 
 4
     
   
 
  5
     
 
  6
     
 
    26
     
  40
     
  42
     
PART II.
OTHER INFORMATION
 
     
42
 42
 42
43
43
43
 43
     
44

 
 

 
 
PART I.  FINANCIAL INFORMATION

Item 1.     Financial Statements
 
CHICOPEE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars In Thousands)
 
   
March 31,
   
December 31,
 
ASSETS
 
2012
   
2011
 
   
(Unaudited)
       
             
Cash and due from banks
  $ 14,309     $ 10,665  
Federal funds sold
    41,265       50,457  
         Total cash and cash equivalents
    55,574       61,122  
                 
Securities available-for-sale, at fair value
    626       613  
Securities held-to-maturity, at cost (fair value $68,309 and $80,607 at
               
   March 31, 2012 and December 31, 2011, respectively)
    62,353       73,852  
Federal Home Loan Bank stock, at cost
    4,277       4,489  
Loans, net of allowance for loan losses ($4,448 at
               
   March 31, 2012 and $4,576 at December 31, 2011)
    449,550       443,471  
Loans held for sale
    1,604       1,635  
Other real estate owned
    901       913  
Mortgage servicing rights
    385       344  
Bank owned life insurance
    13,523       13,427  
Premises and equipment, net
    9,818       9,853  
Accrued interest and dividends receivable
    1,562       1,527  
Deferred income tax asset
    2,888       2,893  
FDIC prepaid insurance
    730       824  
Other assets
    1,270       1,343  
         Total assets
  $ 605,061     $ 616,306  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
Deposits
               
   Non-interest-bearing
  $ 63,378     $ 68,799  
   Interest-bearing
    385,239       384,578  
         Total deposits
    448,617       453,377  
                 
Securities sold under agreements to repurchase
    9,883       12,340  
Advances from Federal Home Loan Bank
    56,373       59,265  
Accrued expenses and other liabilities
    445       542  
         Total liabilities
    515,318       525,524  
                 
                 
Stockholders' equity
               
    Common stock (no par value, 20,000,000 shares authorized, 7,439,368
               
       shares issued at March 31, 2012 and December 31, 2011)
    72,479       72,479  
    Treasury stock, at cost (1,831,654 shares at March 31, 2012
               
       and 1,703,065 shares at December 31, 2011)
    (24,039 )     (22,190 )
    Additional paid-in-capital
    2,939       2,800  
    Unearned compensation (restricted stock awards)
    (354 )     (546 )
    Unearned compensation (Employee Stock Ownership Plan)
    (4,092 )     (4,166 )
    Retained earnings
    42,805       42,408  
    Accumulated other comprehensive income (loss)
    5       (3 )
         Total stockholders' equity
    89,743       90,782  
         Total liabilities and stockholders' equity
  $ 605,061     $ 616,306  
                 
See accompanying notes to unaudited consolidated financial statements.
               

 
1

 
 
CHICOPEE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except for Number of Shares and Per Share Amounts)
(Unaudited)
                                                                                             
   
Three Months Ended
 
   
March 31,
 
   
2012
   
2011
 
             
Interest and dividend income:
           
    Loans, including fees
  $ 5,685     $ 5,809  
    Interest and dividends on securities
    414       367  
    Other interest-earning assets
    19       12  
          Total interest and dividend income
    6,118       6,188  
                 
Interest expense:
               
    Deposits
    1,146       1,374  
    Securities sold under agreements to repurchase
    5       10  
    Other borrowed funds
    365       438  
          Total interest expense
    1,516       1,822  
                 
Net interest income
    4,602       4,366  
Provision for loan losses
    7       233  
                 
Net interest income after provision for loan losses
    4,595       4,133  
                 
Non-interest income:
               
    Service charges, fees and commissions
    540       466  
    Loan sales and servicing, net
    153       148  
    Net gain on sales of securities available-for-sale
    -       12  
    Net loss on other real estate owned
    (108 )     (63 )
    Income from bank owned life insurance
    96       98  
          Total non-interest income
    681       661  
                 
Non-interest expenses:
               
    Salaries and employee benefits
    2,771       2,839  
    Occupancy expenses
    395       447  
    Furniture and equipment
    279       250  
    FDIC insurance assessment
    94       102  
    Data processing
    314       293  
    Professional fees
    165       142  
    Advertising
    149       126  
    Stationery, supplies and postage
    108       83  
    Other non-interest expense
    555       464  
          Total non-interest expenses
    4,830       4,746  
                 
Income before income taxes
    446       48  
Income tax expense
    49       5  
          Net income
  $ 397     $ 43  
                 
Earnings per share: (1)
               
     Basic
  $ 0.08     $ 0.01  
     Diluted
  $ 0.08     $ 0.01  
                 
Adjusted weighted average shares outstanding:
               
     Basic
    5,070,119       5,421,684  
     Diluted
    5,119,446       5,454,160  
 
(1) Common stock equivalents were excluded from the computation of diluted net income per share for the three months ended March 31, 2012 and 2011, since the inclusion of such equivalents would be anti-dilutive.
 
See accompanying notes to unaudited consolidated financial statements.
 
 
2

 
 
CHICOPEE BANCORP, INC. AND SUBSIDIARIES
(In Thousands)
(Unaudited)
 
   
Three Months Ended
 
   
March 31,
 
   
2012
   
2011
 
             
Net income
  $ 397     $ 43  
                 
Other comprehensive income, net of tax
               
     Unrealized gains on securities:
               
         Unrealized holding gains arising during period
    12       6  
         Less: reclassification adjustments for gains included in
               
         net income
    -       (12 )
     Tax effect
    (4 )     2  
Other comprehensive income (loss)
    8       (4 )
        Comprehensive income
  $ 405     $ 39  
 
See accompanying notes to unaudited consolidated financial statements.

 
3

 
 
CHICOPEE BANCORP, INC. AND SUBSIDIARIES
Three Months Ended March 31, 2012 and 2011
(Dollars In Thousands)
(Unaudited)
 
                     
Unearned
   
Unearned
         
Accumulated
       
               
Additional
   
Compensation
   
Compensation
         
Other
       
   
Common
   
Treasury
   
Paid-in
   
(restricted stock
   
(Employee Stock
   
Retained
   
Comprehensive
       
   
Stock
   
Stock
   
Capital
   
awards)
   
Ownership Plan)
   
Earnings
   
Income (Loss)
   
Total
 
                                                 
Balance at December 31, 2011
  $ 72,479     $ (22,190 )   $ 2,800     $ (546 )   $ (4,166 )   $ 42,408     $ (3 )   $ 90,782  
                                                                 
Comprehensive income:
                                                               
Net income
    -       -       -       -       -       397       -       397  
Change in net unrealized loss on securities
                                                               
   available-for-sale (net of deferred income taxes of $4)
    -       -       -       -       -       -       8       8  
           Total comprehensive income
                                                            405  
                                                                 
Treasury stock purchased (128,589 shares)
    -       (1,849 )     -       -       -       -       -       (1,849 )
Change in unearned compensation:
                                                               
       Stock option expense (net of income tax benefit of $22)
    -       -       108       -       -       -       -       108  
       Restricted stock award expense
    -       -       -       192       -       -       -       192  
       Common stock held by ESOP committed to
                                                               
         be released
    -       -       31       -       74       -       -       105  
Balance at March 31, 2012
  $ 72,479     $ (24,039 )   $ 2,939     $ (354 )   $ (4,092 )   $ 42,805     $ 5     $ 89,743  
                                                                 
                                                                 
Balance at December 31, 2010
  $ 72,479     $ (18,295 )   $ 2,255     $ (1,431 )   $ (4,463 )   $ 41,308     $ 29     $ 91,882  
                                                                 
Comprehensive income:
                                                               
Net income
    -       -       -       -       -       43       -       43  
Change in net unrealized gain on securities
                                                               
   available-for-sale (net of deferred income taxes of $2)
    -       -       -       -       -       -       (4 )     (4 )
           Total comprehensive income
                                                            39  
                                                                 
Treasury stock purchased (32,100 shares)
    -       (419 )     -       -       -       -       -       (419 )
Change in unearned compensation:
                                                               
       Stock option expense (net of income tax benefit of $21)
    -       -       91       -       -       -       -       91  
       Restricted stock award expense
    -       -       -       307       -       -       -       307  
       Common stock held by ESOP committed to
                                                               
         be released
    -       -       27       -       74       -       -       101  
Balance at March 31, 2011
  $ 72,479     $ (18,714 )   $ 2,373     $ (1,124 )   $ (4,389 )   $ 41,351     $ 25     $ 92,001  
 
See accompanying notes to unaudited consolidated financial statements.          
                                                                                                                    
 
4

 

CHICOPEE BANCORP, INC. AND SUBSIDIARIES
(Unaudited)
 
   
Three Months Ended March 31,
 
   
2012
   
2011
 
Cash flows from operating activities:
 
(In Thousands)
 
    Net income
  $ 397     $ 43  
    Adjustments to reconcile net income to net cash
               
       provided by operating activities:
               
          Depreciation and amortization
    235       241  
          Provision for loan losses
    7       233  
          Increase in cash surrender value of life insurance
    (96 )     (98 )
          Net realized gain on sales of securities available-for-sale
    -       (12 )
          Realized gains on sales of mortgage loans
    (54 )     (48 )
          Decrease (increase) in other assets
    46       (874 )
          (Increase) decrease in accrued interest and dividends receivable
    (36 )     154  
          Decrease in FDIC prepaid insurance
    94       103  
          Net change in loans originated for resale
    31       1,777  
          Net loss on sales of other real estate owned
    108       63  
          Decrease in other liabilities
    (97 )     (75 )
          Change in unearned compensation
    405       499  
                          Net cash provided by operating activities
    1,040       2,006  
                 
Cash flows from investing activities:
               
    Additions to premises and equipment
    (163 )     (80 )
    Loan originations and principal collections, net
    (6,182 )     (12,937 )
    Proceeds from sales of other real estate owned
    -       162  
    Proceeds from sales of securities available-for-sale
    -       17  
    Purchases of securities held-to-maturity
    (3,004 )     (14,725 )
    Maturities of securities held-to-maturity
    14,009       18,725  
    Proceeds from principal paydowns of securities held-to-maturity
    496       699  
    Proceeds from sale of FHLB stock
    213       -  
                          Net cash provided (used) by investing activities
    5,369       (8,139 )
                 
Cash flows from financing activities:
               
    Net (decrease) increase in deposits
    (4,760 )     12,160  
    Net decrease in securities sold under agreements to repurchase
    (2,457 )     (1,018 )
    Payments on long-term FHLB advances
    (2,891 )     (3,183 )
    Stock purchased for treasury
    (1,849 )     (419 )
                          Net cash (used) provided by financing activities
    (11,957 )     7,540  
                 
Net (decrease) increase in cash and cash equivalents
    (5,548 )     1,407  
                 
Cash and cash equivalents at beginning of period
    61,122       35,873  
                 
Cash and cash equivalents at end of period
  $ 55,574     $ 37,280  
                 
Supplemental cash flow information:
               
    Interest paid on deposits
  $ 1,146     $ 1,374  
    Interest paid on borrowings
    398       367  
    Income taxes paid
    -       57  
    Transfers from loans to other real estate owned
    97       377  
 
See accompanying notes to unaudited consolidated financial statements.

 
5

 

CHICOPEE BANCORP, INC. AND SUBSIDIARIES
March 31, 2012 and 2011

1.
Basis of Presentation

Chicopee Bancorp, Inc. (the “Corporation”) has no significant assets other than all of the outstanding shares of its wholly-owned subsidiaries, Chicopee Savings Bank (the “Bank”) and Chicopee Funding Corporation (collectively, the “Company”). The Corporation was formed on March 14, 2006 and became the holding company for the Bank upon completion of the Bank’s conversion from a mutual savings bank to a stock savings bank.  The conversion of the Bank was completed on July 19, 2006.  The accounts of the Bank include its wholly-owned subsidiaries and a 99% owned subsidiary.  The consolidated financial statements of the Company as of March 31, 2012 and for the periods ended March 31, 2012 and 2011 included herein are unaudited.  In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the financial condition, results of operations, changes in stockholders’ equity and cash flows, as of and for the periods covered herein, have been made.  These financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2011 included in the Company’s Annual Report on Form 10-K.

The results for the three month interim period ended March 31, 2012 are not necessarily indicative of the operating results for a full year.

2.
Earnings Per Share

Basic earnings per share represents income available to common stockholders divided by the adjusted weighted-average number of common shares outstanding during the period.  The adjusted outstanding common shares equals the gross number of common shares issued less average treasury shares, unallocated shares of the Chicopee Savings Bank Employee Stock Ownership Plan (“ESOP”), and average dilutive restricted stock awards under the 2007 Equity Incentive Plan. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued.  Potential common shares that may be issued by the Company relate to outstanding stock options and certain stock awards and are determined using the treasury stock method.

Earnings per share is computed as follows:
 
   
Three Months Ended March
 
   
2012
   
2011
 
             
Net income (in thousands)
  $ 397     $ 43  
                 
Weighted average number of common shares issued
    7,439,368       7,439,368  
Less: average number of treasury shares
    (1,897,395 )     (1,453,446 )
Less: average number of unallocated ESOP shares
    (416,605 )     (446,363 )
Less: average number of dilutive restricted stock awards
    (55,249 )     (117,875 )
                 
Adjusted weighted average number of common
               
shares outstanding
    5,070,119       5,421,684  
Plus: dilutive outstanding restricted stock awards
    49,327       32,476  
Plus: dilutive outstanding stock options
    -       -  
Weighted average number of diluted shares outstanding
    5,119,446       5,454,160  
                 
Earnings per share:
               
Basic- common stock
  $ 0.08     $ 0.01  
Basic- unvested share-based payment awards
  $ 0.08     $ 0.01  
Diluted- common stock
  $ 0.08     $ 0.01  
Diluted- unvested share-based payment awards
  $ 0.08     $ 0.01  

There were 619,198 and 562,698 stock options that were not included in the calculation of diluted earnings per share for the three months ended March 31, 2012 and 2011, respectively, because their effect was anti-dilutive.

 
6

 

3.
Equity Incentive Plan

Stock Options

Under the Company’s 2007 Equity Incentive Plan (the “Plan”) approved by the Company’s stockholders at the annual meeting of the Company’s stockholders on May 30, 2007, the Company may grant options to directors, officers and employees for up to 743,936 shares of common stock. Both incentive stock options and non-qualified stock options may be granted under the Plan. The exercise price for each option is equal to the market price of the Company’s stock on the date of grant and the maximum term of each option is ten years. The stock options vest over five years in five equal installments on each anniversary of the date of grant.

The Company recognizes compensation expense over the vesting period, based on the grant-date fair value of the options granted. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for options granted during the year ended December 31, 2011, and the three months ended March 31, 2012:
 
   
Three Months
   
Year Ended
 
   
Ended March 31,
   
December 31,
 
   
2012
   
2011
 
Expected dividend yield
    0.86 %     0.86 %
Weighted average expected term
 
6.5 years
   
6.5 years
 
Weighted average expected volatility
    23.27 %     25.37 %
Weighted average risk-free interest rate
    1.40 %     2.92 %
 
Expected volatility is based on the historical volatility of the Company’s stock and other factors. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The Company uses historical data, such as option exercise and employee termination rates, to calculate the expected option life.

A summary of options under the Plan as of March 31, 2012, and changes during the three months then ended, is as follows:
 
               
Weighted Average
   
Aggregate
 
               
Remaining
   
Intrinsic
 
   
Number of
   
Weighted Average
   
Contractual Term
   
Value
 
   
Shares
   
Exercise Price
   
(in years)
   
(000's)
 
                         
Outstanding at December 31, 2011
    556,198     $ 14.23       5.74     $ 25  
Granted
    63,000       14.20       9.83       -  
Exercised
    -       -       -       -  
Forfeited or expired
    -       -       -       -  
Outstanding at March 31, 2012
    619,198     $ 14.23       5.93     $ 167  
Exercisable at March 31, 2012
    429,357     $ 14.26       5.38     $ 102  
Exercisable at March 31, 2011
    320,417     $ 14.25       6.17     $ 41  
 
The Company granted 63,000 stock options in the three months ended March 31, 2012 with a fair value of $3.32. The weighted-average grant-date fair value of options granted during 2011 was $4.07, respectively. The weighted average grant-date fair value of the options outstanding and exercisable at March 31, 2012 and December 31, 2011 was $3.84 and $3.91, respectively. For the three months ended March 31, 2012 and 2011, share based compensation expense applicable to options granted under the Plan was $108,000 and $91,000 and the related tax benefit was $22,000 and $21,000, respectively. As of March 31, 2012, unrecognized stock-based compensation expense related to non-vested options amounted to $408,000. This amount is expected to be recognized over a period of 3.12 years.

 
7

 

Stock Awards

Under the Company’s 2007 Equity Incentive Plan, the Company may grant stock awards to its directors, officers and employees for up to 297,574 shares of common stock. The stock awards vest 20% per year beginning on the first anniversary of the date of grant. The fair market value of the stock awards, based on the market price at the date of grant, is recorded as unearned compensation. Unearned compensation is amortized over the applicable vesting period. The weighted-average grant-date fair value of stock awards as of March 31, 2012 is $14.28. The Company recorded compensation cost related to stock awards of approximately $192,000 and $307,000 in the three months ended March 31, 2012 and 2011, respectively. Stock awards with a fair value of $910,000, and $651,000 have vested during the years ended December 31, 2011 and 2010, respectively. No stock awards were granted prior to July 1, 2007. The Company granted 2,000 stock awards during the year ended December 31, 2011 with a grant price of $14.08. There were no awards granted by the company during the three months ended March 31, 2012. As of March 31, 2012, unrecognized stock-based compensation expense related to non-vested restricted stock awards amounted to $266,000. This amount is expected to be recognized over a period of 0.62 years.

A summary of the status of the Company’s stock awards as of March 31, 2012, and changes during the three months ended March 31, 2012, is as follows:
 
         
Weighted
 
         
Average
 
   
Number of
   
Grant-Date
 
Nonvested Shares
 
Shares
   
Fair Value
 
             
Outstanding at December 31, 2011
    55,346     $ 14.28  
Granted
    -       -  
Vested
    400       14.08  
Forfeited
    -       -  
Outstanding at March 31, 2012
    54,946     $ 14.28  
 
4. 
Long-term Incentive Plan
 
On March 13, 2012, the Company adopted the Chicopee Bancorp, Inc. 2012 Phantom Stock Unit Award and Long-Term Incentive Plan (the “Plan”), effective as of January 1, 2012, to promote the long-term financial success of the Company and its subsidiaries by providing a means to attract, retain and reward individuals who contribute to such success and to further align their interest with those of the Company’s shareholders.

A total of 150,000 phantom stock units will be available for awards under the Plan. The only Awards that may be granted under the Plan are Phantom Stock Units. A Phantom Stock Unit represents the right to receive a cash payment on the determination date equal to the book value of a share of the Company’s stock on the determination date. The settlement of a Phantom Stock Unit on the determination date shall be in cash. The Plan year shall be January 1, 2012 to December 31, 2012. Unless the Compensation Committee of the Board of Directors of the Company determines otherwise, the required period of service for full vesting will be three years. The Company’s total expense under the Plan for the three months ended March 31, 2012 amounted to $13,000.

5. 
Recent Accounting Pronouncements (Applicable to the Company)

In January 2010, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-06, “Fair Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements”, to amend the disclosure requirements related to recurring and nonrecurring fair value measurements.  The guidance requires new disclosures regarding transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers.  Additionally, the guidance requires a rollforward of activities, separately reporting purchases, sales, issuance, and settlements, for assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements).  The guidance is effective for annual reporting periods that begin after December 15, 2009, and for interim periods within those annual reporting periods except for the changes to the disclosure of rollforward activities for any Level 3 fair value measurements, which are effective for annual reporting periods that begin after December 15, 2010, and for interim periods within those annual reporting periods.  Other than requiring additional disclosures, adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements.
 
 
8

 
 
In April 2011, the FASB issued ASU No. 2011-03, “Transfer and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements”.   This ASU removes from the assessment of effective control the criterion relating to the transferor’s ability to repurchase or redeem financial assets on substantially the agreed terms, even in the event of default by the transferee.  The guidance is effective for first interim and annual reporting periods ending after December 15, 2011.  The adoption of this new guidance did not have a material effect on the Company’s consolidated financial statements.

In April 2011, the FASB issued ASU No. 2011-02, “A Creditor’s Determination of whether a Restructuring Is a Troubled Debt Restructuring”. The new guidance clarifies when a loan modification or restructuring is a TDR in order to address current diversity in practice and lead to more consistent application of accounting principles generally accepted in the United States of America. In evaluating whether a restructuring constitutes a TDR, a creditor must separately conclude that the restructuring constitutes a concession and the debtor is experiencing financial difficulties. Additionally, the guidance clarifies that a creditor is precluded from using the effective interest rate test in the debtor’s guidance on restructuring of payables when evaluating whether a restructuring constitutes a TDR. The guidance was effective for interim and annual reporting periods beginning on or after June 15, 2011.  The adoption of this new guidance did not have a material effect on the Company’s consolidated financial statements.

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS”.  This ASU clarifies how to measure fair value, but does not require additional fair value measurement and is not intended to affect current valuation practices outside of financial reporting.  However, additional information and disclosure will be required for transfers between Level 1 and Level 2, the sensitivity of a fair value measurement categorized as Level 3, and the categorization of items that are not measured at fair value by level of the fair value hierarchy.  The guidance is effective during interim and annual reporting periods beginning after December 15, 2011.  The adoption of this new guidance did not have a material effect on the Company’s consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”.  This ASU will, “require that all nonowner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income.” This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The adoption of this new guidance did not have a material effect on the Company’s consolidated financial statements.

In December 2011, the FASB issued ASU No. 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05”, which defers the effective date of a requirement in ASU 2011-05 related to reclassifications of items out of accumulated other comprehensive income. The deferral in the effective date was made to allow the FASB time to redilberate whether to require presentation on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented.

6. 
Reclassification

Certain amounts in the 2011 financial statements have been reclassified to conform to the current period’s presentation. These reclassifications had no effect on the net income previously reported.

7. 
Investment Securities

The following table sets forth, at the dates indicated, information regarding the amortized cost and fair values, with gross unrealized gains and losses of the Company's investment securities:

 
9

 
 
   
March 31, 2012
 
         
Gross
   
Gross
       
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
   
Cost
   
Gains
   
Losses
   
Value
 
   
(In Thousands)
 
Securities available-for-sale
                       
  Marketable equity securities
  $ 618     $ 25     $ (17 )   $ 626  
     Total securities available-for-sale
  $ 618     $ 25     $ (17 )   $ 626  
                                 
Securities held-to-maturity
                               
  U.S. Treasury securities
  $ 16,000       -       -     $ 16,000  
  Corporate and industrial
                               
     revenue bonds
    31,367       5,861       -       37,228  
  Certificates of deposit
    13,210       3       -       13,213  
  Collateralized mortgage obligations
    1,776       92       -       1,868  
     Total securities held-to-maturity
  $ 62,353     $ 5,956     $ -     $ 68,309  
                                 
Non-marketable securities
                               
   Federal Home Loan Bank stock
  $ 4,277       -       -     $ 4,277  
   Banker's Bank stock
    183       -       -       183  
     Total non-marketable securities
  $ 4,460     $ -     $ -     $ 4,460  
 
 
   
December 31, 2011
 
         
Gross
   
Gross
       
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
   
Cost
   
Gains
   
Losses
   
Value
 
   
(In Thousands)
 
Securities available-for-sale
                       
  Marketable equity securities
  $ 618     $ 28     $ (33 )   $ 613  
     Total securities available-for-sale
  $ 618     $ 28     $ (33 )   $ 613  
                                 
Securities held-to-maturity
                               
  U.S. Treasury securities
  $ 26,998     $ 1     $ (1 )   $ 26,998  
  Corporate and industrial
                               
     revenue bonds
    31,576       6,643       -       38,219  
  Certificates of deposit
    13,206       7       -       13,213  
  Collateralized mortgage obligations
    2,072       105       -       2,177  
     Total securities held-to-maturity
  $ 73,852     $ 6,756     $ (1 )   $ 80,607  
                                 
Non-marketable securities
                               
   Federal Home Loan Bank stock
  $ 4,489       -       -     $ 4,489  
   Banker's Bank stock
    183       -       -       183  
     Total non-marketable securities
  $ 4,672     $ -     $ -     $ 4,672  

At March 31, 2012 and December 31, 2011, securities with an amortized cost of $14.9 million and $25.5 million, respectively, were pledged as collateral to support securities sold under agreements to repurchase.

The amortized cost and estimated fair value of debt securities by contractual maturity at March 31, 2012 are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties. The collateralized mortgage obligations are allocated to maturity categories according to final maturity date.

 
10

 
 
   
Held-to-Maturity
 
   
Amortized
Cost
   
Fair Value
 
   
(In Thousands)
 
Within 1 year
  $ 29,209     $ 29,212  
From 1 to 5 years
    3,026       3,404  
From 5 to 10 years
    10,045       11,067  
Over 10 years
    20,073       24,626  
    $ 62,353     $ 68,309  
 
Unrealized Losses on Investment Securities
Management conducts, at least on a monthly basis, a review of its investment portfolio including available-for-sale and held-to-maturity securities to determine if the value of any security has declined below its cost or amortized cost and whether such security is other-than-temporarily impaired (“OTTI”). Securities are evaluated individually based on guidelines established by the FASB and the internal policy of the Company and include but are not limited to: (1) intent and ability of the Company to retain the investment for a period of time sufficient to allow for the anticipated recovery in market value; (2) percentage and length of time which an issue is below book value; (3) financial condition and near-term prospects of the issuer; (4) whether the debtor is current on contractually obligated interest and principal payments; (5) the volatility of the market price of the security; and (6) any other information and observable data considered relevant in determining whether other-than-temporary impairment has occurred, including the expectation of receipt of all principal and interest due.

As of March 31, 2012 and December 31, 2011, management determined that there were no securities other-than-temporarily impaired.

The following table presents the fair value of investments with continuous unrealized losses as of March 31, 2012 and December 31, 2011:
 

 
   
March 31, 2012
 
   
Less Than Twelve Months
   
Twelve Months and Over
   
Total
 
   
(In Thousands)
 
         
Gross
         
Gross
         
Gross
 
   
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
   
Value
   
Losses
   
Value
   
Losses
   
Value
   
Losses
 
                                     
Marketable equity securities
  $ 237     $ (17 )   $ -     $ -     $ 237     $ (17 )
    Total temporarily impaired securities
  $ 237     $ (17 )   $ -     $ -     $ 237     $ (17 )

 
   
December 31, 2011
 
   
Less Than Twelve Months
   
Twelve Months and Over
   
Total
 
   
(In Thousands)
 
         
Gross
         
Gross
         
Gross
 
   
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
   
Value
   
Losses
   
Value
   
Losses
   
Value
   
Losses
 
                                     
Marketable equity securities
  $ 221     $ (33 )   $ -     $ -     $ 221     $ (33 )
U.S. Treasury securities
    13,998       (1 )     -       -       13,998       (1 )
    Total temporarily impaired securities
  $ 14,219     $ (34 )   $ -     $ -     $ 14,219     $ (34 )

U.S. Treasury Securities
There were no unrealized losses within the U.S. Treasury securities portfolio as of March 31, 2012. At December 31, 2011, unrealized losses related to five U.S. Treasury securities of which all were for less than 12 months.
 
 
11

 
 
Collateralized Mortgage Obligations (“CMO”)
As of March 31, 2012, the Company has 12 CMO bonds, or 13 individual issues, with an aggregate book value of $1.8 million, which included four bonds, or six individual issues, with FICO scores less than 650. This risk is mitigated by loan-to-value ratios of less than 65%. Since the purchase of these bonds, interest payments have been current and the Company expects to receive all principal and interest due.

Marketable Equity Securities
Unrealized losses within the marketable equity securities portfolio at March 31, 2012 and December 31, 2011, related to three securities issued by one company in the financial industry.  In reviewing these marketable securities for OTTI, it was determined there was no impairement. As of March 31, 2012, and December 31, 2011, none of the three securities had losses for more than 12 months.

Non-Marketable Securities
The Company is a member of the Federal Home Loan Bank (“FHLB”). The FHLB is a cooperatively owned wholesale bank for housing and finance in the six New England States. Its mission is to support the residential mortgage and community development lending activities of its members, which include over 450 financial institutions across New England. As a requirement of membership in the FHLB, the Company must own a minimum required amount of FHLB stock, calculated periodically based primarily on the Company’s level of borrowings from the FHLB. The Company uses the FHLB for much of its wholesale funding needs. As of March 31, 2012 and December 31, 2011, the Company’s investment in FHLB stock totaled $4.3 million, and $4.5 million, respectively.

FHLB stock is a non-marketable equity security and therefore is reported at cost, which equals par value. Shares held in excess of the minimum required amount are generally redeemable at par value. However, in the first quarter of 2009 the FHLB announced a moratorium on such redemptions in order to preserve its capital in response to current market conditions and declining retained earnings. The minimum required shares are redeemable, subject to certain limitations, five years following termination of FHLB membership. The Company has no intention of terminating its FHLB membership. As of March 31, 2012 and December 31, 2011, the Company received $6,000, and $13,000, in dividend income from its FHLB stock investment, respectively. On February 22, 2012, the FHLB announced that the Board of Directors approved the repurchase of excess captial stock from its members. On March 9, 2012, the FHLB repurchased $213,000 representing 42,765 shares from the Company.

The Company periodically evaluates its investment in FHLB stock for impairment based on, among other factors, the capital adequacy of the FHLB and its overall financial condition. No impairment losses have been recorded through March 31, 2012. The Company will continue to monitor its investment in FHLB stock.

Banker’s Bank Northeast stock is carried at cost and is evaluated for impairment based on an estimate of the ultimate recovery to par value. As of March 31, 2012 and December 31, 2011, the Company’s investment in Banker’s Bank totaled $183,000.

8. 
Loans and Allowance for Loan Losses

The following table sets forth the composition of the Company’s loan portfolio in dollar amounts and as a percentage of the respective portfolio.

 
12

 
 
 
 
March 31, 2012
   
December 31, 2011
 
 
       
Percent
         
Percent
 
 
 
Amount
   
of Total
   
Amount
   
of Total
 
 
 
(Dollars In Thousands)
 
 
                       
Real estate loans:
 
 
                   
Residential1
  $ 122,409       27.0 %   $ 123,294       27.6 %
Home equity
    29,983       6.6 %     29,790       6.7 %
Commercial
    177,813       39.2 %     174,761       39.0 %
Total
    330,205       72.8 %     327,845       73.3 %
Construction-residential
    5,839       1.3 %     5,597       1.3 %
Construction-commercial
    35,970       7.9 %     31,706       7.0 %
Total construction
    41,809       9.2 %     37,303       8.3 %
Total real estate loans
    372,014       82.0 %     365,148       81.6 %
Consumer loans
    2,507       0.6 %     2,566       0.6 %
Commercial loans
    78,562       17.4 %     79,412       17.8 %
Total loans
    453,083       100.0 %     447,126       100.0 %
Deferred loan origination costs, net
    915               921          
Allowance for loan losses
    (4,448 )             (4,576 )        
 
                               
Loans, net
  $ 449,550             $ 443,471          
 
 1 Excludes loans held for sale of $1.6 million at March 31, 2012 and December 31, 2011, respectively.    
 
The Company has transferred a portion of its originated commercial real estate and commercial loans to participating lenders. The amounts transferred have been accounted for as sales and therefore not included in the Company’s consolidated statements of financial condition. The Company and participating lenders share proportionally, based on participating agreements, any gains or losses the may result from the borrowers lack of compliance with the terms of the loan. The Company continues to service the loans on behalf of the participating lenders. At March 31, 2012 and December 31, 2011, the Company was servicing loans for participating lenders totaling $10.2 million and $8.8 million, respectively.

In accordance with the Company’s asset/liability management strategy and in an effort to reduce interest rate risk, the Company continues to sell fixed rate, low coupon residential real estate loans to the secondary market. The unpaid principal balance of mortgages that are serviced for others was $83.0 million and $80.7 million at March 31, 2012 and December 31, 2011, respectively. Servicing rights will continue to be retained on all loans written and sold in the secondary market.

Credit Quality
 
To evaluate the risk in the loan portfolio, internal credit risk ratings are used for the following loan segments: commercial real estate, commercial construction and commercial. The risks evaluated in determining an adequate credit risk rating, include the financial strength of the borrower and the collateral securing the loan. All commercial loans are rated from one through nine. Credit risk ratings one through five are considered pass ratings. Classified assets include credit risk ratings of special mention through loss. At least quarterly, classified assets are reviewed by management and by an independent third party. Credit risk ratings are updated as soon as information is obtained that indicates a change in the credit risk rating may be warranted.
 
The following describes the credit risk ratings:
 
Special mention. Assets that do not currently expose the Company to sufficient risk to warrant classification in one of the following categories but possess potential weaknesses.
 
Substandard. Assets that have one or more defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Non-accruing loans are typically classified as substandard.
 
 
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Doubtful. Assets that have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss.
 
Loss. Assets rated in this category are considered uncollectible and are charged off against the allowance for loan losses.
 
Residential real estate and residential construction loans are categorized into pass and substandard risk ratings. Substandard residential loans are loans that are on nonaccrual status and are individually evaluated for impairment.
 
Consumer loans are considered nonperforming when they are 90 days past due or have not returned to accrual status. Consumer loans are not individually evaluated for impairment.
 
Home equity loans are considered nonperforming whey they are 90 days past due or have not returned to accrual status. Each nonperforming home equity loan is individually evaluated for impairment.
 
The following table presents an analysis of total loans segregated by risk rating and segment as of March 31, 2012:
 
   
Commercial Credit Risk Exposure
   
Commercial
   
Commercial
Construction
   
Commercial
Real Estate
   
Total
 
   
(In Thousands)
Pass
  $ 74,586     $ 23,906     $ 168,811     $ 267,303  
Special mention
    2,435       11,851       4,358       18,644  
Substandard
    1,541       213       4,644       6,398  
Doubtful
    -       -       -       -  
Loss
    -       -       -       -  
Total commercial loans
  $ 78,562     $ 35,970     $ 177,813     $ 292,345  
 
   
Residential Credit Risk Exposure
   
Residential
Real Estate
   
Residential
Construction
   
Total
 
   
(In Thousands)
Pass
  $ 120,829     $ 5,508             $ 126,337  
Substandard (nonaccrual)
    1,580       331               1,911  
Total residential loans
  $ 122,409     $ 5,839             $ 128,248  
 
   
Consumer Credit Risk Exposure
   
Consumer
   
Home Equity
           
Total
 
   
(In Thousands)
Performing
  $ 2,473     $ 29,639             $ 32,112  
Nonperforming (nonaccrual)
    34       344               378  
Total consumer loans
  $ 2,507     $ 29,983             $ 32,490  
 
 
14

 
 
The following table presents an analysis of total loans segregated by risk rating and segment as of December 31, 2011:
 
   
Commercial Credit Risk Exposure
 
   
Commercial
   
Commercial
Construction
   
Commercial
Real Estate
   
Total
 
   
(In Thousands)
 
Pass
  $ 74,699     $ 19,904     $ 165,168     $ 259,771  
Special mention
    2,855       11,586       5,622       20,063  
Substandard
    1,858       216       3,971       6,045  
Doubtful
    -       -       -       -  
Loss
    -       -       -       -  
Total commercial loans
  $ 79,412     $ 31,706     $ 174,761     $ 285,879  
 
   
Residential Credit Risk Exposure
 
   
Residential
Real Estate
   
Residential
Construction
           
Total
 
   
(In Thousands)
 
Pass
  $ 121,072     $ 5,597             $ 126,669  
Substandard (nonaccrual)
    2,222       -               2,222  
Total residential loans
  $ 123,294     $ 5,597             $ 128,891  
 
   
Consumer Credit Risk Exposure
 
   
Consumer
   
Home Equity
           
Total
 
   
(In Thousands)
 
Performing
  $ 2,487     $ 29,484             $ 31,971  
Nonperforming (nonaccrual)
    79       306               385  
Total consumer loans
  $ 2,566     $ 29,790             $ 32,356  
 
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 uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is evaluated on a regular basis 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, allocated 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 portfolio segments: residential real estate, commercial real estate, commercial, consumer and home equity.

Management uses an average of historical losses based on a time frame appropriate to capture relevant loss data for each portfolio segment. Management deems 36 months to be an appropriate time frame on which to base historical losses for each portfolio segment. This historical loss factor is adjusted for the following qualitative factors for each portfolio segment: levels/trends in delinquencies; trends in volume and terms of loans; effects of changes in risk selection and changes in lending policies, experience, ability, depth of lending management and staff; and national and local economic conditions. Management follows a similar process to estimate its liability for off-balance-sheet commitments to extend credit.

The qualitative factors are determined based on the various risk characteristics of each portfolio segment. Risk characteristics relevant to each portfolio segment are as follows:
 
 
 
15

 
 
Risk Characteristics

Residential real estate loans enable the borrower to purchase or refinance existing homes, most of which serve as the primary residence of the owner. Repayment is dependent on the credit quality of the borrower. Factors attributable to failure of repayment may include a weakened economy and/or unemployment, as well as possible personal considerations. While we anticipate adjustable-rate mortgages will better offset the potential adverse effects of an increase in interest rates as compared to fixed-rate mortgages, the increased mortgage payments required of adjustable-rate loan borrowers in a rising interest rate environment could cause an increase in delinquencies and defaults. The marketability of the underlying property also may be adversely affected in a high interest rate environment.

Commercial real estate loans are secured by commercial real estate and residential investment real estate and generally have larger balances and involve a greater degree of risk than one- to four-family residential mortgage loans. Risk in commercial real estate and residential investment lending are borrower’s creditworthiness and the feasibility and cash flow potential of the project. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject to a greater extent than residential real estate loans to adverse conditions in the real estate market or the economy.

Commercial and residential construction loans are generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction and the estimated cost (including interest) of construction.

Commercial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

Consumer and home equity loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly. In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and the remaining deficiency often does not warrant further substantial collection efforts against the borrower. In addition, consumer loan collections depend on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

The Company does not disaggregate its portfolio segments into loan classes.

Allocated Component

The allocated component relates to loans that are classified as impaired. Impairment is measured on a loan by loan basis for residential real estate, commercial real estate and commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance is established when the discounted cash flows or collateral value of the impaired loan is lower than the carrying value of that loan. The Company recognizes the change in present value attributable to the passage of time as provision for loan losses. Large groups of smaller balance homogenous loans are collectively evaluated for impairment, and the allowance resulting therefrom is reported as the general component, as described above.

Loans considered for impairment include all loan segments of commercial and residential, as well as home equity loans. The segments are 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.
 
 
 
16

 
 
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, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.
 
The Company may periodically 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 TDR’s are classified as impaired.
 
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer loans for impairment evaluation, except for home equity loans.
 
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 allocated and general reserves in the portfolio.

There were no changes in the Company’s accounting policies or methodology pertaining to the allowance for loan losses during the current period.
 
The following table presents the allowance for loan losses and select loan information as of March 31, 2012:
 
   
Residential
Real Estate
   
Residential
Construction
   
Commercial
Real Estate
   
Commercial
Construction
   
Commercial
   
Consumer
Loans
   
Home
Equity
   
Total
 
Allowance for loan losses
 
(In Thousands)
 
    Balance as of December 31, 2011
  $ 549     $ 89     $ 1,891     $ 526     $ 1,343     $ 47     $ 131     $ 4,576  
    Provision (reduction) for loan losses
    (104 )     14       26       46       6       15       4       7  
    Recoveries
    -       -       -       -       -       6       -       6  
    Loans charged off
    (69 )     -       -       -       (48 )     (24 )     -       (141 )
    Balance as of March 31, 2012
  $ 376     $ 103     $ 1,917     $ 572     $ 1,301     $ 44     $ 135     $ 4,448  
                                                                 
Allowance for loan losses ending balance
                                                         
    Collectively evaluated for impairment
  $ 337     $ 88     $ 1,856     $ 572     $ 1,026     $ 44     $ 122     $ 4,045  
    Individually evaluated for impairment
    39       15       61       -       275       -       13       403  
    $ 376     $ 103     $ 1,917     $ 572     $ 1,301     $ 44     $ 135     $ 4,448  
                                                                 
Total loans ending balance
                                                               
    Collectively evaluated for impairment
  $ 120,475     $ 5,508     $ 173,478     $ 35,757     $ 77,104     $ 2,507     $ 29,640     $ 444,469  
    Individually evaluated for impairment
    1,934       331       4,335       213       1,458       -       343       8,614  
    $ 122,409     $ 5,839     $ 177,813     $ 35,970     $ 78,562     $ 2,507     $ 29,983     $ 453,083  
                                                                 
 

 
17

 
 
The following table presents the allowance for loan losses and select loan information as of March 31, 2011:
 
   
Residential
Real Estate
   
Residential
Construction
   
Commercial
Real Estate
   
Commercial
Construction
   
Commercial
   
Consumer
Loans
   
Home
Equity
   
Total
 
   
(In Thousands)
 
Allowance for loan losses
                                               
    Balance as of December 31, 2010
  $ 513     $ 148     $ 1,783     $ 402     $ 1,429     $ 28     $ 128       4,431  
    Provision (reduction) for loan losses
    (42 )     (6 )     238       14       10       31       (12 )     233  
    Recoveries
    -       -       -       -       -       6       -       6  
    Loans charged off
    (34 )