10-Q/A

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

____________

FORM 10-Q/A

(AMENDMENT NO. 1)

(Mark One)

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

For the quarterly period ended June 30, 2012

OR

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

For the transition period from ______________ to _____________

Commission file number: 0-54447

NAUGATUCK VALLEY FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

MARYLAND	01-0969655
(State or other jurisdiction of incorporation or	(I.R.S. Employer Identification No.)
organization)

333 CHURCH STREET, NAUGATUCK, CONNECTICUT	06770
(Address of principal executive offices)	(Zip Code)

(203) 720-5000

(Registrant’s telephone number, including area code)

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.

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer ¨	Accelerated Filer ¨
Non-accelerated Filer ¨	Smaller Reporting Company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨       No S

As of August 6, 2012, there were 7,002,208 shares of the registrant’s common stock outstanding.

NAUGATUCK VALLEY FINANCIAL CORPORATION

Explanatory Note

This Quarterly Report on Form 10-Q/A contains the restated unaudited consolidated financial statements as of June 30, 2012 and for the six month period ended June 30, 2012, together with related disclosures. Such restated financial statements and related disclosures reflect the recordation in the quarter ended March 31, 2012 of an additional provision for loan losses of $2,573,271 as previously reported in the Current Report on Form 8-K previously filed on November 13, 2012.

NAUGATUCK VALLEY FINANCIAL CORPORATION

Table of Contents

		Page No.
Part I. Financial Information
Item 1.	Consolidated Financial Statements (Unaudited)
	Consolidated Statements of Financial Condition at June 30, 2012 and December 31, 2011	2
	Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2012 and 2011	3
	Consolidated Statements of Changes in Stockholder’s Equity for the six months ended June 30, 2012	4
	Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
	Liquidity and Capital Resources	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	33
Part II.  Other Information
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	35
Signatures		36
Exhibits

Part I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

Consolidated Statements of Financial Condition

(In thousands, except share data)

	June 30,			December 31,
	2012			2011
	(Unaudited)
	Restated
ASSETS
Cash and due from depository institutions	$	21,910		$	15,436
Investment in federal funds		868			2,633
Investment securities available-for-sale, at fair value		26,512			25,051
Investment securities held-to-maturity, at amortized cost		29,379			25,292
Loans held for sale		1,358			2,993
Loans receivable, net		441,853			466,965
Accrued income receivable		1,773			1,932
Foreclosed real estate and repossessed assets, net		403			873
Premises and equipment, net		9,535			9,654
Bank owned life insurance		9,707			9,556
Federal Home Loan Bank stock, at cost		5,917			6,252
Deferred income taxes		3,453			2,439
Other assets		3,597			3,144
Total assets	$	556,265		$	572,220
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits	$	411,346		$	410,887
Borrowed funds		57,252			70,817
Mortgagors' escrow accounts		4,621			4,755
Other liabilities		4,089			3,447
Total liabilities		477,308			489,906
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares issued or outstanding		-			-
Common stock, $.01 par value; 25,000,000 shares authorized; 7,002,366 shares issued; 7,002,208 shares outstanding at June 30, 2012 and 7,002,292 outstanding at December 31, 2011.		70			70
Paid-in capital		58,909			58,908
Retained earnings		23,224			27,014
Unearned ESOP shares (391,479 shares at June 30, 2012 and December 31, 2011)		(3,442	)		(3,442	)
Unearned stock awards (997 shares at June 30, 2012 and 1,395 shares at December 31, 2011)		(9	)		(14	)
Treasury stock, at cost (158 shares at June 30, 2012 and 74 shares at December 31, 2011)		(1	)		(1	)
Accumulated other comprehensive income (loss)		206			(221	)
Total stockholders' equity		78,957			82,314
Total liabilities and stockholders' equity	$	556,265		$	572,220

See accompanying notes to unaudited consolidated financial statements.

2

Consolidated Statements of Income and Comprehensive Income

(In thousands, except per share data)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2012			2011		2012			2011
	(Unaudited)
		Restated					Restated
Interest income
Interest on loans	$	5,652		$	6,452	$	11,699		$	12,784
Interest and dividends on investments and deposits		398			411		817			841
Total interest income		6,050			6,863		12,516			13,625
Interest expense
Interest on deposits		975			1,718		2,069			3,464
Interest on borrowed funds		432			564		890			1,176
Total interest expense		1,407			2,282		2,959			4,640
Net interest income		4,643			4,581		9,557			8,985
Provision for loan losses		2,147			1,040		6,692			1,478
Net interest income after provision for loan losses		2,496			3,541		2,865			7,507
Noninterest income
Mortgage banking income		625			355		1,016			483
Fees for other services		263			233		525			406
Fees for services related to deposit accounts		204			213		406			426
Income from bank owned life insurance		76			78		151			155
Income from investment advisory services, net		51			65		107			139
Net gain on investments		-			86		-			86
Recovery from legal settlement		-			-		-			147
Other income		30			32		54			56
Total noninterest income		1,249			1,062		2,259			1,898
Noninterest expense
Compensation, taxes and benefits		2,705			2,326		5,314			4,669
Office occupancy		575			565		1,150			1,172
Professional fees		244			122		537			259
Loss on foreclosed real estate, net		204			49		341			88
Computer processing		194			64		368			326
FDIC insurance premiums		187			172		321			376
Advertising		160			106		286			205
Directors compensation		130			110		335			286
Office supplies		53			50		107			97
Public company expenses		38			30		57			48
Deposit related charge (reduction)		(88	)		-		712			-
Other expenses		468			292		813			610
Total noninterest expense		4,870			3,886		10,341			8,136
Income (loss) before provision for income taxes		(1,125	)		717		(5,217	)		1,269
Provision (benefit) for income taxes		(410	)		212		(1,826	)		368
Net income (loss)	$	(715	)	$	505	$	(3,391	)	$	901
Other Comprehensive income (loss)
Changes in unrealized gain (loss) on securities available-for-sale, net		(68	)		121		427			18
Total other comprehensive income (loss)		(68	)		121		427			18
Comprehensive income (loss)	$	(783	)	$	626	$	(2,964	)	$	919
Earnings (loss) per common share - basic and diluted	$	(0.11	)	$	0.07	$	(0.51	)	$	0.13

See accompanying notes to unaudited consolidated financial statements.

3

Consolidated Statements of Changes in Stockholder’s Equity

Six months ended June 30, 2012

(Unaudited, in thousands, except share data)

Restated

	Common		Paid-in		Retained			Unearned ESOP			Unearned Stock			Treasury			Accumulated Other Comprehensive
	Stock		Capital		Earnings			Shares			Awards			Stock			Income (Loss)			Total
Balance at December 31, 2011	$	70	$	58,908	$	27,014		$	(3,442	)	$	(14	)	$	(1	)	$	(221	)	$	82,314
Dividends declared
($0.06 per common share)		-		-		(397	)		-			-			-			-			(397	)
Stock based compensation
(199 shares vested and
199 shares forfeited)		-		-		(2	)		-			5			-			-			3
Stock based compensation options		-		1		-			-			-			-			-			1
Treasury stock acquired
(84 shares)		-		-		-			-			-			-			-			-
Comprehensive income (loss)		-		-		(3,391	)		-			-			-			427			(2,964	)
Balance at June 30, 2012	$	70	$	58,909	$	23,224		$	(3,442	)		(9	)	$	(1	)	$	206		$	78,957

See accompanying notes to unaudited consolidated financial statements.

4

Consolidated Statements of Cash Flows (In thousands)

	Six Months Ended
	June 30,
	2012			2011
	(Unaudited)
	Restated
Cash flows from operating activities
Net income (loss)	$	(3,391	)	$	901
Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:
Provision for loan losses		6,692			1,478
Depreciation and amortization expense		351			393
Net loss on foreclosed assets		173			11
Gain on sale of loans		(810	)		(350	)
Loans originated for sale		(35,179	)		(18,664	)
Proceeds from sale of loans held for sale		37,623			16,429
Net amortization from investments		177			73
Amortization of intangible assets		17			17
Provision for deferred taxes		(973	)		124
Net gain on investments		-			(233	)
Stock-based compensation		123			92
Net change in:
Accrued income receivable		159			(5	)
Deferred loan fees		(54	)		(44	)
Cash surrender value of life insurance		(151	)		(155	)
Other assets		648			1,111
Other liabilities		(577	)		432
Net cash provided by operating activities		4,828			1,610
Cash flows from investing activities
Proceeds from maturities and repayments of available-for-sale securities		2,786			2,468
Proceeds from sale of available-for-sale securities		300			1,522
Proceeds from maturities of held-to-maturity securities		3,178			624
Redemption of Federal Home Loan Bank stock		335			-
Purchase of available-for-sale securities		(4,216	)		-
Purchase of held-to-maturity securities		(7,386	)		-
Loan originations net of principal payments		18,217			(12,187	)
Purchase of premises and equipment		(248	)		(532	)
Proceeds from the sale of foreclosed assets		556			109
Net cash provided (used) by investing activities		13,522			(7,996	)
Cash flows from financing activities
Net change in time deposits		(13,790	)		(12,867	)
Net change in other deposit accounts		14,248			22,169
Advances in borrowed funds		-			5,300
Repayment of borrowed funds		(11,387	)		(15,935	)
Net change in mortgagors' escrow accounts		(134	)		23
Change in short term borrowings		(2,178	)		(1,466	)
Proceeds from common stock offering, net of offering costs		-			31,322
Purchase of shares by ESOP pursuant to reorganization		-			(2,003	)
Forfeited restricted shares		(2	)		-
Common stock repurchased		(1	)		(1	)
Cash dividends to common stockholders		(397	)		(220	)
Net cash (used) provided by financing activities		(13,641	)		26,322
Net change in cash and cash equivalents		4,709			19,936
Cash and cash equivalents at beginning of period		18,069			14,263
Cash and cash equivalents at end of period	$	22,778		$	34,199
Non-cash investing activities:
Transfer of loans to foreclosed assets	$	258		$	488
Cash paid during the period for:
Interest	$	2,989		$	4,657
Income taxes		151			76

See accompanying notes to unaudited consolidated financial statements.

5

Notes to Unaudited Consolidated Financial Statements

NOTE 1 – NATURE OF OPERATIONS

Effective June 29, 2011, Naugatuck Valley Financial Corporation (the “Company”) completed its public stock offering in connection with the conversion of Naugatuck Valley Mutual Holding Company (the “MHC”) from the mutual holding company to the stock holding company form of organization (the “Conversion”). As a result of the Conversion, the Company succeeded Naugatuck Valley Financial Corporation, a Federal corporation (the “Federal Corporation”), as the holding company for Naugatuck Valley Savings and Loan (the “Bank”) and the MHC ceased to exist. A total of 4,173,008 shares of Company common stock were sold in a subscription and community offering at $8.00 per share, including 250,380 shares purchased by the Naugatuck Valley Savings and Loan Employee Stock Ownership Plan (the “ESOP”). Additionally, shares totaling 2,829,358 were issued to the stockholders of the Federal Corporation (other than the MHC) in exchange for their shares of Federal Corporation common stock at an exchange ratio of 0.9978 share of Company common stock for each share of Federal Corporation common stock. Shares outstanding after the stock offering and the exchange totaled 7,002,366. Net proceeds from the reorganization and stock offering totaled $31.3 million, after deducting offering costs of $2.1 million.

Originally organized in 1922, the Bank is a federally chartered stock savings bank which is headquartered in Naugatuck, Connecticut. The Bank provides a full range of personal banking services to individual and small business customers located primarily in the Naugatuck Valley and the immediate surrounding vicinity. It is subject to competition from other financial institutions throughout the region. The Bank is also subject to the regulations of various federal agencies and undergoes periodic examinations by those regulatory authorities.

The Bank owns Naugatuck Valley Mortgage Servicing Corporation, which qualifies and operates as a Connecticut passive investment company pursuant to legislation.

NOTE 2 - BASIS OF PRESENTATION

The accompanying consolidated interim financial statements are unaudited and include the accounts of the Company, the Bank, and the Bank’swholly owned subsidiary, Naugatuck Valley Mortgage Servicing Corporation. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. All significant intercompany accounts and transactions have been eliminated in consolidation. These consolidated financial statements reflect, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position and the results of its operations and its cash flows at the dates and for the periods presented.

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statement of condition, and income and expenses for the interim period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for losses on loans, the valuation of real estate acquired in connection with foreclosure or in satisfaction of loans, deferred income taxes and the valuation of certain investment securities. While management uses available information to recognize losses and properly value these assets, future adjustments may be necessary based on changes in economic conditions both in Connecticut and nationally.

Management has evaluated subsequent events for potential recognition or disclosure in the financial statements. No subsequent events were identified that would have required a change to the financial statements or disclosure in the notes to the financial statements.

Operating results for the six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

6

These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2011.

Certain reclassifications have been made to prior period consolidated financial statements to conform to the June 30, 2012 consolidated financial statement presentation. These reclassifications only changed the reporting categories and did not affect the Company’s results of operations or financial position.

NOTE 3 - CRITICAL ACCOUNTING POLICIES

The Company considers accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. The accounting policies related to loans and the allowance for loan losses are presented below. For a summary of all other significant accounting policies, please refer to Note 4, “Summary of Significant Accounting Policies”, contained in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2011.

Allowance for Loan Losses. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Although the Company believes that it uses the best information available to establish the allowance for loan losses, future additions to the allowance may be necessary based on estimates that are susceptible to change as a result of changes in economic conditions and other factors. Management reviews the level of the allowance on a quarterly basis, at a minimum, and establishes the provision for loan losses based on the composition of the loan portfolio, delinquency levels, loss experience, economic conditions, and other factors related to the collectability of the loan portfolio.

The Company engages an independent review of its commercial loan portfolio on a quarterly basis and considers adjustments to its loan ratings based upon this review. In addition, the Company’s regulatory authorities, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination.

Impaired Loans - Impaired loans consist of non-accrual loans and troubled debt restructurings (“TDRs”) in accordance with applicable authoritative accounting guidance. With the exception of loans that were restructured and still accruing interest, a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all contractual principal and interest due according to the terms of the loan agreement. Loans deemed to be impaired are classified as non-accrual.

Impairment is measured by estimating the value of the loan based on the present value of expected future cash flows discounted at the loan’s initial effective interest rate or the fair value of the underlying collateral less costs to sell, if repayment of the loan is considered collateral-dependent. All impaired loans are included in non-performing assets.

Non-accrual loans. Loans are automatically placed on non-accrual status when payment of principal or interest is more than 90 days delinquent. Loans are also placed on non-accrual status if collection of principal or interest in full is in doubt or if the loan has been restructured. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received. The loan may be returned to accrual status if unpaid principal and interest are repaid so that the loan is less than 90 days delinquent.

Troubled Debt Restructurings. TDRs are loans for which the original contractual terms of the loans have been modified and both of the following conditions exist: (i) the restructuring constitutes a concession (including reduction of interest rates or extension of maturity dates) and (ii) the borrower is experiencing financial difficulties. Loans are not classified as TDRs when the modification is short-term or results in only an insignificant delay or shortfall in the payments to be received. The Company’s TDRs are determined on a case-by-case basis in connection with ongoing loan collection processes.

The Company does not accrue interest on any TDRs unless it believes collection of all principal and interest under the modified terms is reasonably assured. Generally, six consecutive months of payment performance by the borrower under the restructured terms is required before a TDR is returned to accrual status assuming the loan is restructured at market rates. However, the period could vary depending upon the individual facts and circumstances of the loan.

7

For a TDR to begin accruing interest, the borrower must demonstrate both some level of performance and the capacity to perform under the modified terms. A history of timely payments and adherence to financial covenants generally serve as sufficient evidence of the borrower’s performance. An evaluation of the borrower’s current creditworthiness is used to assess whether the borrower has the capacity to repay the loan under the modified terms. This evaluation includes an estimate of expected cash flows, evidence of strong financial position, and estimates of the value of collateral, if applicable.

NOTE 4 — Accounting Standards Updates

Recently Adopted Accounting Guidance

Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”): In April 2011, the Financial Accounting Standards Board (“FASB”) issued guidance that clarifies the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements. The guidance does not extend the use of fair value accounting, but clarifies the wording on how it should be applied to be consistent with IFRS and expands certain disclosure requirements relating to Level 3 fair value measurements. For many of the requirements, the FASB does not intend for the amendments in this update to result in a change in application from current guidance. This guidance is to be applied prospectively for interim and annual periods beginning after December 15, 2011. Since the guidance only relates to disclosure, the adoption of this guidance did not impact the Company’s financial condition, results of operations, or liquidity.

Statement of Comprehensive Income: In April 2011, the FASB issued accounting guidance requiring companies to include a statement of comprehensive income as part of its interim and annual financial statements. The new guidance gives companies the option to present net income and comprehensive income either in one continuous statement or in two separate, but consecutive statements. This approach represents a change from current GAAP, which allows companies to report Other Comprehensive Income (“OCI”) and its components in the statement of shareholder’s equity. The guidance also allows companies to present OCI either net of tax with details in the notes or shown gross of tax (with tax effects shown parenthetically). This guidance is effective for fiscal years beginning after December 15, 2011, but early adoption is permitted. Since the guidance only relates to disclosure, the adoption of this guidance did not impact the Company’s financial condition, results of operations, or liquidity.

Recently Issued Accounting Guidance

There were no additional accounting standards updates applicable to the Company issued by FASB during the second quarter ended June 30, 2012. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

8

NOTE 5 – INVESTMENT SECURITIES

At June 30, 2012, the composition of the investment portfolio was:

	Amortized		Gross Unrealized					Fair
(In thousands)	Cost Basis		Gains		Losses			Value
Available-for-sale securities:
U.S. government and agency obligations	$	1,010	$	40	$	-		$	1,050
Government guaranteed mortgage-backed securities		15,698		728		(28	)		16,398
Government guaranteed collateralized mortgage obligations		1,328		18		-			1,346
Private label collateralized mortgage obligations		334		-		(67	)		267
Total debt securities		18,370		786		(95	)		19,061
Auction-rate trust preferred securities		7,700		-		(249	)		7,451
Total available-for-sale securities	$	26,070	$	786	$	(344	)	$	26,512

	Amortized		Gross Unrealized				Fair
(In thousands)	Cost Basis		Gains		Losses		Value
Held-to-maturity securities:
Government guaranteed mortgage-backed securities	$	29,379	$	818	$	-	$	30,197
Total held-to-maturity securities	$	29,379	$	818	$	-	$	30,197

At December 31, 2011, the composition of the investment portfolio was:

	Amortized		Gross Unrealized					Fair
(In thousands)	Cost Basis		Gains		Losses			Value
Available-for-sale securities:
U.S. government and agency obligations	$	1,014	$	54	$	-		$	1,068
Government guaranteed mortgage-backed securities		13,919		844		-			14,763
Government guaranteed collateralized mortgage obligations		1,711		10		-			1,721
Private label collateralized mortgage obligations		352		-		(97	)		255
Total debt securities		16,996		908		(97	)		17,807
Auction-rate trust preferred securities		8,000		-		(756	)		7,244
Total available-for-sale securities	$	24,996	$	908	$	(853	)	$	25,051

	Amortized		Gross Unrealized					Fair
(In thousands)	Cost Basis		Gains		Losses			Value
Held-to-maturity securities:
Government guaranteed mortgage-backed securities	$	25,292	$	387	$	(9	)	$	25,670
Total held-to-maturity securities	$	25,292	$	387	$	(9	)	$	25,670

The Company has identified certain investment securities in which the fair value of the security is less than the cost of the security. This can be from an increase in interest rates since the time of purchase or from deterioration in the credit quality of the issuer. All investment securities which have unrealized losses undergo an internal impairment review.

Management’s review for impairment generally entails identification and analysis of individual investments that have fair values less than amortized cost, including consideration of the length of time the investment has been in an unrealized loss position and the expected recovery period; discussion of evidential matter, including an evaluation of factors or triggers that could cause individual investments to qualify as having other-than-temporary impairment and those that would not support other-than-temporary impairment; and documentation of the results of these analyses. As a result of the reviews, management has determined that there are no other investment securities which have deteriorated in credit quality subsequent to purchase, and believes that these unrealized losses are temporary and are the result of changes in market interest rates and market conditions over the past several years.

9

The following is a summary of the fair values and related unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2012, and December 31, 2011.

	At June 30, 2012
	Securities in Continuous Unrealized
	Loss Position Less Than 12 Months
	Number of		Market		Unrealized
(Dollars in thousands)	Securities		Value		Loss
Government guaranteed mortgage backed securities		2	$	4,005	$	(28	)
Total securities in unrealized loss position		2	$	4,005	$	(28	)

	Securities in Continuous Unrealized
	Loss Position 12 or More Consecutive Months
	Number of		Market		Unrealized
(Dollars in thousands)	Securities		Value		Loss
Private label collateralized mortgage obligations		1	$	267	$	(67	)
Auction-rate trust preferred securities		2		2,150		(249	)
Total securities in unrealized loss position		3	$	2,417	$	(316	)

	At December 31, 2011
	Securities in Continuous Unrealized
	Loss Position Less Than 12 Months
	Number of		Market		Unrealized
(Dollars in thousands)	Securities		Value		Loss
Government guaranteed mortgage backed securities		2	$	4,244	$	(9	)
Total securities in unrealized loss position		2	$	4,244	$	(9	)

	Securities in Continuous Unrealized
	Loss Position 12 or More Consecutive Months
	Number of		Market		Unrealized
(Dollars in thousands)	Securities		Value		Loss
Private label collateralized mortgage obligations		1	$	256	$	(97	)
Auction-rate trust preferred securities		2		1,644		(756	)
Total securities in unrealized loss position		3	$	1,900	$	(853	)

10

NOTE 6 – LOANS RECEIVABLE

A summary of loans receivable at June 30, 2012 and December 31, 2011 is as follows:

	June 30,			December 31,
(Dollars in thousands)	2012			2011
Real estate loans:
One-to four-family	$	208,653		$	217,893
Commercial real estate and multi-family		150,083			160,858
Construction		33,399			29,734
Total real estate loans		392,135			408,485
Commercial business loans		32,869			36,645
Consumer loans:
Home equity		29,277			32,157
Savings accounts		749			847
Automobile		487			509
Personal		162			197
Total consumer loans		30,675			33,710
Totals loans		455,679			478,840
Less:
Allowance for loan losses		10,972			8,053
Undisbursed construction loans		2,574			3,489
Deferred loan origination fees, net		280			333
Loans receivable, net	$	441,853		$	466,965
Weighted average yield		5.16	%		5.29	%

Credit Quality of Financing Receivables and the Allowance for Loan Losses

Management segregates the loan portfolio into portfolio segments, which are defined as the levels at which the Company develops and documents a systematic method for determining its allowance for loan losses. The portfolio segments are segregated based on loan types and the underlying risk factors present in each loan type. Such risk factors are periodically reviewed by management and revised as deemed appropriate.

The Company’s loan portfolio is segregated into the following portfolio segments:

One-to Four-Family Owner Occupied Loans. This portfolio segment consists of the origination of first mortgage loans secured by one-to four-family owner occupied residential properties and residential construction loans to individuals to finance the construction of residential dwellings for personal use located in our market area. Although the Company has experienced an increase in foreclosures on its owner occupied loan portfolio over the past year, foreclosures are still at relatively low levels and believe this is due mainly to its conservative underwriting and lending policies which do not allow for risky loans such as “Option ARM,” “sub-prime” or “Alt-A” loans.

Commercial Real Estate and Multi-family Loans. This portfolio segment includes loans secured by commercial real estate, non-owner occupied one-to four-family and multi-family dwellings for property owners and businesses in our market area. Loans secured by commercial real estate generally have larger loan balances and more credit risk than owner occupied one-to four-family mortgage loans. The increased risk is the result of several factors, including the concentration of principal in a limited number of loans and borrowers, the impact of local and general economic conditions on the borrower’s ability to repay the loan, and the increased difficulty of evaluating and monitoring these types of loans.

Construction and Land Development Loans. This portfolio segment includes commercial construction loans for commercial development projects, including condominiums, apartment buildings, and single family subdivisions as well as office buildings, retail and other income producing properties and land loans, which are loans made with land as security. Construction and land development financing generally involves greater credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost proves to be inaccurate, the Company may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property. Moreover, if the estimated value of the completed project proves to be inaccurate, the borrower may hold a property with a value that is insufficient to assure full repayment. Construction loans also expose the Company to the risks that improvements will not be completed on time in accordance with specifications and projected costs and that repayment will depend on the successful operation or sale of the properties, which may cause some borrowers to be unable to continue with debt service which exposes the Company to greater risk of non-payment and loss. Additionally, economic factors such as the decline of property values may have an adverse effect on the ability of the borrower to sell the property.

11

Commercial Business Loans. This portfolio segment includes commercial business loans secured by real estate, assignments of corporate assets, and personal guarantees of the business owners. Commercial business loans generally have higher interest rates and shorter terms than other loans, but they also may involve higher average balances, increased difficulty of loan monitoring and a higher risk of default since their repayment generally depends on the successful operation of the borrower’s business.

Real Estate Secured Loans. This portfolio segment includes home equity loans and home equity lines of credit secured by owner occupied one-to four-family residential properties. Loans of this type are generally written at a maximum of 75% of the appraised value of the property and require that the Company has a second lien position on the property. These loans are written at a higher interest rate and a shorter term than mortgage loans. The Company has experienced a low level of foreclosure in this type of loan during recent periods. These loans can be affected by economic conditions and the values of the underlying properties.

Consumer Loans. This portfolio segment includes loans secured by passbook or certificate accounts, or automobiles, as well as unsecured personal loans and overdraft lines of credit. This type of loan may entail greater risk than do residential mortgage loans, particularly in the case of loans that are unsecured or secured by assets that depreciate rapidly.

Loans are generally carried at the amount of unpaid principal, less the allowance for loan losses and adjusted for deferred loan fees, which are amortized over the term of the loan using the interest method. Interest on loans is accrued based on the principal amounts outstanding. It is the Company’s policy to discontinue the accrual of interest when a loan is specifically determined to be impaired or when the principal or interest is delinquent for more than 90 days. When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income.

The allowance for loan losses is established through a provision for loan losses. The Company maintains the allowance at a level believed, to the best of management’s knowledge, adequate to cover all known and inherent losses in the loan portfolio that are both probable and reasonable to estimate at each reporting date.

Management reviews the allowance for loan losses on at least a quarterly basis in order to identify those inherent losses and to assess the overall collection probability for the loan portfolio. The evaluation process by portfolio segment includes, among other things, an analysis of delinquency trends, non-performing loan trends, the level of charge-offs and recoveries, prior loss experience, total loans outstanding, the volume of loan originations, the type, size and geographic concentration of the loans, the value of collateral securing the loan, the borrower’s ability to repay and repayment performance, the number of loans requiring heightened management oversight, local economic conditions and industry experience.

The establishment of the allowance for loan losses is significantly affected by management’s judgment and uncertainties, and there is a likelihood that different amounts would be reported under different conditions or assumptions. The Office of the Comptroller of the Currency (“OCC”), as an integral part of its examination process, periodically reviews the allowance for loan losses and may require the Company to make additional provisions for estimated loan losses based upon judgments different from those of management.

The allowance generally consists of specific and general components. The specific component relates to loans that have been evaluated and determined to be impaired under ASC 310-10-35. For such impaired loans, when the discounted cash flows (or collateral value or observable market price if the loan is collateral dependent) of the impaired loan is lower than the carrying value of that loan, the Company will charge the difference to loss or establish a specific allowance if the loss is not confirmed. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. Additional allowances are placed on loans classified as either doubtful, substandard or special mention. Although for analytical purposes, certain allowances are attributed to loans that are impaired and general components are attributed to loans evaluated collectively. The allowance is available to cover all charge offs that arise from the loan portfolio.

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The Company will continue to monitor and modify its allowance for loan losses as conditions dictate. No assurances can be given that the level of allowance for loan losses will cover all of the inherent losses in the loan portfolio or that future adjustments to the allowance for loan losses will not be necessary if economic and other conditions differ substantially from the economic and other conditions used by management to determine the current level of the allowance for loan losses.

The following tables set forth the balance of the allowance for loan losses at June 30, 2012 and December 31, 2011, by portfolio segment, disaggregated by impairment methodology, which is then further segregated by amounts evaluated for impairment collectively and individually. Also included is a summary of transactions in the allowance for loan losses for the six months ended June 30, 2012 and the year ended December 31, 2011. The allowance for loan losses allocated to each portfolio segment is not necessarily indicative of future losses in any particular portfolio segment and does not restrict the use of the allowance to absorb losses in other portfolio segments.

	One-to Four- Family			Construction			Commercial Real Estate			Commercial			Consumer			Total
As of and for the Six Months Ended June 30, 2012
(In thousands)
Allowance for loan losses:
Beginning balance	$	1,745		$	1,327		$	3,745		$	754		$	482		$	8,053
Provision for loan losses		804			842			1,789			3,052			205			6,692
Charge-offs		(347	)		(629	)		(1,245	)		(1,416	)		(146	)		(3,783	)
Recoveries		4			-			-			5			1			10
Ending balance	$	2,206		$	1,540		$	4,289		$	2,395		$	542		$	10,972
Ending loan balance individually evaluated for impairment	$	4,636		$	13,209		$	8,892		$	801		$	175		$	27,713
Ending loan balance collectively evaluated for impairment	$	204,017		$	20,190		$	141,191		$	32,068		$	30,500		$	427,966
As of and for the Year Ended December 31, 2011
(In thousands)
Allowance for loan losses:
Beginning balance	$	1,585		$	600		$	2,714		$	884		$	610		$	6,393
Provision for loan losses		377			1,449			1,942			383			142			4,293
Charge-offs		(217	)		(722	)		(911	)		(516	)		(271	)		(2,637	)
Recoveries		-			-			-			3			1			4
Ending balance	$	1,745		$	1,327		$	3,745		$	754		$	482		$	8,053
Ending loan balance individually evaluated for impairment	$	2,721		$	8,474		$	4,422		$	3,585		$	225		$	19,427
Ending loan balance collectively evaluated for impairment	$	215,172		$	21,260		$	156,436		$	33,060		$	33,485		$	459,413

The Company’s policies provide for the classification of loans and other assets into the following categories: pass (1 - 4), bankable with care (5), special mention (6), substandard (7), doubtful (8) and loss (9). Consistent with regulatory guidelines, loans and other assets that are considered to be of lesser quality are classified as substandard, doubtful, or loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those assets characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Assets (or portions of assets) classified as loss are those considered uncollectible and of such little value that their continuance as assets without establishment of a specific valuation allowance or charge-off is not warranted. Assets that do not expose us to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve close attention, are required to be designated as special mention.

13

When assets are classified as special mention, substandard or doubtful, the Company disaggregates these assets and allocates a portion of the related general loss allowances to such assets as the Company deems prudent. Determinations as to the classification of assets and the amount of loss allowances are subject to review by our principal federal regulator, the Office of the Comptroller of the Currency, which can require that we establish additional loss allowances. The Company regularly reviews its asset portfolio to determine whether any assets require classification in accordance with applicable regulations.

The following tables are a summary of the loan portfolio quality indicators by loan class as of June 30, 2012 and December 31, 2011:

Commercial Loans  - Credit Risk Profile by Internally Assigned Grade:
	At June 30, 2012						At December 31, 2011
(In thousands)	Commercial Loans		Commercial Real Estate Construction		Commercial Real Estate		Commercial Loans		Commercial Real Estate Construction		Commercial Real Estate
Grade:
4	$	6,284	$	-	$	35,141	$	6,659	$	216	$	40,769
5		19,088		8,187		81,692		21,941		7,463		88,089
6		4,116		3,760		17,871		2,072		5,948		15,383
7		3,173		15,168		15,379		5,235		8,595		16,004
8		208		-		-		738		-		613
Total	$	32,869	$	27,115	$	150,083	$	36,645	$	22,222	$	160,858

Consumer Loans - Credit Risk Profile by Internally Assigned Grade:
	At June 30, 2012				At December 31, 2011
(In thousands)	Residential -  Prime		Residential - Construction		Residential -  Prime		Residential - Construction
Grade:
Pass	$	202,420	$	6,284	$	213,049	$	7,512
Special Mention		308		-		746		-
Substandard		5,925		-		4,098		-
Doubtful		-		-		-		-
Total	$	208,653	$	6,284	$	217,893	$	7,512

Consumer Loans - Credit Risk Profile Based on Payment Activity:
	At June 30, 2012		At December 31, 2011
(In thousands)	Consumer - Other		Consumer - Other
Grade:
Performing	$	30,286	$	33,323
Nonperforming		389		387
Total	$	30,675	$	33,710

When a loan is 15 days past due, the Company sends the borrower a late notice. The Company also contacts the borrower by phone if the delinquency is not corrected promptly after the notice has been sent. When the loan is 30 days past due, the Company mails the borrower a letter reminding the borrower of the delinquency, and attempt to contact the borrower personally to determine the reason for the delinquency in order to ensure that the borrower understands the terms of the loan and the importance of making payments on or before the due date. If necessary, subsequent delinquency notices are issued and the account will be monitored on a regular basis thereafter. By the 90th day of delinquency, the Company will send the borrower a final demand for payment and may recommend foreclosure. A summary report of all loans 30 days or more past due is provided to the board of directors of the Company each month, and more frequently to the Asset Quality Committee of the Board of Directors.

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Loans are automatically placed on non-accrual status when payment of principal or interest is more than 90 days delinquent. Loans are also placed on non-accrual status if collection of principal or interest in full is in doubt or if the loan has been restructured. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received. The loan may be returned to accrual status if unpaid principal and interest are repaid so that the loan is less than 90 days delinquent. Management works closely with the Asset Quality Committee of the Board of Directors in an effort to resolve nonperforming assets in a manner most advantageous to the Company.

The following tables set forth certain information with respect to our loan portfolio delinquencies by loan class and amount as of June 30, 2012 and December 31, 2011:

	Credit Quality Information
	31-60 Days Past Due		61-90 Days Past Due		Greater Than 90 Days (Nonaccrual)		Total Past Due		Current		Total Loans		Carrying Amount > 90 Days and Accruing
As of June 30, 2012
(In thousands)
Real estate loans
One-to four-family	$	1,539	$	-	$	4,715	$	6,254		208,683	$	214,937	$	-
Construction		-		480		11,525		12,005		15,110		27,115		-
Commercial real estate and multi-family		750		40		10,828		11,618		138,465		150,083		-
Commercial business loans		347		695		1,680		2,722		30,147		32,869
Consumer - other		390		-		389		779		29,896		30,675		-
Total	$	3,026	$	1,215	$	29,137	$	33,378	$	422,301	$	455,679	$	-
As of December 31, 2011
(In thousands)
Real estate loans
One-to four-family	$	1,379	$	214	$	4,140	$	5,733		212,160	$	217,893	$	-
Construction		270		-		9,005		9,275		20,459		29,734		-
Commercial real estate and multi-family		654		249		9,182		10,085		150,773		160,858		-
Commercial business loans		396		-		1,967		2,363		34,282		36,645
Consumer - other		467		37		387		891		32,819		33,710		-
Total	$	3,166	$	500	$	24,681	$	28,347	$	450,493	$	478,840	$	-

Nonperforming loans (defined as nonaccrual loans and TDRs) totaled $29.1 million at June 30, 2012 compared to $24.7 million at December 31, 2011 ($1.3 million of which at both dates is fully guaranteed by the U.S. Small Business Administration). The amount of income that was contractually due but not recognized on nonperforming loans totaled $329,000 and $1.3 million for the quarter and six months ended June 30, 2012, respectively, compared with $365,000 for the year ended December 31, 2011.

At June 30 2012, there were no loans 90 or more days past due and still accruing interest. At June 30, 2012, the Company had 106 loans on non-accrual status with foregone interest for the period since the loans were placed on non-accrual status in the amount of approximately $1.3 million. Included in these loans were 46 loans which were not 90 days past due, but were placed on non-accrual status as a result of a recent modification or the identification of a weakness on the loan.

The Company accounts for impaired loans in accordance with GAAP. An impaired loan generally is one for which it is probable, based on current information, that the lender will not collect all the amounts due under the contractual terms of the loan. Loans are individually evaluated for impairment. When the Company classifies a problem asset as impaired, it makes a specific allowance for that portion of the asset that is deemed uncollectible.

At June 30, 2012, the Company had $27.8 million of loans which were considered to be impaired, with a valuation allowance of $305,000, compared to $19.4 million of such loans at December 31, 2011 with a valuation allowance of $1.1 million. The increase is primarily due to the classification of the following as impaired during the period: three residential development loans, fourteen commercial real estate loans, ten commercial loans secured by business assets, fifteen residential mortgage loans and four home equity loans. The increases were partially offset by removing from impaired status: one residential mortgage loan, three home equity loans and six commercial business loans. Additionally, $1.1 million of specific allowances that were allowed under previous regulatory supervision, were charged off against the loan balances as required under current regulatory supervision.

15

The following tables are a summary of impaired loans by class of loans as of June 30, 2012 and December 31, 2011:

			Unpaid				Average		Interest
	Carrying		Principal		Related		Carrying		Income
As of June 30, 2012	Amount		Balance		Allowance		Amount		Recognized
	(In thousands)
Impaired loans without valuation allowance:
Real estate loans
One-to four-family	$	4,636	$	5,002	$	-	$	4,784	$	84
Construction		10,492		12,205		-		10,485		80
Commercial real estate and multi-family		8,892		10,390		-		9,195		85
Commercial business loans		801		1,811		-		937		7
Consumer - other		175		397		-		259		6
Total impaired loans without valuation allowance		24,996		29,805		-		25,660		262
Impaired loans with valuation allowance:
Real estate loans
Construction		2,717		3,439		305		2,958		59
Total impaired loans with valuation allowance		2,717		3,439		305		2,958		59
Total impaired loans	$	27,773	$	33,244	$	305	$	28,618	$	321

			Unpaid				Average		Interest
	Carrying		Principal		Related		Carrying		Income
As of December 31, 2011	Amount		Balance		Allowance		Amount		Recognized
	(In thousands)
Impaired loans without valuation allowance:
Real estate loans
One-to four-family	$	1,360	$	1,375	$	-	$	1,368	$	42
Construction		959		959		-		944		5
Commercial real estate and multi-family		3,334		3,352		-		3,370		201
Commercial business loans		2,870		3,094		-		239		80
Consumer - other		101		353		-		206		1
Total impaired loans without valuation allowance		8,624		9,133		-		6,127		329
Impaired loans with valuation allowance:
Real estate loans
One-to four-family		1,361		1,361		109		1,362		42
Construction		7,515		8,980		510		4,173		279
Commercial real estate and multi-family		1,088		1,088		336		1,097		24
Commercial business loans		715		715		46		662		35
Consumer - other		124		124		71		125		6
Total impaired loans with valuation allowance		10,803		12,268		1,072		7,419		386
Total impaired loans	$	19,427	$	21,401	$	1,072	$	13,546	$	715

Loan modifications are generally performed at the request of the individual borrower and may include reduction in interest rates, changes in payments, and maturity date extensions. TDRs are loans for which the original contractual terms of the loans have been modified and both of the following conditions exist: (i) the restructuring constitutes a concession (including reduction of interest rates or extension of maturity dates) and (ii) the borrower is experiencing financial difficulties. Loans are not classified as TDRs when the modification is short-term or results in only an insignificant delay or shortfall in the payments to be received. The Company’s loan modifications are determined on a case-by-case basis in connection with ongoing loan collection processes.

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The following table displays information for impaired loans modified through a TDR at June 30, 2012 and December 31, 2011:

	As of		As of
	June 30,		December 31,
(In thousands)	2012		2011
Aggregate recorded investment of impaired loans with terms
modified through a troubled debt restructuring:
Accruing interest	$	656	$	416
Nonaccrual		10,565		12,235
Total	$	11,221	$	12,651

The following table presents a summary of loans that were restructured during the six months ended June 30, 2012 and for the year ended December 31, 2011:

	For the Six Months Ended June 30, 2012
(Dollars in thousands)	Number of Loans		Pre- Modification Recorded Investment		Funds Disbursed		Interest and Escrow Capitalized		Post- Modification Recorded Investment
Real estate loans:
One-to four-family		4	$	989	$	-	$	3	$	992
Multi-family and commercial real estate		1		426		-		-		426
Consumer loans:
Home equity		3		123		-		-		123
Total TDRs restructured during the period		8	$	1,538	$	-	$	3	$	1,541
TDRs, still accruing interest		3	$	567	$	-	$	-	$	567
TDRs, included in nonaccrual		5		971		-		3		974
Total		8	$	1,538	$	-	$	3	$	1,541

	For the Year Ended December 31, 2011
(Dollars in thousands)	Number of Loans		Pre- Modification Recorded Investment		Funds Disbursed		Interest and Escrow Capitalized		Post- Modification Recorded Investment
Real estate loans:
One-to-four family		2	$	310	$	-	$	-	$	310
Construction		1		48		30		-		78
Commercial real estate and multi-family		5		3,736		19		59		3,814
Commercial business loans		3		673		-		-		673
Total TDRs restructured during the period		11	$	4,767	$	49	$	59	$	4,875
TDRs, still accruing interest		-	$	-	$	-	$	-	$	-
TDRs, included in nonaccrual		11		4,767		49		59		4,875
Total		11	$	4,767	$	49	$	59	$	4,875

The specific allowances for loan losses on TDRs is determined by discounting the restructured cash flows at the original effective rate of the loan before modification or is based on the underlying collateral value less costs to sell, if repayment of the loan is considered collateral-dependent. If the resulting amount is less than the recorded book value, the Company either establishes a specific valuation allowance as a component of the allowance for loan losses, or charges off the impaired balance if it determines that such amount is a confirmed loss. This method is used consistently for all segments of the portfolio. The allowance for loan losses also includes an allowance based on a loss migration analysis for each loan category for loans that are not individually evaluated for specific impairment. All loans charged-off, including TDRs charged-off, are factored into this calculation by portfolio segment. During the six months ended June 30, 2012, the Company charged off $2.1 million of loans previously classified as TDRs, on which there were $743,000 of related specific allowances.

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NOTE 7 - EARNINGS PER SHARE

Basic earnings per common share is calculated by dividing the net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is computed in a manner similar to basic earnings per common share except that the weighted-average number of common shares outstanding is increased to include the incremental common shares (as computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. The Company's common stock equivalents are comprised of stock options and restricted stock awards. Anti-dilutive shares are common stock equivalents with weighted-average exercise prices in excess of the weighted-average market value for the periods presented. For the three and six months ended June 30, 2012, anti-dilutive options excluded from the calculations totaled 278,813 options (with an exercise price of $11.12) and 5,886 options (with an exercise price of $12.51). For the three and six months ended June 30, 2011, anti-dilutive options excluded from the calculations totaled 315,827 options (with an exercise price of $11.12) and 7,483 options (with an exercise price of $12.51). Unallocated common shares held by the ESOP are not included in the weighted-average number of common shares outstanding for purposes of calculating either basic or diluted net income per common share.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2012			2011		2012			2011
Net income (loss)	$	(715,000	)	$	505,000	$	(3,391,000	)	$	901,000
Weighted-average common shares outstanding:
Basic		6,610,729			6,826,963		6,610,766			6,827,055
Effect of dilutive stock options and restrictive stock awards		-			-		-			-
Diluted		6,610,729			6,826,963		6,610,766			6,827,055
Earnings (loss) per common share:
Basic	$	(0.11	)	$	0.07	$	(0.51	)	$	0.13
Diluted	$	(0.11	)	$	0.07	$	(0.51	)	$	0.13

NOTE 8 - COMPREHENSIVE INCOME

Comprehensive income is net income adjusted for any changes in equity from non-owner sources that are not recorded in the income statement (such as changes in the net unrealized gain/loss on available-for-sale securities). The purpose of reporting comprehensive income is to provide a measure of all changes in equity that result from recognized transactions and other economic events of the period other than transactions with owners in their capacity as owners. The Company’s sole source of other comprehensive income is the net unrealized gain on its available-for-sale securities.

18

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
	(In thousands)
Net income (loss)	$	(715	)	$	505		$	(3,391	)	$	901
Other comprehensive income:
Unrealized gain (loss) on securities available-for-sale		(76	)		226			386			101
Reclassification adjustment for (gain) loss realized in net income		-			(86	)		-			(86	)
Other comprehensive income (loss) before tax effect		(76	)		140			386			15
Income tax effect related to items of other comprehensive income (loss)		(8	)		19			(41	)		(3	)
Other comprehensive income (loss) net of tax effect		(68	)		121			427			18
Total comprehensive income (loss)	$	(783	)	$	626		$	(2,964	)	$	919

The Company has not recognized deferred taxes related to unrealized capital losses in other comprehensive income due to its current inability to use them.

NOTE 9 - EQUITY INCENTIVE PLAN

Under the Naugatuck Valley Financial Corporation 2005 Equity Incentive Plan (the “Incentive Plan”), the Company may grant up to 371,794 stock options and 148,717 shares of restricted stock to its employees, officers and directors for an aggregate amount of up to 520,511 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.

The amounts and terms of the awards granted under the Incentive Plan are summarized in the following table.

	Grant date
	July 26,		December 18,		March 20,		March 21,
	2008		2007		2007		2006
Option awards
Awarded		997		1,995		7,483		6,485
Exercise price	$	11.12	$	11.12	$	12.51	$	11.12
Maximum term in years		10		10		10		10
Restricted stock awards
Awarded		997		2,993		1,995		1,496

To date, stock option awards have been granted with an exercise price equal to the higher of the market price of the Company’s stock at the date of grant or $11.12, which was the market price of the Company’s stock at the date stock option awards were initially granted under the Incentive Plan. All granted stock options and restricted stock awards vest at 20% per year beginning on the first anniversary of the date of 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 records 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 to unearned stock awards. Compensation expenses related to unearned restricted shares are amortized to compensation, taxes 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 as described below. The Company recorded share-based compensation expense of $2,065 and $3,148 for the three and six months ended June 30, 2012, respectively, compared to $4,550 and $10,301 for the three and six months ended June 30, 2011, respectively, in connection with the stock option and restricted stock awards.

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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. In determining the expected term of the option awards, the Company elected to follow the simplified method as permitted by the SEC Staff Accounting Bulletin 107. Under this method, the Company has estimated the expected term of the options as being equal to the average of the vesting term plus the original contractual term. The Company estimated its volatility using the historical volatility of other, similar companies during a period of time equal to the expected life of the options. The risk-free rate for the periods within the contractual life of the options is based upon the U.S. Treasury yield curve in effect at the time of grant. Assumptions used to determine the weighted-average fair value of stock options granted were as follows:

	July 26,			December 18,			March 20,			March 21,
Grant date	2008			2007			2007			2006
Dividend yield		2.74	%		2.20	%		1.60	%		1.89	%
Expected volatility		13.40	%		11.00	%		10.49	%		11.20	%
Risk-free rate		3.56	%		3.63	%		4.48	%		4.61	%
Expected life in years		6.5			6.5			6.5			6.5
Weighted average fair value of options at grant date	$	1.51		$	1.18		$	2.55		$	2.25

NOTE 10 - DIVIDENDS

On May 16, 2012, the Company's Board of Directors declared a cash dividend of $0.03 per outstanding common share, which was paid on June 15, 2012, to stockholders of record as of the close of business on May 28, 2012.

NOTE 11 – FAIR VALUE

The Company uses fair value to record adjustments to certain assets and liabilities and to prepare required disclosures. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined using market quotes. However, in many instances, there are no quoted market prices available. In such instances, fair values are determined using various valuation techniques. Various assumptions and observable inputs must be relied upon in applying these techniques. Accordingly, the fair value estimates may not be realized in an immediate transfer of the respective asset or liability.

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The following is a summary of the carrying value and estimated fair value of the Company’s significant financial instruments as of June 30, 2012 and December 31, 2011:

	June 30, 2012				December 31, 2011
	Carrying		Estimated		Carrying		Estimated
(In thousands)	Amount		Fair Value		Amount		Fair Value
Financial Assets
Cash and cash equivalents	$	22,778	$	22,778	$	18,069	$	18,069
Investment securities		55,891		56,709		50,343		50,721
Loans held for sale		1,358		1,358		2,993		2,993
Loans receivable, net		441,853		458,606		466,965		492,446
Accrued income receivable		1,773		1,773		1,932		1,932
Mortgage servicing rights		685		720		700		742
Financial Liabilities
Deposits		411,346		414,865		410,887		409,357
Borrowed funds		57,252		62,547		70,817		72,757
Mortgagors' escrow accounts		4,621		4,621		4,755		4,755

Fair Value Hierarchy

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Current accounting guidance establishes a fair value hierarchy based on the transparency of inputs participants use to price an asset or liability. The fair value hierarchy prioritizes these inputs into the following three levels:

• Level 1: Valuation is based upon unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

• Level 2: Fair value is calculated using inputs other than quoted market prices that are directly or indirectly observable for the asset or liability. The valuation may rely on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit ratings, etc.) or inputs that are derived principally or corroborated by market data by correlation or other means.

• Level 3: Inputs for determining the fair value of the respective assets or liabilities are not observable. Level 3 valuations are reliant upon pricing models and techniques that require significant management judgment or estimation.

Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. A description of the valuation methodologies used by the Company is presented below:

Cash and cash equivalents - The carrying amount of cash, due from banks, and interest-bearing deposits is used to approximate fair value, given the short timeframe to maturity and as such assets do not present unanticipated credit concerns.

Investment Securities - When quoted prices are available in an active market, the Company classifies securities within Level 1 of the valuation hierarchy. If quoted market prices are not available, the Company employs an independent pricing service who utilizes matrix pricing to calculate fair value. Such fair value measurements consider observable data such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayments speeds, credit information, and the respective terms and conditions for debt instruments. Level 2 securities include CMOs, mortgage backed securities and corporate bonds issued by GSEs.

When a market is illiquid or there is a lack of transparency around the inputs to valuation, the respective securities are classified as Level 3 and reliance is placed upon internally developed models and management judgment and evaluation for valuation. Auction-rate trust preferred securities (“ARPs”) are currently classified as Level 3.

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Management uses an internally developed model to value ARPs. The valuation model is based on a discounted cash flow using the expected value of the collateral preferred shares, either at call dates or the maturity date of the trust, the credit rating of the issuer of each of the ARPs, the expected yield during the holding period and current rates for U.S. Treasury securities matching the expected remaining term of the trust. The expected value of the collateral preferred shares (either when called or upon maturity of the trust) is assumed to range between current market prices and par. Discount rates are implied from observable market inputs. The resulting discounted cash flows for each of the ARPs indicated little to no impairment in the fair value of the securities. On a quarterly basis, management reviews the trust preferred securities pricing generated from our internal model.

Loans Receivable - Loans held for sale are accounted for at the lower of cost or market. The fair value of loans held for sale are based on quoted market prices of similar or identical loans sold in conjunction with securitization transactions, adjusted as required for changes in loan characteristics. The Company employs an independent third party to provide fair value estimates for loans held for investment. Such estimates are calculated using discounted cash flow analysis, using market interest rates for comparable loans. The associated cash flows are adjusted for credit and other potential losses. Fair value for impaired loans is estimated using the net present value of the expected cash flows or the fair value of the underlying collateral if repayment is collateral dependent.

Accrued income receivable – The carrying amounts reported in the statement of financial condition approximate these assets’ fair value.

Mortgage-servicing rights – The Company sells residential mortgage loans with servicing rights retained. At the time of the sale, the Company determines the value of the retained servicing rights, which represents the present value of the differential between the contractual servicing fee and adequate compensation, defined as the fee a sub-servicer would require, to assume the role of servicer, after considering the estimated effects of prepayments. If material, a portion of the gain on the sale of the loan is recognized as due to the value of the servicing rights, and a servicing asset is recorded.

The Company has engaged an independent third party to perform the servicing rights analysis on a quarterly basis. The cost basis of loan servicing rights is amortized on a level yield basis over the period of estimated net servicing revenue and such amortization is included in the consolidated statement of income as a reduction of loan servicing fee income. Servicing rights are evaluated for impairment by comparing their aggregate carrying amount to their fair value. The fair value of loan servicing rights is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of loan prepayments and discount rates. All assumptions are based on standards used by market participants. Impairment is recognized as an adjustment to loan and servicing income.

Foreclosed Property and Repossessed Assets - Foreclosed property and repossessed assets are recorded as held for sale initially at the lower of the loan balance or fair value of the collateral less estimated selling costs. For the six months ended June 30, 2012 and 2011, foreclosed properties and repossessed assets with a carrying value of $258,000 and $488,000, respectively, were transferred to foreclosed property and repossessed assets from loans. Prior to the transfer, the assets whose fair value less costs to sell was less than their carrying value, were written down to fair value through a charge to the allowance for loan losses. Subsequent to foreclosure, valuations are updated periodically, and the assets may be marked down further, reflecting a new cost basis. There were subsequent valuation adjustments to five foreclosed properties in the amount of $94,000 for the six months ended June 30, 2012. There were no subsequent valuation adjustments to foreclosed properties and repossessed assets for the six months ended June 30, 2011. Collateral dependent impaired loans and foreclosed real estate and repossessed assets are considered Level 3, as the fair value is based on an appraisal and the adjustment to comparable sales made by the appraiser are unobservable. Non collateral dependent loans are measured using a discounted cash flow technique and are also considered Level 3, as the inputs are the Bank’s own assumptions.

Deposit Liabilities - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date which is also their carrying value. The carrying amounts of variable-rate, fixed term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates on comparable instruments to a schedule of aggregated expensed monthly maturities on time deposits.

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Borrowed Funds - Carrying value is as an estimate of fair value for securities sold under agreements to repurchase and other short term debt that matures within 90 days. The fair values of other borrowings are estimated using discounted cash flow analyses based on current market rates adjusted, as appropriate, for associated credit and option risks.

Mortgagors’ escrow accounts – The carrying amounts reported in the statement of financial condition approximate the fair value of the mortgagors’ escrow accounts.

Under certain circumstances we make adjustment to fair value for our assets although they are not measured at fair value on an ongoing basis. These include assets that are measured at the lower of cost or market that were recognized at fair value (i.e., below cost) at the end of the period, as well as assets that are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment).

Assets and liabilities measured at fair value on a recurring and non-recurring basis at June 30, 2012 and December 31, 2011 are summarized below:

	June 30, 2012
	Carrying Value
(In thousands)	Level 1		Level 2		Level 3		Total
Assets measured at fair value on a recurring basis:
Available-for-sale investment securities:
U.S. Government and agency obligations	$	-	$	1,050	$	-	$	1,050
Government guaranteed mortgage-backed securities		-		16,398		-		16,398
Government guaranteed collateralized mortgage obligations		-		1,346		-		1,346
Private label collateralized mortgage obligations		-		267		-		267
Auction-rate trust preferred securities		-		-		7,451		7,451
Residential loans held for sale		-		1,358		-		1,358
Assets measured at fair value on a non-recurring basis:
Impaired loans	$	-	$	-	$	27,465	$	27,465
Foreclosed real estate and other repossessed assets		-		-		403		403
Mortgage-servicing rights		-		-		803		803

	December 31, 2011
	Carrying Value
(In thousands)	Level 1		Level 2		Level 3		Total
Assets measured at fair value on a recurring basis:
Available-for-sale investment securities:
U.S. Government and agency obligations	$	-	$	1,068	$	-	$	1,068
Government guaranteed mortgage-backed securities		-		14,763		-		14,763
Government guaranteed collateralized mortgage obligations		-		1,721		-		1,721
Private label collateralized mortgage obligations		-		255		-		255
Auction-rate trust preferred securities		-		-		7,244		7,244
Residential loans held for sale		-		2,993		-		2,993
Assets measured at fair value on a non-recurring basis:
Impaired loans	$	-	$	-	$	18,355	$	18,355
Foreclosed real estate and other repossessed assets		-		-		873		873
Mortgage-servicing rights		-		-		726		726

There were no significant transfers of assets between Levels 1, 2 or 3 of the fair value hierarchy during the three or six months ended June 30, 2012.

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The following table shows a reconciliation of the beginning and ending balances for Level 3 assets measured at fair value on a recurring basis:

	For the Six			For the Year
	Months Ended			Ended
	June 30,			December 31,
(In thousands)	2012			2011
Balance at beginning of period	$	7,244		$	7,960
Increase (decrease) in fair value of securities included in accumulated other comprehensive income		507			(516	)
Redemptions at par		(300	)		(200	)
Balance at end of period	$	7,451		$	7,244

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

This discussion should be read in conjunction with the Company’s Consolidated Financial Statements for the year ended December 31, 2011 included in the Company’s Annual Report on Form 10-K/A.

Forward-Looking Statements

This report contains forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project” or similar expressions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, changes in interest rates, national and regional economic conditions, legislative and regulatory changes, monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board, the size, quality and composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area, changes in real estate market values in the Company’s market area, and changes in relevant accounting principles and guidelines. Additional factors are discussed below under “Item 1A – Risk Factors” and in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2011. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, the Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

Comparison of Financial Condition at June 30, 2012 and December 31, 2011

Total assets contracted $16.0 million from $572.2 million at December 31, 2011 to $556.2 million at June 30, 2012. Net loans receivable decreased by $25.1 million, or 5.4%, partially offset by an increase in investments of $5.5 million and an increase in cash and cash equivalents of $4.7 million. Multi-family and commercial real estate loans decreased by $10.8 million, one-to four-family loans decreased by $9.2 million, commercial business loans decreased by $3.8 million and consumer loans decreased by $3.0 million. These decreases were partially offset by an increase in construction loans of $3.7 million, primarily due to a reclassification of one large loan from the commercial business loan portfolio. The decrease in one-to four-family loans is primarily related to the sale of new production fixed rate mortgages on the secondary market. Commercial real estate loans and commercial business loans decreased primarily due to normal amortization, repayments, charge offs, and decreased demand for these types of products. Consumer loans have decreased as customers have been paying off second mortgages as they refinance into first mortgages.

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Total liabilities were $477.3 million at June 30, 2012 compared to $489.9 million at December 31, 2011. Deposits at June 30, 2012 were relatively flat with an increase of $459,000, or 0.1%, from December 31, 2011. Between December 31, 2011 and June 30, 2012, core deposits (defined as all deposits other than certificates of deposit) increased $14.2 million while certificates of deposit decreased $13.8 million. Management attributes the increase in core deposits to management’s strategy to offer competitive short term rates and products, as well as depositor preference to maintain funds in short term accounts given the expectation for higher market interest rates in future periods. Advances from the Federal Home Loan Bank of Boston decreased by $11.4 million, from $64.3 million at December 31, 2011 to $52.9 million at June 30, 2012. Reverse repurchase agreements decreased $2.2 million, from $6.5 million to $4.3 million over the same period.

Total stockholders’ equity was $79.0 million at June 30, 2012 compared to $82.3 million at December 31, 2011. The decrease in stockholders’ equity was primarily due to the net loss of $3.4 million experienced for the six month period and dividends of $397,000 paid to shareholders, partially offset by a net decrease in the unrealized loss on available for sale securities of $427,000.

Comparison of Operating Results For the Three and Six Months Ended June 30, 2012 and 2011

General. For the three months ended June 30, 2012, the Company recorded a net loss of $715,000 compared to net income of $505,000 for the three months ended June 30, 2011, a decrease of $1.2 million or 241.6%. The Company recorded a net loss of $3.4 million for the six month period ended June 30, 2012, compared to net income of $901,000 for the six months ended June 30, 2011. The decrease was primarily due to increased loan loss provisions and a higher level of noninterest expense, including the previously reported deposit related charge relating to the underpayment of interest on certain certificate of deposit accounts. These increases were partially offset by higher levels of net interest income and noninterest income.

Net Interest Income. Net interest income for the quarter ended June 30, 2012 totaled $4.64 million compared to $4.58 million for the quarter ended June 30, 2011, an increase of $62,000 or 1.4%. For the six month period ended June 30, 2012, net interest income totaled $9.6 million, compared to $9.0 million for the six months ended June 30, 2011. The increase in net interest income was primarily due to a decrease in interest expense in both periods. Interest expense decreased by $875,000, or 38.3%, in the three month period and decreased by $1.7 million, or 36.2%, in the six month period. The decrease was primarily due to a decrease in the average rates paid on interest bearing liabilities. The average rates paid on deposits and borrowings decreased by 57 basis points in both the three and six month periods. The rate decrease is mainly due to certificates of deposit renewing at lower rates or being transferred to savings accounts during the period, combined with the payoff of higher rate borrowings from the Federal Home Loan Bank at maturity. The average balances of interest bearing liabilities decreased by 8.3% and 6.5% for the three and six months ended June 30, 2012, respectively. The decrease in interest bearing liabilities is attributed primarily to a decrease in the average balance of borrowings in both periods.

The decrease in interest expense was partially offset by a decrease in interest income. Interest income decreased by $813,000, or 11.8%, in the three month period and decreased by $1.1 million, or 8.1% in the six month period. The decrease was primarily due to a decrease in the average rates earned on loans and investments. The average rates earned on loans and investments decreased by 42 basis points and 30 basis points in the three and six month periods, respectively. Additionally, the average balances of interest earning assets decreased by 4.0% and 2.4% for the three and six months ended June 30, 2012. The decrease in interest earning assets is attributed to decreases of 6.6% and 4.5% in the average balance of the loan portfolio in the three and six month periods, respectively, partially offset by increases of 23.1% and 18.3% in the average balance of the investment portfolio over the same periods. The decreases in the loan portfolio are due primarily to the sale of new production of residential mortgages through the Bank’s secondary mortgage operation, combined with loan payoffs.

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The following table summarizes changes in interest income and interest expense for the three and six months ended June 30, 2012 and 2011:

	Three Months							Six Months
	Ended June 30,							Ended June 30,
	2012		2011		% Change			2012		2011		% Change
	(Dollars in thousands)
Interest income:
Loans	$	5,652	$	6,452		(12.40	)%	$	11,699	$	12,784		(8.49	)%
Investment securities		390		406		(3.94	)		801		831		(3.61	)
Federal Home Loan Bank stock		8		5		60.00			16		10		60.00
Total interest income		6,050		6,863		(11.85	)		12,516		13,625		(8.14	)
Interest expense:
Certificate accounts		854		1,541		(44.58	)		1,819		3,128		(41.85	)
Regular savings accounts		88		119		(26.05	)		179		223		(19.73	)
Checking and NOW accounts		12		11		9.09			24		22		9.09
Money market savings accounts		21		47		(55.32	)		47		91		(48.35	)
Total interest-bearing deposits		975		1,718		(43.25	)		2,069		3,464		(40.27	)
FHLB advances		425		547		(22.30	)		870		1,136		(23.42	)
Other borrowings		7		17		(58.82	)		20		40		(50.00	)
Total interest expense		1,407		2,282		(38.34	)		2,959		4,640		(36.23	)
Net interest income	$	4,643	$	4,581		1.35	%	$	9,557	$	8,985		6.37	%

The following table summarizes average balances and average yields and costs for the three and six months ended June 30, 2012 and 2011:

	Three Months Ended June 30,										Six Months Ended June 30,
	2012					2011					2012					2011
	Average		Yield/			Average		Yield/			Average		Yield/			Average		Yield/
	Balance		Cost			Balance		Cost			Balance		Cost			Balance		Cost
	(Dollars in thousands)
Interest-earning assets
Loans	$	448,366		5.04	%	$	482,770		5.35	%	$	455,621		5.14	%	$	478,348		5.35	%
Fed Funds sold		2,985		0.00			2,100		0.00			2,841		0.00			2,126		0.00
Investment securities		53,609		2.91			43,539		3.73			52,705		3.04			44,535		3.73
Federal Home Loan Bank stock		5,917		0.54			6,252		0.32			6,062		0.53			6,252		0.32
Total interest-earning assets	$	510,877		4.74		$	534,661		5.13		$	517,229		4.84		$	531,261		5.13
Interest-bearing liabilities
Certificate accounts	$	194,199		1.76		$	233,623		2.64		$	198,413		1.83		$	235,935		2.65
Regular savings accounts & escrow		116,007		0.30			93,987		0.51			113,297		0.32			89,631		0.50
Checking and NOW accounts		73,494		0.07			69,871		0.06			70,805		0.07			64,669		0.07
Money market savings accounts		27,628		0.30			28,080		0.67			27,893		0.34			27,443		0.66
Total interest-bearing deposits		411,328		0.95			425,561		1.61			410,408		1.01			417,678		1.66
FHLB advances		59,865		2.84			86,692		2.52			61,756		2.82			87,661		2.59
Other borrowings		7,510		0.37			9,841		0.69			10,826		0.37			11,395		0.70
Total interest-bearing liabilities	$	478,703		1.18	%	$	522,094		1.75	%	$	482,990		1.23	%	$	516,734		1.80	%

Allowance for Loan Losses and Asset Quality. The allowance for loan losses is a valuation allowance for the probable losses inherent in the loan portfolio. We evaluate the need to establish allowances against losses on loans on a quarterly basis, or more often if warranted. When additional allowances are needed a provision for loan losses is charged against earnings. The recommendations for increases or decreases to the allowance are presented by management to the Board of Directors on a quarterly basis, or more often if warranted. The methodology for assessing the adequacy of the allowance for loan losses consists of the following process:

On a quarterly basis, or more often if warranted, management analyzes the loan portfolio. For individually evaluated loans that are considered impaired, a charge to the allowance will be made based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or for loans that are considered collateral dependant, the fair value of the collateral when a loss in not confirmed. A loan is considered impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due under the contractual term of the loan agreement.

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All other loans, including loans that are individually evaluated but not considered impaired, are segregated into groups based on similar risk factors. Each of these groups is then evaluated based on several factors to estimate credit losses. Management will determine for each category of loans with similar risk characteristics the historical loss rate. Historical loss rates provide a reasonable starting point for the Bank’s analysis but analysis and trends in losses do not form a sufficient basis to determine the appropriate level of the loan loss allowance. Management also considers qualitative and environmental factors likely to cause losses. These factors include but are not limited to: changes in the amount and severity of past due, non-accrual and adversely classified loans; changes in local, regional, and national economic conditions that will affect the collectibility of the portfolio; changes in the nature and volume of loans in the portfolio; changes in concentrations of credit, lending area, industry concentrations, or types of borrowers; changes in lending policies, procedures, competition, management, portfolio mix, competition, pricing, loan to value trends, extension and modification requests; and loan quality trends. This analysis establishes factors that are applied to each of the segregated groups of loans to determine an acceptable level of loan loss allowance.

In addition, the Company engages an independent consultant to review the commercial loan portfolio and considers recommendations based on their review of specific credits in the portfolio for classifying and monitoring these loans.

Although the Company believes that it uses the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. In addition, because further events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses is adequate or that increases will not be necessary should the quality of any loans deteriorate as a result of the factors discussed above.

Furthermore, while the Company believes it has established the allowance for loan losses in conformity with GAAP, there can be no assurance that regulators, in reviewing the Company’s loan portfolio during their examination process, will not request the Company to increase our allowance for loan losses based on information available to them at the time of their examination and their judgment, which may differ from ours.

Any material increase in the allowance for loan losses may adversely affect the Company’s financial condition and results of operations.

The following table summarizes the activity in the allowance for loan losses and provision for loan losses for the three and six months ended June 30, 2012 and 2011:

	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Allowance at beginning of period	$	9,793		$	6,684		$	8,053		$	6,393
Provision for loan losses		2,147			1,040			6,692			1,478
Charge-offs		(972	)		(116	)		(3,783	)		(263	)
Recoveries		4			1			10			1
Net charge-offs		(968	)		(115	)		(3,773	)		(262	)
Allowance at end of period	$	10,972		$	7,609		$	10,972		$	7,609

27

The provision for loan losses was $2.1 million for the three months ended June 30, 2012, compared to $1.0 million for the same period in 2011. The increased provision in the 2012 period is due to management’s estimate of possible losses in the loan portfolio, primarily due to increased non-performing loans, charge offs and continuing recessionary economic conditions. Provisions of $6.7 million and $1.5 million were recorded for the six months ended June 30, 2012 and 2011, respectively. The balances of non-performing assets increased $4.0 million between December 31, 2011 and June 30, 2012, primarily as a result of higher balances of nonaccrual loans. Classified assets increased $7.3 million over the same period as several large loans were downgraded. Classified assets consisted primarily of loans rated special mention, substandard or doubtful in accordance with regulatory guidance. Additionally, three investments totaling $2.5 million, which were performing at the end of the period, and real estate acquired through foreclosure in the amount of $403,000 are included in the substandard category. Charge-offs were $972,000 and $3.8 million during the three and six months ended June 30, 2012, respectively, compared to $116,000 and $263,000 during the three and six months ended June 30, 2011, respectively. The charge-offs in the 2012 period were due to the write-down of $347,000 on 17 one- to four-family loans, one of which was for a deed-in-lieu of foreclosure, the write-down of $145,000 on six home equity loans, one of which was to facilitate a short sale of the collateral property, the write down of 13 commercial real estate loans and seven construction loans in the amounts of $1.2 million and $629,000, respectively, and the charge-off of 21 commercial business loans totaling $1.4 million. Included in the charge-off amounts this period was the write off of $1.1 million of specific reserves that were allowed under previous regulatory supervision, but are now required to be charged directly against the loan balances.

The following table provides information with respect to the Company’s nonperforming assets at the dates indicated. The Company did not have any accruing loans past due 90 days or more at the dates presented:

	At June 30,			At December 31,
	2012			2011			% Change
	(Dollars in thousands)
Nonaccrual loans	$	25,262		$	16,187			56.06	%
Troubled debt restructurings		3,875			8,494			(54.38	)
Real estate owned		403			783			(48.53	)
Other repossessed assets		-			90			(100.00	)
Total nonperforming assets	$	29,540		$	25,554			15.60	%
Total nonperforming loans to total loans		6.47	%		5.20	%		24.42	%
Total nonperforming loans to total assets		5.24	%		4.31	%		21.58	%
Total nonperforming assets to total assets		5.31	%		4.47	%		18.79	%

The following table shows the aggregate amounts of the Company’s classified assets at the dates indicated:

	At June 30,		At December 31,
	2012		2011
	(In thousands)
Special mention assets	$	26,425	$	24,756
Substandard assets		40,050		36,094
Doubtful assets		218		1,429
Loss assets		-		-
Total classified assets	$	66,693	$	62,279

The 7.1% increase in the level of classified assets from December 31, 2011 to June 30, 2012 was primarily in the commercial loan portfolio. Classified assets are primarily loans rated special mention or substandard in accordance with regulatory guidance. These assets warrant and receive increased management oversight and allowance for loan losses (both general allowances and, in certain cases, specific allowances) have been established to account for the increased credit risk of these assets.  At June 30, 2012, $29.5 million of classified assets were nonperforming assets, compared to $25.6 million at December 31, 2011.

28

Noninterest Income. The following table summarizes noninterest income for the three and six months ended June 30, 2012 and 2011.

	Three Months							Six Months
	Ended June 30,							Ended June 30,
	2012		2011		% Change			2012		2011		% Change
(Dollars in thousands)
Mortgage banking income	$	625	$	355		76.06	%	$	1,016	$	483		110.35	%
Fees for other services		263		233		12.88			525		406		29.31
Fees for services related to deposit accounts		204		213		(4.23	)		406		426		(4.69	)
Income from bank owned life insurance		76		78		(2.56	)		151		155		(2.58	)
Income from investment advisory services, net		51		65		(21.54	)		107		139		(23.02	)
Net gain on investments		-		86		(100.00	)		-		86		(100.00	)
Recovery from legal settlement		-		-		N/A			-		147		(100.00	)
Other income		30		32		(6.25	)		54		56		(3.57	)
Total	$	1,249	$	1,062		17.61	%	$	2,259	$	1,898		19.02	%

Noninterest income was $1.2 million for the quarter ended June 30, 2012 compared to $1.0 million for the quarter ended June 30, 2011, an increase of 17.6%. For the six months ended June 30, 2012 noninterest income was $2.3 million compared to $1.9 million for the period ended June 30, 2011, an increase of 19.0%. The increase in both periods is primarily due to an increase in income generated by increased sales of mortgage loans in the secondary mortgage market, combined with increases in fees for other services. These increases were partially offset by decreases in gains on investments, income from investment advisory services, fees for services related to deposit accounts and income from bank owned life insurance. Additionally, $147,000, representing a partial recovery with respect to Fannie Mae auction rate pass-through certificates on which an other-than-temporary impairment charge was recorded in the third quarter of 2008, is included in noninterest income for the six month period ended June 30, 2011.

Noninterest Expense. The following table summarizes noninterest expense for the three and six months ended June 30, 2012 and 2011.

	Three Months								Six Months
	Ended June 30,								Ended June 30,
	2012			2011		% Change			2012		2011		% Change
(Dollars in thousands)
Compensation, taxes and benefits	$	2,705		$	2,326		16.29	%	$	5,314	$	4,669		13.81	%
Office occupancy		575			565		1.77			1,150		1,172		(1.88	)
Professional fees		244			122		100.00			537		259		107.34
Loss on foreclosed real estate, net		204			49		316.33			341		88		287.50
Computer processing		194			64		203.13			368		326		12.88
FDIC insurance premiums		187			172		8.72			321		376		(14.63	)
Advertising		160			106		50.94			286		205		39.51
Directors compensation		130			110		18.18			335		286		17.13
Office supplies		53			50		6.00			107		97		10.31
Public company expenses		38			30		26.67			57		48		18.75
Deposit related charge (reduction)		(88	)		-		N/A			712		-		N/A
Other expenses		468			292		60.27			813		610		33.28
Total	$	4,870		$	3,886		25.32	%	$	10,341	$	8,136		27.10	%

Noninterest expense was $4.9 million for the quarter ended June 30, 2012 compared to $3.9 million for the quarter ended June 30, 2011. For the six months ended June 30, 2012 noninterest expense was $10.3 million, compared to $8.1 million for the six months ended June 30, 2011. The increase was the result of increases in compensation costs, professional fees, net loss on foreclosed real estate, advertising, directors compensation and office supplies over the 2011 period. These increases were partially offset by decreases in office occupancy and FDIC insurance premiums in the six month period. The increases in compensation and professional fees are due to additional staff hired and additional work performed by legal and accounting professionals related to compliance with the previously announced regulatory order. Additionally, an $88,000 reduction in the estimate for the previously announced $800,000 accrual for a deposit-related charge is included in noninterest expense for the three month period. The net charge of $712,000 is included in noninterest expense for the six month period.

29

Income Taxes. Provision (benefit) for income taxes was ($410,000) for the quarter ended June 30, 2012 compared to $212,000 for the quarter ended June 30, 2011, and ($1.8 million) for the six months ended June 30, 2012 compared to $368,000 for the six months ended June 30, 2011. The primary reason for the decrease was the net loss experienced before provision for income taxes.

Liquidity and Capital Resources

Liquidity is the ability to meet current and future short-term financial obligations. The Bank’s primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of investment securities and advances from the Federal Home Loan Bank of Boston. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

Each quarter the Bank projects liquidity availability and demands on this liquidity for the next 90 days. The Bank regularly adjusts its investments in liquid assets based upon its assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities, and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in federal funds and short- and intermediate-term U.S. Government agency obligations.

The Bank’s most liquid assets are cash and cash equivalents. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At June 30, 2012, cash and cash equivalents totaled $22.8 million, including federal funds of $868,000. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $26.5 million at June 30, 2012. At June 30, 2012, the Bank had the ability to borrow a total of $136.2 million from the Federal Home Loan Bank of Boston, of which $52.9 million in borrowings was outstanding, along with $4.4 million in repurchase agreements. At June 30, 2012, the Bank had arranged overnight lines of credit of $2.5 million with the Federal Home Loan Bank of Boston. The Bank had no overnight advances outstanding with the Federal Home Loan Bank of Boston as of that date. In addition, at June 30, 2012, the Bank had the ability to borrow $15 million from the Federal Reserve Bank Discount Window. The Bank had no advances outstanding on this line at June 30, 2012.

The following table summarizes the commitments and contingent liabilities as of the dates indicated:

	June 30,		December 31,
(In thousands)	2012		2011
Commitments to extend credit:
Loan commitments on one-to four-family loans	$	8,655	$	8,782
Unused lines of credit		20,044		19,424
Amounts due mortgagors on construction loans		15,250		15,476
Amounts due on commercial  loans		15,755		21,213
Commercial letters of credit		4,015		5,683

Certificates of deposit due within one year of June 30, 2012 totaled $94.7 million, or 23.0% of total deposits. If these deposits do not remain with the Bank, it will be required to seek other sources of funds, including other certificates of deposit and its available lines of credit. Depending on market conditions, the Bank may be required to pay higher rates on such deposits or other borrowings than are currently paid on the certificates of deposit due on or before June 30, 2013. Based on past experience, however, the Bank believes that a significant portion of our certificates of deposit will remain with us. The Bank has the ability to attract and retain deposits by adjusting the interest rates offered.

30

Historically, the Company (on a consolidated basis) has remained highly liquid. The Company is not aware of any trends and/or demands, commitments, events or uncertainties that could result in a material decrease in liquidity. The Company expects that all of our liquidity needs, including the contractual commitments stated above and increases in loan demand, can be met by our currently available liquid assets and cash flows. In the event loan demand was to increase at a pace greater than expected, or any unforeseen demand or commitment were to occur, we could access our borrowing capacity with the Federal Home Loan Bank of Boston or the Federal Reserve Bank Discount Window. The Company expects that our currently available liquid assets and our ability to borrow from both the Federal Home Loan Bank of Boston and the Federal Reserve Bank would be sufficient to satisfy our liquidity needs without any material adverse effect on our liquidity.

The Bank’s primary investing activities are the origination of loans and the purchase of securities. For the six months ended June 30, 2012, the Bank originated $85.9 million of loans, including renewals, refinances and advances. These activities were funded primarily by the proceeds from sales and maturities of available-for-sale securities and held to maturity securities of $6.3 million, proceeds of from the sale of loans in the secondary market in the amount of $37.6 million, and loan payoffs combined with normal amortization.

Financing activities consist primarily of activity in deposit accounts and in Federal Home Loan Bank advances. The Bank experienced a net increase in total deposits of $458,000 for the six months ended June 30, 2012. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and its local competitors and other factors. The Bank generally manages the pricing of deposits to be competitive and to increase core deposit relationships. Occasionally, the Bank offers promotional rates on certain deposit products in order to attract deposits. The Bank experienced a net decrease in Federal Home Loan Bank advances of $11.4 million, and a decrease in repurchase agreements of $2.2 million for the six months ended June 30, 2012.

The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company, on a stand-alone basis, is responsible for paying any dividends declared to its shareholders. The Company’s primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to the Company in any calendar year, without the receipt of prior approval from the OCC but with prior notice to the OCC, cannot exceed net income for that year to date plus retained net income (as defined) for the preceding two calendar years. On a stand-alone basis, the Company had liquid assets of $11.5 million at June 30, 2012.

The Company is not subject to separate regulatory capital requirements. At June 30, 2012, the Bank was subject to the regulatory capital requirements of the OCC, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At June 30, 2012, the Bank exceeded all of its regulatory capital requirements, and was considered “well capitalized” under regulatory guidelines.

The following table is a summary of the Bank’s actual capital as computed under the standards established by the OCC at June 30, 2012.

							Naugatuck Valley
	OCC Regulation						Savings and Loan
	Adequately			Well
(Dollars in thousands)	Capitalized			Capitalized			Amount		Ratio
Total Risk-Based Capital (to Risk-Weighted Assets)		8.00	%		10.00	%	$	67,704		17.49	%
Tier I Risk-Based Capital (to Risk-Weighted Assets)		4.00	%		6.00	%		62,866		16.24	%
Tier I  Capital (to Adjusted Total Assets)		4.00	%		5.00	%		62,866		11.27	%

Off-Balance Sheet Arrangements

In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with GAAP, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risks. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments, unused lines of credit, amounts due on construction loans, amounts due on commercial loans, commercial letters of credit and commitments to sell loans.

For the six months ended June 30, 2012, the Company did not engage in any off-balance-sheet transactions reasonably likely to have a material effect on its financial condition, results of operations or cash flows.

31

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Qualitative Aspects of Market Risk.The Company’s most significant form of market risk is interest rate risk. The Company manages the interest rate sensitivity of our interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment. Deposit accounts typically react more quickly to changes in market interest rates than mortgage loans because of the shorter maturities of deposits. As a result, sharp increases in interest rates may adversely affect the Company’s earnings while decreases in interest rates may beneficially affect the Company’s earnings. To reduce the potential volatility of the Company’s earnings, the Company has sought to improve the match between assets and liability maturities (or rate adjustment periods), while maintaining an acceptable interest rate spread, by originating adjustable-rate mortgage loans for retention in our loan portfolio, variable-rate home equity lines and variable-rate commercial loans and by purchasing variable-rate investments and investments with expected maturities of less than 10 years. Generally, loans are sold without recourse and with servicing retained. The Company currently does not participate in hedging programs, interest rate swaps or other activities involving the use of off-balance sheet derivative financial instruments.

The Bank’s Asset/Liability Committee communicates, coordinates and controls all aspects of asset/liability management. The committee establishes and monitors the volume and mix of assets and funding sources with the objective of managing assets and funding sources.

Quantitative Aspects of Market Risk. The Company also uses a third party consultant to perform interest rate sensitivity and net interest income simulation analysis. The net interest income simulation measures the volatility of net interest income as a consequence of different interest rate conditions at a particular point in time. Using a range of assumptions, the simulations provide an estimate of the impact of changes in interest rates on net interest income. The various assumptions used in the model are reviewed on a quarterly basis by the asset/liability committee. Changes to these assumptions can significantly affect the results of the simulation.

The following table, which is based on information that we provided to our third party consultant as of June 30, 2012, presents an approximation of our exposure as a percentage of estimated net interest income for the next 12-month period using interest income simulation. The simulation uses projected repricing of assets and liabilities on the basis of contractual maturities, anticipated repayments and scheduled rate adjustments. Prepayment speeds can have a significant impact on the interest income simulation. When interest rates rise, prepayment speeds tend to slow down. When interest rates fall, prepayment speeds tend to increase. We believe that our assumptions included in the simulation are reasonable; however, there can be no guarantee that these prepayment rates will approximate actual future repayment activity.

	At June 30, 2012
	Percentage Change in
Basis Point (“bp”)	Estimated Net Interest Income
Change in Rates	Over 12 months
+300 bp		-0.04	%
+200		0.54	%
+100		0.60	%
Flat		0.00	%
-100		-2.12	%

Our third party consultant also performs dynamic modeling. This type of modeling employs a further set of assumptions attempting to simulate scenarios that are more likely than an immediate and sustained shock of 100 to 300 basis points and include the business planning strategies. The changes in rates in the table below are assumed to occur immediately.

32

Item 4. Controls and Procedures.

Naugatuck Valley Financial Corporation’s Chief Executive Officer and Chief Financial Officer (collectively, the "Certifying Officers") evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934) as of June 30, 2012 in connection with the filing of the initial Form 10-Q for that period.

The Certifying Officers evaluated the effectiveness of disclosure controls and procedures as of June 30, 2012. Based on that evaluation, and in light of material weaknesses in internal control over financial reporting that existed throughout this quarter as described below, management concluded that the Company’s disclosure and procedures were not effective as of June 30, 2012.

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-l5(f) under the Exchange Act.

Because of their inherent limitations, systems of internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can only provide reasonable assurance with respect to financial statement preparation and presentation.

A "material weakness" in internal control over financial reporting is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected in a timely basis by the Company's internal controls.

Material Weaknesses In Internal Control

Allowance for Loan and Lease Losses

Estimating the allowance for loan losses requires credit administration staff to estimate the provision for loan losses based on the Company’s model, processes and procedures. Management identified deficiencies within the credit administration function which compromised the operational effectiveness of the internal controls, particularly in estimating the provision for loan losses. This led to management’s determination that there was a material weakness in internal control over financial reporting in estimating the allowance for loan losses.

Financial & Accounting

Management concluded that a material weakness existed due to ineffective staffing resources with the requisite skills and industry knowledge of U.S. GAAP and regulatory accounting, which resulted in insufficient accounting supervision over the credit administration function.

33

Remediation and Compensating Controls:

The Company has implemented certain changes in its internal controls as of the date of this report to address the material weaknesses. Specifically, management took the following steps to remediate the material weaknesses set forth above:

Allowances for Loan and Lease Losses.

— Engaged qualified outside consultants to review the compliance of the ALLL model for compliance with GAAP and regulatory requirements.

— The consultants also tested the ALLL model for integrity of input and accuracy of computations. Additionally, the consultants reviewed the factors used in the model for reasonableness and consistency.

— Improved the processes for identifying loans and the determination of the amount of impairment.

Financial & Accounting

— Increased oversight of the financial reporting process through the Audit Committee.

34

Part II - OTHER INFORMATION

Item 1. - Legal Proceedings.

The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. Such routine legal proceedings, in the aggregate, are believed by management to be immaterial to its financial condition and results of operations.

Item 1A. – Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2011, which could materially affect the Company’s business, financial condition or future results. The risks described in the Company’s Annual Report on Form 10-K/A are not the only risks that the Company faces. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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

(a) Not applicable.

(b) Not applicable.

(c) The Company did not repurchase any shares of its common stock during the quarter ended June 30, 2012.

Item 3. – Defaults Upon Senior Securities. Not applicable

Item 4. – Mine Safety Disclosures. Not applicable

Item 5. – Other Information. Not applicable

Item 6. – Exhibits.

Exhibits –

3.1 Articles of Incorporation of Naugatuck Valley Financial Corporation (1)

3.2 Bylaws of Naugatuck Valley Financial Corporation, as amended (2)

4.1 Specimen Stock Certificate of Naugatuck Valley Financial Corporation (3)

31.1 Rule 13a-14(a)/15d-14(a) Certification.

31.2 Rule 13a-14(a)/15d-14(a) Certification.

32 Section 1350 Certifications.

101* The following materials from the Company’s Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2012, formatted in XBRL (Extensible Business reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Income and Comprehensive Income, (iii) the Consolidated Statements of Changes in Stockholder’s Equity, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to Unaudited Consolidated Financial Statements.

* Furnished, not filed.

(1) Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1, as amended, initially filed on June 11, 2010.

(2) Incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, as amended, initially filed on June 11, 2010.

(3) Incorporated herein by reference to Exhibit 4.0 to the Company’s Registration Statement on Form S-1, as amended, initially filed on June 11, 2010.

35

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Naugatuck Valley Financial Corporation
Date: November 28, 2012	by:	/s/ William C. Calderara
		William C. Calderara
		President & Chief Executive Officer
		(principal executive officer)
Date: November 28, 2012	by:	/s/ Thomas Van Lenten
		Thomas Van Lenten
		Chief Financial Officer

36

EX-31.1

Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, William C. Calderara, certify that:

1. I have reviewed this quarterly report on Form 10-Q/A of Naugatuck Valley Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 28, 2012
By	/s/ William C. Calderara
	President and Chief Executive Officer
	(principal executive officer)

EX-31.2

Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Thomas Van Lenten, certify that:

1. I have reviewed this quarterly report on Form 10-Q/A of Naugatuck Valley Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 28, 2012
By:	/s/ Thomas Van Lenten
	Chief Financial Officer

EX-32

EXHIBIT 32

SECTION 1350 CERTIFICATIONS

In connection with the Quarterly Report of Naugatuck Valley Financial Corporation (the “Company”) on Form 10-Q/A for the period ended March 31, 2012, as filed with the Securities and Exchange Commission (the "Report"), I, William C. Calderara, President and Chief Executive Officer of the Company, and I, Thomas Van Lenten, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as added by section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the date and for the period covered by the Report.

/s/ William C. Calderara

William C. Calderara

President and Chief Executive Officer

(principal executive officer)

/s/ Thomas Van Lenten

Thomas Van Lenten

Chief Financial Officer

Date: November 28, 2012

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COMPREHENSIVE INCOME (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Net income (loss)	$ (715)	$ 505	$ (3,391)	$ 901
Other comprehensive income:
Unrealized gain (loss) on securities available-for-sale	(76)	226	386	101
Reclassification adjustment for (gain) loss realized in net income	0	(86)	0	(86)
Other comprehensive income (loss) before tax effect	(76)	140	386	15
Income tax effect related to items of other comprehensive income (loss)	(8)	19	(41)	(3)
Other comprehensive income (loss) net of tax effect	(68)	121	427	18
Total comprehensive income (loss)	$ (783)	$ 626	$ (2,964)	$ 919

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FAIR VALUE (Details 2) (USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Balance at beginning of period	$ 7,244	$ 7,960
Increase (decrease) in fair value of securities included in accumulated other comprehensive income	507	(516)
Redemptions at par	$ (300)	$ (200)
Balance at end of period	$ 7,451	$ 7,244

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LOANS RECEIVABLE (Details 4) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Carrying Amount, impaired loans without valuation allowance	$ 24,996	$ 8,624
Unpaid Principal Balance, impaired loans without valuation allowance	29,805	9,133
Related Allowance, impaired loans without valuation allowance	0	0
Average Carrying Amount, impaired loans without valuation allowance	25,660	6,127
Interest Income Recognized, impaired loans without valuation allowance	262	329
Carrying Amount, impaired loans with valuation allowance	2,717	10,803
Unpaid Principal Balance, impaired loans with valuation allowance	3,439	12,268
Average Carrying Amount, impaired loans with valuation allowance	2,958	7,419
Interest Income Recognized, impaired loans with valuation allowance	59	386
Carrying Amount, Total impaired loans	27,773	19,427
Unpaid Principal Balance, Total impaired loans	33,244	21,401
Related Allowance, Total impaired loans	305	1,072
Average Carrying Amount, Total impaired loans	28,618	13,546
Interest Income Recognized, Total impaired loans	321	715
One-to four-family [Member] | Real Estate [Member]
Carrying Amount, impaired loans without valuation allowance	4,636	1,360
Unpaid Principal Balance, impaired loans without valuation allowance	5,002	1,375
Related Allowance, impaired loans without valuation allowance	0	0
Average Carrying Amount, impaired loans without valuation allowance	4,784	1,368
Interest Income Recognized, impaired loans without valuation allowance	84	42
Carrying Amount, impaired loans with valuation allowance		1,361
Unpaid Principal Balance, impaired loans with valuation allowance		1,361
Average Carrying Amount, impaired loans with valuation allowance		1,362
Interest Income Recognized, impaired loans with valuation allowance		42
Related Allowance, Total impaired loans		109
Construction Loans [Member] | Real Estate [Member]
Carrying Amount, impaired loans without valuation allowance	10,492	959
Unpaid Principal Balance, impaired loans without valuation allowance	12,205	959
Related Allowance, impaired loans without valuation allowance	0	0
Average Carrying Amount, impaired loans without valuation allowance	10,485	944
Interest Income Recognized, impaired loans without valuation allowance	80	5
Carrying Amount, impaired loans with valuation allowance	2,717	7,515
Unpaid Principal Balance, impaired loans with valuation allowance	3,439	8,980
Average Carrying Amount, impaired loans with valuation allowance	2,958	4,173
Interest Income Recognized, impaired loans with valuation allowance	59	279
Related Allowance, Total impaired loans	305	510
Commercial Real Estate and Multi-Family [Member] | Real Estate [Member]
Carrying Amount, impaired loans without valuation allowance	8,892	3,334
Unpaid Principal Balance, impaired loans without valuation allowance	10,390	3,352
Related Allowance, impaired loans without valuation allowance	0	0
Average Carrying Amount, impaired loans without valuation allowance	9,195	3,370
Interest Income Recognized, impaired loans without valuation allowance	85	201
Carrying Amount, impaired loans with valuation allowance		1,088
Unpaid Principal Balance, impaired loans with valuation allowance		1,088
Average Carrying Amount, impaired loans with valuation allowance		1,097
Interest Income Recognized, impaired loans with valuation allowance		24
Related Allowance, Total impaired loans		336
Commercial Loan [Member]
Carrying Amount, impaired loans without valuation allowance	801	2,870
Unpaid Principal Balance, impaired loans without valuation allowance	1,811	3,094
Related Allowance, impaired loans without valuation allowance	0	0
Average Carrying Amount, impaired loans without valuation allowance	937	239
Interest Income Recognized, impaired loans without valuation allowance	7	80
Carrying Amount, impaired loans with valuation allowance		715
Unpaid Principal Balance, impaired loans with valuation allowance		715
Average Carrying Amount, impaired loans with valuation allowance		662
Interest Income Recognized, impaired loans with valuation allowance		35
Related Allowance, Total impaired loans		46
Consumer Other Financing Receivable [Member]
Carrying Amount, impaired loans without valuation allowance	175	101
Unpaid Principal Balance, impaired loans without valuation allowance	397	353
Related Allowance, impaired loans without valuation allowance	0	0
Average Carrying Amount, impaired loans without valuation allowance	259	206
Interest Income Recognized, impaired loans without valuation allowance	6	1
Carrying Amount, impaired loans with valuation allowance		124
Unpaid Principal Balance, impaired loans with valuation allowance		124
Average Carrying Amount, impaired loans with valuation allowance		125
Interest Income Recognized, impaired loans with valuation allowance		6
Related Allowance, Total impaired loans		$ 71

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FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Schedule Of Carrying Amount and Fair Values Of Financial Instruments [Table Text Block]

The following is a summary of the carrying value and estimated fair value of the Company’s significant financial instruments as of June 30, 2012 and December 31, 2011:

	June 30, 2012				December 31, 2011
	Carrying		Estimated		Carrying		Estimated
(In thousands)	Amount		Fair Value		Amount		Fair Value
Financial Assets
Cash and cash equivalents	$	22,778	$	22,778	$	18,069	$	18,069
Investment securities		55,891		56,709		50,343		50,721
Loans held for sale		1,358		1,358		2,993		2,993
Loans receivable, net		441,853		458,606		466,965		492,446
Accrued income receivable		1,773		1,773		1,932		1,932
Mortgage servicing rights		685		720		700		742
Financial Liabilities
Deposits		411,346		414,865		410,887		409,357
Borrowed funds		57,252		62,547		70,817		72,757
Mortgagors' escrow accounts		4,621		4,621		4,755		4,755

Fair Value, Assets Measured on Recurring and Nonrecurring Basis [Table Text Block]

Assets and liabilities measured at fair value on a recurring and non-recurring basis at June 30, 2012 and December 31, 2011 are summarized below:

	June 30, 2012
	Carrying Value
(In thousands)	Level 1		Level 2		Level 3		Total
Assets measured at fair value on a recurring basis:
Available-for-sale investment securities:
U.S. Government and agency obligations	$	-	$	1,050	$	-	$	1,050
Government guaranteed mortgage-backed securities		-		16,398		-		16,398
Government guaranteed collateralized mortgage obligations		-		1,346		-		1,346
Private label collateralized mortgage obligations		-		267		-		267
Auction-rate trust preferred securities		-		-		7,451		7,451
Residential loans held for sale		-		1,358		-		1,358
Assets measured at fair value on a non-recurring basis:
Impaired loans	$	-	$	-	$	27,465	$	27,465
Foreclosed real estate and other repossessed assets		-		-		403		403
Mortgage-servicing rights		-		-		803		803

	December 31, 2011
	Carrying Value
(In thousands)	Level 1		Level 2		Level 3		Total
Assets measured at fair value on a recurring basis:
Available-for-sale investment securities:
U.S. Government and agency obligations	$	-	$	1,068	$	-	$	1,068
Government guaranteed mortgage-backed securities		-		14,763		-		14,763
Government guaranteed collateralized mortgage obligations		-		1,721		-		1,721
Private label collateralized mortgage obligations		-		255		-		255
Auction-rate trust preferred securities		-		-		7,244		7,244
Residential loans held for sale		-		2,993		-		2,993
Assets measured at fair value on a non-recurring basis:
Impaired loans	$	-	$	-	$	18,355	$	18,355
Foreclosed real estate and other repossessed assets		-		-		873		873
Mortgage-servicing rights		-		-		726		726

Fair Value, Instruments Classified in Shareholders' Equity Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The following table shows a reconciliation of the beginning and ending balances for Level 3 assets measured at fair value on a recurring basis:

	For the Six			For the Year
	Months Ended			Ended
	June 30,			December 31,
(In thousands)	2012			2011
Balance at beginning of period	$	7,244		$	7,960
Increase (decrease) in fair value of securities included in accumulated other comprehensive income		507			(516	)
Redemptions at par		(300	)		(200	)
Balance at end of period	$	7,451		$	7,244

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EQUITY INCENTIVE PLAN (Details Textual) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2005
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period			371,794
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures			148,717
Stock Issued For Grant Or Exercise Of Awards			520,511
Share Base Compensation Arrangement By Share Based Payment Award Option Granted Vested					20.00%
Allocated Share-based Compensation Expense	$ 2,065	$ 4,550	$ 3,148	$ 10,301

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EARNINGS PER SHARE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Net income (loss)	$ (715)	$ 505	$ (3,391)	$ 901
Weighted-average common shares outstanding:
Basic (in shares)	6,610,729	6,826,963	6,610,766	6,827,055
Effect of dilutive stock options and restrictive stock awards	$ 0	$ 0	$ 0	$ 0
Diluted (in shares)	6,610,729	6,826,963	6,610,766	6,827,055
Earnings (loss) per common share:
Basic (in dollars per share)	$ (0.11)	$ 0.07	$ (0.51)	$ 0.13
Diluted (in dollars per share)	$ (0.11)	$ 0.07	$ (0.51)	$ 0.13

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FAIR VALUE (Details Textual) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Foreclosed Properties and Repossessed Assets Carrying Value	$ 258,000	$ 488,000
Valuation Adjustment To Foreclosed Property	$ 94,000

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BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

Basis of Accounting [Text Block]

NOTE 2 - BASIS OF PRESENTATION

The accompanying consolidated interim financial statements are unaudited and include the accounts of the Company, the Bank, and the Bank’swholly owned subsidiary, Naugatuck Valley Mortgage Servicing Corporation. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. All significant intercompany accounts and transactions have been eliminated in consolidation. These consolidated financial statements reflect, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position and the results of its operations and its cash flows at the dates and for the periods presented.

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statement of condition, and income and expenses for the interim period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for losses on loans, the valuation of real estate acquired in connection with foreclosure or in satisfaction of loans, deferred income taxes and the valuation of certain investment securities. While management uses available information to recognize losses and properly value these assets, future adjustments may be necessary based on changes in economic conditions both in Connecticut and nationally.

Management has evaluated subsequent events for potential recognition or disclosure in the financial statements. No subsequent events were identified that would have required a change to the financial statements or disclosure in the notes to the financial statements.

Operating results for the six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2011.

Certain reclassifications have been made to prior period consolidated financial statements to conform to the June 30, 2012 consolidated financial statement presentation. These reclassifications only changed the reporting categories and did not affect the Company’s results of operations or financial position.

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DIVIDENDS (Details Textual) (USD $)	0 Months Ended	6 Months Ended
	May 16, 2012	Jun. 30, 2012
Dividends declared, per common share (in dollars per share)	$ 0.03	$ 0.06

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LOANS RECEIVABLE (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Dec. 31, 2010
Totals loans	$ 455,679	$ 478,840
Allowance for loan losses	10,972	8,053	6,393
Undisbursed construction loans	2,574	3,489
Deferred loan origination fees, net	280	333
Loans receivable, net	441,853	466,965
Weighted average yield	5.16%	5.29%
One-to four-family [Member]
Totals loans	208,653	217,893
Allowance for loan losses	2,013	1,745	1,585
Commercial Real Estate and Multi-Family [Member]
Totals loans	150,083	160,858
Construction [Member]
Totals loans	33,399	29,734
Allowance for loan losses	1,072	1,327	600
Commercial business loans [Member]
Totals loans	32,869	36,645
Allowance for loan losses	1,424	754	884
Real Estate [Member]
Totals loans	392,135	408,485
Real Estate [Member] | One-to four-family [Member]
Totals loans	208,653	217,893
Real Estate [Member] | Commercial Real Estate and Multi-Family [Member]
Totals loans	150,083	160,858
Real Estate [Member] | Construction [Member]
Totals loans	33,399	29,734
Consumer Loan [Member]
Totals loans	30,675	33,710
Allowance for loan losses	542	482	610
Consumer Loan [Member] | Home Equity Line Of Credit [Member]
Totals loans	29,277	32,157
Consumer Loan [Member] | Savings Account [Member]
Totals loans	749	847
Consumer Loan [Member] | Automobile Loan [Member]
Totals loans	487	509
Consumer Loan [Member] | Personal [Member]
Totals loans	$ 162	$ 197

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INVESTMENT SECURITIES (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Securities in Continuous Unrealized Loss Position Less Than 12 Months, Number of Securities	2	2
Securities in Continuous Unrealized Loss Position Less Than 12 Months, Market Value	$ 4,005	$ 424
Securities in Continuous Unrealized Loss Position Less Than 12 Months, Unrealized Loss	(28)	(9)
Securities in Continuous Unrealized Loss Position 12 or More Consecutive Months, Number of Securities	3	3
Securities in Continuous Unrealized Loss Position 12 or More Consecutive Months, Market Value	2,414	1,900
Securities in Continuous Unrealized Loss Position 12 or More Consecutive Months, Unrealized Loss	(316)	(853)
Mortgage-Backed Securities, Issued By Us Government Sponsored Enterprises [Member]
Securities in Continuous Unrealized Loss Position Less Than 12 Months, Number of Securities	2	2
Securities in Continuous Unrealized Loss Position Less Than 12 Months, Market Value	4,005	4,244
Securities in Continuous Unrealized Loss Position Less Than 12 Months, Unrealized Loss	(28)	(9)
Mortgage-Backed Securities, Issued By Private Enterprises [Member]
Securities in Continuous Unrealized Loss Position 12 or More Consecutive Months, Number of Securities	1	1
Securities in Continuous Unrealized Loss Position 12 or More Consecutive Months, Market Value	267	256
Securities in Continuous Unrealized Loss Position 12 or More Consecutive Months, Unrealized Loss	(67)	(97)
Auction-Rate Trust Preferred Securities [Member]
Securities in Continuous Unrealized Loss Position 12 or More Consecutive Months, Number of Securities	2	2
Securities in Continuous Unrealized Loss Position 12 or More Consecutive Months, Market Value	2,150	1,644
Securities in Continuous Unrealized Loss Position 12 or More Consecutive Months, Unrealized Loss	$ (249)	$ (756)

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FAIR VALUE (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011	Dec. 31, 2010
Financial Assets, Carrying Amount
Cash and cash equivalents, Carrying Amount	$ 22,778	$ 18,069	$ 34,199	$ 14,263
Investment securities, Carrying Amount	55,891	50,343
Loans held for sale, Carrying Amount	1,358	2,993
Loans receivable, net, Carrying Amount	441,853	466,965
Accrued income receivable, Carrying Amount	1,773	1,932
Mortgage servicing rights, Carrying Amount	685	700
Financial Liabilities, Carrying Amount
Deposits, Carrying Amount	411,346	410,887
Borrowed funds, Carrying Amount	57,252	70,817
Mortgagors' escrow accounts, Carrying Amount	4,621	4,755
Financial Assets, Estimated Fair Value
Cash and Cash Equivalents, Fair Value Disclosure	22,778	18,069
Investment securities, Estimated Fair Value	56,709	50,721
Loans held for sale, Estimated Fair Value	1,358	2,993
Loans receivable, net, Estimated Fair Value	458,606	492,446
Accrued income receivable, Estimated Fair Value	1,773	1,932
Mortgage servicing rights, Estimated Fair Value	720	742
Financial Liabilities, Estimated Fair Value
Deposits, Estimated Fair Value	414,865	409,357
Borrowed funds, Estimated Fair Value	62,547	72,757
Mortgagors' escrow accounts, Estimated Fair Value	$ 4,621	$ 4,755

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LOANS RECEIVABLE (Details 1) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Allowance for Loan Losses:
Beginning Balance	$ 8,053	$ 6,393
Provision for loan losses	6,692	4,293
Charge-offs	(3,783)	(2,637)
Recoveries	10	4
Ending Balance	10,972	8,053
Ending loan balance individually evaluated for impairment	27,713	19,427
Ending loan balance collectively evaluated for impairment	427,966	459,413
One-to four-family [Member]
Allowance for Loan Losses:
Beginning Balance	1,745	1,585
Provision for loan losses	804	377
Charge-offs	(347)	(217)
Recoveries	4	0
Ending Balance	2,206	1,745
Ending loan balance individually evaluated for impairment	4,636	2,721
Ending loan balance collectively evaluated for impairment	204,017	215,172
Construction [Member]
Allowance for Loan Losses:
Beginning Balance	1,327	600
Provision for loan losses	842	1,449
Charge-offs	(629)	(722)
Recoveries	0	0
Ending Balance	1,540	1,327
Ending loan balance individually evaluated for impairment	13,209	8,474
Ending loan balance collectively evaluated for impairment	20,190	21,260
Commercial Real Estate [Member]
Allowance for Loan Losses:
Beginning Balance	3,745	2,714
Provision for loan losses	1,789	1,942
Charge-offs	(1,245)	(911)
Recoveries	0	0
Ending Balance	4,289	3,745
Ending loan balance individually evaluated for impairment	8,892	4,422
Ending loan balance collectively evaluated for impairment	141,191	156,436
Commercial Loan [Member]
Allowance for Loan Losses:
Beginning Balance	754	884
Provision for loan losses	3,052	383
Charge-offs	(1,416)	(516)
Recoveries	5	3
Ending Balance	2,395	754
Ending loan balance individually evaluated for impairment	801	3,585
Ending loan balance collectively evaluated for impairment	32,068	33,060
Consumer [Member]
Allowance for Loan Losses:
Beginning Balance	482	610
Provision for loan losses	205	142
Charge-offs	(146)	(271)
Recoveries	1	1
Ending Balance	542	482
Ending loan balance individually evaluated for impairment	175	225
Ending loan balance collectively evaluated for impairment	$ 30,500	$ 33,485

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LOANS RECEIVABLE (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Total	$ 455,679	$ 478,840
Commercial Loan [Member]
Total	32,869	36,645
Commercial Loan [Member] | Pass [Member]
Total	6,284	6,659
Commercial Loan [Member] | Special Mention [Member]
Total	19,088	21,941
Commercial Loan [Member] | Substandard [Member]
Total	4,116	2,072
Commercial Loan [Member] | Doubtful [Member]
Total	3,173	5,235
Commercial Loan [Member] | Doubtful and Loss [Member]
Total	208	738
Commercial Real Estate Construction [Member]
Total	27,115	22,222
Commercial Real Estate Construction [Member] | Pass [Member]
Total	0	216
Commercial Real Estate Construction [Member] | Special Mention [Member]
Total	8,187	7,463
Commercial Real Estate Construction [Member] | Substandard [Member]
Total	3,760	5,948
Commercial Real Estate Construction [Member] | Doubtful [Member]
Total	15,168	8,595
Commercial Real Estate Construction [Member] | Doubtful and Loss [Member]
Total	0	0
Commercial Real Estate [Member]
Total	150,083	160,858
Commercial Real Estate [Member] | Pass [Member]
Total	35,141	40,769
Commercial Real Estate [Member] | Special Mention [Member]
Total	81,692	88,089
Commercial Real Estate [Member] | Substandard [Member]
Total	17,871	15,383
Commercial Real Estate [Member] | Doubtful [Member]
Total	15,379	16,004
Commercial Real Estate [Member] | Doubtful and Loss [Member]
Total	0	613
Residential Prime [Member]
Total	208,653	217,893
Residential Prime [Member] | Pass [Member]
Total	202,420	213,049
Residential Prime [Member] | Special Mention [Member]
Total	308	746
Residential Prime [Member] | Substandard [Member]
Total	5,925	4,098
Residential Prime [Member] | Doubtful [Member]
Total	0	0
Residential Construction [Member]
Total	6,284	7,512
Residential Construction [Member] | Pass [Member]
Total	6,284	7,512
Residential Construction [Member] | Special Mention [Member]
Total	0	0
Residential Construction [Member] | Substandard [Member]
Total	0	0
Residential Construction [Member] | Doubtful [Member]
Total	0	0
Consumer Other Financing Receivable [Member]
Total	30,675	33,710
Consumer Other Financing Receivable [Member] | Performing Financing Receivable [Member]
Total	30,286	33,323
Consumer Other Financing Receivable [Member] | Nonperforming Financing Receivable [Member]
Total	$ 389	$ 387

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NATURE OF OPERATIONS

6 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

Nature of Operations [Text Block]

NOTE 1 – NATURE OF OPERATIONS

Effective June 29, 2011, Naugatuck Valley Financial Corporation (the “Company”) completed its public stock offering in connection with the conversion of Naugatuck Valley Mutual Holding Company (the “MHC”) from the mutual holding company to the stock holding company form of organization (the “Conversion”). As a result of the Conversion, the Company succeeded Naugatuck Valley Financial Corporation, a Federal corporation (the “Federal Corporation”), as the holding company for Naugatuck Valley Savings and Loan (the “Bank”) and the MHC ceased to exist. A total of 4,173,008 shares of Company common stock were sold in a subscription and community offering at $8.00 per share, including 250,380 shares purchased by the Naugatuck Valley Savings and Loan Employee Stock Ownership Plan (the “ESOP”). Additionally, shares totaling 2,829,358 were issued to the stockholders of the Federal Corporation (other than the MHC) in exchange for their shares of Federal Corporation common stock at an exchange ratio of 0.9978 share of Company common stock for each share of Federal Corporation common stock. Shares outstanding after the stock offering and the exchange totaled 7,002,366. Net proceeds from the reorganization and stock offering totaled $31.3 million, after deducting offering costs of $2.1 million.

Originally organized in 1922, the Bank is a federally chartered stock savings bank which is headquartered in Naugatuck, Connecticut. The Bank provides a full range of personal banking services to individual and small business customers located primarily in the Naugatuck Valley and the immediate surrounding vicinity. It is subject to competition from other financial institutions throughout the region. The Bank is also subject to the regulations of various federal agencies and undergoes periodic examinations by those regulatory authorities.

The Bank owns Naugatuck Valley Mortgage Servicing Corporation, which qualifies and operates as a Connecticut passive investment company pursuant to legislation.

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LOANS RECEIVABLE (Details 3) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
31-60 Days Past Due	$ 3,026	$ 3,166
61-90 Days Past Due	1,215	500
Greater Than 90 Days (Nonaccrual)	29,137	24,681
Total Past Due	33,378	28,347
Current	422,301	450,493
Total Loans	455,679	478,840
Carrying Amount > 90 Days and Accruing	0	0
One-to four-family [Member]
31-60 Days Past Due	1,539	1,379
61-90 Days Past Due	0	214
Greater Than 90 Days (Nonaccrual)	4,715	4,140
Total Past Due	6,254	5,733
Current	208,683	212,160
Total Loans	214,937	217,893
Carrying Amount > 90 Days and Accruing	0	0
Construction [Member]
31-60 Days Past Due	0	270
61-90 Days Past Due	480	0
Greater Than 90 Days (Nonaccrual)	11,525	9,005
Total Past Due	12,005	9,275
Current	15,110	20,459
Total Loans	27,115	29,734
Carrying Amount > 90 Days and Accruing	0	0
Commercial Real Estate and Multi-Family [Member]
31-60 Days Past Due	750	654
61-90 Days Past Due	40	249
Greater Than 90 Days (Nonaccrual)	10,828	9,182
Total Past Due	11,618	10,085
Current	138,465	150,773
Total Loans	150,083	160,858
Carrying Amount > 90 Days and Accruing	0	0
Commercial Loan [Member]
31-60 Days Past Due	347	396
61-90 Days Past Due	695	0
Greater Than 90 Days (Nonaccrual)	1,680	1,967
Total Past Due	2,722	2,363
Current	30,147	34,282
Total Loans	32,869	36,645
Consumer Other Financing Receivable [Member]
31-60 Days Past Due	390	467
61-90 Days Past Due	0	37
Greater Than 90 Days (Nonaccrual)	389	387
Total Past Due	779	891
Current	29,896	32,819
Total Loans	30,675	33,710
Carrying Amount > 90 Days and Accruing	$ 0	$ 0

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EQUITY INCENTIVE PLAN (Details) (USD $)	1 Months Ended				12 Months Ended
	Jul. 26, 2008	Dec. 18, 2007	Mar. 20, 2007	Mar. 21, 2006	Dec. 31, 2005
Awarded, Option awards	997	1,995	7,483	6,485	371,794
Exercise price, Option awards	$ 11.12	$ 11.12	$ 12.51	$ 11.12
Maximum term in years, Option awards	10 years	10 years	10 years	10 years
Awarded, Restricted stock awards	997	2,993	1,995	1,496

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Consolidated Statements of Financial Condition (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
ASSETS
Cash and due from depository institutions	$ 21,910	$ 15,436
Investment in federal funds	868	2,633
Investment securities available-for-sale, at fair value	26,512	25,051
Investment securities held-to-maturity, at amortized cost	29,379	25,292
Loans held for sale	1,358	2,993
Loans receivable, net	441,853	466,965
Accrued income receivable	1,773	1,932
Foreclosed real estate and repossessed assets, net	403	873
Premises and equipment, net	9,535	9,654
Bank owned life insurance	9,707	9,556
Federal Home Loan Bank stock, at cost	5,917	6,252
Deferred income taxes	3,453	2,439
Other assets	3,597	3,144
Total assets	556,265	572,220
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits	411,346	410,887
Borrowed funds	57,252	70,817
Mortgagors' escrow accounts	4,621	4,755
Other liabilities	4,089	3,447
Total liabilities	477,308	489,906
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares issued or outstanding	0	0
Common stock, $.01 par value; 25,000,000 shares authorized; 7,002,366 shares issued; 7,002,208 shares outstanding at March 31, 2012 and 7,002,292 outstanding at December 31, 2011.	70	70
Paid-in capital	58,909	58,908
Retained earnings	23,224	27,014
Unearned ESOP shares (391,479 shares at June 30, 2012 and December 31, 2011)	(3,442)	(3,442)
Unearned stock awards (997 shares at June 30, 2012 and 1,395 shares at December 31, 2011)	(9)	(14)
Treasury stock, at cost (158 shares at June 30, 2012 and 74 shares at December 31, 2011)	(1)	(1)
Accumulated other comprehensive income (loss)	206	(221)
Total stockholders' equity	78,957	82,314
Total liabilities and stockholders' equity	$ 556,265	$ 572,220

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FAIR VALUE (Details 1) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Carrying Value	$ 26,512	$ 25,051
Residential loans held for sale	1,358	2,993
Impaired loans	27,465	18,355
Foreclosed real estate and other repossessed assets	403	873
Mortgage-servicing rights	803	726
Us Government Agencies Debt Securities [Member]
Carrying Value	1,050	1,068
Mortgage-Backed Securities, Issued By Us Government Sponsored Enterprises [Member]
Carrying Value	16,398	14,763
Collateralized Mortgage Backed Securities [Member]
Carrying Value	1,346	1,721
Mortgage-Backed Securities, Issued By Private Enterprises [Member]
Carrying Value	267	255
Auction-Rate Trust Preferred Securities [Member]
Carrying Value	7,451	7,244
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Residential loans held for sale	0	0
Impaired loans		0
Foreclosed real estate and other repossessed assets		0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Us Government Agencies Debt Securities [Member]
Carrying Value	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Mortgage-Backed Securities, Issued By Us Government Sponsored Enterprises [Member]
Carrying Value	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Collateralized Mortgage Backed Securities [Member]
Carrying Value	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Mortgage-Backed Securities, Issued By Private Enterprises [Member]
Carrying Value	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Auction-Rate Trust Preferred Securities [Member]
Carrying Value	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Residential loans held for sale	1,358	2,993
Impaired loans		0
Foreclosed real estate and other repossessed assets		0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Us Government Agencies Debt Securities [Member]
Carrying Value	1,050	1,068
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Mortgage-Backed Securities, Issued By Us Government Sponsored Enterprises [Member]
Carrying Value	16,398	14,763
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Collateralized Mortgage Backed Securities [Member]
Carrying Value	1,346	1,721
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Mortgage-Backed Securities, Issued By Private Enterprises [Member]
Carrying Value	267	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Auction-Rate Trust Preferred Securities [Member]
Carrying Value	0	2,993
Residential loans held for sale		0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Residential loans held for sale	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Us Government Agencies Debt Securities [Member]
Carrying Value	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Mortgage-Backed Securities, Issued By Us Government Sponsored Enterprises [Member]
Carrying Value	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Collateralized Mortgage Backed Securities [Member]
Carrying Value	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Mortgage-Backed Securities, Issued By Private Enterprises [Member]
Carrying Value	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Auction-Rate Trust Preferred Securities [Member]
Carrying Value	7,451	7,244
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Impaired loans	0
Foreclosed real estate and other repossessed assets	0
Mortgage-servicing rights	0
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Impaired loans	0
Foreclosed real estate and other repossessed assets	0
Mortgage-servicing rights	0
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Residential loans held for sale		0
Impaired loans	27,465	18,355
Foreclosed real estate and other repossessed assets	403	873
Mortgage-servicing rights	$ 803

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Consolidated Statements of Changes in Stockholder's Equity [Parenthetical] (USD $)	6 Months Ended
	Jun. 30, 2012
Dividends declared, per common share (in dollars per share)	$ 0.06
Share based compensation awards - shares vested	199
Share based compensation awards - shares forfeited	199
Treasury stock acquired, shares	84

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LOANS RECEIVABLE (Details 6) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Number of Loans	8	11
Pre-Modification Recorded Investment	$ 1,538	$ 4,767
Funds Disbursed	0	49
Interest and Escrow Capitalized	3	59
Post-Modification Recorded Investment	1,541	4,875
One-to four-family [Member] | Real Estate [Member]
Number of Loans	4	2
Pre-Modification Recorded Investment	989	310
Funds Disbursed	0	0
Interest and Escrow Capitalized	3	0
Post-Modification Recorded Investment	992	310
Multi Family and Commercial Real Estate [Member] | Real Estate [Member]
Number of Loans	1	5
Pre-Modification Recorded Investment	426	3,736
Funds Disbursed	0	19
Interest and Escrow Capitalized	0	59
Post-Modification Recorded Investment	426	3,814
Home Equity Line Of Credit [Member] | Consumer Loan [Member]
Number of Loans	3
Pre-Modification Recorded Investment	123
Funds Disbursed	0
Interest and Escrow Capitalized	0
Post-Modification Recorded Investment	123
TDRs Accruing Interest [Member]
Number of Loans	3	0
Pre-Modification Recorded Investment	567	0
Funds Disbursed	0	0
Interest and Escrow Capitalized	0	0
Post-Modification Recorded Investment	567	0
TDRs Nonaccrual [Member]
Number of Loans	5	11
Pre-Modification Recorded Investment	971	4,767
Funds Disbursed	0	49
Interest and Escrow Capitalized	3	59
Post-Modification Recorded Investment	974	4,875
Commercial Loan [Member] | Real Estate [Member]
Number of Loans		3
Pre-Modification Recorded Investment		673
Funds Disbursed		0
Interest and Escrow Capitalized		0
Post-Modification Recorded Investment		673
Construction [Member] | Real Estate [Member]
Number of Loans		1
Pre-Modification Recorded Investment		48
Funds Disbursed		30
Interest and Escrow Capitalized		0
Post-Modification Recorded Investment		$ 78

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EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

Unallocated common shares held by the ESOP are not included in the weighted-average number of common shares outstanding for purposes of calculating either basic or diluted net income per common share.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2012			2011		2012			2011
Net income (loss)	$	(715,000	)	$	505,000	$	(3,391,000	)	$	901,000
Weighted-average common shares outstanding:
Basic		6,610,729			6,826,963		6,610,766			6,827,055
Effect of dilutive stock options and restrictive stock awards		-			-		-			-
Diluted		6,610,729			6,826,963		6,610,766			6,827,055
Earnings (loss) per common share:
Basic	$	(0.11	)	$	0.07	$	(0.51	)	$	0.13
Diluted	$	(0.11	)	$	0.07	$	(0.51	)	$	0.13

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LOANS RECEIVABLE (Details Textual) (USD $)	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Jun. 30, 2012	Dec. 31, 2011
Maximum Percentage On Appraised Value Property		75.00%
Total nonaccrual loans	$ 29,137,000	$ 29,137,000	$ 24,681,000
Income Not Recognized On Non Performing Loans	329,000	1,300,000	365,000
SBA Guaranteed Portion	1,300,000	1,300,000
Specific Reserves On Regulatory Supervision	305,000	305,000	1,100,000
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down		2,100,000
Specific Reserves Related To Tdrs	743,000	743,000
Us Small Business Administration [Member]
Total nonaccrual loans	$ 1,300,000	$ 1,300,000

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EQUITY INCENTIVE PLAN (Tables)

6 Months Ended

Jun. 30, 2012

Equity Incentive Plan Disclosure [Abstract]

Schedule Of Stock Options and Restricted Stock Award [Table Text Block]

The amounts and terms of the awards granted under the Incentive Plan are summarized in the following table.

	Grant date
	July 26,		December 18,		March 20,		March 21,
	2008		2007		2007		2006
Option awards
Awarded		997		1,995		7,483		6,485
Exercise price	$	11.12	$	11.12	$	12.51	$	11.12
Maximum term in years		10		10		10		10
Restricted stock awards
Awarded		997		2,993		1,995		1,496

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

Treasury yield curve in effect at the time of grant. Assumptions used to determine the weighted-average fair value of stock options granted were as follows:

	July 26,			December 18,			March 20,			March 21,
Grant date	2008			2007			2007			2006
Dividend yield		2.74	%		2.20	%		1.60	%		1.89	%
Expected volatility		13.40	%		11.00	%		10.49	%		11.20	%
Risk-free rate		3.56	%		3.63	%		4.48	%		4.61	%
Expected life in years		6.5			6.5			6.5			6.5
Weighted average fair value of options at grant date	$	1.51		$	1.18		$	2.55		$	2.25

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash flows from operating activities
Net income (loss)	$ (3,391)	$ 901
Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:
Provision for loan losses	6,692	1,478
Depreciation and amortization expense	351	393
Net loss on foreclosed assets	173	11
Gain on sale of loans	(810)	(350)
Loans originated for sale	(35,179)	(18,664)
Proceeds from sale of loans held for sale	37,623	16,429
Net amortization from investments	177	73
Amortization of intangible assets	17	17
Provision for deferred taxes	(973)	124
Net gain on investments	0	(233)
Stock-based compensation	123	92
Net change in:
Accrued income receivable	159	(5)
Deferred loan fees	(54)	(44)
Cash surrender value of life insurance	(151)	(155)
Other assets	648	1,111
Other liabilities	(577)	432
Net cash provided by operating activities	4,828	1,610
Cash flows from investing activities
Proceeds from maturities and repayments of available-for-sale securities	2,786	2,468
Proceeds from sale of available-for-sale securities	300	1,522
Proceeds from maturities of held-to-maturity securities	3,178	624
Redemption of Federal Home Loan Bank stock	335	0
Purchase of available-for-sale securities	(4,216)	0
Purchase of held-to-maturity securities	(7,386)	0
Loan originations net of principal payments	18,217	(12,187)
Purchase of premises and equipment	(248)	(532)
Proceeds from the sale of foreclosed assets	556	109
Net cash provided (used) by investing activities	13,522	(7,996)
Cash flows from financing activities
Net change in time deposits	(13,790)	(12,867)
Net change in other deposit accounts	14,248	22,169
Advances in borrowed funds	0	5,300
Repayment of borrowed funds	(11,387)	(15,935)
Net change in mortgagors' escrow accounts	(134)	23
Change in short term borrowings	(2,178)	(1,466)
Proceeds from common stock offering, net of offering costs	0	31,322
Purchase of shares by ESOP pursuant to reorganization	0	(2,003)
Forfeited restricted shares	(2)	0
Common stock repurchased	(1)	(1)
Cash dividends to common stockholders	(397)	(220)
Net cash (used) provided by financing activities	(13,641)	26,322
Net change in cash and cash equivalents	4,709	19,936
Cash and cash equivalents at beginning of period	18,069	14,263
Cash and cash equivalents at end of period	22,778	34,199
Non-cash investing activities:
Transfer of loans to foreclosed assets	258	488
Cash paid during the period for:
Interest	2,989	4,657
Income taxes	$ 151	$ 76

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Consolidated Statements of Financial Condition [Parenthetical] (USD $)	Jun. 30, 2012	Dec. 31, 2011
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	7,002,366	7,002,366
Common stock, shares outstanding	7,002,208	7,002,292
Unearned ESOP, shares	391,479	391,479
Unearned stock awards, shares	997	1,395
Treasury stock, shares	158	74

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DIVIDENDS

6 Months Ended

Jun. 30, 2012

Dividends [Abstract]

Dividends Per Share Disclosure [Text Block]

NOTE 10 - DIVIDENDS

On May 16, 2012, the Company's Board of Directors declared a cash dividend of $0.03 per outstanding common share, which was paid on June 15, 2012, to stockholders of record as of the close of business on May 28, 2012.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 06, 2012
Entity Registrant Name	Naugatuck Valley Financial Corp
Entity Central Index Key	0001493552
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	nvsl
Entity Common Stock, Shares Outstanding		7,002,208
Document Type	10-Q
Amendment Flag	true
Document Period End Date	Jun. 30, 2012
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2012
Amendment Description	This Quarterly Report on Form 10-Q/A contains the restated unaudited consolidated financial statements as of June 30, 2012 and for the six month period ended June 30, 2012, together with related disclosures. Such restated financial statements and related disclosures reflect the recordation in the quarter ended March 31, 2012 of an additional provision for loan losses of $2,573,271 as previously reported in the Current Report on Form 8-K previously filed on November 13, 2012.

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FAIR VALUE

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

NOTE 11 – FAIR VALUE

The Company uses fair value to record adjustments to certain assets and liabilities and to prepare required disclosures. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined using market quotes. However, in many instances, there are no quoted market prices available. In such instances, fair values are determined using various valuation techniques. Various assumptions and observable inputs must be relied upon in applying these techniques. Accordingly, the fair value estimates may not be realized in an immediate transfer of the respective asset or liability.

The following is a summary of the carrying value and estimated fair value of the Company’s significant financial instruments as of June 30, 2012 and December 31, 2011:

	June 30, 2012				December 31, 2011
	Carrying		Estimated		Carrying		Estimated
(In thousands)	Amount		Fair Value		Amount		Fair Value
Financial Assets
Cash and cash equivalents	$	22,778	$	22,778	$	18,069	$	18,069
Investment securities		55,891		56,709		50,343		50,721
Loans held for sale		1,358		1,358		2,993		2,993
Loans receivable, net		441,853		458,606		466,965		492,446
Accrued income receivable		1,773		1,773		1,932		1,932
Mortgage servicing rights		685		720		700		742
Financial Liabilities
Deposits		411,346		414,865		410,887		409,357
Borrowed funds		57,252		62,547		70,817		72,757
Mortgagors' escrow accounts		4,621		4,621		4,755		4,755

Fair Value Hierarchy

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Current accounting guidance establishes a fair value hierarchy based on the transparency of inputs participants use to price an asset or liability. The fair value hierarchy prioritizes these inputs into the following three levels:

• Level 1: Valuation is based upon unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

• Level 2: Fair value is calculated using inputs other than quoted market prices that are directly or indirectly observable for the asset or liability. The valuation may rely on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit ratings, etc.) or inputs that are derived principally or corroborated by market data by correlation or other means.

• Level 3: Inputs for determining the fair value of the respective assets or liabilities are not observable. Level 3 valuations are reliant upon pricing models and techniques that require significant management judgment or estimation.

Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. A description of the valuation methodologies used by the Company is presented below:

Cash and cash equivalents - The carrying amount of cash, due from banks, and interest-bearing deposits is used to approximate fair value, given the short timeframe to maturity and as such assets do not present unanticipated credit concerns.

Investment Securities - When quoted prices are available in an active market, the Company classifies securities within Level 1 of the valuation hierarchy. If quoted market prices are not available, the Company employs an independent pricing service who utilizes matrix pricing to calculate fair value. Such fair value measurements consider observable data such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayments speeds, credit information, and the respective terms and conditions for debt instruments. Level 2 securities include CMOs, mortgage backed securities and corporate bonds issued by GSEs.

When a market is illiquid or there is a lack of transparency around the inputs to valuation, the respective securities are classified as Level 3 and reliance is placed upon internally developed models and management judgment and evaluation for valuation. Auction-rate trust preferred securities (“ARPs”) are currently classified as Level 3.

Management uses an internally developed model to value ARPs. The valuation model is based on a discounted cash flow using the expected value of the collateral preferred shares, either at call dates or the maturity date of the trust, the credit rating of the issuer of each of the ARPs, the expected yield during the holding period and current rates for U.S. Treasury securities matching the expected remaining term of the trust. The expected value of the collateral preferred shares (either when called or upon maturity of the trust) is assumed to range between current market prices and par. Discount rates are implied from observable market inputs. The resulting discounted cash flows for each of the ARPs indicated little to no impairment in the fair value of the securities. On a quarterly basis, management reviews the trust preferred securities pricing generated from our internal model.

Loans Receivable - Loans held for sale are accounted for at the lower of cost or market. The fair value of loans held for sale are based on quoted market prices of similar or identical loans sold in conjunction with securitization transactions, adjusted as required for changes in loan characteristics. The Company employs an independent third party to provide fair value estimates for loans held for investment. Such estimates are calculated using discounted cash flow analysis, using market interest rates for comparable loans. The associated cash flows are adjusted for credit and other potential losses. Fair value for impaired loans is estimated using the net present value of the expected cash flows or the fair value of the underlying collateral if repayment is collateral dependent.

Accrued income receivable – The carrying amounts reported in the statement of financial condition approximate these assets’ fair value.

Mortgage-servicing rights – The Company sells residential mortgage loans with servicing rights retained. At the time of the sale, the Company determines the value of the retained servicing rights, which represents the present value of the differential between the contractual servicing fee and adequate compensation, defined as the fee a sub-servicer would require, to assume the role of servicer, after considering the estimated effects of prepayments. If material, a portion of the gain on the sale of the loan is recognized as due to the value of the servicing rights, and a servicing asset is recorded.

The Company has engaged an independent third party to perform the servicing rights analysis on a quarterly basis. The cost basis of loan servicing rights is amortized on a level yield basis over the period of estimated net servicing revenue and such amortization is included in the consolidated statement of income as a reduction of loan servicing fee income. Servicing rights are evaluated for impairment by comparing their aggregate carrying amount to their fair value. The fair value of loan servicing rights is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of loan prepayments and discount rates. All assumptions are based on standards used by market participants. Impairment is recognized as an adjustment to loan and servicing income.

Foreclosed Property and Repossessed Assets - Foreclosed property and repossessed assets are recorded as held for sale initially at the lower of the loan balance or fair value of the collateral less estimated selling costs. For the six months ended June 30, 2012 and 2011, foreclosed properties and repossessed assets with a carrying value of $258,000 and $488,000, respectively, were transferred to foreclosed property and repossessed assets from loans. Prior to the transfer, the assets whose fair value less costs to sell was less than their carrying value, were written down to fair value through a charge to the allowance for loan losses. Subsequent to foreclosure, valuations are updated periodically, and the assets may be marked down further, reflecting a new cost basis. There were subsequent valuation adjustments to five foreclosed properties in the amount of $94,000 for the six months ended June 30, 2012. There were no subsequent valuation adjustments to foreclosed properties and repossessed assets for the six months ended June 30, 2011. Collateral dependent impaired loans and foreclosed real estate and repossessed assets are considered Level 3, as the fair value is based on an appraisal and the adjustment to comparable sales made by the appraiser are unobservable. Non collateral dependent loans are measured using a discounted cash flow technique and are also considered Level 3, as the inputs are the Bank’s own assumptions.

Deposit Liabilities - The fair values disclosed for demand deposits are by definition equal to the amount payable on demand at the reporting date which is also their carrying value. The carrying amounts of variable-rate, fixed term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates on comparable instruments to a schedule of aggregated expensed monthly maturities on time deposits.

Borrowed Funds - Carrying value is as an estimate of fair value for securities sold under agreements to repurchase and other short term debt that matures within 90 days. The fair values of other borrowings are estimated using discounted cash flow analyses based on current market rates adjusted, as appropriate, for associated credit and option risks.

Mortgagors’ escrow accounts – The carrying amounts reported in the statement of financial condition approximate the fair value of the mortgagors’ escrow accounts.

Under certain circumstances we make adjustment to fair value for our assets although they are not measured at fair value on an ongoing basis. These include assets that are measured at the lower of cost or market that were recognized at fair value (i.e., below cost) at the end of the period, as well as assets that are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment).

Assets and liabilities measured at fair value on a recurring and non-recurring basis at June 30, 2012 and December 31, 2011 are summarized below:

	June 30, 2012
	Carrying Value
(In thousands)	Level 1		Level 2		Level 3		Total
Assets measured at fair value on a recurring basis:
Available-for-sale investment securities:
U.S. Government and agency obligations	$	-	$	1,050	$	-	$	1,050
Government guaranteed mortgage-backed securities		-		16,398		-		16,398
Government guaranteed collateralized mortgage obligations		-		1,346		-		1,346
Private label collateralized mortgage obligations		-		267		-		267
Auction-rate trust preferred securities		-		-		7,451		7,451
Residential loans held for sale		-		1,358		-		1,358
Assets measured at fair value on a non-recurring basis:
Impaired loans	$	-	$	-	$	27,465	$	27,465
Foreclosed real estate and other repossessed assets		-		-		403		403
Mortgage-servicing rights		-		-		803		803

	December 31, 2011
	Carrying Value
(In thousands)	Level 1		Level 2		Level 3		Total
Assets measured at fair value on a recurring basis:
Available-for-sale investment securities:
U.S. Government and agency obligations	$	-	$	1,068	$	-	$	1,068
Government guaranteed mortgage-backed securities		-		14,763		-		14,763
Government guaranteed collateralized mortgage obligations		-		1,721		-		1,721
Private label collateralized mortgage obligations		-		255		-		255
Auction-rate trust preferred securities		-		-		7,244		7,244
Residential loans held for sale		-		2,993		-		2,993
Assets measured at fair value on a non-recurring basis:
Impaired loans	$	-	$	-	$	18,355	$	18,355
Foreclosed real estate and other repossessed assets		-		-		873		873
Mortgage-servicing rights		-		-		726		726

There were no significant transfers of assets between Levels 1, 2 or 3 of the fair value hierarchy during the three or six months ended June 30, 2012.

The following table shows a reconciliation of the beginning and ending balances for Level 3 assets measured at fair value on a recurring basis:

	For the Six			For the Year
	Months Ended			Ended
	June 30,			December 31,
(In thousands)	2012			2011
Balance at beginning of period	$	7,244		$	7,960
Increase (decrease) in fair value of securities included in accumulated other comprehensive income		507			(516	)
Redemptions at par		(300	)		(200	)
Balance at end of period	$	7,451		$	7,244

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Consolidated Statements of Income and Comprehensive Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Interest income
Interest on loans	$ 5,652	$ 6,452	$ 11,699	$ 12,784
Interest and dividends on investments and deposits	398	411	817	841
Total interest income	6,050	6,863	12,516	13,625
Interest expense
Interest on deposits	975	1,718	2,069	3,464
Interest on borrowed funds	432	564	890	1,176
Total interest expense	1,407	2,282	2,959	4,640
Net interest income	4,643	4,581	9,557	8,985
Provision for loan losses	2,147	1,040	6,692	1,478
Net interest income after provision for loan losses	2,496	3,541	2,865	7,507
Noninterest income
Mortgage banking income	625	355	1,016	483
Fees for other services	263	233	525	406
Fees for services related to deposit accounts	204	213	406	426
Income from bank owned life insurance	76	78	151	155
Income from investment advisory services, net	51	65	107	139
Net gain on investments	0	86	0	86
Recovery from legal settlement	0	0	0	147
Other income	30	32	54	56
Total noninterest income	1,249	1,062	2,259	1,898
Noninterest expense
Compensation, taxes and benefits	2,705	2,326	5,314	4,669
Office occupancy	575	565	1,150	1,172
Professional fees	244	122	537	259
Loss on foreclosed real estate, net	204	49	341	88
Computer processing	194	64	368	326
FDIC insurance premiums	187	172	321	376
Advertising	160	106	286	205
Directors compensation	130	110	335	286
Office supplies	53	50	107	97
Public company expenses	38	30	57	48
Deposit related charge (reduction)	(88)	0	712	0
Other expenses	468	292	813	610
Total noninterest expense	4,870	3,886	10,341	8,136
Income (loss) before provision for income taxes	(1,125)	717	(5,217)	1,269
Provision (benefit) for income taxes	(410)	212	(1,826)	368
Net income (loss)	(715)	505	(3,391)	901
Other Comprehensive income (loss)
Changes in unrealized gain (loss) on securities available-for-sale, net	(68)	121	427	18
Total other comprehensive income (loss)	(68)	121	427	18
Comprehensive income (loss)	$ (783)	$ 626	$ (2,964)	$ 919
Earnings (loss) per common share - basic and diluted	$ (0.11)	$ 0.07	$ (0.51)	$ 0.13

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INVESTMENT SECURITIES

6 Months Ended

Jun. 30, 2012

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

NOTE 5 – INVESTMENT SECURITIES

At June 30, 2012, the composition of the investment portfolio was:

	Amortized		Gross Unrealized					Fair
(In thousands)	Cost Basis		Gains		Losses			Value
Available-for-sale securities:
U.S. government and agency obligations	$	1,010	$	40	$	-		$	1,050
Government guaranteed mortgage-backed securities		15,698		728		(28	)		16,398
Government guaranteed collateralized mortgage obligations		1,328		18		-			1,346
Private label collateralized mortgage obligations		334		-		(67	)		267
Total debt securities		18,370		786		(95	)		19,061
Auction-rate trust preferred securities		7,700		-		(249	)		7,451
Total available-for-sale securities	$	26,070	$	786	$	(344	)	$	26,512

	Amortized		Gross Unrealized				Fair
(In thousands)	Cost Basis		Gains		Losses		Value
Held-to-maturity securities:
Government guaranteed mortgage-backed securities	$	29,379	$	818	$	-	$	30,197
Total held-to-maturity securities	$	29,379	$	818	$	-	$	30,197

At December 31, 2011, the composition of the investment portfolio was:

	Amortized		Gross Unrealized					Fair
(In thousands)	Cost Basis		Gains		Losses			Value
Available-for-sale securities:
U.S. government and agency obligations	$	1,014	$	54	$	-		$	1,068
Government guaranteed mortgage-backed securities		13,919		844		-			14,763
Government guaranteed collateralized mortgage obligations		1,711		10		-			1,721
Private label collateralized mortgage obligations		352		-		(97	)		255
Total debt securities		16,996		908		(97	)		17,807
Auction-rate trust preferred securities		8,000		-		(756	)		7,244
Total available-for-sale securities	$	24,996	$	908	$	(853	)	$	25,051

	Amortized		Gross Unrealized					Fair
(In thousands)	Cost Basis		Gains		Losses			Value
Held-to-maturity securities:
Government guaranteed mortgage-backed securities	$	25,292	$	387	$	(9	)	$	25,670
Total held-to-maturity securities	$	25,292	$	387	$	(9	)	$	25,670

The Company has identified certain investment securities in which the fair value of the security is less than the cost of the security. This can be from an increase in interest rates since the time of purchase or from deterioration in the credit quality of the issuer. All investment securities which have unrealized losses undergo an internal impairment review.

Management’s review for impairment generally entails identification and analysis of individual investments that have fair values less than amortized cost, including consideration of the length of time the investment has been in an unrealized loss position and the expected recovery period; discussion of evidential matter, including an evaluation of factors or triggers that could cause individual investments to qualify as having other-than-temporary impairment and those that would not support other-than-temporary impairment; and documentation of the results of these analyses. As a result of the reviews, management has determined that there are no other investment securities which have deteriorated in credit quality subsequent to purchase, and believes that these unrealized losses are temporary and are the result of changes in market interest rates and market conditions over the past several years.

The following is a summary of the fair values and related unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2012, and December 31, 2011.

	At June 30, 2012
	Securities in Continuous Unrealized
	Loss Position Less Than 12 Months
	Number of		Market		Unrealized
(Dollars in thousands)	Securities		Value		Loss
Government guaranteed mortgage backed securities		2	$	4,005	$	(28	)
Total securities in unrealized loss position		2	$	4,005	$	(28	)

	Securities in Continuous Unrealized
	Loss Position 12 or More Consecutive Months
	Number of		Market		Unrealized
(Dollars in thousands)	Securities		Value		Loss
Private label collateralized mortgage obligations		1	$	267	$	(67	)
Auction-rate trust preferred securities		2		2,150		(249	)
Total securities in unrealized loss position		3	$	2,417	$	(316	)

	At December 31, 2011
	Securities in Continuous Unrealized
	Loss Position Less Than 12 Months
	Number of		Market		Unrealized
(Dollars in thousands)	Securities		Value		Loss
Government guaranteed mortgage backed securities		2	$	4,244	$	(9	)
Total securities in unrealized loss position		2	$	4,244	$	(9	)

	Securities in Continuous Unrealized
	Loss Position 12 or More Consecutive Months
	Number of		Market		Unrealized
(Dollars in thousands)	Securities		Value		Loss
Private label collateralized mortgage obligations		1	$	256	$	(97	)
Auction-rate trust preferred securities		2		1,644		(756	)
Total securities in unrealized loss position		3	$	1,900	$	(853	)

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Accounting Standards Updates

6 Months Ended

Jun. 30, 2012

New Accounting Pronouncements and Changes In Accounting Principles [Abstract]

Accounting Changes and Error Corrections [Text Block]

NOTE 4 — Accounting Standards Updates

Recently Adopted Accounting Guidance

Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”): In April 2011, the Financial Accounting Standards Board (“FASB”) issued guidance that clarifies the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements. The guidance does not extend the use of fair value accounting, but clarifies the wording on how it should be applied to be consistent with IFRS and expands certain disclosure requirements relating to Level 3 fair value measurements. For many of the requirements, the FASB does not intend for the amendments in this update to result in a change in application from current guidance. This guidance is to be applied prospectively for interim and annual periods beginning after December 15, 2011. Since the guidance only relates to disclosure, the adoption of this guidance did not impact the Company’s financial condition, results of operations, or liquidity.

Statement of Comprehensive Income: In April 2011, the FASB issued accounting guidance requiring companies to include a statement of comprehensive income as part of its interim and annual financial statements. The new guidance gives companies the option to present net income and comprehensive income either in one continuous statement or in two separate, but consecutive statements. This approach represents a change from current GAAP, which allows companies to report Other Comprehensive Income (“OCI”) and its components in the statement of shareholder’s equity. The guidance also allows companies to present OCI either net of tax with details in the notes or shown gross of tax (with tax effects shown parenthetically). This guidance is effective for fiscal years beginning after December 15, 2011, but early adoption is permitted. Since the guidance only relates to disclosure, the adoption of this guidance did not impact the Company’s financial condition, results of operations, or liquidity.

Recently Issued Accounting Guidance

There were no additional accounting standards updates applicable to the Company issued by FASB during the second quarter ended June 30, 2012. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

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COMPREHENSIVE INCOME (Tables)

6 Months Ended

Jun. 30, 2012

Stockholders' Equity Note [Abstract]

Schedule of Comprehensive Income (Loss) [Table Text Block]

The Company’s sole source of other comprehensive income is the net unrealized gain on its available-for-sale securities.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
	(In thousands)
Net income (loss)	$	(715	)	$	505		$	(3,391	)	$	901
Other comprehensive income:
Unrealized gain (loss) on securities available-for-sale		(76	)		226			386			101
Reclassification adjustment for (gain) loss realized in net income		-			(86	)		-			(86	)
Other comprehensive income (loss) before tax effect		(76	)		140			386			15
Income tax effect related to items of other comprehensive income (loss)		(8	)		19			(41	)		(3	)
Other comprehensive income (loss) net of tax effect		(68	)		121			427			18
Total comprehensive income (loss)	$	(783	)	$	626		$	(2,964	)	$	919

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CRITICAL ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

Allowance for Loan Losses. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Although the Company believes that it uses the best information available to establish the allowance for loan losses, future additions to the allowance may be necessary based on estimates that are susceptible to change as a result of changes in economic conditions and other factors. Management reviews the level of the allowance on a quarterly basis, at a minimum, and establishes the provision for loan losses based on the composition of the loan portfolio, delinquency levels, loss experience, economic conditions, and other factors related to the collectability of the loan portfolio.

The Company engages an independent review of its commercial loan portfolio on a quarterly basis and considers adjustments to its loan ratings based upon this review. In addition, the Company’s regulatory authorities, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination.

Impaired Financing Receivable, Policy [Policy Text Block]

Impaired Loans - Impaired loans consist of non-accrual loans and troubled debt restructurings (“TDRs”) in accordance with applicable authoritative accounting guidance. With the exception of loans that were restructured and still accruing interest, a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all contractual principal and interest due according to the terms of the loan agreement. Loans deemed to be impaired are classified as non-accrual.

Impairment is measured by estimating the value of the loan based on the present value of expected future cash flows discounted at the loan’s initial effective interest rate or the fair value of the underlying collateral less costs to sell, if repayment of the loan is considered collateral-dependent. All impaired loans are included in non-performing assets.

Non Accrual Loans Policy [Policy Text Block]

Non-accrual loans. Loans are automatically placed on non-accrual status when payment of principal or interest is more than 90 days delinquent. Loans are also placed on non-accrual status if collection of principal or interest in full is in doubt or if the loan has been restructured. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received. The loan may be returned to accrual status if unpaid principal and interest are repaid so that the loan is less than 90 days delinquent.

Loans and Leases Receivable, Troubled Debt Restructuring Policy [Policy Text Block]

Troubled Debt Restructurings. TDRs are loans for which the original contractual terms of the loans have been modified and both of the following conditions exist: (i) the restructuring constitutes a concession (including reduction of interest rates or extension of maturity dates) and (ii) the borrower is experiencing financial difficulties. Loans are not classified as TDRs when the modification is short-term or results in only an insignificant delay or shortfall in the payments to be received. The Company’s TDRs are determined on a case-by-case basis in connection with ongoing loan collection processes.

The Company does not accrue interest on any TDRs unless it believes collection of all principal and interest under the modified terms is reasonably assured. Generally, six consecutive months of payment performance by the borrower under the restructured terms is required before a TDR is returned to accrual status assuming the loan is restructured at market rates. However, the period could vary depending upon the individual facts and circumstances of the loan.

For a TDR to begin accruing interest, the borrower must demonstrate both some level of performance and the capacity to perform under the modified terms. A history of timely payments and adherence to financial covenants generally serve as sufficient evidence of the borrower’s performance. An evaluation of the borrower’s current creditworthiness is used to assess whether the borrower has the capacity to repay the loan under the modified terms. This evaluation includes an estimate of expected cash flows, evidence of strong financial position, and estimates of the value of collateral, if applicable.

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COMPREHENSIVE INCOME

6 Months Ended

Jun. 30, 2012

Stockholders' Equity Note [Abstract]

Comprehensive Income (Loss) Note [Text Block]

NOTE 8 - COMPREHENSIVE INCOME

Comprehensive income is net income adjusted for any changes in equity from non-owner sources that are not recorded in the income statement (such as changes in the net unrealized gain/loss on available-for-sale securities). The purpose of reporting comprehensive income is to provide a measure of all changes in equity that result from recognized transactions and other economic events of the period other than transactions with owners in their capacity as owners. The Company’s sole source of other comprehensive income is the net unrealized gain on its available-for-sale securities.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
	(In thousands)
Net income (loss)	$	(715	)	$	505		$	(3,391	)	$	901
Other comprehensive income:
Unrealized gain (loss) on securities available-for-sale		(76	)		226			386			101
Reclassification adjustment for (gain) loss realized in net income		-			(86	)		-			(86	)
Other comprehensive income (loss) before tax effect		(76	)		140			386			15
Income tax effect related to items of other comprehensive income (loss)		(8	)		19			(41	)		(3	)
Other comprehensive income (loss) net of tax effect		(68	)		121			427			18
Total comprehensive income (loss)	$	(783	)	$	626		$	(2,964	)	$	919

The Company has not recognized deferred taxes related to unrealized capital losses in other comprehensive income due to its current inability to use them.

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LOANS RECEIVABLE

6 Months Ended

Jun. 30, 2012

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE 6 – LOANS RECEIVABLE

A summary of loans receivable at June 30, 2012 and December 31, 2011 is as follows:

	June 30,			December 31,
(Dollars in thousands)	2012			2011
Real estate loans:
One-to four-family	$	208,653		$	217,893
Commercial real estate and multi-family		150,083			160,858
Construction		33,399			29,734
Total real estate loans		392,135			408,485
Commercial business loans		32,869			36,645
Consumer loans:
Home equity		29,277			32,157
Savings accounts		749			847
Automobile		487			509
Personal		162			197
Total consumer loans		30,675			33,710
Totals loans		455,679			478,840
Less:
Allowance for loan losses		10,972			8,053
Undisbursed construction loans		2,574			3,489
Deferred loan origination fees, net		280			333
Loans receivable, net	$	441,853		$	466,965
Weighted average yield		5.16	%		5.29	%

Credit Quality of Financing Receivables and the Allowance for Loan Losses

Management segregates the loan portfolio into portfolio segments, which are defined as the levels at which the Company develops and documents a systematic method for determining its allowance for loan losses. The portfolio segments are segregated based on loan types and the underlying risk factors present in each loan type. Such risk factors are periodically reviewed by management and revised as deemed appropriate.

The Company’s loan portfolio is segregated into the following portfolio segments:

One-to Four-Family Owner Occupied Loans. This portfolio segment consists of the origination of first mortgage loans secured by one-to four-family owner occupied residential properties and residential construction loans to individuals to finance the construction of residential dwellings for personal use located in our market area. Although the Company has experienced an increase in foreclosures on its owner occupied loan portfolio over the past year, foreclosures are still at relatively low levels and believe this is due mainly to its conservative underwriting and lending policies which do not allow for risky loans such as “Option ARM,” “sub-prime” or “Alt-A” loans.

Commercial Real Estate and Multi-family Loans. This portfolio segment includes loans secured by commercial real estate, non-owner occupied one-to four-family and multi-family dwellings for property owners and businesses in our market area. Loans secured by commercial real estate generally have larger loan balances and more credit risk than owner occupied one-to four-family mortgage loans. The increased risk is the result of several factors, including the concentration of principal in a limited number of loans and borrowers, the impact of local and general economic conditions on the borrower’s ability to repay the loan, and the increased difficulty of evaluating and monitoring these types of loans.

Construction and Land Development Loans. This portfolio segment includes commercial construction loans for commercial development projects, including condominiums, apartment buildings, and single family subdivisions as well as office buildings, retail and other income producing properties and land loans, which are loans made with land as security. Construction and land development financing generally involves greater credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost proves to be inaccurate, the Company may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property. Moreover, if the estimated value of the completed project proves to be inaccurate, the borrower may hold a property with a value that is insufficient to assure full repayment. Construction loans also expose the Company to the risks that improvements will not be completed on time in accordance with specifications and projected costs and that repayment will depend on the successful operation or sale of the properties, which may cause some borrowers to be unable to continue with debt service which exposes the Company to greater risk of non-payment and loss. Additionally, economic factors such as the decline of property values may have an adverse effect on the ability of the borrower to sell the property.

Commercial Business Loans. This portfolio segment includes commercial business loans secured by real estate, assignments of corporate assets, and personal guarantees of the business owners. Commercial business loans generally have higher interest rates and shorter terms than other loans, but they also may involve higher average balances, increased difficulty of loan monitoring and a higher risk of default since their repayment generally depends on the successful operation of the borrower’s business.

Real Estate Secured Loans. This portfolio segment includes home equity loans and home equity lines of credit secured by owner occupied one-to four-family residential properties. Loans of this type are generally written at a maximum of 75% of the appraised value of the property and require that the Company has a second lien position on the property. These loans are written at a higher interest rate and a shorter term than mortgage loans. The Company has experienced a low level of foreclosure in this type of loan during recent periods. These loans can be affected by economic conditions and the values of the underlying properties.

Consumer Loans. This portfolio segment includes loans secured by passbook or certificate accounts, or automobiles, as well as unsecured personal loans and overdraft lines of credit. This type of loan may entail greater risk than do residential mortgage loans, particularly in the case of loans that are unsecured or secured by assets that depreciate rapidly.

Loans are generally carried at the amount of unpaid principal, less the allowance for loan losses and adjusted for deferred loan fees, which are amortized over the term of the loan using the interest method. Interest on loans is accrued based on the principal amounts outstanding. It is the Company’s policy to discontinue the accrual of interest when a loan is specifically determined to be impaired or when the principal or interest is delinquent for more than 90 days. When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income.

The allowance for loan losses is established through a provision for loan losses. The Company maintains the allowance at a level believed, to the best of management’s knowledge, adequate to cover all known and inherent losses in the loan portfolio that are both probable and reasonable to estimate at each reporting date.

Management reviews the allowance for loan losses on at least a quarterly basis in order to identify those inherent losses and to assess the overall collection probability for the loan portfolio. The evaluation process by portfolio segment includes, among other things, an analysis of delinquency trends, non-performing loan trends, the level of charge-offs and recoveries, prior loss experience, total loans outstanding, the volume of loan originations, the type, size and geographic concentration of the loans, the value of collateral securing the loan, the borrower’s ability to repay and repayment performance, the number of loans requiring heightened management oversight, local economic conditions and industry experience.

The establishment of the allowance for loan losses is significantly affected by management’s judgment and uncertainties, and there is a likelihood that different amounts would be reported under different conditions or assumptions. The Office of the Comptroller of the Currency (“OCC”), as an integral part of its examination process, periodically reviews the allowance for loan losses and may require the Company to make additional provisions for estimated loan losses based upon judgments different from those of management.

The allowance generally consists of specific and general components. The specific component relates to loans that have been evaluated and determined to be impaired under ASC 310-10-35. For such impaired loans, when the discounted cash flows (or collateral value or observable market price if the loan is collateral dependent) of the impaired loan is lower than the carrying value of that loan, the Company will charge the difference to loss or establish a specific allowance if the loss is not confirmed. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. Additional allowances are placed on loans classified as either doubtful, substandard or special mention. Although for analytical purposes, certain allowances are attributed to loans that are impaired and general components are attributed to loans evaluated collectively. The allowance is available to cover all charge offs that arise from the loan portfolio.

The Company will continue to monitor and modify its allowance for loan losses as conditions dictate. No assurances can be given that the level of allowance for loan losses will cover all of the inherent losses in the loan portfolio or that future adjustments to the allowance for loan losses will not be necessary if economic and other conditions differ substantially from the economic and other conditions used by management to determine the current level of the allowance for loan losses.

The following tables set forth the balance of the allowance for loan losses at June 30, 2012 and December 31, 2011, by portfolio segment, disaggregated by impairment methodology, which is then further segregated by amounts evaluated for impairment collectively and individually. Also included is a summary of transactions in the allowance for loan losses for the six months ended June 30, 2012 and the year ended December 31, 2011. The allowance for loan losses allocated to each portfolio segment is not necessarily indicative of future losses in any particular portfolio segment and does not restrict the use of the allowance to absorb losses in other portfolio segments.

	One-to Four- Family			Construction			Commercial Real Estate			Commercial			Consumer			Total
As of and for the Six Months Ended June 30, 2012
(In thousands)
Allowance for loan losses:
Beginning balance	$	1,745		$	1,327		$	3,745		$	754		$	482		$	8,053
Provision for loan losses		804			842			1,789			3,052			205			6,692
Charge-offs		(347	)		(629	)		(1,245	)		(1,416	)		(146	)		(3,783	)
Recoveries		4			-			-			5			1			10
Ending balance	$	2,206		$	1,540		$	4,289		$	2,395		$	542		$	10,972
Ending loan balance individually evaluated for impairment	$	4,636		$	13,209		$	8,892		$	801		$	175		$	27,713
Ending loan balance collectively evaluated for impairment	$	204,017		$	20,190		$	141,191		$	32,068		$	30,500		$	427,966
As of and for the Year Ended December 31, 2011
(In thousands)
Allowance for loan losses:
Beginning balance	$	1,585		$	600		$	2,714		$	884		$	610		$	6,393
Provision for loan losses		377			1,449			1,942			383			142			4,293
Charge-offs		(217	)		(722	)		(911	)		(516	)		(271	)		(2,637	)
Recoveries		-			-			-			3			1			4
Ending balance	$	1,745		$	1,327		$	3,745		$	754		$	482		$	8,053
Ending loan balance individually evaluated for impairment	$	2,721		$	8,474		$	4,422		$	3,585		$	225		$	19,427
Ending loan balance collectively evaluated for impairment	$	215,172		$	21,260		$	156,436		$	33,060		$	33,485		$	459,413

The Company’s policies provide for the classification of loans and other assets into the following categories: pass (1 - 4), bankable with care (5), special mention (6), substandard (7), doubtful (8) and loss (9). Consistent with regulatory guidelines, loans and other assets that are considered to be of lesser quality are classified as substandard, doubtful, or loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those assets characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Assets (or portions of assets) classified as loss are those considered uncollectible and of such little value that their continuance as assets without establishment of a specific valuation allowance or charge-off is not warranted. Assets that do not expose us to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve close attention, are required to be designated as special mention.

When assets are classified as special mention, substandard or doubtful, the Company disaggregates these assets and allocates a portion of the related general loss allowances to such assets as the Company deems prudent. Determinations as to the classification of assets and the amount of loss allowances are subject to review by our principal federal regulator, the Office of the Comptroller of the Currency, which can require that we establish additional loss allowances. The Company regularly reviews its asset portfolio to determine whether any assets require classification in accordance with applicable regulations.

The following tables are a summary of the loan portfolio quality indicators by loan class as of June 30, 2012 and December 31, 2011:

Commercial Loans  - Credit Risk Profile by Internally Assigned Grade:
	At June 30, 2012						At December 31, 2011
(In thousands)	Commercial Loans		Commercial Real Estate Construction		Commercial Real Estate		Commercial Loans		Commercial Real Estate Construction		Commercial Real Estate
Grade:
4	$	6,284	$	-	$	35,141	$	6,659	$	216	$	40,769
5		19,088		8,187		81,692		21,941		7,463		88,089
6		4,116		3,760		17,871		2,072		5,948		15,383
7		3,173		15,168		15,379		5,235		8,595		16,004
8		208		-		-		738		-		613
Total	$	32,869	$	27,115	$	150,083	$	36,645	$	22,222	$	160,858

Consumer Loans - Credit Risk Profile by Internally Assigned Grade:
	At June 30, 2012				At December 31, 2011
(In thousands)	Residential -  Prime		Residential - Construction		Residential -  Prime		Residential - Construction
Grade:
Pass	$	202,420	$	6,284	$	213,049	$	7,512
Special Mention		308		-		746		-
Substandard		5,925		-		4,098		-
Doubtful		-		-		-		-
Total	$	208,653	$	6,284	$	217,893	$	7,512

Consumer Loans - Credit Risk Profile Based on Payment Activity:
	At June 30, 2012		At December 31, 2011
(In thousands)	Consumer - Other		Consumer - Other
Grade:
Performing	$	30,286	$	33,323
Nonperforming		389		387
Total	$	30,675	$	33,710

When a loan is 15 days past due, the Company sends the borrower a late notice. The Company also contacts the borrower by phone if the delinquency is not corrected promptly after the notice has been sent. When the loan is 30 days past due, the Company mails the borrower a letter reminding the borrower of the delinquency, and attempt to contact the borrower personally to determine the reason for the delinquency in order to ensure that the borrower understands the terms of the loan and the importance of making payments on or before the due date. If necessary, subsequent delinquency notices are issued and the account will be monitored on a regular basis thereafter. By the 90th day of delinquency, the Company will send the borrower a final demand for payment and may recommend foreclosure. A summary report of all loans 30 days or more past due is provided to the board of directors of the Company each month, and more frequently to the Asset Quality Committee of the Board of Directors.

Loans are automatically placed on non-accrual status when payment of principal or interest is more than 90 days delinquent. Loans are also placed on non-accrual status if collection of principal or interest in full is in doubt or if the loan has been restructured. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received. The loan may be returned to accrual status if unpaid principal and interest are repaid so that the loan is less than 90 days delinquent. Management works closely with the Asset Quality Committee of the Board of Directors in an effort to resolve nonperforming assets in a manner most advantageous to the Company.

The following tables set forth certain information with respect to our loan portfolio delinquencies by loan class and amount as of June 30, 2012 and December 31, 2011:

	Credit Quality Information
	31-60 Days Past Due		61-90 Days Past Due		Greater Than 90 Days (Nonaccrual)		Total Past Due		Current		Total Loans		Carrying Amount > 90 Days and Accruing
As of June 30, 2012
(In thousands)
Real estate loans
One-to four-family	$	1,539	$	-	$	4,715	$	6,254		208,683	$	214,937	$	-
Construction		-		480		11,525		12,005		15,110		27,115		-
Commercial real estate and multi-family		750		40		10,828		11,618		138,465		150,083		-
Commercial business loans		347		695		1,680		2,722		30,147		32,869
Consumer - other		390		-		389		779		29,896		30,675		-
Total	$	3,026	$	1,215	$	29,137	$	33,378	$	422,301	$	455,679	$	-
As of December 31, 2011
(In thousands)
Real estate loans
One-to four-family	$	1,379	$	214	$	4,140	$	5,733		212,160	$	217,893	$	-
Construction		270		-		9,005		9,275		20,459		29,734		-
Commercial real estate and multi-family		654		249		9,182		10,085		150,773		160,858		-
Commercial business loans		396		-		1,967		2,363		34,282		36,645
Consumer - other		467		37		387		891		32,819		33,710		-
Total	$	3,166	$	500	$	24,681	$	28,347	$	450,493	$	478,840	$	-

Nonperforming loans (defined as nonaccrual loans and TDRs) totaled $29.1 million at June 30, 2012 compared to $24.7 million at December 31, 2011 ($1.3 million of which at both dates is fully guaranteed by the U.S. Small Business Administration). The amount of income that was contractually due but not recognized on nonperforming loans totaled $329,000 and $1.3 million for the quarter and six months ended June 30, 2012, respectively, compared with $365,000 for the year ended December 31, 2011.

At June 30 2012, there were no loans 90 or more days past due and still accruing interest. At June 30, 2012, the Company had 106 loans on non-accrual status with foregone interest for the period since the loans were placed on non-accrual status in the amount of approximately $1.3 million. Included in these loans were 46 loans which were not 90 days past due, but were placed on non-accrual status as a result of a recent modification or the identification of a weakness on the loan.

The Company accounts for impaired loans in accordance with GAAP. An impaired loan generally is one for which it is probable, based on current information, that the lender will not collect all the amounts due under the contractual terms of the loan. Loans are individually evaluated for impairment. When the Company classifies a problem asset as impaired, it makes a specific allowance for that portion of the asset that is deemed uncollectible.

At June 30, 2012, the Company had $27.8 million of loans which were considered to be impaired, with a valuation allowance of $305,000, compared to $19.4 million of such loans at December 31, 2011 with a valuation allowance of $1.1 million. The increase is primarily due to the classification of the following as impaired during the period: three residential development loans, fourteen commercial real estate loans, ten commercial loans secured by business assets, fifteen residential mortgage loans and four home equity loans. The increases were partially offset by removing from impaired status: one residential mortgage loan, three home equity loans and six commercial business loans. Additionally, $1.1 million of specific allowances that were allowed under previous regulatory supervision, were charged off against the loan balances as required under current regulatory supervision.

The following tables are a summary of impaired loans by class of loans as of June 30, 2012 and December 31, 2011:

			Unpaid				Average		Interest
	Carrying		Principal		Related		Carrying		Income
As of June 30, 2012	Amount		Balance		Allowance		Amount		Recognized
	(In thousands)
Impaired loans without valuation allowance:
Real estate loans
One-to four-family	$	4,636	$	5,002	$	-	$	4,784	$	84
Construction		10,492		12,205		-		10,485		80
Commercial real estate and multi-family		8,892		10,390		-		9,195		85
Commercial business loans		801		1,811		-		937		7
Consumer - other		175		397		-		259		6
Total impaired loans without valuation allowance		24,996		29,805		-		25,660		262
Impaired loans with valuation allowance:
Real estate loans
Construction		2,717		3,439		305		2,958		59
Total impaired loans with valuation allowance		2,717		3,439		305		2,958		59
Total impaired loans	$	27,773	$	33,244	$	305	$	28,618	$	321

			Unpaid				Average		Interest
	Carrying		Principal		Related		Carrying		Income
As of December 31, 2011	Amount		Balance		Allowance		Amount		Recognized
	(In thousands)
Impaired loans without valuation allowance:
Real estate loans
One-to four-family	$	1,360	$	1,375	$	-	$	1,368	$	42
Construction		959		959		-		944		5
Commercial real estate and multi-family		3,334		3,352		-		3,370		201
Commercial business loans		2,870		3,094		-		239		80
Consumer - other		101		353		-		206		1
Total impaired loans without valuation allowance		8,624		9,133		-		6,127		329
Impaired loans with valuation allowance:
Real estate loans
One-to four-family		1,361		1,361		109		1,362		42
Construction		7,515		8,980		510		4,173		279
Commercial real estate and multi-family		1,088		1,088		336		1,097		24
Commercial business loans		715		715		46		662		35
Consumer - other		124		124		71		125		6
Total impaired loans with valuation allowance		10,803		12,268		1,072		7,419		386
Total impaired loans	$	19,427	$	21,401	$	1,072	$	13,546	$	715

Loan modifications are generally performed at the request of the individual borrower and may include reduction in interest rates, changes in payments, and maturity date extensions. TDRs are loans for which the original contractual terms of the loans have been modified and both of the following conditions exist: (i) the restructuring constitutes a concession (including reduction of interest rates or extension of maturity dates) and (ii) the borrower is experiencing financial difficulties. Loans are not classified as TDRs when the modification is short-term or results in only an insignificant delay or shortfall in the payments to be received. The Company’s loan modifications are determined on a case-by-case basis in connection with ongoing loan collection processes.

The following table displays information for impaired loans modified through a TDR at June 30, 2012 and December 31, 2011:

	As of		As of
	June 30,		December 31,
(In thousands)	2012		2011
Aggregate recorded investment of impaired loans with terms
modified through a troubled debt restructuring:
Accruing interest	$	656	$	416
Nonaccrual		10,565		12,235
Total	$	11,221	$	12,651

The following table presents a summary of loans that were restructured during the six months ended June 30, 2012 and for the year ended December 31, 2011:

	For the Six Months Ended June 30, 2012
(Dollars in thousands)	Number of Loans		Pre- Modification Recorded Investment		Funds Disbursed		Interest and Escrow Capitalized		Post- Modification Recorded Investment
Real estate loans:
One-to four-family		4	$	989	$	-	$	3	$	992
Multi-family and commercial real estate		1		426		-		-		426
Consumer loans:
Home equity		3		123		-		-		123
Total TDRs restructured during the period		8	$	1,538	$	-	$	3	$	1,541
TDRs, still accruing interest		3	$	567	$	-	$	-	$	567
TDRs, included in nonaccrual		5		971		-		3		974
Total		8	$	1,538	$	-	$	3	$	1,541

	For the Year Ended December 31, 2011
(Dollars in thousands)	Number of Loans		Pre- Modification Recorded Investment		Funds Disbursed		Interest and Escrow Capitalized		Post- Modification Recorded Investment
Real estate loans:
One-to-four family		2	$	310	$	-	$	-	$	310
Construction		1		48		30		-		78
Commercial real estate and multi-family		5		3,736		19		59		3,814
Commercial business loans		3		673		-		-		673
Total TDRs restructured during the period		11	$	4,767	$	49	$	59	$	4,875
TDRs, still accruing interest		-	$	-	$	-	$	-	$	-
TDRs, included in nonaccrual		11		4,767		49		59		4,875
Total		11	$	4,767	$	49	$	59	$	4,875

The specific allowances for loan losses on TDRs is determined by discounting the restructured cash flows at the original effective rate of the loan before modification or is based on the underlying collateral value less costs to sell, if repayment of the loan is considered collateral-dependent. If the resulting amount is less than the recorded book value, the Company either establishes a specific valuation allowance as a component of the allowance for loan losses, or charges off the impaired balance if it determines that such amount is a confirmed loss. This method is used consistently for all segments of the portfolio. The allowance for loan losses also includes an allowance based on a loss migration analysis for each loan category for loans that are not individually evaluated for specific impairment. All loans charged-off, including TDRs charged-off, are factored into this calculation by portfolio segment. During the six months ended June 30, 2012, the Company charged off $2.1 million of loans previously classified as TDRs, on which there were $743,000 of related specific allowances.

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EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

NOTE 7 - EARNINGS PER SHARE

Basic earnings per common share is calculated by dividing the net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is computed in a manner similar to basic earnings per common share except that the weighted-average number of common shares outstanding is increased to include the incremental common shares (as computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. The Company's common stock equivalents are comprised of stock options and restricted stock awards. Anti-dilutive shares are common stock equivalents with weighted-average exercise prices in excess of the weighted-average market value for the periods presented. For the three and six months ended June 30, 2012, anti-dilutive options excluded from the calculations totaled 278,813 options (with an exercise price of $11.12) and 5,886 options (with an exercise price of $12.51). For the three and six months ended June 30, 2011, anti-dilutive options excluded from the calculations totaled 315,827 options (with an exercise price of $11.12) and 7,483 options (with an exercise price of $12.51). Unallocated common shares held by the ESOP are not included in the weighted-average number of common shares outstanding for purposes of calculating either basic or diluted net income per common share.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2012			2011		2012			2011
Net income (loss)	$	(715,000	)	$	505,000	$	(3,391,000	)	$	901,000
Weighted-average common shares outstanding:
Basic		6,610,729			6,826,963		6,610,766			6,827,055
Effect of dilutive stock options and restrictive stock awards		-			-		-			-
Diluted		6,610,729			6,826,963		6,610,766			6,827,055
Earnings (loss) per common share:
Basic	$	(0.11	)	$	0.07	$	(0.51	)	$	0.13
Diluted	$	(0.11	)	$	0.07	$	(0.51	)	$	0.13

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EQUITY INCENTIVE PLAN

6 Months Ended

Jun. 30, 2012

Equity Incentive Plan Disclosure [Abstract]

Equity Incentive Plan Disclosure [Text Block]

NOTE 9 - EQUITY INCENTIVE PLAN

Under the Naugatuck Valley Financial Corporation 2005 Equity Incentive Plan (the “Incentive Plan”), the Company may grant up to 371,794 stock options and 148,717 shares of restricted stock to its employees, officers and directors for an aggregate amount of up to 520,511 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.

The amounts and terms of the awards granted under the Incentive Plan are summarized in the following table.

	Grant date
	July 26,		December 18,		March 20,		March 21,
	2008		2007		2007		2006
Option awards
Awarded		997		1,995		7,483		6,485
Exercise price	$	11.12	$	11.12	$	12.51	$	11.12
Maximum term in years		10		10		10		10
Restricted stock awards
Awarded		997		2,993		1,995		1,496

To date, stock option awards have been granted with an exercise price equal to the higher of the market price of the Company’s stock at the date of grant or $11.12, which was the market price of the Company’s stock at the date stock option awards were initially granted under the Incentive Plan. All granted stock options and restricted stock awards vest at 20% per year beginning on the first anniversary of the date of 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 records 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 to unearned stock awards. Compensation expenses related to unearned restricted shares are amortized to compensation, taxes 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 as described below. The Company recorded share-based compensation expense of $2,065 and $3,148 for the three and six months ended June 30, 2012, respectively, compared to $4,550 and $10,301 for the three and six months ended June 30, 2011, respectively, in connection with the stock option and 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. In determining the expected term of the option awards, the Company elected to follow the simplified method as permitted by the SEC Staff Accounting Bulletin 107. Under this method, the Company has estimated the expected term of the options as being equal to the average of the vesting term plus the original contractual term. The Company estimated its volatility using the historical volatility of other, similar companies during a period of time equal to the expected life of the options. The risk-free rate for the periods within the contractual life of the options is based upon the U.S. Treasury yield curve in effect at the time of grant. Assumptions used to determine the weighted-average fair value of stock options granted were as follows:

	July 26,			December 18,			March 20,			March 21,
Grant date	2008			2007			2007			2006
Dividend yield		2.74	%		2.20	%		1.60	%		1.89	%
Expected volatility		13.40	%		11.00	%		10.49	%		11.20	%
Risk-free rate		3.56	%		3.63	%		4.48	%		4.61	%
Expected life in years		6.5			6.5			6.5			6.5
Weighted average fair value of options at grant date	$	1.51		$	1.18		$	2.55		$	2.25

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LOANS RECEIVABLE (Details 5) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Accruing interest	$ 656	$ 416
Nonaccrual	10,565	12,235
Total	$ 11,221	$ 12,651

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LOANS RECEIVABLE (Tables)

6 Months Ended

Jun. 30, 2012

Receivables [Abstract]

Schedule Of Composition Of Loans Receivable Table [Text Block]

A summary of loans receivable at June 30, 2012 and December 31, 2011 is as follows:

	June 30,			December 31,
(Dollars in thousands)	2012			2011
Real estate loans:
One-to four-family	$	208,653		$	217,893
Commercial real estate and multi-family		150,083			160,858
Construction		33,399			29,734
Total real estate loans		392,135			408,485
Commercial business loans		32,869			36,645
Consumer loans:
Home equity		29,277			32,157
Savings accounts		749			847
Automobile		487			509
Personal		162			197
Total consumer loans		30,675			33,710
Totals loans		455,679			478,840
Less:
Allowance for loan losses		10,972			8,053
Undisbursed construction loans		2,574			3,489
Deferred loan origination fees, net		280			333
Loans receivable, net	$	441,853		$	466,965
Weighted average yield		5.16	%		5.29	%

Allowance for Credit Losses on Financing Receivables [Table Text Block]

	One-to Four- Family			Construction			Commercial Real Estate			Commercial			Consumer			Total
As of and for the Six Months Ended June 30, 2012
(In thousands)
Allowance for loan losses:
Beginning balance	$	1,745		$	1,327		$	3,745		$	754		$	482		$	8,053
Provision for loan losses		804			842			1,789			3,052			205			6,692
Charge-offs		(347	)		(629	)		(1,245	)		(1,416	)		(146	)		(3,783	)
Recoveries		4			-			-			5			1			10
Ending balance	$	2,206		$	1,540		$	4,289		$	2,395		$	542		$	10,972
Ending loan balance individually evaluated for impairment	$	4,636		$	13,209		$	8,892		$	801		$	175		$	27,713
Ending loan balance collectively evaluated for impairment	$	204,017		$	20,190		$	141,191		$	32,068		$	30,500		$	427,966
As of and for the Year Ended December 31, 2011
(In thousands)
Allowance for loan losses:
Beginning balance	$	1,585		$	600		$	2,714		$	884		$	610		$	6,393
Provision for loan losses		377			1,449			1,942			383			142			4,293
Charge-offs		(217	)		(722	)		(911	)		(516	)		(271	)		(2,637	)
Recoveries		-			-			-			3			1			4
Ending balance	$	1,745		$	1,327		$	3,745		$	754		$	482		$	8,053
Ending loan balance individually evaluated for impairment	$	2,721		$	8,474		$	4,422		$	3,585		$	225		$	19,427
Ending loan balance collectively evaluated for impairment	$	215,172		$	21,260		$	156,436		$	33,060		$	33,485		$	459,413

Financing Receivable Credit Quality Indicators [Table Text Block]

The following tables are a summary of the loan portfolio quality indicators by loan class as of June 30, 2012 and December 31, 2011:

Commercial Loans  - Credit Risk Profile by Internally Assigned Grade:
	At June 30, 2012						At December 31, 2011
(In thousands)	Commercial Loans		Commercial Real Estate Construction		Commercial Real Estate		Commercial Loans		Commercial Real Estate Construction		Commercial Real Estate
Grade:
4	$	6,284	$	-	$	35,141	$	6,659	$	216	$	40,769
5		19,088		8,187		81,692		21,941		7,463		88,089
6		4,116		3,760		17,871		2,072		5,948		15,383
7		3,173		15,168		15,379		5,235		8,595		16,004
8		208		-		-		738		-		613
Total	$	32,869	$	27,115	$	150,083	$	36,645	$	22,222	$	160,858

Consumer Loans - Credit Risk Profile by Internally Assigned Grade:
	At June 30, 2012				At December 31, 2011
(In thousands)	Residential -  Prime		Residential - Construction		Residential -  Prime		Residential - Construction
Grade:
Pass	$	202,420	$	6,284	$	213,049	$	7,512
Special Mention		308		-		746		-
Substandard		5,925		-		4,098		-
Doubtful		-		-		-		-
Total	$	208,653	$	6,284	$	217,893	$	7,512

Consumer Loans - Credit Risk Profile Based on Payment Activity:
	At June 30, 2012		At December 31, 2011
(In thousands)	Consumer - Other		Consumer - Other
Grade:
Performing	$	30,286	$	33,323
Nonperforming		389		387
Total	$	30,675	$	33,710

Past Due Financing Receivables [Table Text Block]

The following tables set forth certain information with respect to our loan portfolio delinquencies by loan class and amount as of June 30, 2012 and December 31, 2011:

	Credit Quality Information
	31-60 Days Past Due		61-90 Days Past Due		Greater Than 90 Days (Nonaccrual)		Total Past Due		Current		Total Loans		Carrying Amount > 90 Days and Accruing
As of June 30, 2012
(In thousands)
Real estate loans
One-to four-family	$	1,539	$	-	$	4,715	$	6,254		208,683	$	214,937	$	-
Construction		-		480		11,525		12,005		15,110		27,115		-
Commercial real estate and multi-family		750		40		10,828		11,618		138,465		150,083		-
Commercial business loans		347		695		1,680		2,722		30,147		32,869
Consumer - other		390		-		389		779		29,896		30,675		-
Total	$	3,026	$	1,215	$	29,137	$	33,378	$	422,301	$	455,679	$	-
As of December 31, 2011
(In thousands)
Real estate loans
One-to four-family	$	1,379	$	214	$	4,140	$	5,733		212,160	$	217,893	$	-
Construction		270		-		9,005		9,275		20,459		29,734		-
Commercial real estate and multi-family		654		249		9,182		10,085		150,773		160,858		-
Commercial business loans		396		-		1,967		2,363		34,282		36,645
Consumer - other		467		37		387		891		32,819		33,710		-
Total	$	3,166	$	500	$	24,681	$	28,347	$	450,493	$	478,840	$	-

Schedule Of Impaired Loans Receivable [Table Text Block]

The following tables are a summary of impaired loans by class of loans as of June 30, 2012 and December 31, 2011:

			Unpaid				Average		Interest
	Carrying		Principal		Related		Carrying		Income
As of June 30, 2012	Amount		Balance		Allowance		Amount		Recognized
	(In thousands)
Impaired loans without valuation allowance:
Real estate loans
One-to four-family	$	4,636	$	5,002	$	-	$	4,784	$	84
Construction		10,492		12,205		-		10,485		80
Commercial real estate and multi-family		8,892		10,390		-		9,195		85
Commercial business loans		801		1,811		-		937		7
Consumer - other		175		397		-		259		6
Total impaired loans without valuation allowance		24,996		29,805		-		25,660		262
Impaired loans with valuation allowance:
Real estate loans
Construction		2,717		3,439		305		2,958		59
Total impaired loans with valuation allowance		2,717		3,439		305		2,958		59
Total impaired loans	$	27,773	$	33,244	$	305	$	28,618	$	321

			Unpaid				Average		Interest
	Carrying		Principal		Related		Carrying		Income
As of December 31, 2011	Amount		Balance		Allowance		Amount		Recognized
	(In thousands)
Impaired loans without valuation allowance:
Real estate loans
One-to four-family	$	1,360	$	1,375	$	-	$	1,368	$	42
Construction		959		959		-		944		5
Commercial real estate and multi-family		3,334		3,352		-		3,370		201
Commercial business loans		2,870		3,094		-		239		80
Consumer - other		101		353		-		206		1
Total impaired loans without valuation allowance		8,624		9,133		-		6,127		329
Impaired loans with valuation allowance:
Real estate loans
One-to four-family		1,361		1,361		109		1,362		42
Construction		7,515		8,980		510		4,173		279
Commercial real estate and multi-family		1,088		1,088		336		1,097		24
Commercial business loans		715		715		46		662		35
Consumer - other		124		124		71		125		6
Total impaired loans with valuation allowance		10,803		12,268		1,072		7,419		386
Total impaired loans	$	19,427	$	21,401	$	1,072	$	13,546	$	715

Impaired Loans Modified Tdr [Table Text Block]

The following table displays information for impaired loans modified through a TDR at June 30, 2012 and December 31, 2011:

	As of		As of
	June 30,		December 31,
(In thousands)	2012		2011
Aggregate recorded investment of impaired loans with terms
modified through a troubled debt restructuring:
Accruing interest	$	656	$	416
Nonaccrual		10,565		12,235
Total	$	11,221	$	12,651

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

The following table presents a summary of loans that were restructured during the six months ended June 30, 2012 and for the year ended December 31, 2011:

	For the Six Months Ended June 30, 2012
(Dollars in thousands)	Number of Loans		Pre- Modification Recorded Investment		Funds Disbursed		Interest and Escrow Capitalized		Post- Modification Recorded Investment
Real estate loans:
One-to four-family		4	$	989	$	-	$	3	$	992
Multi-family and commercial real estate		1		426		-		-		426
Consumer loans:
Home equity		3		123		-		-		123
Total TDRs restructured during the period		8	$	1,538	$	-	$	3	$	1,541
TDRs, still accruing interest		3	$	567	$	-	$	-	$	567
TDRs, included in nonaccrual		5		971		-		3		974
Total		8	$	1,538	$	-	$	3	$	1,541

	For the Year Ended December 31, 2011
(Dollars in thousands)	Number of Loans		Pre- Modification Recorded Investment		Funds Disbursed		Interest and Escrow Capitalized		Post- Modification Recorded Investment
Real estate loans:
One-to-four family		2	$	310	$	-	$	-	$	310
Construction		1		48		30		-		78
Commercial real estate and multi-family		5		3,736		19		59		3,814
Commercial business loans		3		673		-		-		673
Total TDRs restructured during the period		11	$	4,767	$	49	$	59	$	4,875
TDRs, still accruing interest		-	$	-	$	-	$	-	$	-
TDRs, included in nonaccrual		11		4,767		49		59		4,875
Total		11	$	4,767	$	49	$	59	$	4,875

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NATURE OF OPERATIONS (Details Textual) (USD $)	1 Months Ended
	Jun. 29, 2011
Stock Issued During Period, Shares, New Issues	4,173,008
Sale of Stock, Price Per Share	$ 8.00
Company's stock offering and concurrent second-step conversion ratio	0.9978
Proceeds From Reorganization and Stock Offering	$ 31,300,000
Payments of Stock Issuance Costs	$ 2,100,000
Employee Stock Ownership Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Shares Purchased for Award	250,380
Federal Corporation [Member]
Shares, Issued	2,829,358
Company's stock offering and concurrent second-step conversion ratio	0.9978
Common Stock, Other Shares, Outstanding	7,002,366

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EQUITY INCENTIVE PLAN (Details 1) (USD $)	1 Months Ended
	Jul. 26, 2008	Dec. 18, 2007	Mar. 20, 2007	Mar. 21, 2006
Dividend yield	2.74%	2.20%	1.60%	1.89%
Expected volatility	13.40%	11.00%	10.49%	11.20%
Risk-free rate	3.56%	3.63%	4.48%	4.61%
Expected life in years	6 years 6 months	6 years 6 months	6 years 6 months	6 years 6 months
Weighted average fair value of options at grant date	$ 1.51	$ 1.18	$ 2.55	$ 2.25

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Consolidated Statements of Changes in Stockholder's Equity (USD $) In Thousands	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings [Member]	Unearned Esop Shares [Member]	Unearned Stock Awards [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Balance at Dec. 31, 2011	$ 70	$ 58,908	$ 27,014	$ (3,442)	$ (14)	$ (1)	$ (221)	$ 82,314
Dividends declared ($0.06 per common share)	0	0	(397)	0	0	0	0	(397)
Stock based compensation (199 shares vested and 199 shares forfeited)	0	0	(2)	0	5	0	0	3
Stock based compensation options	0	1	0	0	0	0	0	1
Treasury stock acquired (84 shares)	0	0	0	0	0	0	0	0
Comprehensive income (loss)	0	0	(3,391)	0	0	0	427	(2,964)
Balance at Jun. 30, 2012	$ 70	$ 58,909	$ 23,224	$ (3,442)	$ (9)	$ (1)	$ 206	$ 78,957

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CRITICAL ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

NOTE 3 - CRITICAL ACCOUNTING POLICIES

The Company considers accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. The accounting policies related to loans and the allowance for loan losses are presented below. For a summary of all other significant accounting policies, please refer to Note 4, “Summary of Significant Accounting Policies”, contained in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2011.

Allowance for Loan Losses. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Although the Company believes that it uses the best information available to establish the allowance for loan losses, future additions to the allowance may be necessary based on estimates that are susceptible to change as a result of changes in economic conditions and other factors. Management reviews the level of the allowance on a quarterly basis, at a minimum, and establishes the provision for loan losses based on the composition of the loan portfolio, delinquency levels, loss experience, economic conditions, and other factors related to the collectability of the loan portfolio.

The Company engages an independent review of its commercial loan portfolio on a quarterly basis and considers adjustments to its loan ratings based upon this review. In addition, the Company’s regulatory authorities, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination.

Impaired Loans - Impaired loans consist of non-accrual loans and troubled debt restructurings (“TDRs”) in accordance with applicable authoritative accounting guidance. With the exception of loans that were restructured and still accruing interest, a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all contractual principal and interest due according to the terms of the loan agreement. Loans deemed to be impaired are classified as non-accrual.

Impairment is measured by estimating the value of the loan based on the present value of expected future cash flows discounted at the loan’s initial effective interest rate or the fair value of the underlying collateral less costs to sell, if repayment of the loan is considered collateral-dependent. All impaired loans are included in non-performing assets.

Non-accrual loans. Loans are automatically placed on non-accrual status when payment of principal or interest is more than 90 days delinquent. Loans are also placed on non-accrual status if collection of principal or interest in full is in doubt or if the loan has been restructured. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received. The loan may be returned to accrual status if unpaid principal and interest are repaid so that the loan is less than 90 days delinquent.

Troubled Debt Restructurings. TDRs are loans for which the original contractual terms of the loans have been modified and both of the following conditions exist: (i) the restructuring constitutes a concession (including reduction of interest rates or extension of maturity dates) and (ii) the borrower is experiencing financial difficulties. Loans are not classified as TDRs when the modification is short-term or results in only an insignificant delay or shortfall in the payments to be received. The Company’s TDRs are determined on a case-by-case basis in connection with ongoing loan collection processes.

The Company does not accrue interest on any TDRs unless it believes collection of all principal and interest under the modified terms is reasonably assured. Generally, six consecutive months of payment performance by the borrower under the restructured terms is required before a TDR is returned to accrual status assuming the loan is restructured at market rates. However, the period could vary depending upon the individual facts and circumstances of the loan.

For a TDR to begin accruing interest, the borrower must demonstrate both some level of performance and the capacity to perform under the modified terms. A history of timely payments and adherence to financial covenants generally serve as sufficient evidence of the borrower’s performance. An evaluation of the borrower’s current creditworthiness is used to assess whether the borrower has the capacity to repay the loan under the modified terms. This evaluation includes an estimate of expected cash flows, evidence of strong financial position, and estimates of the value of collateral, if applicable.

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INVESTMENT SECURITIES (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Available-for-sale securities:
Amortized Cost Basis	$ 26,070	$ 24,996
Gross Unrealized Gains	786	908
Gross Unrealized Losses	(344)	(853)
Fair Value	26,512	25,051
Held-to-maturity securities:
Amortized Cost Basis	29,379	25,292
Gross Unrealized Gains	818	387
Gross Unrealized Losses	0	(9)
Fair Value	30,197	25,670
Us Government Agencies Debt Securities [Member]
Available-for-sale securities:
Amortized Cost Basis	1,010	1,014
Gross Unrealized Gains	40	54
Gross Unrealized Losses	0	0
Fair Value	1,050	1,068
Mortgage-Backed Securities, Issued By Us Government Sponsored Enterprises [Member]
Available-for-sale securities:
Amortized Cost Basis	15,698	13,919
Gross Unrealized Gains	728	844
Gross Unrealized Losses	(28)	0
Fair Value	16,398	14,763
Held-to-maturity securities:
Amortized Cost Basis	29,379	25,292
Gross Unrealized Gains	818	387
Gross Unrealized Losses	0	(9)
Fair Value	30,197	25,670
Collateralized Mortgage Backed Securities [Member]
Available-for-sale securities:
Amortized Cost Basis	1,328	1,711
Gross Unrealized Gains	18	10
Gross Unrealized Losses	0	0
Fair Value	1,346	1,721
Mortgage-Backed Securities, Issued By Private Enterprises [Member]
Available-for-sale securities:
Amortized Cost Basis	334	352
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(67)	(97)
Fair Value	267	255
Debt Securities [Member]
Available-for-sale securities:
Amortized Cost Basis	18,370	16,996
Gross Unrealized Gains	786	908
Gross Unrealized Losses	(95)	(97)
Fair Value	19,061	17,807
Auction-Rate Trust Preferred Securities [Member]
Available-for-sale securities:
Amortized Cost Basis	7,700	8,000
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(249)	(756)
Fair Value	$ 7,451	$ 7,244

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EARNINGS PER SHARE (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Jun. 30, 2012	Jun. 30, 2011
11.12 Exercise Price [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	278,813	315,827	278,813	315,827
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Exercise Price			$ 11.12	$ 11.12
12.51 Exercise Price [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	5,886	7,483	5,886	7,483
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Exercisable Options, Weighted Average Exercise Price			$ 12.51	$ 12.51

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INVESTMENT SECURITIES (Tables)

6 Months Ended

Jun. 30, 2012

Investments, Debt and Equity Securities [Abstract]

Schedule Of Available For Sale Securities and Held To Maturity Securities [Table Text Block]

At June 30, 2012, the composition of the investment portfolio was:

	Amortized		Gross Unrealized					Fair
(In thousands)	Cost Basis		Gains		Losses			Value
Available-for-sale securities:
U.S. government and agency obligations	$	1,010	$	40	$	-		$	1,050
Government guaranteed mortgage-backed securities		15,698		728		(28	)		16,398
Government guaranteed collateralized mortgage obligations		1,328		18		-			1,346
Private label collateralized mortgage obligations		334		-		(67	)		267
Total debt securities		18,370		786		(95	)		19,061
Auction-rate trust preferred securities		7,700		-		(249	)		7,451
Total available-for-sale securities	$	26,070	$	786	$	(344	)	$	26,512

	Amortized		Gross Unrealized				Fair
(In thousands)	Cost Basis		Gains		Losses		Value
Held-to-maturity securities:
Government guaranteed mortgage-backed securities	$	29,379	$	818	$	-	$	30,197
Total held-to-maturity securities	$	29,379	$	818	$	-	$	30,197

At December 31, 2011, the composition of the investment portfolio was:

	Amortized		Gross Unrealized					Fair
(In thousands)	Cost Basis		Gains		Losses			Value
Available-for-sale securities:
U.S. government and agency obligations	$	1,014	$	54	$	-		$	1,068
Government guaranteed mortgage-backed securities		13,919		844		-			14,763
Government guaranteed collateralized mortgage obligations		1,711		10		-			1,721
Private label collateralized mortgage obligations		352		-		(97	)		255
Total debt securities		16,996		908		(97	)		17,807
Auction-rate trust preferred securities		8,000		-		(756	)		7,244
Total available-for-sale securities	$	24,996	$	908	$	(853	)	$	25,051

	Amortized		Gross Unrealized					Fair
(In thousands)	Cost Basis		Gains		Losses			Value
Held-to-maturity securities:
Government guaranteed mortgage-backed securities	$	25,292	$	387	$	(9	)	$	25,670
Total held-to-maturity securities	$	25,292	$	387	$	(9	)	$	25,670

Schedule of Unrealized Loss on Investments [Table Text Block]

The following is a summary of the fair values and related unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2012, and December 31, 2011.

	At June 30, 2012
	Securities in Continuous Unrealized
	Loss Position Less Than 12 Months
	Number of		Market		Unrealized
(Dollars in thousands)	Securities		Value		Loss
Government guaranteed mortgage backed securities		2	$	4,005	$	(28	)
Total securities in unrealized loss position		2	$	4,005	$	(28	)

	Securities in Continuous Unrealized
	Loss Position 12 or More Consecutive Months
	Number of		Market		Unrealized
(Dollars in thousands)	Securities		Value		Loss
Private label collateralized mortgage obligations		1	$	267	$	(67	)
Auction-rate trust preferred securities		2		2,150		(249	)
Total securities in unrealized loss position		3	$	2,417	$	(316	)

	At December 31, 2011
	Securities in Continuous Unrealized
	Loss Position Less Than 12 Months
	Number of		Market		Unrealized
(Dollars in thousands)	Securities		Value		Loss
Government guaranteed mortgage backed securities		2	$	4,244	$	(9	)
Total securities in unrealized loss position		2	$	4,244	$	(9	)

	Securities in Continuous Unrealized
	Loss Position 12 or More Consecutive Months
	Number of		Market		Unrealized
(Dollars in thousands)	Securities		Value		Loss
Private label collateralized mortgage obligations		1	$	256	$	(97	)
Auction-rate trust preferred securities		2		1,644		(756	)
Total securities in unrealized loss position		3	$	1,900	$	(853	)