S-1

As filed with the Securities and Exchange Commission on October 29, 2010
Registration No. 333-_________

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Fraternity Community Bancorp, Inc.
Fraternity Federal Savings and Loan Association 401(k) Plan

(Exact name of registrant as specified in its charter)

Maryland	6035	27-3683448
State or other jurisdiction of incorporation or organization	(Primary Standard Industrial Classification Code Number)	(IRS Employer Identification Number)

764 Washington Boulevard
Baltimore, Maryland 21230
(410) 539-1313
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)

Thomas K. Sterner
Chairman of the Board, Chief Executive Officer
and Chief Financial Officer
Fraternity Community Bancorp, Inc.
764 Washington Boulevard
Baltimore, Maryland 21230
(410) 539-1313
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

Copies to:

Gary R. Bronstein, Esq.	Matthew Dyckman, Esq.
Joel E. Rappoport, Esq.	SNR Denton US LLP
Kilpatrick Stockton LLP	1301 K Street, NW
607 14th Street, NW, Suite 900	Suite 600, East Tower
Washington, DC 20005	Washington, DC 20005
(202) 508-5800	(202) 408-6400

     Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

     If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box: þ

     If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

     If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

     If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

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

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

Calculation of Registration Fee

	Amount to be	Proposed maximum	Proposed maximum	Amount of
Title of each class of securities to be registered	registered	offering price per unit	Aggregate offering price (1)	registration fee
Common Stock, $0.01 par value	1,587,000 shares	$10.00	$15,870,000	$1,132.00
Participation Interests	(2)	—	(2)	(3)

(1)	Estimated solely for the purpose of calculating the registration fee pursuant to Regulation 457(o) under the Securities Act.
(2)	In addition, pursuant to Rule 416(c) under the Securities Act, this registration statement also covers an indeterminate amount of interests to be offered or sold pursuant to the employee benefit plan described herein.
(3)	The securities of Fraternity Community Bancorp, Inc. to be purchased by the Fraternity Federal Savings and Loan Association 401(k) Plan are included in the common stock. Accordingly, no separate fee is required for the participation interests pursuant to Rule 457(h)(2) of the Securities Act.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

PARTICIPATION INTERESTS IN
FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
401(K) PLAN
AND
OFFERING OF 152,800 SHARES OF
FRATERNITY COMMUNITY BANCORP, INC.
COMMON STOCK ($.01 PAR VALUE)

     This prospectus supplement relates to the offer and sale to participants in the Fraternity Federal Savings and Loan Association 401(k) Plan (the “401(k) Plan”) of participation interests and shares of common stock of Fraternity Community Bancorp, Inc. (“Fraternity Community Bancorp”) in connection with the Fraternity Community Bancorp initial public offering.

     401(k) Plan participants may direct ______________ (collectively referred to herein as the “Fraternity Community Bancorp Stock Fund Trustee”), to use their account balances to subscribe for and purchase shares of Fraternity Community Bancorp common stock through the new Fraternity Community Bancorp Stock Fund in the 401(k) Plan. Based upon the value of the 401(k) plan assets as of September 30, 2010, the Fraternity Community Bancorp Stock Fund Trustee may purchase up to 152,800 shares of Fraternity Community Bancorp common stock at a purchase price of $10.00 per share. This prospectus supplement relates to the election of 401(k) Plan participants to direct the Fraternity Community Bancorp Stock Fund Trustee to invest all or a portion of their 401(k) Plan account balances in Fraternity Community Bancorp common stock through the new Fraternity Community Bancorp Stock Fund.

     The Fraternity Community Bancorp prospectus dated ____________, 2010, which we have attached to this prospectus supplement, includes detailed information regarding the offering of shares of Fraternity Community Bancorp common stock and the financial condition, results of operations and business of Fraternity Federal Savings and Loan Association (“Fraternity Federal”). This prospectus supplement provides information regarding the 401(k) Plan. You should read this prospectus supplement together with the prospectus and keep both for future reference.

Please refer to “Risk Factors” beginning on page ___ of the prospectus.

Neither the Securities and Exchange Commission, the Office of Thrift Supervision, the Federal Deposit
Insurance Corporation, nor any other state or federal agency or any state securities commission, has
approved or disapproved these securities. Any representation to the contrary is a criminal offense.

These securities are not deposits or accounts and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.

     This prospectus supplement may be used only in connection with offers and sales by Fraternity Community Bancorp of participation interests or shares of common stock under the 401(k) Plan in the offering. No one may use this prospectus supplement to re-offer or resell interests or shares of common stock acquired through the 401(k) Plan.

     You should rely only on the information contained in this prospectus supplement and the attached prospectus. Neither Fraternity Community Bancorp, Fraternity Federal nor the 401(k) Plan have authorized anyone to provide you with different information.

     This prospectus supplement does not constitute an offer to sell or solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in that jurisdiction. Neither the delivery of this prospectus supplement and the prospectus nor any sale of common stock shall under any circumstances imply that there has been no change in the affairs of Fraternity Federal or the 401(k) Plan since the date of this prospectus supplement, or that the information contained in this prospectus supplement or incorporated by reference is correct as of any time after the date of this prospectus supplement.

The date of this Prospectus Supplement is _____________, 2010.

TABLE OF CONTENTS

	Page
THE OFFERING		1
Securities Offered		1
Election to Purchase Fraternity Community Bancorp, Inc. Common Stock in the Stock Offering		1
Value of Participation Interests		2
Method of Directing Transfer		2
Time for Directing Transfer		2
Irrevocability of Transfer Direction		2
Purchase Price of Fraternity Community Bancorp, Inc. Common Stock		3
Nature of a Participant’s Interest in Fraternity Community Bancorp, Inc. Common Stock		3
Voting and Tender Rights of Fraternity Community Bancorp, Inc. Common Stock		3
DESCRIPTION OF THE 401(k) PLAN		3
Introduction		3
Eligibility and Participation		4
Contributions Under the 401(k) Plan		4
Limitations on Contributions		5
401(k) Plan Investments		6
Benefits Under the 401(k) Plan		7
Withdrawals and Distributions from the 401(k) Plan		7
ADMINISTRATION OF THE 401(k) PLAN		9
Trustees		9
Reports to 401(k) Plan Participants		9
Plan Administrator		9
Amendment and Termination		9
Merger, Consolidation or Transfer		9
Federal Income Tax Consequences		9
Restrictions on Resale		11
SEC Reporting and Short-Swing Profit Liability		11
LEGAL OPINION		12

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THE OFFERING

Securities Offered

     The securities offered in connection with this prospectus supplement are participation interests in the 401(k) Plan. At a purchase price of $10.00 per share, the Fraternity Community Bancorp Stock Fund Trustee may acquire up to 152,800 shares of Fraternity Community Bancorp common stock in the stock offering (the “Stock Offering”) through the new Fraternity Community Bancorp Stock Fund. The interests offered through this prospectus supplement are conditioned on the close of the Stock Offering. Certain subscription rights and purchase limitations also govern your investment in the new Fraternity Community Bancorp Stock Fund in connection with the Stock Offering. See “The Conversion and Stock Offering — Subscription Offering and Subscription Rights” and “— Limitations on Purchases of Shares” in the prospectus attached to this prospectus supplement for further discussion of these subscription rights and purchase limitations.

     This prospectus supplement contains information regarding the 401(k) Plan. The attached prospectus contains information regarding the Stock Offering and the financial condition, results of operations and business of Fraternity Federal and its affiliates. The address of the principal executive office of Fraternity Federal is 764 Washington Boulevard, Baltimore, Maryland 21230. The telephone number of Fraternity Federal is (410) 539-1313.

Election to Purchase Fraternity Community Bancorp, Inc. Common Stock in the Stock Offering

     In connection with the Stock Offering, Fraternity Federal Savings and Loan Association withdrew from the Pentegra Multi-Employer Defined Contribution Plan for Financial Institutions (“Thrift Plan”) and adopted a single employer 401(k) Plan which allows for the investment in Fraternity Community Bancorp common stock through a new employer stock fund. If you wish to use all or a portion of your 401(k) Plan funds to invest in Fraternity Community Bancorp common stock, you may direct the Fraternity Community Bancorp Stock Fund Trustee to transfer all or a portion of your 401(k) Plan account balance to the Fraternity Community Bancorp Stock Fund. The Fraternity Community Bancorp Stock Fund Trustee will subscribe for Fraternity Community Bancorp common stock offered for sale in the Stock Offering in accordance with your direction. If there is not enough Fraternity Community Bancorp common stock available in the Stock Offering to fill all subscriptions, the common stock will be apportioned and the Fraternity Community Bancorp Stock Fund Trustee may not be able to purchase all of the common stock you requested. If the Stock Offering is oversubscribed and your order is cut back, your 401(k) Plan funds (which are not invested in Fraternity Community Bancorp common stock) will be reinvested in accordance with the investment elections that you have in place for your elective deferrals.

     All 401(k) Plan participants are permitted to direct a transfer of all or a portion of their account balances in the 401(k) Plan into the Fraternity Community Bancorp Stock Fund. However, transfer directions are subject to subscription rights and purchase priorities. See “Summary — Persons Who Can Order Stock in the Offering” in the attached prospectus. Fraternity Community Bancorp has granted rights to subscribe for shares of Fraternity Community Bancorp common stock to the following persons in the following order of priority: (1) persons with $50 or more on deposit at Fraternity Federal Savings and Loan Association as of the close of business on June 30, 2009; (2) the Fraternity Federal Savings and Loan Association Employee Stock Ownership Plan; (3) persons with $50 or more on deposit at Fraternity Federal Savings and Loan Association as of the close of business on ____________, 20__; and (4) except for persons eligible to subscribe for shares under categories 1 and 3, Fraternity Federal Savings and Loan Association’s depositors as of the close of business on ___________, 20___, who were not able to subscribe for shares of Fraternity Community Bancorp common stock under categories 1 and 3. If you fall into one of the above subscription offering categories, you have subscription rights to purchase shares

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of Fraternity Community Bancorp common stock in the Stock Offering and you may use your account balance in the 401(k) Plan to subscribe for shares of Fraternity Community Bancorp common stock through the Fraternity Community Bancorp Stock Fund.

     The limitations on the total amount of Fraternity Community Bancorp common stock that you may purchase in the Stock Offering, as described in the prospectus (see “The Conversion and Stock Offering — Limitations on Purchases of Shares”), will be calculated based on the aggregate amount that you subscribed for: (a) through your 401(k) Plan account and (b) through your sources of funds outside of the 401(k) Plan. Whether you place an order through the 401(k) Plan, outside the 401(k) Plan, or both, the number of shares of Fraternity Community Bancorp common stock, if any, that you receive will be determined based on the total number of subscriptions, your purchase priority and the allocation priorities described in the prospectus. If, as a result of the calculation, you are allocated insufficient shares to fill all of your orders, available shares will be allocated between orders on a pro rata basis.

Value of Participation Interests

     As of September 30, 2010, the market value of the plan assets equaled approximately $1,528,000. The Plan Administrator has distributed quarterly statements to each participant reflecting the value of his or her beneficial interest in the plan as of September 30, 2010. The value of the plan assets represents past contributions made to the plan on your behalf, plus or minus earnings or losses on the contributions, less previous withdrawals.

Method of Directing Transfer

     In order to facilitate your investment in the Fraternity Community Bancorp Stock Fund in connection with the Stock Offering, you must complete, sign and submit the blue form included with this prospectus supplement (the “Investment Form”). In order to invest in the Fraternity Community Bancorp Stock Fund, you must direct the Fraternity Community Bancorp Stock Fund Trustee to transfer a percentage of your beneficial interest in the assets of the 401(k) Plan to the Fraternity Community Bancorp Stock Fund (in multiples of not less than 1%). If you do not wish to invest in the Fraternity Community Bancorp Stock Fund at this time, you do not need to take any action. The minimum investment in the Fraternity Community Bancorp Stock Fund during the Stock Offering is $_______ and the maximum individual investment is $________. Your blue Investment Form must be received by [_____________] by noon on _______________, 2010.

Time for Directing Transfer

     The deadline to submit your Investment Form to [___________] is 12:00 noon, local time, on _____________________, 2010, unless extended by Fraternity Federal. If you have any questions regarding the Fraternity Community Bancorp Stock Fund, you can call [_____________] at (___) __-___.

Irrevocability of Transfer Direction

     Once you have submitted your Investment Form, you cannot change your direction to transfer amounts credited to your account in the 401(k) Plan to the Fraternity Community Bancorp Stock Fund. Following the closing of the Stock Offering and the initial purchase of shares in the Fraternity Community Bancorp Stock Fund, you will again have complete access to any funds you directed towards the purchase of shares of Fraternity Community Bancorp common stock in the Stock Offering. Special restrictions may apply to transfers directed to and from the Fraternity Community Bancorp Stock Fund by

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participants who are subject to Section 16(b) of the Securities Exchange Act of 1934, as amended. See “SEC Reporting and Short-Swing Profit Liability”.

Purchase Price of Fraternity Community Bancorp, Inc. Common Stock

     The Fraternity Community Bancorp Stock Fund Trustee will use the funds transferred to the Fraternity Community Bancorp Stock Fund to purchase shares of Fraternity Community Bancorp common stock in the Stock Offering. The Fraternity Community Bancorp Stock Fund Trustee will pay the same price for shares of Fraternity Community Bancorp common stock as all other persons who purchase shares of Fraternity Community Bancorp common stock in the Stock Offering. If there is not enough common stock available in the Stock Offering to fill all subscriptions, the common stock will be apportioned and the trustee may not be able to purchase all of the common stock you requested. If the Stock Offering is oversubscribed and your order is cut back, your 401(k) Plan funds (which are not invested in Fraternity Community Bancorp common stock) will be reinvested in accordance with the investment elections that you have in place for your elective deferrals.

Nature of a Participant’s Interest in Fraternity Community Bancorp, Inc. Common Stock

     All shares of Fraternity Community Bancorp common stock purchased through the Fraternity Community Bancorp Stock Fund will be registered in the name of the 401(k) Plan. The Fraternity Community Bancorp Stock Fund Trustee will credit the shares of Fraternity Community Bancorp common stock acquired at your direction in the Stock Offering to your account in the 401(k) Plan. Therefore, the investment designations of other 401(k) Plan participants should not affect earnings on your 401(k) Plan account.

Voting and Tender Rights of Fraternity Community Bancorp, Inc. Common Stock

     The Fraternity Community Bancorp Stock Fund Trustee will exercise voting and tender rights attributable to all Fraternity Community Bancorp common stock held in the Fraternity Community Bancorp Stock Fund, as directed by participants with interests in the Fraternity Community Bancorp Stock Fund. With respect to each matter as to which holders of Fraternity Community Bancorp common stock have a right to vote, you will have voting instruction rights that reflect your proportionate interest in the Fraternity Community Bancorp Stock Fund. The number of shares of Fraternity Community Bancorp common stock held in the Fraternity Community Bancorp Stock Fund voted for and against each matter will be proportionate to the number of voting instruction rights exercised. If there is a tender offer for Fraternity Community Bancorp common stock, the 401(k) Plan allots each participant a number of tender instruction rights reflecting the participant’s proportionate interest in the Fraternity Community Bancorp Stock Fund. The percentage of shares of Fraternity Community Bancorp common stock held in the Fraternity Community Bancorp Stock Fund that will be tendered will be the same as the percentage of the total number of tender instruction rights exercised in favor of the tender offer. The remaining shares of Fraternity Community Bancorp common stock held in the Fraternity Community Bancorp Stock Fund will not be tendered.

DESCRIPTION OF THE 401(k) PLAN

Introduction

     Fraternity Federal originally adopted the Thrift Plan effective ________________. In connection with the Stock Offering, Fraternity Federal withdrew from the Thrift Plan and adopted a single employer plan that permits the establishment of an employer stock fund. Fraternity Federal intends for the 401(k) Plan to comply, in form and in operation, with all applicable provisions of the Internal

3

Revenue Code and the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Fraternity Federal may change the 401(k) Plan from time to time in the future to ensure continued compliance with these laws. Fraternity Federal may also amend the 401(k) Plan from time to time in the future to add, modify, or eliminate certain features of the plan, as it sees fit. Federal law provides you with various rights and protections as a participant in the 401(k) Plan, which is governed by ERISA. However, the Pension Benefit Guaranty Corporation does not guarantee your benefits under the 401(k) Plan.

     Reference to Full Text of the Plan. The following portions of this prospectus supplement summarize the material provisions of the 401(k) Plan. Fraternity Federal qualifies this summary in its entirety by reference to the full text of the 401(k) Plan. You may obtain copies of the 401(k) Plan document, including any amendments to the plan and a summary plan description, by contacting [_____________] at (___) __-___. You should carefully read the 401(k) Plan documents to understand your rights and obligations under the 401(k) Plan.

Eligibility and Participation

     Employees may begin participating in the 401(k) Plan on the first day of the month coinciding with or next following the date the employee completes at least 1,000 hours of service in a 12 consecutive month period.

     As of September 30, 2010, ____ of the ______ eligible employees of Fraternity Federal actively participated in the Thrift Plan.

Contributions Under the 401(k) Plan

     Employee Pre-Tax Salary Deferrals. Subject to certain Internal Revenue Service limitations, the 401(k) Plan permits you to make pre-tax salary deferrals each payroll period of up to 50% of your compensation. Compensation is defined for purposes of the 401(k) Plan as each participant’s Box 1, Form W-2 compensation. In addition to pre-tax salary deferrals, you may make “catch up” contributions if you are currently age 50 or will be 50 before the end of the calendar year.

     Fraternity Federal Matching Contributions. The 401(k) Plan provides that Fraternity Federal will make matching contributions on behalf of each eligible participant with respect to each eligible participant’s elective deferrals. If you elect to defer funds into the 401(k) Plan, Fraternity Federal will match your contributions as follows:

Employee	Employer
Deferral Rate	Matching
(% of Compensation)	Contribution
1.0%	1.0%
2.0%	2.0%
3.0%	3.0%
4.0%	4.0%
5.0%	4.5%
6.0%	5.0%

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     Fraternity Federal will make matching contributions equal to 100% of the participant’s deferrals, not to exceed 4% of the participant’s compensation, plus 50% of the next 2% of the participant’s elective contributions.

     Rollover Contributions. Fraternity Federal allows employees who receive a distribution from a previous employer’s tax-qualified employee benefit plan to deposit that distribution into a Rollover Contribution account under the 401(k) Plan, provided the rollover contribution satisfies IRS requirements. For additional information on Rollover Contributions see the Summary Plan Description for the 401(k) Plan.

Limitations on Contributions

     Limitation on Employee Salary Deferrals. By law, your total deferrals under the 401(k) Plan, together with similar plans, may not exceed $16,500 for 2010. Eligible employees who are age 50 and over may also make additional “catch-up” contributions to the plan, up to a maximum of $5,500 for 2010. The Internal Revenue Service periodically increases these limitations. An eligible participant who exceeds these limitations must include any excess deferrals in gross income for federal income tax purposes in the year of deferral. In addition, the participant must pay federal income taxes on any excess deferrals when distributed by the 401(k) Plan to the participant, unless the plan distributes the excess deferrals and any related income no later than the first April 15th following the close of the taxable year in which the participant made the excess deferrals. Any income on excess deferrals distributed before such date is treated, for federal income tax purposes, as earned and received by the participant in the taxable year of the distribution.

     Limitation on Annual Additions and Benefits. As required by the Internal Revenue Code, the 401(k) Plan provides that the total amount of contributions and forfeitures (annual additions) credited to a participant during any year under all defined contribution plans of Fraternity Federal (including the 401(k) Plan and the proposed Fraternity Federal Employee Stock Ownership Plan) may not exceed the lesser of 100% of the participant’s annual compensation or $49,000 for 2010.

     Limitation on Plan Contributions for Highly Compensated Employees. Special provisions of the Internal Revenue Code limit the amount of pre-tax and matching contributions that may be made to the 401(k) Plan in any year on behalf of highly compensated employees, in relation to the amount of pre-tax and matching contributions made by or on behalf of all other employees eligible to participate in the 401(k) Plan. If pre-tax and matching contributions exceed these limitations, the plan must adjust the contribution levels for highly compensated employees.

     In general, a highly compensated employee includes any employee who (1) was a 5% owner of the sponsoring employer at any time during the year or the preceding year, or (2) had compensation for the preceding year in excess of $110,000 and, if the sponsoring employer so elects, was in the top 20% of employees by compensation for such year.

     Top-Heavy Plan Requirements. If the 401(k) Plan is a Top-Heavy Plan for any calendar year, Fraternity Federal may be required to make certain minimum contributions to the 401(k) Plan on behalf of non-key employees. In general, the 401(k) Plan will be treated as a “Top-Heavy Plan” for any calendar year if, as of the last day of the preceding calendar year, the aggregate balance of the accounts of “Key Employees” exceeds 60% of the aggregate balance of the accounts of all employees under the plan. A Key Employee is generally any employee who, at any time during the calendar year or any of the four preceding years, is:

(1) an officer of Fraternity Federal whose annual compensation exceeds $165,000;

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(2)	a 5% owner of the employer, meaning an employee who owns more than 5% of the outstanding stock of Fraternity Community Bancorp, or who owns stock that possesses more than 5% of the total combined voting power of all stock of Fraternity Community Bancorp; or
(3)	a 1% owner of the employer, meaning an employee who owns more than 1% of the outstanding stock of Fraternity Community Bancorp, or who owns stock that possesses more than 1% of the total combined voting power of all stock of Fraternity Community Bancorp, and whose annual compensation exceeds $150,000.

     The foregoing dollar amounts are for 2010.

     Prior to January 1, 2011, participant retirement funds were invested in the following investment vehicles through the Thrift Plan.

	Annual Rates of Return
	as of December 31,
Fund Name	2009			2008			2007
Target Retirement 2015 Fund		17.11	%		-22.80	%		6.20	%
Target Retirement 2025 Fund		20.75			-28.70			6.60
Target Retirement 2035 Fund		25.83			-34.20			6.80
Target Retirement 2045 Fund		26.35			-34.10			7.50
Income Plus		11.25			-7.60			6.00
Growth & Income		18.22			-20.90			5.90
Growth		25.13			-33.20			5.70
Stable Value Fund		2.19			2.90			3.80
Short Term Investment Fund (money market)		0.19			2.30			4.90
Government Short Term Investment Fund		-0.09			1.90			4.80
Treasury Inflation Protected Securities Fund		10.60			—			—
Long Treasury Index Fund (government bond)		-13.14			23.90			9.20
Aggregate Bond Index Fund		5.49			4.90			6.30
S&P 500 Fund		26.01			-37.30			4.90
S&P Value Stock Fund		20.62			-39.60			1.40
S&P Growth Stock Fund		31.92			-34.80			8.50
S&P Midcap Stock Fund		36.58			-36.50			7.40
Russell 2000 Stock Fund		26.85			-33.80			-2.10
Nasdaq 100 Stock Fund		53.98			-42.00			18.20
US REIT Index Fund		26.77			-39.30			-18.10
International Stock Fund		31.33			-43.60			10.60

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     As of January 1, 2011, participant retirement funds were invested in the following investment vehicles through the Fraternity Federal 401(k)Plan.

     [INSERT FUND DESCRIPTIONS]

     In connection with the Stock Offering, Fraternity Federal has implemented the Fraternity Community Bancorp Stock Fund. Following the close of the Stock Offering, the Fraternity Community Bancorp Stock Fund will consist of investments in the common stock of Fraternity Community Bancorp made on the closing date of the Stock Offering. Your investment in the Fraternity Community Bancorp Stock Fund will be recorded using the unit accounting method. If cash dividends are paid on Fraternity Community Bancorp common stock, the trustee will, to the extent practicable, use the dividends held in the Fraternity Community Bancorp Stock Fund to purchase shares of the common stock. Pending investment in the common stock, assets held in the Fraternity Community Bancorp Stock Fund will be placed in the short term investment component of the Fraternity Community Bancorp Stock Fund earning a market rate of interest.

     As of the date of this prospectus supplement, no shares of Fraternity Community Bancorp common stock have been issued or are outstanding, and there is no established market for Fraternity Community Bancorp common stock. Accordingly, there is no record of the historical performance of the Fraternity Community Bancorp Stock Fund. Performance of the Fraternity Community Bancorp Stock Fund depends on a number of factors, including the financial condition and profitability of Fraternity Federal and general stock market conditions. See “Risk Factors” in the attached prospectus.

     Once you have submitted your Investment Form, you may not change your investment directions in the Stock Offering.

Benefits Under the 401(k) Plan

     Vesting. All participants are 100% vested in their pre-tax salary deferrals and employer matching contribution. This means that participants have a non-forfeitable right to these funds and any earnings on the funds at all times.

Withdrawals and Distributions from the 401(k) Plan

     Withdrawals Before Termination of Employment. While in active service, participants may take one non-hardship withdrawal from the 401(k) Plan per plan year (subject to the restrictions set forth in the 401(k) Plan). A participant may also take one hardship withdrawal per plan year, provided the participant has a hardship event as defined by the Internal Revenue Service regulations and subject to approval by the Fraternity Federal Compensation Committee.

     Distribution Upon Retirement, Death or Disability. If a participant’s accounts are $500 or less upon termination of employment, payment will be in the form of a lump sum as of a valuation date as soon thereafter as administratively possible. If a participant’s accounts exceed $500 and are $5,000 or less upon termination of employment, and the participant does not elect to have his/her distribution paid, payment will be in the form of a Direct Rollover to an individual retirement plan designated by the Plan Administrator.

     If termination of employment is due to Normal or Postponed Retirement, Death, or Total and Permanent Disability (as defined in the 401(k) Plan), and a participant’s account exceeds $5,000, distribution of the participant’s accounts will be in the form of a lump sum payment, upon the

7

participant’s attainment of Normal Retirement Date, unless the participant elects (within 30 days of receipt of an election notice) to further defer distribution beyond Normal Retirement Date to a Postponed Retirement Date (subject to an Internal Revenue Service minimum distribution of benefits requirement following attainment of age 70¹/2), or unless the participant elects one of the following optional forms of payment:

• Lump sum payment or in annual installments over a period not exceeding the participant’s life expectancy or the joint and survivor life expectancy of the participants and his/her designated beneficiary, as selected by the participant as of any valuation date following the date of termination of employment. (Note: lump sums are subject to a mandatory 20% income tax withholding and a statutory 10% additional federal tax if paid before age 55). A participant “Rollover” within 60 days of distribution to an Individual Retirement Account (IRA), or another employer’s plan (if permitted by that plan).

• Direct “Rollover” from the 401(k) Plan to another employer’s plan (if permitted by that plan) for accounts which are lesser or greater than $5,000.

     Distribution Upon Termination for Any Other Reason. If a participant’s accounts are $500 or less upon termination of employment, payment will be in the form of a lump sum as of a valuation date as soon thereafter as administratively possible. If a participant’s accounts exceed $500 and are $5,000 or less upon termination of employment, and the participant does not elect to have his/her distribution paid, payment will be in the form of a Direct Rollover to an individual retirement plan designated by the Plan Administrator.

     If upon termination of employment, a participant’s accounts exceed $5,000, payment will be deferred to Normal Retirement Date, unless the participant elects one of the following optional forms of payment:

• Lump sum payment as of any valuation date following the date of termination of employment. (Note: lump sums are subject to a mandatory 20% income tax withholding and a statutory 10% additional federal tax if paid before age 55). A participant “Rollover” is permitted within 60 days of distribution to an Individual Retirement Account (IRA), or another employer’s plan (if permitted by that plan).

• Direct “Rollover” from the 401(k) Plan to another employer’s plan (if permitted by that plan) for accounts which are lesser or greater than $5,000.

     Nonalienation of Benefits. Except with respect to federal income tax withholding, and as provided for under a qualified domestic relations order, benefits payable under the 401(k) Plan will not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any rights to benefits payable under the 401(k) Plan will be void.

     Applicable federal tax law requires the 401(k) Plan to impose substantial restrictions on your right to withdraw amounts held under the 401(k) Plan before your termination of employment with Fraternity Federal. Federal law may also impose an excise tax on withdrawals from the 401(k) Plan before you attain 59¹/2 years of age, regardless of whether the withdrawal occurs during your employment with Fraternity Federal or after termination of employment.

8

ADMINISTRATION OF THE 401(k) PLAN

Trustees

     The board of directors of Fraternity Federal has appointed [_____________] to serve as the trustees for the Fraternity Community Bancorp Stock Fund. Reliance Trust Company will serve as the custodian of the shares held in the Fraternity Community Bancorp Stock Fund and the trustee of all the other plan assets. The trustees receive, hold and invest the contributions to the 401(k) Plan in trust and distribute them to participants and beneficiaries in accordance with the terms of the 401(k) Plan and the directions of the Plan Administrator. The trustees are responsible for the investment of the trust assets, as directed by the Plan Administrator and the participants.

Reports to 401(k) Plan Participants

     The Plan Administrator furnishes participants quarterly statements that show the balance in their accounts as of the statement date, contributions made to their accounts during that period and any additional adjustments required to reflect earnings or losses.

Plan Administrator

     Fraternity Federal currently serves as Plan Administrator for the 401(k) Plan. The Plan Administrator handles the following administrative functions: interpreting the provisions of the plan, prescribing procedures for filing applications for benefits, preparing and distributing information explaining the plan, maintaining plan records, books of account and all other data necessary for the proper administration of the plan, preparing and filing all returns and reports required by the U.S. Department of Labor and the IRS and making all required disclosures to participants, beneficiaries and others under ERISA.

Amendment and Termination

     Fraternity Federal expects to continue the 401(k) Plan indefinitely. Nevertheless, Fraternity Federal may terminate the 401(k) Plan at any time. If Fraternity Federal terminates the 401(k) Plan in whole or in part, all affected participants become fully vested in their accounts, regardless of other provisions of the 401(k) Plan. Fraternity Federal reserves the right to make, from time to time, changes which do not cause any part of the trust to be used for, or diverted to, any purpose other than the exclusive benefit of participants or their beneficiaries. Fraternity Federal may amend the plan, however, as necessary or desirable, in order to comply with ERISA or the Internal Revenue Code.

Merger, Consolidation or Transfer

     If the 401(k) Plan merges or consolidates with another plan or transfers the trust assets to another plan, and either the 401(k) Plan or the other plan is subsequently terminated, the 401(k) Plan requires that you receive a benefit immediately after the merger, consolidation or transfer that would equal or exceed the benefit you would have been entitled to receive immediately before the merger, consolidation or transfer, if the 401(k) Plan had terminated at that time.

Federal Income Tax Consequences

     The following briefly summarizes the material federal income tax aspects of the 401(k) Plan. You should not rely on this summary as a complete or definitive description of the material federal

9

income tax consequences of the 401(k) Plan. Statutory provisions change, as do their interpretation, and their application may vary in individual circumstances. Finally, applicable state and local income tax laws may have different tax consequences than the federal income tax laws. 401(k) Plan participants should consult a tax advisor with respect to any transaction involving the 401(k) Plan, including any distribution from the 401(k) Plan.

     As a “tax-qualified retirement plan,” the Internal Revenue Code affords the 401(k) Plan certain tax advantages, including the following:

(1)	the sponsoring employer may take an immediate tax deduction for the amount contributed to the plan each year;
(2)	participants pay no current income tax on amounts contributed by the employer on their behalf; and
(3)	earnings of the plan are tax-deferred, thereby permitting the tax-free accumulation of income and gains on investments.

     Fraternity Federal administers the 401(k) Plan to comply in operation with the requirements of the Internal Revenue Code as of the applicable effective date of any change in the law. If Fraternity Federal should receive an adverse determination letter from the Internal Revenue Service regarding the 401(k) Plan’s tax exempt status, all participants would generally recognize income equal to their vested interests in the 401(k) Plan, the participants would not be permitted to transfer amounts distributed from the 401(k) Plan to an Individual Retirement Account or to another qualified retirement plan, and Fraternity Federal would be denied certain tax deductions taken in connection with the 401(k) Plan.

     Lump Sum Distribution. A distribution from the 401(k) Plan to a participant or the beneficiary of a participant qualifies as a lump sum distribution if it is made within one taxable year, on account of the participant’s death, disability or separation from service, or after the participant attains age 59¹/2; and consists of the balance credited to the participant under this plan and all other profit sharing plans, if any, maintained by Fraternity Federal. The portion of any lump sum distribution included in taxable income for federal income tax purposes consists of the entire amount of the lump sum distribution, less the amount of after-tax contributions, if any, made to any other profit-sharing plans maintained by Fraternity Federal, if the distribution includes those amounts.

     Fraternity Community Bancorp Common Stock Included in Lump Sum Distribution. If a lump sum distribution includes Fraternity Community Bancorp common stock, the distribution generally is taxed in the manner described above. The total taxable amount is reduced, however, by the amount of any net unrealized appreciation on Fraternity Community Bancorp common stock; that is, the excess of the value of Fraternity Community Bancorp common stock at the time of the distribution over the cost or other basis of the securities to the trust. The tax basis of Fraternity Community Bancorp common stock, for purposes of computing gain or loss on a subsequent sale, equals the value of Fraternity Community Bancorp common stock at the time of distribution, less the amount of net unrealized appreciation. Any gain on a subsequent sale or other taxable disposition of Fraternity Community Bancorp common stock, to the extent of the net unrealized appreciation at the time of distribution, is long-term capital gain, regardless of how long you hold the Fraternity Community Bancorp common stock, or the “holding period.” Any gain on a subsequent sale or other taxable disposition of Fraternity Community Bancorp common stock that exceeds the amount of net unrealized appreciation upon distribution is considered long-term capital gain, regardless of the holding period. The recipient of a distribution may elect to include the amount of any net unrealized appreciation in the total taxable amount of the distribution, to the extent allowed under IRS regulations.

10

     We have provided you with a brief description of the material federal income tax aspects of the 401(k) Plan that are generally applicable under the Internal Revenue Code. We do not intend this description to be a complete or definitive description of the federal income tax consequences of participating in or receiving distributions from the 401(k) Plan. Accordingly, you should consult a tax advisor concerning the federal, state and local tax consequences of participating in and receiving distributions from the 401(k) Plan.

Restrictions on Resale

     Any “affiliate” of Fraternity Community Bancorp under Rules 144 and 405 of the Securities Act of 1933, as amended, who receives a distribution of common stock under the 401(k) Plan, may re-offer or resell such shares only under a registration statement filed under the Securities Act of 1933, as amended, assuming the availability of a registration statement, or under Rule 144 or some other exemption from these registration requirements. An “affiliate” of Fraternity Community Bancorp is someone who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, Fraternity Community Bancorp. Generally, a director, principal officer or major shareholder of a corporation is deemed to be an “affiliate” of that corporation.

     Any person who may be an “affiliate” of Fraternity Community Bancorp may wish to consult with counsel before transferring any common stock they own. In addition, participants should consult with counsel regarding the applicability to them of Section 16 of the Securities Exchange Act of 1934, as amended, which may restrict the sale of Fraternity Community Bancorp common stock acquired under the 401(k) Plan or other sales of Fraternity Community Bancorp common stock.

     Persons who are not deemed to be “affiliates” of Fraternity Community Bancorp at the time of resale may resell freely any shares of Fraternity Community Bancorp common stock distributed to them under the 401(k) Plan, either publicly or privately, without regard to the registration and prospectus delivery requirements of the Securities Act of 1933, as amended, or compliance with the restrictions and conditions contained in the exemptions available under federal law. A person deemed an “affiliate” of Fraternity Community Bancorp at the time of a proposed resale may publicly resell common stock only under a “re-offer” prospectus or in accordance with the restrictions and conditions contained in Rule 144 of the Securities Act of 1933, as amended, or some other exemption from registration, and may not use this prospectus supplement or the accompanying prospectus in connection with any such resale. In general, Rule 144 restricts the amount of common stock which an affiliate may publicly resell in any three-month period to the greater of one percent of Fraternity Community Bancorp common stock then outstanding or the average weekly trading volume reported on the Nasdaq Capital Market during the four calendar weeks before the sale. Affiliates may sell only through brokers without solicitation and only at a time when Fraternity Community Bancorp is current in filing all required reports under the Securities Exchange Act of 1934, as amended.

SEC Reporting and Short-Swing Profit Liability

     Section 16 of the Securities Exchange Act of 1934, as amended, imposes reporting and liability requirements on officers, directors and persons who beneficially own more than 10% of public companies such as Fraternity Community Bancorp. Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the filing of reports of beneficial ownership. Within ten days of becoming a person required to file reports under Section 16(a), such person must file a Form 3 reporting initial beneficial ownership with the Securities and Exchange Commission (“SEC”). Such persons must also report periodically certain changes in beneficial ownership involving the allocation or reallocation of assets held

11

in their 401(k) Plan accounts, either on a Form 4 within two business days after a transaction, or annually on a Form 5 within 45 days after the close of a company’s fiscal year.

     In addition to the reporting requirements described above, Section 16(b) of the Securities Exchange Act of 1934, as amended, provides for the recovery by Fraternity Community Bancorp of profits realized from the purchase and sale or sale and purchase of its common stock within any six-month period by any officer, director or person who beneficially owns more than 10% of the common stock.

     The SEC has adopted rules that exempt many transactions involving the 401(k) Plan from the “short-swing” profit recovery provisions of Section 16(b). The exemptions generally involve restrictions upon the timing of elections to buy or sell employer securities for the accounts of any officer, director or person who beneficially owns more than 10% of the common stock of a company.

     Except for distributions of the common stock due to death, disability, retirement, termination of employment or under a qualified domestic relations order, persons who are subject to Section 16(b) may be required, under limited circumstances involving the purchase of common stock within six months of the distribution, to hold the shares of common stock distributed from the 401(k) Plan for six months after the distribution date.

LEGAL OPINION

     The validity of the issuance of the common stock of Fraternity Community Bancorp will be passed upon by Kilpatrick Stockton LLP, Washington, DC. Kilpatrick Stockton LLP acted as special counsel for Fraternity Community Bancorp in connection with the Stock Offering.

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PROSPECTUS

[LOGO]
Fraternity Community Bancorp, Inc.
(Proposed Holding Company for Fraternity Federal Savings and Loan Association)
Minimum of 1,020,000 and Up to 1,380,000 Shares of Common Stock

     Fraternity Community Bancorp, Inc. is offering shares of its common stock for sale in connection with the conversion of Fraternity Federal Savings and Loan Association from the mutual to the stock form of ownership. After the offering, Fraternity Community Bancorp will be the holding company for Fraternity Federal Savings and Loan Association through its ownership of 100% of Fraternity Federal Savings and Loan Association’s outstanding common stock. We intend to have our common stock quoted on the OTC Bulletin Board.

     If you are or were a depositor of Fraternity Federal Savings and Loan Association:

• You may have priority rights to purchase shares of common stock.

     If you do not fit into the category above, but are interested in purchasing shares of our common stock:

• You may have an opportunity to purchase shares of common stock after priority orders are filled.

     We are offering up to 1,380,000 shares of common stock for sale on a best efforts basis, subject to certain conditions. We must sell a minimum of 1,020,000 shares to complete the offering. If, as a result of regulatory considerations, demand for the shares or changes in market conditions, the independent appraiser determines that our pro forma market value has increased, we may sell up to 1,587,000 shares without giving you further notice or the opportunity to change or cancel your order. If our pro forma market value at the end of the stock offering period is either below $10.2 million or above $15.87 million, then, after consulting with the Office of Thrift Supervision, we may: (i) terminate the stock offering and promptly return all funds, with interest and without deduction; (ii) set a new offering range and give all subscribers the opportunity to confirm, modify or rescind their stock purchase orders; or (iii) take such other actions as may be permitted by the Office of Thrift Supervision and the Securities and Exchange Commission.

     The offering is expected to expire at 2:00 p.m., Eastern time, on [EXP DATE]. We may extend this expiration date without notice to you until [DATE 1], unless the Office of Thrift Supervision approves a later date, which will not be beyond [DATE 2].

     Sandler O’Neill + Partners, L.P. will use its best efforts to assist us in our selling efforts, but is not required to purchase any of the common stock that is being offered for sale. Purchasers will not pay a commission to purchase shares of common stock in the offering. All shares offered for sale are offered at a price of $10.00 per share.

     The minimum purchase is 25 shares. Once submitted, orders are irrevocable unless the offering is terminated or extended beyond [DATE 1]. If the offering is extended beyond [DATE 1], subscribers will have the right to modify or rescind their purchase orders. Funds received before the completion of the offering will be maintained in a segregated account at Fraternity Federal Savings and Loan Association. All funds received will bear interest at Fraternity Federal Savings and Loan Association’s passbook savings rate, which is subject to change at any time and is currently _____% per annum. If we terminate the offering for any reason, or if we extend the offering beyond [DATE 1], we will notify you and will promptly return your funds with interest if you do not respond to the notice.

     The Office of Thrift Supervision conditionally approved our plan of conversion on _______________. However, such approval does not constitute a recommendation or endorsement of this offering.

This investment involves a degree of risk, including the possible loss of principal.
Please read “Risk Factors” beginning on page __.

OFFERING SUMMARY

Price Per Share: $10.00

					Maximum,
	Minimum		Maximum		as Adjusted
Number of shares		1,020,000		1,380,000		1,587,000
Gross offering proceeds	$	10,200,000	$	13,800,000	$	15,870,000
Estimated offering expenses, excluding selling agent fees and expenses	$	550,000	$	550,000	$	550,000
Estimated selling agent fees and expenses	$	250,000	$	250,000	$	250,000
Estimated net proceeds	$	9,400,000	$	13,000,000	$	15,070,000
Estimated net proceeds per share	$	9.22	$	9.42	$	9.50

     These securities are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

     Neither the Securities and Exchange Commission, the Office of Thrift Supervision nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

     For assistance, please contact the stock information center at (___) ___-_____

SANDLER O’NEILL + PARTNERS, L.P.

The date of this prospectus is _______________

[Map of Maryland showing office locations of Fraternity Federal Savings and Loan Association]

TABLE OF CONTENTS

	PAGE
Summary		1
Risk Factors		13
A Warning About Forward-Looking Statements		22
Selected Consolidated Financial and Other Data		23
Use of Proceeds		25
Our Dividend Policy		26
Market for the Common Stock		27
Capitalization		28
Regulatory Capital Compliance		30
Pro Forma Data		31
Our Business		36
Management’s Discussion and Analysis of Financial Condition and Results of Operations		45
Our Management		75
Subscriptions by Executive Officers and Directors		84
Regulation and Supervision		85
Federal and State Taxation		93
The Conversion and Stock Offering		95
Restrictions on the Acquisition of Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association		114
Description of Fraternity Community Bancorp Capital Stock		117
Transfer Agent and Registrar		119
Registration Requirements		119
Legal and Tax Opinions		119
Experts		119
Where You Can Find More Information		119
Index to Consolidated Financial Statements of Fraternity Federal Savings and Loan Association		121
EX-1.1
EX-1.2
EX-2.0
EX-3.1
EX-3.2
EX-4.0
EX-5.0
EX-8.1
EX-8.2
EX-10.2
EX-10.3
EX-10.4
EX-10.5
EX-10.6
EX-10.7
EX-10.8
EX-10.10
EX-10.11
EX-23.2
EX-23.3
EX-99.1
EX-99.2
EX-99.3

Summary

     This summary highlights selected information from this document and may not contain all the information that is important to you. To understand the stock offering fully, you should read this entire document carefully. In certain instances where appropriate, the terms “we,” “us” and “our” refer to Fraternity Community Bancorp and/or Fraternity Federal Savings and Loan Association, as indicated by context. For assistance, please contact our conversion center at (___) ___-____.

The Companies

Fraternity Community Bancorp, Inc.
Fraternity Federal Savings and Loan Association
764 Washington Boulevard
Baltimore, Maryland 21230
(410) 539-1313

     Fraternity Community Bancorp, Inc. This offering is made by Fraternity Community Bancorp, a Maryland corporation incorporated in October 2010 by Fraternity Federal Savings and Loan Association to be its holding company following the conversion. Currently, Fraternity Community Bancorp has no assets. Following the conversion, Fraternity Community Bancorp will own all of Fraternity Federal Savings and Loan Association’s capital stock and will direct, plan and coordinate Fraternity Federal Savings and Loan Association’s business activities. In the future, Fraternity Community Bancorp might also acquire or organize other operating subsidiaries, including other financial institutions or financial services companies, although it currently has no specific plans or agreements to do so.

     Fraternity Federal Savings and Loan Association. Founded in 1913, Fraternity Federal Savings and Loan Association is a community-oriented financial institution, dedicated to serving the financial service needs of customers and businesses within its market area, which consists of Baltimore City and Baltimore, Carroll and Howard Counties in Maryland. We offer a variety of deposit products and provide loans secured by real estate located in our market area. Our real estate loans consist primarily of one- to four-family mortgage loans, as well as commercial real estate loans, land loans, home equity lines of credit and residential construction loans. We also offer consumer loans and, to a limited extent, commercial business loans. We currently operate out of our corporate headquarters and main office in Baltimore and full-service branch offices located in Cockeysville, Ellicott City and Hampstead, Maryland. We are subject to extensive regulation, examination and supervision by the Office of Thrift Supervision, our primary federal regulator, and the Federal Deposit Insurance Corporation, our deposit insurer. At June 30, 2010, we had total assets of $167.9 million, total deposits of $125.8 million and total equity of $16.6 million.

Recent Operating Results and Operating Strategy (page __)

     We have identified the following strategic initiatives we will pursue in our efforts to achieve our mission to operate and grow a profitable community-oriented financial institution:

• building on our strengths as a community-oriented financial institution;

• improving our interest margin and earnings and reducing our interest rate risk by increasing commercial real estate loans;

• emphasizing lower cost core deposits to reduce funding costs;

• generating higher non-interest income by selling loans in the secondary market;

• adding a new branch in our existing market area or a contiguous county within the next three years; and

• expanding our market share within our primary market area.

The Conversion

Description of the Conversion (page __)

     Currently, we are a federally chartered mutual savings association with no shareholders. Our depositors and borrowers currently have the right to vote on certain matters such as the election of directors and this conversion transaction. The conversion transaction that we are undertaking involves a change from our mutual form to a stock savings association charter that will result in all of Fraternity Federal Savings and Loan Association’s capital stock being owned by Fraternity Community Bancorp. Voting rights in Fraternity Community Bancorp will belong to its shareholders, including our employee stock ownership plan. For more information on the employee stock ownership plan, see “Summary—The Offering—Benefits of the Offering to Management—Employee Stock Ownership Plan.”

     We are conducting the conversion under the terms of our plan of conversion. The Office of Thrift Supervision has conditionally approved the plan of conversion, including a condition that it be approved by our members. We have called a special meeting of members for [MEETING DATE] to vote on the plan of conversion.

     The following diagram depicts our corporate structure after the conversion and offering, including the number and percentage of shares of common stock that will be owned by public shareholders at the minimum, maximum, and maximum, as adjusted, of the offering range upon completion of the conversion and the offering:

Regulation and Supervision (page __)

     We are, and Fraternity Community Bancorp will be upon completion of the conversion, subject to regulation, supervision and examination by the Office of Thrift Supervision. We are also subject to regulation by the Federal Deposit Insurance Corporation. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), signed by the President on July 21, 2010, provides for the regulation and supervision of federal savings associations like Fraternity Federal Savings and Loan Association to be transferred to the Office of the Comptroller of the Currency, the agency that regulates national banks. The Office of the Comptroller of the Currency will assume primary responsibility for implementing and enforcing many of the laws and regulations applicable to federal savings associations. The transfer will occur over a transition period of up to one year, subject to a possible six month extension. At the same time, the responsibility for supervising savings and loan holding companies will be transferred to the Federal Reserve Board.

2

The Offering

Purchase Price

     The purchase price is $10.00 per share. You will not pay a commission to buy any shares in the offering.

Number of Shares to be Sold

     We are offering for sale between 1,020,000 and 1,380,000 shares of Fraternity Community Bancorp common stock in a subscription offering, community offering and possibly a syndicated offering. With regulatory approval, we may increase the number of shares to be sold to 1,587,000 shares without giving you further notice or the opportunity to change or cancel your order. In considering whether to permit an increase in the offering size, the Office of Thrift Supervision will consider such factors as the level of subscriptions, the views of our independent appraiser, our financial condition and results of operations and changes in market conditions.

How We Determined the Offering Range (page ___)

     We are offering between 1,020,000 and 1,380,000 shares, which is our offering range, based on an independent appraisal of our pro forma market value prepared by Feldman Financial Advisors, Inc., an independent appraisal firm experienced in appraisals of financial institutions. Feldman Financial Advisors estimates that as of October 12, 2010, our pro forma market value was between $10.2 million and $13.8 million, with a midpoint of $12.0 million.

     In preparing its appraisal, Feldman Financial Advisors considered the information in this prospectus, including our consolidated financial statements. Feldman Financial Advisors also considered the following factors, among others:

• our historical, present and projected operating results and financial condition and the economic and demographic characteristics of our primary market area;

• a comparative evaluation of the operating and financial statistics of Fraternity Federal Savings and Loan Association with those of other similarly situated, publicly traded companies;

• the effect of the capital raised in this offering on our net worth and earnings potential; and

• the trading market for securities of comparable institutions and general conditions in the market for such securities.

     Two measures that some investors use to analyze whether a stock might be a good investment are the ratio of the offering price to the issuer’s “book value” and the ratio of the offering price per share to the issuer’s income per share for the past twelve months. Feldman Financial Advisors considered these ratios, among other factors, in preparing its appraisal. Book value is the same as total equity and represents the difference between the issuer’s assets and liabilities. Feldman Financial Advisors’ appraisal also incorporates an analysis of a peer group of publicly traded companies that Feldman Financial Advisors considered to be comparable to us.

3

     The following table presents a summary of selected pricing ratios for the peer group companies and for us utilized by Feldman Financial Advisors in its appraisal. These ratios are based on book value and tangible book value as of June 30, 2010 at the latest date for which complete financial data was publicly available for the peer group.

				Price to
	Price to			Tangible
	Book Value			Book Value
	Ratio			Ratio
Fraternity Community Bancorp (pro forma):
Minimum		41.4	%		41.4	%
Midpoint		45.4			45.4
Maximum		49.3			49.3
Maximum, as adjusted		53.2			53.2
Peer group companies as of October 12, 2010:
Average		53.9			55.7
Median		50.5			52.3

     We reported negative earnings for the most recent twelve months ended June 30, 2010. Thus, comparisons to peer group ratios related to earnings are not meaningful. Compared to the average pricing ratios of the peer group at the maximum of the offering range, our stock would be priced at a discount of 8.5% to the peer group on a price-to-book basis and a discount of 11.5% on a price-to-tangible book basis. This means that, at the maximum of the offering rate, a share of our common stock would be less expensive than the peer group based on a book value per share basis.

     The independent appraisal does not indicate market value. You should not assume or expect that the valuation described above means that our common stock will trade at or above the $10.00 purchase price after the offering.

Possible Change in Offering Range (page ___)

     Feldman Financial Advisors will update its appraisal before we complete the stock offering. If, as a result of regulatory considerations, demand for the shares or changes in market conditions, Feldman Financial Advisors determines that our pro forma market value has increased, with regulatory approval we may sell up to 1,587,000 shares without further notice to you. If our pro forma market value at the end of the stock offering period is either below $10.2 million or above $15.87 million, then, after consulting with the Office of Thrift Supervision, we may: (i) terminate the stock offering and promptly return all funds, with interest and without deduction; (ii) set a new offering range and give all subscribers the opportunity to confirm, modify or rescind their purchase orders for shares of Fraternity Community Bancorp’s common stock; or (iii) take such other actions as may be permitted by the Office of Thrift Supervision and the Securities and Exchange Commission.

Possible Termination of the Offering

     We must sell a minimum of 1,020,000 shares to complete the offering. If we do not sell the minimum number of shares, or if we terminate the offering for any other reason, we will promptly return all funds, with interest, at our current passbook rate, and without deduction.

After-Market Performance of Mutual to Stock Conversions

     The appraisal prepared by Feldman Financial Advisors includes examples of after-market stock price performance for standard mutual to stock conversion offerings (i.e., excluding “second step” conversions by mutual holding companies) completed between January 1, 2009 and October 12, 2010. These companies did not constitute the group of ten comparable public companies utilized in Feldman Financial Advisors’ valuation analysis.

4

					Percentage Change from Initial Offering Price
			Offering											Through
			Size (In		After 1			After 1			After 1			October 12,
Issuer (Market/Symbol)	Date of IPO		Millions)		Day			Week			Month			2010
Madison Bancorp, Inc. (OTCBB/MDSN) (1)		10/07/10	$	6.1		0.0	%		N/A	%		N/A	%		0.0	%
Standard Financial Corp. (NASDAQ/STND)		10/07/10		34.8		19.0			N/A			N/A			18.5
Century Next Financial Corporation (OTCBB/CTUY)		10/01/10		10.6		0.0			15.0			N/A			15.0
United-American Savings Bank (OTCBB/UASB)		08/06/10		3.0		0.0			(5.0	)		5.0			2.5
Peoples Federal Bancshares, Inc. (NASDAQ/PEOP)		07/07/10		66.1		4.0			7.5			4.2			7.9
Fairmount Bancorp, Inc. (OTCBB/FMTB)		06/03/10		4.4		0.0			5.0			10.0			20.0
Harvard Illinois Bancorp, Inc. (OTCBB/HARI)		04/09/10		7.8		0.0			0.0			(1.0	)		(30.0	)
OBA Financial Services, Inc. (NASDAQ/OBAF)		01/22/10		46.3		3.9			1.5			3.0			11.8
OmniAmerican Bancorp, Inc. (NASDAQ/OABC)		01/21/10		119.0		18.5			14.0			9.9			16.6
Versailles Financial Corporation (OTCBB/VERF) (1)		01/11/10		4.3		0.0			0.0			0.0			0.0
Athens Bancshares Corporation (NASDAQ/AFCB)		01/07/10		26.8		16.0			15.0			10.6			11.2
Territorial Bancorp, Inc. (NASDAQ/TBNK)		07/13/09		122.3		49.9			47.2			48.0			70.5
St. Joseph Bancorp, Inc. (OTCBB/SJBA) (1)		02/02/09		3.8		0.0			0.0			0.0			0.0
Hibernia Homestead Bancorp, Inc. (OTCBB/HIBE)		01/28/09		11.1		0.0			5.0			5.0			45.0
All Transactions:
Average		N/A		33.3		8.0			8.8			8.6			13.5
Median		N/A		10.9		0.0			5.0			5.0			11.5
High		N/A		122.3		49.9			47.2			48.0			70.5
Low		N/A		3.0		0.0			(5.0	)		(1.0	)		(30.0	)
OTCBBB Transactions:
Average		N/A		6.8		0.0			3.3			3.8			7.5
Median		N/A		6.1		0.0			2.5			5.0			2.5
High		N/A		11.1		0.0			15.0			10.0			45.0
Low		N/A		3.0		0.0			(5.0	)		(1.0	)		(30.0	)

(1) There were no reported trades of this common stock issue through October 12, 2010.

     This table is not intended to indicate how our stock may perform. Furthermore, this table presents only short-term price performance with respect to a limited number of companies that have only recently completed their initial public offerings and may not be indicative of the longer-term stock price performance of these companies.

     Stock price appreciation or depreciation is affected by many factors, including, but not limited to: general market and economic conditions; the interest rate environment; the amount of proceeds a company raises in its offering and its ability to successfully deploy those proceeds through originating loans and making other investments; and numerous factors relating to the specific company, including the experience and ability of management, historical and anticipated operating results, the nature and quality of the company’s assets, and the company’s primary market area. The companies listed in the table above may not be similar to Fraternity Community Bancorp, the pricing ratios for their stock offerings were in some cases different from the pricing ratios for Fraternity Community Bancorp’s common stock and the market conditions in which these offerings were completed were, in some cases, different from current market conditions. Any or all of these differences may cause our stock to perform differently from these other offerings. Before you make an investment decision, we urge you to read carefully this prospectus, including, but not limited to, the section entitled “Risk Factors.”

     You also should be aware that, recently, stock prices of some thrift initial public offerings have decreased once the stock has begun trading. We cannot assure you that our stock will not trade below the $10.00 purchase price or that our stock will perform similarly to other recent mutual to stock conversions.

Conditions to Completing the Conversion and Offering

     We are conducting the conversion and offering under the terms of our plan of conversion. We cannot complete the conversion and offering unless:

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• we sell at least the minimum number of shares offered;

• we receive the final approval of the Office of Thrift Supervision to complete the offering; and

• our members approve the plan of conversion.

Reasons for the Conversion and Offering (page __)

     Our primary reasons for the conversion and offering are to:

• increase the capital of Fraternity Federal Savings and Loan Association to support future lending;

• enhance profitability and earnings through reinvesting and leveraging the proceeds, primarily through traditional lending and investing activities;

• support future branching activities and/or the acquisition of other financial institutions or financial services companies; and

• implement equity compensation plans to retain and attract qualified directors, officers and staff to enhance our current incentive-based compensation programs.

Benefits of the Offering to Management (page __)

     We intend to adopt the following benefit plans and employment agreements:

     Employee Stock Ownership Plan. We have adopted an employee stock ownership plan that we anticipate will purchase in the conversion offering a number of shares of common stock equal to 8% of the shares sold in the offering by means of a 12-year loan from Fraternity Community Bancorp. As the loan is repaid and shares are released from collateral, the plan will allocate shares to the accounts of participating employees. Participants will receive allocations based on their individual compensation as a percentage of total plan compensation. Non-employee directors are not eligible to participate in the employee stock ownership plan. The purchase of common stock by the employee stock ownership plan in the offering will comply with all applicable Office of Thrift Supervision regulations except to the extent waived by the Office of Thrift Supervision. We will incur additional compensation expense as a result of this plan. See “Pro Forma Data” for an illustration of the effects of this plan.

     Future Equity Incentive Plan. We intend to implement an equity incentive plan no earlier than six months after completion of the conversion. If we implement the plan within one year after the conversion, the plan must be approved by a majority of the total votes eligible to be cast by our shareholders. If we implement the plan more than one year after the conversion, it must be approved only by a majority of the total votes cast. We currently expect to implement this plan more than one year after the conversion, although no decision has been made. Under this plan, we may award stock options and shares of restricted stock to key employees and directors. We will award shares of restricted stock at no cost to the recipient. We will grant stock options at an exercise price at least equal to 100% of the fair market value of our common stock on the option grant date. We will incur additional compensation expense as a result of this plan. See “Pro Forma Data” for an illustration of the effects of this plan. Under this plan, we may grant stock options in an amount up to 10% of the number of shares sold in the offering, and we may grant awards of restricted stock in an amount of up to 4% of the number of shares sold in the offering. We expect to fund the plan with shares we purchase in the open market, but in determining whether to do so, the board of directors will consider our financial condition and results of operations, capital requirements, economic conditions and whether sufficient shares are available for purchase in the open market. The equity incentive plan will comply with all applicable Office of Thrift Supervision regulations except to the extent waived by the Office of Thrift Supervision.

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     The following table represents the total value of all shares to be available for restricted stock awards under the equity incentive plan, based on a range of market prices from $8.00 per share to $14.00 per share. The value of the grants will depend on the actual trading price of our common stock at the time of grant.

		Value of
								63,480
		40,800		48,000		55,200		Shares
		Shares		Shares		Shares		Awarded at
		Awarded at		Awarded at		Awarded at		Maximum, as
		Minimum of		Midpoint of		Maximum of		Adjusted, of
Share Price		Range		Range		Range		Range
		(In thousands, except per share amounts)
$	8.00	$	326	$	384	$	442	$	508
	10.00		408		480		552		635
	12.00		490		576		662		762
	14.00		571		672		773		889

     The following table presents the total value of all stock options available for grant under the equity incentive plan, based on a range of market prices at the date of grant from $8.00 per share to $14.00 per share. For purposes of this table, the value of the stock options was determined using the Black-Scholes option-pricing formula. See “Pro Forma Data.” Financial gains can be realized on a stock option only if the market price of the common stock increases above the exercise price at which the option is granted.

				Value of
										158,700
				102,000		120,000		138,000		Options
				Options		Options		Options		Granted at
				Granted at		Granted at		Granted at		Maximum, as
				Minimum of		Midpoint of		Maximum of		Adjusted, of
Exercise Price		Option Value		Range		Range		Range		Range
				(In thousands, except per share amounts)
$	8.00	$	3.07	$	313	$	368	$	424	$	487
	10.00		3.84		392		461		530		609
	12.00		4.61		470		553		636		732
	14.00		5.38		549		646		742		854

     The following tables summarize at the minimum and maximum of the offering range the total number and value of the shares of common stock that the employee stock ownership plan expects to acquire and the total value of all restricted stock awards and stock options that are expected to be available under the equity incentive plan. At the minimum of the offering range we would sell 1,020,000 shares and have 1,020,000 shares outstanding, and at the maximum of the offering range, we would sell 1,380,000 shares and have 1,380,000 shares outstanding. The number of shares reflected for the benefit plans in the table below assumes that we grant a number of restricted stock awards equal to 4% of the shares sold in the offering and the application of the net proceeds as described under “Use of Proceeds.”

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	Number of Shares to be Granted or Purchased At
	Minimum of Offering Range
						Total
			As a % of			Estimated
	Number of		Common Stock			Value of
	Shares		Sold			Grants
Employee stock ownership plan (1)		81,600		8.00	%	$	816,000
Restricted stock awards (1)		40,800		4.00			408,000
Stock options (2)		102,000		10.00			391,680
Total		224,400		22.00	%	$	1,615,680

(1)	Assumes the value of Fraternity Community Bancorp common stock is $10.00 per share for purposes of determining the total estimated value of the grants.
(2)	Assumes the value of a stock option is $3.84, which was determined using the Black-Scholes option-pricing formula. See “Pro Forma Data.”

	Number of Shares to be Granted or Purchased At
	Maximum of Offering Range
						Total
			As a % of			Estimated
	Number of		Common Stock			Value of
	Shares		Sold			Grants
Employee stock ownership plan (1)		110,400		8.00	%	$	1,104,000
Restricted stock awards (1)		55,200		4.00			552,000
Stock options (2)		138,000		10.00			529,920
Total		303,600		22.00	%	$	2,185,920

(1)	Assumes the value of Fraternity Community Bancorp common stock is $10.00 per share for purposes of determining the total estimated value of the grants.
(2)	Assumes the value of a stock option is $3.84, which was determined using the Black-Scholes option-pricing formula. See “Pro Forma Data.”

     Employment Agreements. Fraternity Federal Savings and Loan Association currently has three-year employment agreements with Thomas K. Sterner, our Chairman of the Board, Chief Executive Officer and Chief Financial Officer, and Richard C. Schultze, our President and Chief Operating Officer. Fraternity Community Bancorp intends to enter into employment agreements with each of Thomas K. Sterner and Richard C. Schultze on terms similar to the employment agreements with Fraternity Federal Savings and Loan Association. Based solely on initial cash compensation payable under the employment agreements and excluding any benefits that would be payable under any employee benefit plan, if a change in control of Fraternity Community Bancorp occurred and we terminated the executives, the total payment due under the employment agreements would be approximately $1.13 million.

   Employee Severance Compensation Plan. In connection with the conversion, we intend to adopt an employee severance compensation plan. This plan will provide severance benefits to eligible employees if there is a change in control of Fraternity Community Bancorp or Fraternity Federal Savings and Loan Association. Based solely on compensation levels as of June 30, 2010, if a change in control occurred, and we terminated all employees covered by the severance compensation plan, the total payment due under the plan would be approximately $388,000.

The Offering Is Not Expected to Be Taxable to Persons Receiving or Exercising Subscription Rights (page __)

     As a general matter, the offering is not expected to be a taxable transaction for purposes of federal income taxes to persons who receive or exercise subscription rights. We have received an opinion from our special counsel, Kilpatrick Stockton LLP, that, for federal income tax purposes:

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• it is more likely than not that the members of Fraternity Federal Savings and Loan Association will not realize any income upon the issuance or exercise of subscription rights;

• it is more likely than not that the tax basis to the purchasers in the offering will be the amount paid for our common stock, and that the holding period for shares of common stock will begin on the date of completion of the subscription offering; and

• the holding period for shares of common stock purchased in the community offering or syndicated offering will begin on the day after the date of completion of the purchase.

Persons Who May Order Stock in the Offering (page __)

     Note: Subscription rights are not transferable, and persons with subscription rights may not subscribe for shares for the benefit of any other person. If you violate this prohibition, you may lose your rights to purchase shares and may face criminal prosecution and/or other sanctions.

     We have granted rights to subscribe for shares of Fraternity Community Bancorp common stock in a “subscription offering” to the following persons in the following order of priority:

1.	Persons with $50 or more on deposit at Fraternity Federal Savings and Loan Association as of the close of business on June 30, 2009.
2.	Our employee stock ownership plan, which will provide retirement benefits to our employees.
3.	Persons (other than our directors and officers) with $50 or more on deposit at Fraternity Federal Savings and Loan Association as of the close of business on [SERD].
4.	Fraternity Federal Savings and Loan Association’s depositors and borrowers as of the close of business on [RECORD DATE] who were not able to subscribe for shares under categories 1 or 3.

     If we receive subscriptions for more shares than are to be sold in this offering, we may be unable to fill or may only partially fill your order. Shares will be allocated in order of the priorities described above under a formula outlined in the plan of conversion. Generally, shares first will be allocated so as to permit each eligible subscriber, if possible, to purchase a number of shares sufficient to make the subscriber’s total allocation equal to 100 shares or the number of shares actually subscribed for, whichever is less. After that, unallocated shares will be allocated among the remaining eligible subscribers whose subscriptions remain unfilled in proportion to the amounts that their respective qualifying deposits bear to the total qualifying deposits of all remaining eligible subscribers whose subscriptions remain unfilled. If we increase the number of shares to be sold above 1,380,000, the employee stock ownership plan will have the first priority right to purchase any shares exceeding that amount to the extent that its subscription has not previously been filled. Any shares remaining will be allocated in the order of priorities described above. See “The Conversion and Stock Offering — Subscription Offering and Subscription Rights” for a description of the allocation procedure.

     We may offer shares not sold in the subscription offering, if any, to the general public in a community offering. People, and trusts for the benefit of people, who are residents of Baltimore, Howard and Carroll Counties and Baltimore City in Maryland will be given a first preference to purchase shares in the community offering. We may, in our sole discretion, reject orders received in the community offering either in whole or in part. For example, we would reject an order submitted by a person whom we believe is making false representations or whom we believe is attempting to violate, evade or circumvent the terms and conditions of the plan of conversion. If your order is rejected in part, you cannot cancel the remainder of your order. The community offering may commence concurrently with the subscription offering or at any time thereafter and may terminate at any time without notice until [DATE 1], unless the Office of Thrift Supervision approves a later date, which will not be beyond [DATE 2].

     Shares of our common stock not purchased in the subscription offering or the community offering may be offered for sale to the general public in a syndicated offering through a syndicate of selected dealers. We may begin the syndicated offering at any time following the commencement of the subscription offering. Sandler O’Neill +

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Partners, L.P. will act as sole book-running manager for any syndicated offering, which will also be conducted on a best efforts basis. Neither Sandler O’Neill + Partners, L.P. nor any other member of the syndicate will be required to purchase any shares in the syndicated offering.

Deadline for Ordering Stock (page ___)

     The subscription offering will expire at 2:00 p.m., Eastern time, on [EXP DATE]. We expect that the community offering will expire at the same time, although it may continue for up to 45 days after the end of the subscription offering, or longer if the Office of Thrift Supervision approves a later date. No single extension may be for more than 90 days. If we extend the offering beyond [DATE 1], or if we intend to sell fewer than 1,020,000 shares or more than 1,587,000 shares, all subscribers will be notified and given the opportunity to confirm, change or cancel their orders. If you do not respond to this notice, we will return your funds promptly with interest at our passbook rate and without deduction.

Purchase Limitations (page ___)

     Our plan of conversion establishes limitations on the purchase of stock in the offering. These limitations include the following:

• The minimum purchase is 25 shares.

• No individual (or individuals on a single deposit account) may purchase more than $250,000 of common stock (which equals 25,000 shares) in the subscription offering.

• No individual may purchase more than $250,000 of common stock (which equals 25,000 shares) in the community offering.

• No individual, no individual together with any associates, and no group of persons acting in concert may purchase more than $400,000 of common stock (which equals 40,000 shares) in all offering categories.

     Subject to the Office of Thrift Supervision’s approval, we may increase or decrease the purchase limitations at any time.

How to Purchase Common Stock (page ___)

     If you want to place an order for shares in the offering, you must complete an original stock order and certification form and send it to us together with full payment, or deliver it in person to the stock information center located at Fraternity Federal Savings and Loan Association’s main office, 764 Washington Boulevard, Baltimore, Maryland 21230. We must receive your stock order and certification form before the end of the subscription offering or the end of the community offering, as appropriate, regardless of the postmark date. Once we receive your order, you cannot cancel or change it without our consent.

     To ensure that we properly identify your subscription rights, you must list all of your deposit accounts as of the applicable eligibility date on the stock order form. If you fail to do so, your subscription may be reduced or rejected if the offering is oversubscribed. To preserve your purchase priority, only the name(s) of person(s) listed on your deposit account at the applicable date of eligibility may be listed on your order form. You may not add the names of others who were not eligible to purchase common stock in the offering on the applicable date of eligibility.

     You may pay for shares in the subscription offering or the community offering in either of the following ways:

• By check or money order made payable to Fraternity Community Bancorp, Inc.; or

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• By authorizing withdrawal from an account at Fraternity Federal Savings and Loan Association.

     Depositors interested in using funds in an individual retirement account with us to purchase common stock should contact the stock information center as soon as possible so that the necessary forms may be forwarded for execution and returned before the subscription offering ends. To use funds in an individual retirement account at Fraternity Federal Savings and Loan Association, you must transfer your account to an unaffiliated institution or broker and open a self-directed individual retirement account. Individual retirement accounts at Fraternity Federal Savings and Loan Association are not self-directed and common stock may only be purchased using a self-directed individual retirement account. Please contact your broker or financial institution as quickly as possible to determine if you may transfer your individual retirement account from Fraternity Federal Savings and Loan Association because the transfer may take several days. You may use funds currently in an independent, self-directed individual retirement account to purchase stock by having your trustee complete and return the subscription form together with a check payable to Fraternity Community Bancorp, Inc. before the expiration of the subscription offering.

     We will pay interest on your subscription funds at the rate we pay on passbook accounts, which is subject to change at any time and is currently ____% per annum, from the date we receive your funds until the offering is completed or terminated. All funds authorized for withdrawal from deposit accounts with us will earn interest at the applicable account rate until the offering is completed or terminated. If, as a result of a withdrawal from a certificate of deposit, the balance falls below the minimum balance requirement, the remaining funds will earn interest at our passbook rate. There will be no early withdrawal penalty for withdrawals from certificates of deposit used to pay for stock.

How We Will Use the Proceeds of this Offering (page __)

     The following table summarizes how we will use the proceeds of this offering, based on the sale of shares at the minimum and maximum of the offering range. We expect to contribute 50% of the net proceeds of the offering to Fraternity Federal Savings and Loan Association.

	Minimum 1,020,000			Maximum 1,380,000
(In thousands)	Shares at $10.00 Per Share			Shares at $10.00 Per Share
Offering proceeds	$	10,200		$	13,800
Less estimated offering expenses		(800	)		(800	)
Net offering proceeds		9,400			13,000
Less:
Proceeds contributed to Fraternity Federal Savings and Loan Association		4,700			6,500
Proceeds used for loan to employee stock ownership plan		816			1,104
Proceeds remaining for Fraternity Community Bancorp	$	3,884		$	5,396

     Fraternity Community Bancorp may use the portion of the proceeds that it retains to, among other things, invest in securities, pay cash dividends or repurchase shares of common stock, subject to regulatory restrictions. Fraternity Federal Savings and Loan Association may use the portion of the proceeds that it receives to fund new loans, open new branches, invest in securities and expand its business activities. Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association may also use the proceeds of the offering to diversify their businesses and acquire other companies, although we have no specific plans, arrangements or understandings to do so at this time. Except as described above, neither Fraternity Community Bancorp nor Fraternity Federal Savings and Loan Association has any specific plans for the investment of the proceeds of this offering and has not allocated a specific portion of the proceeds to any particular use. For a discussion of our business reasons for undertaking this offering, see “The Conversion and Stock Offering — Reasons for the Conversion.”

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Purchases by Directors and Executive Officers (page __)

     We expect that our directors and executive officers, together with their associates, will subscribe for 45,000 shares, which equals 4.4% of the shares that would be sold at the minimum of the offering range. Our directors and executive officers, together with their associates, will pay the same $10.00 price per share as everyone else who purchases shares in the offering. Like all of our depositors, our directors and executive officers and their associates have subscription rights based on their deposits and, if there is an oversubscription, their orders will be subject to the allocation provisions set forth in our plan of conversion, unless waived by the Office of Thrift Supervision. Purchases by our directors and executive officers and their associates will count towards the minimum number of shares we must sell to close the offering.

Market for Fraternity Community Bancorp, Inc.’s Common Stock (page __)

     We intend to list the common stock of Fraternity Community Bancorp for trading on the OTC Bulletin Board. Sandler O’Neill + Partners, L.P. currently intends to become a market maker in the common stock, but it is under no obligation to do so. In addition, if needed, Sandler O’Neill + Partners, L.P. will assist us in obtaining additional market makers. We cannot assure you that other market makers will be obtained or that an active and liquid trading market for our common stock will develop or, if developed, will be maintained. After shares of the common stock begin trading, you may contact a stock broker to buy or sell shares.

Fraternity Community Bancorp, Inc.’s Dividend Policy (page __)

     After the offering, we initially do not intend to pay cash dividends. Our ability to pay dividends will depend on a number of factors, including capital requirements, regulatory limitations and our operating results and financial condition.

Delivery of Prospectus

     To ensure that each person receives a prospectus at least 48 hours before the offering deadline, we may not mail prospectuses any later than five days before such date or hand-deliver prospectuses later than two days before that date. Stock order forms may only be delivered if accompanied or preceded by a prospectus. We are not obligated to deliver a prospectus or order form by means other than U.S. mail.

     We will make reasonable attempts to provide a prospectus and offering materials to holders of subscription rights. The subscription offering and all subscription rights will expire at 2:00 p.m., Eastern time, on [EXP DATE] whether or not we have been able to locate each person entitled to subscription rights.

Delivery of Stock Certificates (page ___)

     Certificates representing shares of common stock issued in the subscription and community offerings will be mailed to purchasers at the address provided by them on the order form as soon as practicable following completion of the offering. Shares of common stock issued in any syndicated offering will be issued in book entry form. Until certificates for common stock are available and delivered to subscribers, subscribers may not be able to sell their shares, even though trading of the common stock will have commenced.

Stock Information Center

     If you have any questions regarding the offering, please call the stock information center at (___) ___-____ to speak to a registered representative of Sandler O’Neill + Partners, L.P. The stock information center will be open Monday through Friday, 10:00 a.m. to 4:00 p.m., Eastern time. The stock information center will be closed on weekends and bank holidays.

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Risk Factors

     You should consider carefully the following risk factors before purchasing Fraternity Community Bancorp common stock.

Risks Related to Our Business

We have had losses and low earnings in recent periods. If we cannot increase our income to competitive levels, our stock price may be adversely affected.

     We have had losses and low earnings in recent periods, including a net loss of $411,000 for the six months ended June 30, 2010 and net income of $343,000 and $8,000 for the years ended December 31, 2009 and 2008, respectively. Our return on average assets was (0.49)% for the six months ended June 30, 2010 and 0.20% and 0% for the years ended December 31, 2009 and 2008, respectively, and our return on average equity was (4.83)% and 2.03% and 0.05% for the years ended December 31, 2009 and 2008, respectively. These returns compared to a median return on average assets of (0.09)% and a median return on average equity of (0.78)% for the most recent 12-month period for the peer group of comparable institutions utilized by Feldman Financial Advisors, Inc. in preparing our appraisal. We have identified various strategic initiatives we will pursue in our efforts to overcome these challenges and improve earnings. These strategic initiatives include the following:

• building on our strengths as a community-oriented financial institution;

• improving our net interest margin and reducing our interest rate risk by increasing commercial real estate loans;

• emphasizing lower cost core deposits to reduce funding costs;

• generating higher non-interest income by selling loans in the secondary market;

• adding a new branch in our existing market area or a contiguous county within the next three years; and

• expanding our market share within our primary market.

     For a detailed description of our strategic initiatives to improve earnings, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Operating Strategy.” However, our strategic initiatives may not succeed in generating or increasing income. If we are unable to generate or increase income, our stock price may be adversely affected. Moreover, even if we are successful in generating net income, our earnings may be low for some time. In such event, our return on equity, which equals net income divided by average equity, may be below returns on equity achieved by peer institutions, which also could adversely affect our stock price.

Our increased emphasis on commercial real estate lending may expose us to increased lending risks.

     At June 30, 2010, our loan portfolio consisted of $4.0 million, or 3.35%, of commercial real estate loans. As part of our strategy to increase earnings, we will seek to increase commercial real estate lending, and intend to add commercial lending personnel to assist us in these efforts. These types of loans generally expose a lender to greater risk of non-payment and loss than one- to four-family mortgage loans because repayment of the loans often depends on the successful operation of the property and the income stream of the borrowers. Such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family mortgage loans. In addition, since such loans generally entail greater risk than one- to four-family mortgage loans, we may need to increase our allowance for loan losses in the future associated with the growth of such loans. Also, commercial real estate borrowers often have more than one loan outstanding with their lender. Consequently, if we increase our commercial real estate lending, an adverse development with respect to one loan or one credit

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relationship could expose us to a significantly greater risk of loss compared to an adverse development with respect to a one- to four-family mortgage loan.

Significant loan losses could require us to increase our allowance for loan losses through a charge to earnings.

     When we loan money, we incur the risk that our borrowers will not repay their loans. We provide for loan losses by establishing an allowance through a charge to earnings. The amount of this allowance is based on our assessment of loan losses inherent in our loan portfolio. The process for determining the amount of the allowance is critical to our financial condition and results of operations. It requires subjective and complex judgments about the future, including forecasts of economic or market conditions that might impair the ability of our borrowers to repay their loans. We might underestimate the loan losses inherent in our loan portfolio and have loan losses in excess of the amount recorded in our allowance for loan losses. We might increase the allowance because of changing economic conditions. For example, in a rising interest rate environment, borrowers with adjustable-rate loans could see their payments increase. There may be a significant increase in the number of borrowers who are unable or unwilling to repay their loans, resulting in our charging off more loans and increasing our allowance. In addition, when real estate values decline, the potential severity of loss on a real estate-secured loan can increase significantly, especially in the case of loans with high combined loan-to-value ratios. The recent decline in the national economy and the local economies of the areas in which the loans are concentrated could result in an increase in loan delinquencies, foreclosures or repossessions resulting in increased charge-off amounts and the need for additional loan loss allowances in future periods. In addition, our determination as to the amount of our allowance for loan losses is subject to review by our primary regulator, the Office of Thrift Supervision, as part of its examination process, which may result in the establishment of an additional allowance based upon the judgment of the Office of Thrift Supervision after a review of the information available at the time of its examination. Our allowance for loan losses amounted to $805,000, or 0.67% of total loans outstanding and 24.68% of nonperforming loans, at June 30, 2010. Our allowance for loan losses at June 30, 2010 may not be sufficient to cover future loan losses. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would decrease our earnings. In addition, at June 30, 2010, we had 18 loan relationships with outstanding balances, net of participation interests sold, that exceeded $1.0 million, all of which were performing according to their original terms. However, the deterioration of one or more of these loans could result in a significant increase in our nonperforming loans and our provision for loan losses, which would negatively impact our results of operations.

Our speculative construction loan portfolio may expose us to increased credit risk.

     During 2007 and 2008, we determined to offer a limited number of speculative construction loans to builders who have not identified a buyer for the completed property at the time of origination (known as “speculative” construction loans). Such loans were for the building of luxury residences. We determined to make these speculative construction loans because of the higher yields on such loans compared to conforming loans for the construction of owner-occupied, one- to four-family residences and to reduce our interest rate risk. As a result of the deterioration in local economic conditions in 2009 and 2010, certain of our speculative construction borrowers experienced difficulties selling the completed residences. At June 30, 2010, we had two speculative construction loans totaling $1.8 million that were nonperforming. Subsequent to June 30, 2010, we foreclosed on the collateral securing those loans. At June 30, 2010, all three remaining speculative construction loans, totaling $3.9 million, were performing in accordance with their terms, although we have extended the terms of two of these loans. Of our three remaining speculative construction loans, one was classified as substandard, and the other two were classified as special mention in accordance with a policy we adopted in 2009 of classifying all speculative construction loans as special mention. If difficult economic conditions continue, we could experience difficulty selling the two properties we acquired in foreclosure, and other speculative construction loan borrowers could have difficulty selling their properties. If a borrower has insufficient liquidity to pay interest on such projects, the loan could become impaired and require an increase in the allowance for loan losses which would adversely impact our results of operations. In light of current market conditions, we have discontinued speculative construction lending.

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The loss of senior management could hurt our operations.

   We rely heavily on our two senior executive officers, Thomas K. Sterner, our Chairman of the Board, Chief Executive Officer and Chief Financial Officer, and Richard C. Schultze, our President and Chief Operating Officer. The loss of either or both of our senior executive officers could have an adverse effect on us because, as a small community bank, our senior executive officers have more responsibility than would be typical at a larger financial institution with more employees. In addition, as a small community bank, we have fewer management-level personnel who are in a position to assume the responsibilities of our senior executive officers. We have not purchased key man life insurance on our senior executive officers.

If we conclude that the decline in value of any of our investment securities is other than temporary, we are required to write down the value of that security through a charge to earnings.

     We review our investment securities portfolio at each quarter-end reporting period to determine whether the fair value is below the current carrying value. When the fair value of any of our investment securities has declined below its carrying value, we are required to assess whether the decline is other-than-temporary. If we conclude that the decline is other-than-temporary, we are required to write down the value of that security through a charge to earnings. As of June 30, 2010, our investment securities portfolio available-for-sale included approximately two nonagency mortgage-backed securities with a book value of $1,130,081 and an estimated fair value of $1,070,049. Changes in the expected cash flows of these securities and/or prolonged price declines may result in our concluding in future periods that the impairment of these securities is other-than-temporary, which would require a charge to earnings to write down theses securities to their fair value. Any charges for other-than-temporary impairment would not impact cash flow, tangible capital or liquidity.

If in the future we determined to buy nonagency mortgage-backed securities, we would be exposed to increased risk of losses related to our investment portfolio.

     Under applicable laws and regulations, banks like Fraternity Federal Savings and Loan Association have authority to invest in mortgage-backed securities, including mortgage-backed securities that are not guaranteed by the U.S. government or an agency thereof, which could include mortgage-backed securities where the underlying loans are subprime loans, interest only loans, option adjustable-rate loans, Alt-A loans or other similar mortgage loans that have higher risk characteristics. In recent years, many banks and other investors have recorded impairment charges related to their investments in these nonagency mortgage-backed securities. If in the future we determined to buy nonagency mortgage-backed securities, we would be exposed to increased risk of losses related to our investment portfolio.

Our stock price may decline when trading commences.

     If you purchase shares in the offering, you may not be able to sell them at or above the $10.00 purchase price. After the shares of our common stock begin trading, the trading price of the common stock will be determined by the marketplace, and will be influenced by many factors outside of our control, including prevailing interest rates, investor perceptions, securities analyst research reports and general industry, geopolitical and economic conditions. Publicly traded stocks, including stocks of financial institutions, often experience substantial market price volatility. These market fluctuations might not be related to the operating performance of particular companies whose shares are traded. Additionally, the stock prices of some recently converted thrift institutions have declined below, and remain below, their initial offering prices.

Continued turmoil in the financial markets could have an adverse effect on our financial position or results of operations.

     Beginning in 2008, United States and global financial markets experienced severe disruption and volatility, and general economic conditions have declined significantly. Adverse developments in credit quality, asset values and revenue opportunities throughout the financial services industry, as well as general uncertainty regarding the economic, industry and regulatory environment, have had a negative impact on the industry. The United States and the governments of other countries have taken steps to try to stabilize the financial system, including investing in financial institutions, and have implemented programs intended to improve general economic conditions. The U.S.

15

Department of the Treasury created the Capital Purchase Program under the Troubled Asset Relief Program, pursuant to which the U.S. Department of the Treasury provided additional capital to participating financial institutions through the purchase of preferred stock or other securities. Other measures include homeowner relief that encourages loan restructuring and modification; the establishment of significant liquidity and credit facilities for financial institutions and investment banks; the lowering of the federal funds rate; regulatory action against short selling practices; a temporary guaranty program for money market funds; the establishment of a commercial paper funding facility to provide back-stop liquidity to commercial paper issuers; and coordinated international efforts to address illiquidity and other weaknesses in the banking sector. Notwithstanding the actions of the United States and other governments, there can be no assurance that these efforts will be successful in restoring industry, economic or market conditions to their previous levels and that they will not result in adverse unintended consequences. Factors that could continue to pressure financial services companies, including Fraternity Community Bancorp, are numerous and include:

• worsening credit quality, leading among other things to increases in loan losses and reserves,

• continued or worsening disruption and volatility in financial markets, leading among other things to continuing reductions in asset values,

• capital and liquidity concerns regarding financial institutions generally,

• limitations resulting from or imposed in connection with governmental actions intended to stabilize or provide additional regulation of the financial system, or

• recessionary conditions that are deeper or last longer than currently anticipated.

The recent economic downturn could result in increases in our level of nonperforming loans and/or reduce demand for our products and services, which would lead to lower revenue, higher loan losses and lower earnings.

     Our business activities and earnings are affected by general business conditions in the United States and in our primary market area. These conditions include short-term and long-term interest rates, inflation, unemployment levels, monetary supply, consumer confidence and spending, fluctuations in both debt and equity capital markets and the strength of the economy in the United States generally and in our primary market area in particular. Recently, the national economy has experienced a general downturn, with rising unemployment levels, declines in real estate values and an erosion in consumer confidence. These economic conditions also had a negative impact on our primary market area. In addition, our primary market area has experienced a softening of the local real estate market, including reductions in local property values, and a decline in the local manufacturing industry, which employs many of our borrowers. A prolonged or more severe economic downturn, continued elevated levels of unemployment, further declines in the values of real estate, or other events that affect household and/or corporate incomes could impair the ability of our borrowers to repay their loans in accordance with their terms. Nearly all of our loans are secured by real estate or made to businesses in our primary market area, which consists of Baltimore, Carroll, Howard, Harford and Anne Arundel Counties and Baltimore City in Maryland and the surrounding areas. As a result of this concentration, a prolonged or more severe downturn in the local economy could result in significant increases in nonperforming loans, which would negatively impact our interest income and result in higher provisions for loan losses, which would decrease our earnings. The economic downturn could also result in reduced demand for credit or fee-based products and services, which also would decrease our revenues.

Increased and/or special Federal Deposit Insurance Corporation assessments will hurt our earnings.

   The recent economic downturn has caused a high level of bank failures, which has dramatically increased Federal Deposit Insurance Corporation resolution costs and led to a significant reduction in the balance of the Deposit Insurance Fund. As a result, the Federal Deposit Insurance Corporation has significantly increased the initial base assessment rates paid by financial institutions for deposit insurance. Increases in the base assessment rate have increased our deposit insurance costs and negatively impacted our earnings. In addition, in May 2009, the

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Federal Deposit Insurance Corporation imposed a special assessment on all insured institutions. Our special assessment, which was reflected in earnings for the quarter ended June 30, 2009, was $76,000. In lieu of imposing an additional special assessment, the Federal Deposit Insurance Corporation required all institutions to prepay their assessments for all of 2010, 2011 and 2012, which for us totaled $629,000. Additional increases in the base assessment rate or additional special assessments would negatively impact our earnings.

Changing interest rates may decrease our earnings and asset value.

     Our net interest income is the interest we earn on loans and investments less the interest we pay on our deposits and borrowings. Our interest rate spread is the difference between the yield we earn on our assets and the interest rate we pay for deposits and our other sources of funding. Changes in interest rates—up or down—could adversely affect our interest rate spread and, as a result, our net interest income. Although the yield we earn on our assets and our funding costs tend to move in the same direction in response to changes in interest rates, one can rise or fall faster than the other, causing our interest rate spread to expand or contract. Our liabilities tend to be shorter in duration than our assets, so they may adjust faster in response to changes in interest rates. As a result, when interest rates rise, our funding costs may rise faster than the yield we earn on our assets, causing our interest rate spread to contract until the yield catches up. This contraction could be more severe following a prolonged period of lower interest rates, as a larger proportion of our fixed-rate one- to four-family loan portfolio will have been originated at those lower rates and borrowers may be more reluctant or unable to sell their homes in a higher interest rate environment. Changes in the slope of the “yield curve”—or the spread between short-term and long-term interest rates—could also reduce our net interest margin. Normally, the yield curve is upward sloping, meaning short-term rates are lower than long-term rates. Because our liabilities tend to be shorter in duration than our assets, when the yield curve flattens or even inverts, we could experience pressure on our interest rate spread as our cost of funds increases relative to the yield we can earn on our assets. For further discussion of how changes in interest rates could impact us, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Risk Management — Interest Rate Risk Management.”

Our strategies to modify our interest rate risk profile may be difficult to implement.

     Our asset/liability management strategies are designed to decrease our interest rate risk sensitivity. One such strategy is increasing the amount of adjustable-rate and/or short-term assets. We offer ten-year fixed rate and adjustable rate loan products as a means to achieve this strategy. However, the currently prevailing low long-term interest rates have created a decrease in borrower demand for these types of loans. Additionally, there is no guarantee that any adjustable-rate assets obtained will not prepay. At June 30, 2010, 43% of our loan portfolio consisted of adjustable-rate loans, compared to 44% and 43% at December 31, 2009 and 2008, respectively, and 6% of our loan portfolio consisted of ten-year fixed-rate loans, compared to 8% at December 31, 2009 and 2008.

     We are also managing our liabilities to moderate our interest rate risk sensitivity. Customer demand is primarily for short-term maturity certificates of deposit. Using short-term liabilities to fund long-term, fixed-rate assets will increase the interest rate sensitivity of any financial institution. We have utilized Federal Home Loan Bank advances to mitigate the impact of customer demand by lengthening the maturities of our liabilities.

     Federal Home Loan Bank advances are entered into as liquidity is needed or to fund assets that provide for a spread considered sufficient by management. If we are unable to originate short-term or adjustable-rate loans at favorable rates or fund loan originations or securities purchases with long-term advances, we may have difficulty executing this asset/liability management strategy and/or it may result in a reduction in profitability.

Strong competition within our primary market area could negatively impact our profits and slow growth.

     We face intense competition both in making loans and attracting deposits. This competition has made it more difficult for us to make new loans and attract deposits. Price competition for loans and deposits might result in us earning less on our loans and paying more on our deposits, which would reduce net interest income. Competition also makes it more difficult to grow loans and deposits. At June 30, 2010, which is the most recent date for which data is available from the Federal Deposit Insurance Corporation, we held approximately 0.28% of the deposits in

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Baltimore County, Maryland, 1.21% of the deposits in Howard County, Maryland and 0.13% of the deposits in Carroll County, Maryland. Most of the institutions with which we compete have substantially greater resources and lending limits than we have and may offer services that we do not provide. We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Our profitability depends upon our continued ability to compete successfully in our primary market area. See “Our Business — Market Area” and “Our Business — Competition” for more information about our primary market area and the competition we face.

We operate in a highly regulated environment and we may be adversely affected by changes in laws and regulations.

   We are subject to extensive regulation, supervision and examination by the Office of Thrift Supervision, our primary federal regulator, and the Federal Deposit Insurance Corporation, as insurer of our deposits. Such regulation and supervision governs the activities in which an institution and its holding company may engage, and are intended primarily for the protection of the insurance fund and the depositors and borrowers of Fraternity Federal Savings and Loan Association rather than for holders of our common stock. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations.

Recently enacted regulatory reform may have a material impact on our operations.

     On July 21, 2010, the President signed into law the Dodd-Frank Act. The Dodd-Frank Act restructures the regulation of depository institutions. The Dodd-Frank Act contains various provisions designed to enhance the regulation of depository institutions and prevent the recurrence of a financial crisis such as occurred in 2008-2009. Under the Dodd-Frank Act, the Office of Thrift Supervision will be eliminated and its duties and powers transferred to the Office of the Comptroller of the Currency, which regulates national banks. Savings and loan holding companies, such as Fraternity Community Bancorp, will be regulated by the Federal Reserve Board. Because Fraternity Federal Savings and Loan Association will be regulated by the Office of the Comptroller of the Currency and Fraternity Community Bancorp will be regulated by the Federal Reserve Board, we will have two new federal banking regulators instead of only being regulated by the Office of Thrift Supervision, as is currently the case. Also included in the Dodd-Frank Act is the creation of a new federal agency to administer consumer and fair lending laws, a function that is now performed by the depository institution regulators. The federal preemption of state laws currently accorded federally chartered depository institutions will be reduced as well. The Dodd-Frank Act also will impose consolidated capital requirements on savings and loan holding companies effective in five years, which will limit our ability to borrow at the holding company and invest the proceeds from such borrowings as capital in Fraternity Federal Savings and Loan Association that could be leveraged to support additional growth. The full impact of the Dodd-Frank Act on our business and operations will not be known for years until regulations implementing the statute are written and adopted. The Dodd-Frank Act may have a material impact on our operations, particularly through increased regulatory burden and compliance costs resulting from possible future consumer and fair lending regulations as well as the change in primary federal banking regulators.

Risks Related to This Offering

We may sell up to 1,587,000 shares of stock in the offering without providing you with an opportunity to change or cancel your order.

     Pursuant to the Office of Thrift Supervision conversion regulations, we are permitted to close the offering if we obtain orders for shares within the range of a minimum of 1,020,000 shares to a maximum, as adjusted, of 1,587,000 shares, without giving you further notice or the opportunity to change or cancel your order. Should we receive orders for the maximum, as adjusted, of 1,587,000 shares, this will result in higher pro forma pricing ratios in terms of the price to book value ratio and the price to tangible book value ratio (see “Pro Forma Data”). This may negatively affect our post-conversion trading price.

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There likely will be a limited market for our common stock, which may adversely affect our stock price.

     Although we intend to list our shares of common stock for trading on the OTC Bulletin Board, our shares of common stock are not likely to be actively traded. If an active trading market for our common stock does not develop, you may not be able to sell all of your shares of common stock and the sale of a large number of shares at one time could temporarily depress the market price. There also may be a wide spread between the bid and asked price for our common stock. When there is a wide spread between the bid and asked price, the price at which you may be able to sell our common stock may be significantly lower than the price at which you could buy it at that time.

Additional expenses following the offering from operating as a public company will adversely affect our profitability.

     Following the offering, our noninterest expenses will increase as a result of the financial accounting, legal and various other expenses usually associated with operating as a public company and complying with public company disclosure obligations, particularly those obligations imposed by the Sarbanes-Oxley Act of 2002. Compliance with the Sarbanes-Oxley Act of 2002 will require us to upgrade our accounting systems, which will increase our operating expenses and adversely affect our profitability.

We will incur additional expenses following the conversion relating to our plan to hire additional lending personnel in furtherance of our strategy to expand our lending activity.

     Part of our strategic plan is to improve our net interest margin and income and reduce our interest rate risk by increasing commercial real estate loans. To accomplish this, we anticipate that following the conversion we will add additional lending personnel. We anticipate that this initiative will enhance long-term shareholder value. However, upon the addition of new lending personnel, we will be required to make increased expenditures for salaries and employee benefits, and it may take some period of time for the new personnel to generate sufficient loan volume to offset these expenditures. Accordingly, we anticipate that, in the short term, net income will be negatively affected.

Additional expenses following the offering from the implementation of new equity benefit plans will adversely affect our profitability.

     We will recognize additional annual employee compensation and benefit expenses stemming from options and shares of common stock granted to employees, directors and executives under new benefit plans. These additional expenses will adversely affect our profitability. We cannot determine the actual amount of these new stock-related compensation and benefit expenses at this time because applicable accounting practices generally require that they be based on the fair market value of the options or shares of common stock at the date of the grant; however, we expect them to be material. We will recognize expenses for our employee stock ownership plan when shares are committed to be released to participants’ accounts and will recognize expenses for restricted stock awards and stock options generally over the vesting period of awards made to recipients. These benefit expenses in the first year following the offering have been estimated to be approximately $308,000 on a pre-tax basis at the maximum of the offering range assuming the $10.00 per share purchase price as fair market value. Actual expenses, however, may be higher or lower, depending on the price of our common stock. See “Pro Forma Data” and “Our Management — Executive Compensation — Benefit Plans.”

We have broad discretion in allocating the proceeds of the offering. Our failure to effectively utilize such proceeds would reduce our profitability.

     We intend to contribute 50% of the net proceeds of the offering to Fraternity Federal Savings and Loan Association. Fraternity Community Bancorp may use the portion of the proceeds that it retains to, among other things, invest in securities, pay cash dividends or repurchase shares of common stock, subject to regulatory restrictions. Fraternity Federal Savings and Loan Association may use the portion of the proceeds that it receives to fund new loans, open new branches, invest in securities and expand its business activities. Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association may also use the proceeds of the offering to diversify

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their businesses and acquire other companies, although we have no specific plans to do so at this time. We have not allocated specific amounts of proceeds for any of these purposes, and we will have significant flexibility in determining how much of the net proceeds we apply to different uses and the timing of such applications. Our failure to utilize these funds effectively would reduce our profitability.

A significant percentage of our common stock will be held by our directors and executive officers and benefit plans.

     We expect that our directors and executive officers, together with their associates, will subscribe for 45,000 shares in the offering. In addition, we intend to establish an employee stock ownership plan that will purchase an amount of shares equal to 8% of the shares sold in the offering. As a result, upon consummation of the offering, a total of up to 126,600, or 12.4%, and 155,400, or 11.3%, of our outstanding shares will be held by our directors and executive officers and our employee stock ownership plan at the minimum and maximum of the offering range, respectively. Further, shares will be held by management following the implementation of an equity incentive plan, which we intend to implement no earlier than six months following the completion of the offering. Assuming the equity incentive plan is implemented, under the plan options are granted to and exercised by directors and executive officers for 10% of the shares sold in the conversion and restricted stock awards are made to directors and executive officers for 4% of the shares sold in the conversion and the plan is funded with shares purchased in the open market, a total of up to 269,400, or 26.4%, and 348,600, or 25.3%, of our outstanding shares will be held by our directors and executive officers and our employee stock ownership plan at the minimum and maximum of the offering range, respectively. The articles of incorporation of Fraternity Community Bancorp contain supermajority voting provisions that require that the holders of at least 75% of Fraternity Community Bancorp’s outstanding shares of voting stock approve certain actions including, but not limited to, the amendment of certain provisions of Fraternity Community Bancorp’s articles of incorporation and bylaws. If our directors and executive officers and benefit plans were to hold more than 25% of our outstanding common stock following the completion of the offering, the shares held by these individuals and benefit plans could be voted in a manner that would ensure that the 75% supermajority needed to approve such actions could not be attained. For more information on the restrictions included in the articles of incorporation and bylaws of Fraternity Community Bancorp, see “Restrictions on the Acquisition of Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association.”

Issuance of shares for benefit programs may dilute your ownership interest.

     We intend to adopt an equity incentive plan following the offering. If shareholders approve the new equity incentive plan, we intend to issue shares to our officers, employees and directors through this plan. If the restricted stock awards under the equity incentive plan are funded from authorized but unissued stock, your ownership interest in the shares could be diluted by up to approximately 3.85%, assuming awards of common stock equal to 4% of the shares sold in the offering are awarded under the plan. If we adopt the equity incentive plan more than one year after completion of the offering, we may elect to increase the awards of restricted stock we may grant. In such event, your ownership interest in the shares could be further diluted. If the shares issued upon the exercise of stock options under the equity incentive plan are issued from authorized but unissued stock, your ownership interest in the shares could be diluted by up to approximately 9.09%, assuming stock option grants equal to 10% of the shares sold in the offering are granted under the plan. See “Pro Forma Data” and “Our Management — Executive Compensation — Benefit Plans.”

The articles of incorporation and bylaws of Fraternity Community Bancorp and certain laws and regulations may prevent or make more difficult certain transactions, including a sale or merger of Fraternity Community Bancorp

   Provisions of the articles of incorporation and bylaws of Fraternity Community Bancorp, state corporate law and federal banking regulations may make it more difficult for companies or persons to acquire control of Fraternity Community Bancorp. As a result, our shareholders may not have the opportunity to participate in such a transaction and the trading price of our common stock may not rise to the level of other institutions that are more vulnerable to hostile takeovers. The factors that may discourage takeover attempts or make them more difficult include:

• Articles of incorporation and bylaws. Provisions of the articles of incorporation and bylaws of Fraternity Community Bancorp may make it more difficult and expensive to pursue a takeover attempt

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that the board of directors opposes. These provisions also make more difficult the removal of current directors or management, or the election of new directors. These provisions include:

• limitation on the right to vote shares;

• the election of directors to staggered terms of three years;

• provisions regarding the timing and content of shareholder proposals and nominations;

• provisions restricting the calling of special meetings of shareholders;

• the absence of cumulative voting by shareholders in the election of directors;

• the removal of directors only for cause; and

• supermajority voting requirements for changes to some provisions of the articles of incorporation and bylaws.

• Maryland anti-takeover statute. Under Maryland law, any person who acquires more than 10% of a Maryland corporation without prior approval of its board of directors is prohibited from engaging in any type of business combination with the corporation for a five-year period. Any business combination after the five-year period would be subject to supermajority shareholder approval or minimum price requirements.

• Office of Thrift Supervision regulations. Office of Thrift Supervision regulations prohibit, for three years following the completion of a mutual to stock conversion, the offer to acquire or the acquisition of more than 10% of any class of equity security of a converted institution without the prior approval of the Office of Thrift Supervision. See “Restrictions on Acquisition of Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association.”

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A Warning About Forward-Looking Statements

     This prospectus contains forward-looking statements, which can be identified by the use of words such as “believes,” “expects,” “anticipates,” “estimates” or similar expressions. Forward-looking statements include:

• statements of our goals, intentions and expectations;

• statements regarding our business plans, prospects, growth and operating strategies;

• statements regarding the quality of our loan and investment portfolios; and

• estimates of our risks and future costs and benefits.

     These forward-looking statements are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the following factors:

• general economic conditions, either nationally or in our primary market area, that are worse than expected;

• a continued decline in real estate values;

• changes in the interest rate environment that reduce our interest margins or reduce the fair value of financial instruments;

• increased competitive pressures among financial services companies;

• changes in consumer spending, borrowing and savings habits;

• legislative, regulatory or supervisory changes that adversely affect our business;

• adverse changes in the securities markets; and

• changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board or the Public Company Accounting Oversight Board.

     Any of the forward-looking statements that we make in this prospectus and in other public statements we make may later prove incorrect because of inaccurate assumptions, the factors illustrated above or other factors that we cannot foresee. Consequently, no forward-looking statement can be guaranteed.

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Selected Consolidated Financial and Other Data

     The summary consolidated financial information presented below is derived in part from our consolidated financial statements. The following is only a summary and you should read it in conjunction with the consolidated financial statements and notes beginning on page F-1. The information at December 31, 2009 and 2008 and for the years then ended is derived in part from the audited consolidated financial statements of Fraternity Federal Savings and Loan Association that appear elsewhere in this prospectus. The selected data at June 30, 2010 and for the six months ended June 30, 2010 and 2009 was not audited, but in the opinion of management, represents all adjustments necessary for a fair presentation. All of these adjustments are normal and recurring. The results of operations for the six months ended June 30, 2010 are not necessarily indicative of the results of operations that may be expected for the entire year.

	At June 30,		At December 31,
(In thousands)	2010		2009		2008
	(Unaudited)
Financial Condition Data:
Total assets	$	167,928	$	166,976	$	170,688
Cash and cash equivalents		20,135		13,908		11,439
Investment securities available-for-sale		19,650		24,116		8,526
Investment and securities held-to-maturity		—		—		7,447
Loans receivable, net		118,770		120,092		136,547
Deposits		125,770		125,960		124,913
Federal Home Loan Bank advances		22,750		22,917		28,417
Total equity		16,647		16,992		16,475

	For the Six Months Ended					For the Year Ended
	June 30,					December 31,
(In thousands)	2010			2009		2009		2008
	(Unaudited)
Operating Data:
Interest income	$	3,848		$	4,287	$	8,272	$	8,993
Interest expense		1,957			2,500		4,805		5,856
Net interest income		1,891			1,787		3,467		3,137
Provision for loan losses		865			51		51		5
Net interest income after provision for loan losses		1,026			1,736		3,416		3,132
Noninterest income		311			378		692		323
Noninterest expenses		2,065			1,805		3,646		3,600
Income (loss) before income tax expense (benefit)		(728	)		309		462		(145	)
Income tax expense (benefit)		317			95		119		(153	)
Net income	$	(411	)	$	214	$	343	$	8

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	At or for the Six Months						At of For the Year
	Ended June 30,						Ended December 31,
	2010			2009			2009			2008
	(Unaudited)
Performance Ratios (1)(2):
Return on average assets		(0.49	)%		0.25	%		0.20	%		—	%
Return on average equity		(4.83	)		2.55			2.03			0.05
Interest rate spread (3)		1.98			1.79			1.74			1.48
Net interest margin (4)		2.27			2.14			2.08			1.86
Noninterest expenses to average assets		2.45			2.15			2.17			2.12
Average interest-earning assets to average interest-bearing liabilities		112.28			111.80			111.71			111.22
Average equity to average assets		10.08			9.98			10.04			9.71
Regulatory Capital Ratios:
Tier 1 capital (to adjusted total assets)		9.87			10.05			10.19			9.75
Tier 1 capital (to risk-weighted assets)		17.87			19.22			18.34			18.01
Total risk-based capital (to risk-weighted assets)		18.79			19.58			18.69			18.35
Asset Quality Ratios:
Allowance for loan losses as a percent of total loans		0.67			0.26			0.23			0.20
Allowance for loan losses as a percent of nonperforming loans		24.68			119.08			15.91			145.52
Net charge-offs to average outstanding loans during the period		0.28			—			0.04			—
Nonperforming loans as a percent of total loans		2.73			0.22			1.45			0.14
Nonperforming assets as a percent of total assets		1.94			0.16			0.62			0.11
Other Data:
Number of offices		4			3			4			3
Number of deposit accounts		6,469			6,858			6,677			6,969
Number of loans		1,186			1,222			1,208			1,252

(1)	With the exception of end of period ratios, all ratios are based on average monthly balances during the periods.
(2)	Performance ratios for the six-month periods have been annualized.
(3)	Represents the difference between the average yield on average interest-earning assets and the average cost on average interest-bearing liabilities.
(4)	Represents net interest income as a percent of average interest-earning assets.

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Use of Proceeds

     The following table shows how we intend to use the net proceeds of the offering. The actual net proceeds will depend on the number of shares of common stock sold in the offering and the actual expenses incurred in connection with the offering. Payments for shares made through withdrawals from deposit accounts at Fraternity Federal Savings and Loan Association will reduce deposits and will not result in the receipt of new funds for investment. See “Pro Forma Data” for the assumptions used to arrive at these amounts.

																			Maximum,
	Minimum of						Midpoint of						Maximum of						as Adjusted,
	Offering Range						Offering Range						Offering Range						of Offering Range
	1,020,000			Percent			1,200,000			Percent			1,380,000			Percent			1,587,000			Percent
	Shares at			of			Shares at			of			Shares at			of			Shares at			of
	$10.00			Net			$10.00			Net			$10.00			Net			$10.00			Net
(Dollars in thousands)	Per Share			Proceeds			Per Share			Proceeds			Per Share			Proceeds			Per Share			Proceeds
Offering proceeds	$	10,200					$	12,000					$	13,800					$	15,870
Less: estimated offering expenses		(800	)					(800	)					(800	)					(800	)
Net offering proceeds	$	9,400			100.00	%	$	11,200			100.00	%	$	13,000			100.00	%	$	15,070			100.00	%
Less:
Proceeds contributed to Fraternity Federal Savings and Loan Association		4,700			50.0			5,600			50.0			6,500			50.0			7,535			50.0
Proceeds used for loan to employee stock ownership plan		816			8.7			960			8.6			1,104			8.5			1,270			8.4
Proceeds remaining for Fraternity Community Bancorp (1)	$	3,884			41.3	%	$	4,640			41.4	%	$	5,396			41.5	%	$	6,265			41.6	%

(1) Following the completion of the stock offering and in accordance with applicable regulations, Fraternity Community Bancorp may purchase shares of its common stock in the open market in order to grant awards of restricted stock under its proposed equity incentive plan. Assuming a market price of $10.00 per share at the time of purchase, the cost of acquiring the shares would be approximately $408,000 (40,800 shares) at the minimum of the offering range, $480,000 (48,000 shares) at the midpoint of the offering range, $552,000 (55,200 shares) at the maximum of the offering range and $634,800 (63,480 shares) at the maximum, as adjusted, of the offering range and assuming we grant a number of restricted stock awards equal to 4% of the shares sold in the offering. See “Pro Forma Data” and “Our Management — Executive Compensation — Nonqualified Deferred Compensation — Future Equity Incentive Plan.”

     Fraternity Community Bancorp intends to invest the proceeds it retains from the offering initially in short-term, liquid investments. Over time, Fraternity Community Bancorp may use the proceeds it retains from the offering:

• to invest in securities;

• to pay dividends to shareholders;

• to repurchase shares of its common stock, subject to regulatory restrictions;

• for possible future investment in Fraternity Federal Savings and Loan Association if needed to support future growth or expansion; and

• for general corporate purposes.

     The specific amounts of net proceeds to be allocated in the future to each of the uses described above have not been determined, is subject to change and will depend on capital requirements, regulatory limitations, future expansion opportunities and our operating results and financial condition.

     Under current Office of Thrift Supervision regulations, Fraternity Community Bancorp may not repurchase shares of its common stock during the first year following the offering, except to fund shareholder-approved equity benefit plans or, with prior regulatory approval, when extraordinary circumstances exist.

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     We expect to contribute 50% of the net proceeds of the offering to Fraternity Federal Savings and Loan Association. Fraternity Federal Savings and Loan Association may use the proceeds that it receives from the offering, which is shown in the table above as the amount contributed to Fraternity Federal Savings and Loan Association:

• to fund new loans;

• to invest in securities;

• subject to the receipt of regulatory approval, to finance the possible expansion of its business activities through the establishment of new branch offices and/or the acquisition of other financial institutions or financial services companies; while we intend to open a new branch office in our current market area or a contiguous county in the next three years, we currently have no definitive plans, arrangements, understandings or commitments regarding potential branch office expansion or acquisition opportunities; and

• for general corporate purposes.

     Except as described above, neither Fraternity Community Bancorp nor Fraternity Federal Savings and Loan Association has any specific plans, arrangements or understandings for the investment of the proceeds of this offering and has not allocated a specific portion of the proceeds to any particular use. The specific amounts of net proceeds to be allocated in the future to each of the uses described above have not been determined, is subject to change and will depend on capital requirements, regulatory limitations, future expansion opportunities and our operating results and financial condition. For a discussion of our business reasons for undertaking the offering, see “The Conversion and Stock Offering — Reasons for the Conversion.”

Our Dividend Policy

     Following the offering, our board of directors initially does not intend to pay cash dividends.

     In the future, the board of directors may declare and pay regular cash dividends and/or periodic special cash dividends in addition to, or in lieu of, regular cash dividends. In determining whether to declare or pay any dividends, whether regular or special, the board of directors will take into account our financial condition and results of operations, tax considerations, capital requirements, industry standards, and economic conditions. We will also consider the regulatory restrictions that affect the payment of dividends by Fraternity Federal Savings and Loan Association to us, as discussed below.

     Fraternity Community Bancorp is subject to Maryland law, which generally permits a corporation to pay dividends on its common stock unless, after giving effect to the dividend, the corporation would be unable to pay its debts as they become due in the usual course of its business or the total assets of the corporation would be less than its total liabilities.

     Fraternity Community Bancorp will not be subject to Office of Thrift Supervision regulatory restrictions on the payment of dividends. However, our ability to pay dividends may depend, in part, upon dividends we receive from Fraternity Federal Savings and Loan Association because we initially will have no source of income other than dividends from Fraternity Federal Savings and Loan Association and earnings from the investment of the net proceeds from the offering that we retain. Office of Thrift Supervision regulations limit dividends and other distributions from Fraternity Federal Savings and Loan Association to us. Fraternity Federal Savings and Loan Association may not declare or pay a cash dividend on its capital stock if its effect would be to reduce the regulatory capital of Fraternity Federal Savings and Loan Association below the amount required for the liquidation account to be established as required by our plan of conversion. No insured depository institution may make a capital distribution if, after making the distribution, the institution would be undercapitalized. See “Regulation and Supervision — Regulation of Federal Savings Associations — Limitation on Capital Distributions” and “The Conversion and Stock Offering —Effects of Conversion to Stock Form — Liquidation Account.”

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     Any payment of dividends by Fraternity Federal Savings and Loan Association to us that would be deemed to be drawn out of Fraternity Federal Savings and Loan Association’s bad debt reserves would require Fraternity Federal Savings and Loan Association to pay federal income taxes at the then current income tax rate on the amount deemed distributed. See “Federal and State Taxation —Federal Income Taxation.” We do not contemplate any distribution by Fraternity Federal Savings and Loan Association that would result in this type of tax liability.

     In addition, Fraternity Community Bancorp may not make a distribution that would constitute a return of capital during the three-year term of the business plan submitted in connection with the offering.

Market for the Common Stock

     We have not previously issued common stock and there is currently no established market for the common stock. We intend to list our common stock for trading on the OTC Bulletin Board upon completion of the offering. Sandler O’Neill + Partners, L.P. intends to become a market maker in our common stock following the offering, but it is under no obligation to do so. We cannot assure you that an active and liquid trading market for the common stock will develop or, if developed, will be maintained.

     The development of a public market having the desirable characteristics of depth, liquidity and orderliness depends on the existence of willing buyers and sellers, the presence of which is not within our control or that of any market maker. The number of active buyers and sellers of our common stock at any particular time may be limited, which may have an adverse effect on the price at which our common stock can be sold. There can be no assurance that persons purchasing the common stock will be able to sell their shares at or above the $10.00 price per share in the offering. Purchasers of our common stock should recognize that there likely will be a limited trading market in the common stock and, therefore, should have the financial ability to withstand a longer-term investment horizon.

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Capitalization

     The following table presents the historical capitalization of Fraternity Federal Savings and Loan Association at June 30, 2010 and the capitalization of Fraternity Community Bancorp reflecting the offering (referred to as “pro forma” information). The pro forma capitalization gives effect to the assumptions listed under “Pro Forma Data,” based on the sale of the number of shares of common stock indicated in the table. This table does not reflect the issuance of additional shares as a result of the exercise of options granted under the proposed equity incentive plan. A change in the number of shares to be issued in the offering may materially affect pro forma capitalization. We are offering our common stock on a best efforts basis. We must sell a minimum of 1,020,000 shares to complete the offering.

				Pro Forma
				Capitalization Based Upon the Sale of
				1,020,000			1,200,000			1,380,000			1,587,000
	Capitalization			Shares at			Shares at			Shares at			Shares at
	as of			$10.00			$10.00			$10.00			$10.00
(Dollars in thousands)	June 30, 2010			Per Share			Per Share			Per Share			Per Share
	(Unaudited)
Deposits (1)	$	125,760		$	125,760		$	125,760		$	125,760		$	125,760
Borrowings		22,750			22,750			22,750			22,750			22,750
Total deposits and borrowed funds	$	148,510		$	148,510		$	148,510		$	148,510		$	148,510
Shareholders’ equity:
Preferred stock:
1,000,000 shares, $0.01 par value per share, authorized; none issued or outstanding		—			—			—			—			—
Common stock:
15,000,000 shares, $0.01 par value per share, authorized; specified number of shares assumed to be issued and outstanding (2)		—			10			12			14			16
Additional paid-in capital		—			9,390			11,188			12,986			15,054
Retained earnings (3)		16,592			16,592			16,592			16,592			16,592
Accumulated other comprehensive income		55			55			55			55			55
Less :
Common stock acquired by employee stock ownership plan (4)		—			(816	)		(960	)		(1,104	)		(1,270	)
Common stock to be acquired by equity incentive plan (5)		—			(408	)		(480	)		(552	)		(635	)
Total shareholders’ equity	$	16,647		$	24,823		$	26,407		$	27,991		$	29,812
Shareholders’ equity to assets (1)		9.91	%		14.10	%		14.86	%		15.61	%		16.46	%

(1)	Does not reflect withdrawals from deposit accounts for the purchase of common stock in the offering. Withdrawals to purchase common stock will reduce pro forma deposits and assets by the amounts of the withdrawals.
(2)	Reflects total issued and outstanding shares of 1,020,000, 1,200,000, 1,380,000, and 1,587,000 at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively.
(3)	Retained earnings are restricted by applicable regulatory capital requirements.
(4)	Assumes that 8% of the common stock sold in the offering will be acquired by the employee stock ownership plan in the offering with funds borrowed from Fraternity Community Bancorp. Under generally accepted accounting principles, the amount of common stock to be purchased by the employee stock ownership plan represents unearned compensation and is, accordingly, reflected as a reduction of capital and a liability to the employee stock ownership plan. As shares are released to plan participants’ accounts, a compensation expense will be charged, along with related tax benefit, and a reduction in the charge against capital will occur in the amount of the compensation expense recognized. Since the funds are borrowed from Fraternity Community Bancorp, the borrowing will be eliminated in consolidation and no liability or interest expense will be reflected in the financial statements of Fraternity Community Bancorp. The loan will be repaid principally through Fraternity Federal Savings and Loan Association’s contributions to the employee stock ownership plan and dividends

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payable on common stock, if any, held by the plan over the anticipated 12-year term of the loan. See “Our Management — Executive Compensation — Benefit Plans — Employee Stock Ownership Plan.”

(5)

Assumes the purchase in the open market at $10.00 per share, for restricted stock awards under the proposed equity incentive plan, of a number of shares equal to 4% of the shares of common stock sold in the offering. The shares are reflected as a reduction of shareholders’ equity. The equity incentive plan will be submitted to shareholders for approval at a meeting following the offering. See “Risk Factors — Issuance of shares for benefit programs may dilute your ownership interest,” “Pro Forma Data” and “Our Management — Executive Compensation — Nonqualified Deferred Compensation — Future Equity Incentive Plan.”

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Regulatory Capital Compliance

     At June 30, 2010, Fraternity Federal Savings and Loan Association exceeded all regulatory capital requirements. The following table presents Fraternity Federal Savings and Loan Association’s capital position relative to its regulatory capital requirements at June 30, 2010, on a historical and a pro forma basis. The table reflects receipt by Fraternity Federal Savings and Loan Association of 50% of the net proceeds of the offering. For purposes of the table, the amount expected to be borrowed by the employee stock ownership plan is deducted from pro forma regulatory capital. For a discussion of the assumptions underlying the pro forma capital calculations presented below, see “Use of Proceeds,” “Capitalization” and “Pro Forma Data.” The definitions of the terms used in the table are those provided in the capital regulations issued by the Office of Thrift Supervision. For a discussion of the capital standards applicable to Fraternity Federal Savings and Loan Association, see “Regulation and Supervision — Regulation of Federal Savings Associations — Capital Requirements.”

						Pro Forma at June 30, 2010
																								Maximum, as Adjusted,
						Minimum of						Midpoint of						Maximum of						of
						Offering Range						Offering Range						Offering Range						Offering Range
	Historical at					1,020,000 Shares						1,200,000 Shares						1,380,000 Shares						1,587,000 Shares
	June 30, 2010					At $10.00 Per Share						At $10.00 Per Share						At $10.00 Per Share						At $10.00 Per Share
			Percent						Percent						Percent						Percent						Percent
			of						of						of						of						of
	Amount		Assets (1)			Amount			Assets			Amount			Assets			Amount			Assets			Amount			Assets
	(Dollars in thousands)
Total capital under generally accepted accounting principles	$	16,647		9.91	%	$	20,531			11.89	%	$	21,287			12.27	%	$	22,043			12.64	%	$	22,912			13.06	%
Tangible Capital:
Capital level (2)	$	16,555		9.87	%	$	20,476			11.87	%	$	21,232			12.25	%	$	21,988			12.62	%	$	22,857			13.04	%
Requirement		2,516		1.50			2,587			1.50			2,600			1.50			2,614			1.50			2,630			1.50
Excess	$	14,039		8.37	%	$	17,889			10.37	%	$	18,632			10.75	%	$	19,374			11.12	%	$	20,228			11.54	%
Core Capital:
Capital level (2)	$	16,555		9.87	%	$	20,476			11.87	%	$	21,232			12.25	%	$	21,988			12.62	%	$	22,857			13.04	%
Requirement		5,033		3.00			5,174			3.00			5,201			3.00			5,228			3.00			5,259			3.00
Excess	$	11,522		6.87	%	$	15,302			8.87	%	$	16,031			9.25	%	$	16,760			9.62	%	$	17,598			10.04	%
Tier 1 Risk-Based Capital:
Capital level	$	16,555		17.87	%	$	20,476			21.88	%	$	21,232			22.65	%	$	21,988			23.41	%	$	22,857			24.28
Requirement		3,706		4.00			3,743			4.00			3,750			4.00			3,757			4.00			3,765			4.00
Excess	$	12,849		13.87	%	$	16,733			17.88	%	$	17,482			18.65	%	$	18,231			19.41	%	$	19,092			20.28	%
Total Risk-Based Capital:
Total risk-based capital (3)	$	17,405		18.79	%	$	21,326			22.79	%	$	22,082			23.55	%	$	22,838			24.31	%	$	23,707			25.18	%
Requirement		7,411		8.00			7,486			8.00			7,500			8.00			7,514			8.00			7,531			8.00
Excess	$	9,994		10.79	%	$	13,840			14.79	%	$	14,582			15.55	%	$	15,324			16.31	%	$	16,176			16.31	%
Reconciliation of capital infusion to Fraternity Federal Savings and Loan Association:
Net proceeds of offering						$	9,400					$	11,200					$	13,800					$	15,870
Proceeds to Fraternity Federal Savings and Loan Association						$	4,700					$	5,600					$	6,500					$	7,535
Less: stock acquired by employee stock ownership plan							(816	)					(960	)					(1,104	)					(1,270	)
Pro forma increase in GAAP and regulatory capital						$	3,884					$	4,640					$	5,396					$	6,265

(1)	Tangible capital and core capital levels are shown as a percentage of adjusted total assets of $167.8 million. Risk-based capital levels are shown as a percentage of risk-weighted assets of $92.6 million.
(2)	See note 13 of the notes to consolidated financial statements for further information regarding our tangible capital, core capital, Tier 1 risk-based capital and total risk-based capital ratios.
(3)	Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 20% risk-weighting.

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Pro Forma Data

     The following tables show information about our net income and shareholders’ equity reflecting the sale of common stock in the offering. The information provided illustrates our pro forma net income and shareholders’ equity based on the sale of common stock at the minimum of the offering range, the midpoint of the offering range, the maximum of the offering range and the maximum, as adjusted, of the offering range. The actual net proceeds from the sale of the common stock cannot be determined until the offering is completed. Net proceeds indicated in the following tables are based upon the following assumptions:

• All shares of stock will be sold in the subscription and community offerings;

• Our employee stock ownership plan will purchase a number of shares equal to 8% of the shares sold in the offering with a loan from Fraternity Community Bancorp that will be repaid in equal installments over 12 years;

• Sandler O’Neill + Partners, L.P. will receive a success fee equal to $160,000; and

• Total expenses of the offering, excluding fees paid to Sandler O’Neill + Partners, L.P., will be approximately $640,000.

     Actual expenses may vary from this estimate.

     Pro forma net income for the six months ended June 30, 2010 and the year ended December 31, 2009 has been calculated as if the offering were completed at the beginning of the period, and the net proceeds had been invested at 0.61% for the six months ended June 30, 2010 and 1.14% for the year ended December 31, 2009, which represents the two-year treasury rate at June 30, 2010. We believe that the two-year treasury rate at June 30, 2010 represents a more realistic yield on the investment of the offering proceeds than the arithmetic average of the weighted average yield earned on our interest-earning assets and the weighted average rate paid on our deposits, which is the reinvestment rate required to be assumed by Office of Thrift Supervision regulations.

     A pro forma after-tax return of 0.40% is used for the six months ended June 30, 2010 and 0.75% is used for the year ended December 31, 2009, after giving effect to a combined federal and state income tax rate of 34% for the period. Historical and pro forma per share amounts have been calculated by dividing historical and pro forma amounts by the number of shares of common stock indicated in the tables.

     When reviewing the following tables you should consider the following:

• The final column gives effect to a 15% increase in the offering range, which may occur without any further notice if Feldman Financial Advisors increases its appraisal to reflect the results of this offering, changes in our financial condition or results of operations or changes in market conditions after the offering begins. See “The Conversion and Stock Offering — How We Determined the Offering Range and the $10.00 Per Share Purchase Price.”

• Since funds on deposit at Fraternity Federal Savings and Loan Association may be withdrawn to purchase shares of common stock, the amount of funds available for investment will be reduced by the amount of withdrawals for stock purchases. The pro forma tables do not reflect withdrawals from deposit accounts.

• Historical per share amounts have been computed as if the shares of common stock expected to be issued in the offering had been outstanding at the beginning of the period covered by the table. However, neither historical nor pro forma shareholders’ equity has been adjusted to reflect the investment of the estimated net proceeds from the sale of the shares in the offering, the additional employee stock ownership plan expense or the proposed equity incentive plan.

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• Pro forma shareholders’ equity (“book value”) represents the difference between the stated amounts of our assets and liabilities. Book value amounts do not represent fair market values or amounts available for distribution to shareholders in the unlikely event of liquidation. The amounts shown do not reflect the federal income tax consequences of the restoration to income of Fraternity Federal Savings and Loan Association’s special bad debt reserves for income tax purposes or give effect to the liquidation account in the unlikely event of liquidation. See “Federal and State Taxation” and “The Conversion and Stock Offering — Effects of Conversion to Stock Form — Liquidation Account.”

• The amounts shown as pro forma shareholders’ equity per share do not represent possible future price appreciation of our common stock.

     The following pro forma data may not represent the actual financial effects of the offering or our operating results after the offering. The pro forma data relies exclusively on the assumptions outlined above and in the notes to the pro forma tables. The pro forma data does not represent the fair market value of our common stock, the current fair market value of our assets or liabilities, or the amount of money that would be available for distribution to shareholders if we are liquidated after the offering.

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     We are offering our common stock on a best efforts basis. We must sell a minimum of 1,020,000 shares to complete the offering.

	At or For the Six Months Ended June 30, 2010
										Maximum, as
	Minimum of			Midpoint of			Maximum of			Adjusted, of
	Offering			Offering			Offering			Offering
	Range			Range			Range			Range
	1,020,000			1,200,000			1,380,000			1,587,000
	Shares			Shares			Shares			Shares
	at $10.00			at $10.00			at $10.00			at $10.00
	Per Share			Per Share			Per Share			Per Share
	(Dollars in thousands)
Gross proceeds	$	10,200		$	12,000		$	13,800		$	15,870
Less: estimated offering expenses		(800	)		(800	)		(800	)		(800	)
Estimated net conversion proceeds		9,400			11,200			13,000			15,070
Less: common stock acquired by employee stock ownership plan (1)		(816	)		(960	)		(1,104	)		(1,270	)
Less: common stock to be acquired by equity incentive plan (2)		(408	)		(480	)		(552	)		(635	)
Net investable proceeds	$	8,176		$	9,760		$	11,344		$	13,165
Pro Forma Net Income:
Pro forma net income (loss):
Historical	$	(411	)	$	(411	)	$	(411	)	$	(411	)
Pro forma income on net investable proceeds		16			20			23			26
Less: pro forma employee stock ownership plan adjustments (1)		(22	)		(26	)		(30	)		(35	)
Less: pro forma restricted stock award expense (2)		(27	)		(32	)		(36	)		(42	)
Less: pro forma stock option expense (3)		(36	)		(42	)		(48	)		(56	)
Pro forma net income (loss)	$	(480	)	$	(491	)	$	(502	)	$	(518	)
Pro forma net income (loss) per share:
Historical	$	(0.44	)	$	(0.37	)	$	(0.32	)	$	(0.28	)
Pro forma income on net investable proceeds		0.02			0.02			0.02			0.02
Less: pro forma employee stock ownership plan adjustments (1)		(0.02	)		(0.02	)		(0.02	)		(0.02	)
Less: pro forma restricted stock award expense (2)		(0.03	)		(0.03	)		(0.03	)		(0.03	)
Less: pro forma stock option expense (3)		(0.04	)		(0.04	)		(0.04	)		(0.04	)
Pro forma net income (loss) per share	$	(0.51	)	$	(0.44	)	$	(0.39	)	$	(0.35	)
Offering price as a multiple of annualized pro forma net income per share		N/M			N/M			N/M			N/M
Number of shares used to calculate pro forma annualized net income per share (4)		941,800			1,108,000			1,274,200			1,465,330
Pro Forma Shareholders’ Equity:
Pro forma shareholders’ equity (book value) (4):
Historical	$	16,647		$	16,647		$	16,647		$	16,647
Estimated net proceeds		9,400			11,200			13,000			15,070
Less: common stock acquired by employee stock ownership plan (1)		(816	)		(960	)		(1,104	)		(1,270	)
Less: common stock to be acquired by equity incentive plan (2)		(406	)		(480	)		(552	)		(635	)
Pro forma shareholders’ equity	$	24,823		$	26,407		$	27,991		$	29,812
Pro forma shareholders’ equity per share (4):
Historical	$	16.32		$	13.87		$	12.06		$	10.49
Estimated net proceeds		9.22			9.34			9.42			9.50
Less: common stock acquired by employee stock ownership plan (1)		(0.80	)		(0.80	)		(0.80	)		(0.80	)
Less: common stock to be acquired by equity incentive plan (2)		(0.40	)		(0.40	)		(0.40	)		(0.40	)
Pro forma shareholders’ equity per share	$	24.34		$	22.01		$	20.28		$	18.79
Offering price as a percentage of pro forma shareholders’ equity per share		41.1	%		45.4	%		49.3	%		53.2	%
Number of shares used to calculate pro forma shareholders’ equity per share (4)		1,020,000			1,200,000			1,380,000			1,587,000

(footnotes on page __)

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	At or For the Year Ended December 31, 2009
										Maximum, as
	Minimum of			Midpoint of			Maximum of			Adjusted, of
	Offering			Offering			Offering			Offering
	Range			Range			Range			Range
	1,020,000			1,200,000			1,380,000			1,587,000
	Shares			Shares			Shares			Shares
	at $10.00			at $10.00			at $10.00			at $10.00
	Per Share			Per Share			Per Share			Per Share
	(Dollars in thousands)
Gross proceeds	$	10,200		$	12,000		$	13,800		$	15,870
Less: estimated offering expenses		(800	)		(800	)		(800	)		(800	)
Estimated net conversion proceeds		9,400			11,200			13,000			15,070
Less: common stock acquired by employee stock ownership plan (1)		(816	)		(960	)		(1,104	)		(1,270	)
Less: common stock to be acquired by equity incentive plan (2)		(408	)		(480	)		(552	)		(635	)
Net investable proceeds	$	8,176		$	9,760		$	11,344		$	13,165
Pro Forma Net Income:
Pro forma net income (loss):
Historical	$	343		$	343		$	343		$	343
Pro forma income on net investable proceeds		61			73			85			99
Less: pro forma employee stock ownership plan adjustments (1)		(45	)		(53	)		(61	)		(70	)
Less: pro forma restricted stock award expense (2)		(54	)		(63	)		(73	)		(84	)
Less: pro forma stock option expense (3)		(72	)		(84	)		(97	)		(112	)
Pro forma net income (loss)	$	233		$	216		$	197		$	176
Pro forma net income (loss) per share:
Historical	$	0.36		$	0.31		$	0.27		$	0.23
Pro forma income on net investable proceeds		0.07			0.07			0.07			0.07
Less: pro forma employee stock ownership plan adjustments (1)		(0.05	)		(0.05	)		(0.05	)		(0.05	)
Less: pro forma restricted stock award expense (2)		(0.06	)		(0.06	)		(0.06	)		(0.06	)
Less: pro forma stock option expense (3)		(0.07	)		(0.08	)		(0.08	)		(0.08	)
Pro forma net income (loss) per share	$	0.25		$	0.19		$	0.15		$	0.12
Offering price as a multiple of pro forma net income per share		40.0	x		52.6	x		66.7	x		83.3	x
Number of shares used to calculate pro forma net income per share (4)		945,200			1,112,000			1,278,800			1,470,620
Pro Forma Shareholders’ Equity:
Pro forma shareholders’ equity (book value) (4):
Historical	$	16,992		$	16,992		$	16,992		$	16,992
Estimated net proceeds		9,400			11,200			13,000			15,070
Less: common stock acquired by employee stock ownership plan (1)		(816	)		(960	)		(1,104	)		(1,270	)
Less: common stock to be acquired by equity incentive plan (2)		(408	)		(480	)		(552	)		(635	)
Pro forma shareholders’ equity	$	25,168		$	26,752		$	28,336		$	30,157
Pro forma shareholders’ equity per share (4):
Historical	$	16.66		$	14.16		$	12.31		$	10.71
Estimated net proceeds		9.21			9.33			9.42			9.49
Less: common stock acquired by employee stock ownership plan (1)		(0.80	)		(0.80	)		(0.80	)		(0.80	)
Less: common stock to be acquired by equity incentive plan (2)		(0.40	)		(0.40	)		(0.40	)		(0.40	)
Pro forma shareholders’ equity per share	$	24.67		$	22.29		$	20.53		$	19.00
Offering price as a percentage of pro forma shareholders’ equity per share		40.5	%		44.9	%		48.7	%		52.6	%
Number of shares used to calculate pro forma shareholders’ equity per share (4)		1,020,000			1,200,000			1,380,000			1,587,000

(footnotes on page __)

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(1)	Assumes that the employee stock ownership plan will acquire a number of shares of stock equal to 8% of the shares sold in the offering (81,600, 96,000, 110,400 and 126,960) shares at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively). The employee stock ownership plan will borrow the funds to acquire these shares from the net offering proceeds retained by Fraternity Community Bancorp. The amount of this borrowing has been reflected as a reduction from gross proceeds to determine estimated net investable proceeds. This borrowing will have an interest rate equal to the prime rate as published in The Wall Street Journal, which is currently 3.25%, and a term of 12 years. Fraternity Federal Savings and Loan Association intends to make contributions to the employee stock ownership plan in amounts at least equal to the principal and interest requirement of the debt. Interest income that Fraternity Community Bancorp will earn on the loan will offset the interest expense paid on the loan by Fraternity Federal Savings and Loan Association. As the debt is paid down, shares will be released for allocation to participants’ accounts and shareholders’ equity will be increased. The adjustment to pro forma net income for the employee stock ownership plan reflects the after-tax compensation expense associated with the plan. Applicable accounting principles require that compensation expense for the employee stock ownership plan be based upon the market value of shares committed to be released and that unallocated shares be excluded from earnings per share computations. An equal number of shares (1/15 of the total, based on a 12-year loan) will be released each year over the term of the loan. The valuation of shares committed to be released would be based upon the average market value of the shares during the year, which, for purposes of this calculation, was assumed to be equal to the $10.00 per share purchase price. If the average market value per share is greater than $10.00 per share, total employee stock ownership plan expense would be greater. See “Our Management — Executive Compensation — Benefit Plans — Employee Stock Ownership Plan.”
(2)	Assumes that Fraternity Community Bancorp will purchase in the open market a number of shares of stock equal to 4% of the shares sold in the offering (40,800, 48,000, 55,200 and 63,480 shares at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively), that will be reissued as restricted stock awards under an equity incentive plan to be adopted following the offering. Purchases will be funded with cash on hand at Fraternity Community Bancorp or with dividends paid to Fraternity Community Bancorp by Fraternity Federal Savings and Loan Association. The cost of these shares has been reflected as a reduction from gross proceeds to determine estimated net investable proceeds. In calculating the pro forma effect of the restricted stock awards, it is assumed that the required shareholder approval has been received, that the shares used to fund the awards were acquired at the beginning of the respective period and that the shares were acquired at the $10.00 per share purchase price. The issuance of authorized but unissued shares of the common stock instead of shares repurchased in the open market would dilute the ownership interests of existing shareholders by approximately 3.85%. The adjustment to pro forma net income for the restricted stock awards reflects the after-tax compensation expense associated with the awards. It is assumed that the fair market value of a share of Fraternity Community Bancorp common stock was $10.00 at the time the awards were made, that shares of restricted stock issued under the equity incentive plan vest 20% per year, that compensation expense is recognized on a straight-line basis over each vesting period so that 20% of the value of the shares awarded was an amortized expense during each year, and that the combined federal and state income tax rate was 34%. If the fair market value per share is greater than $10.00 per share on the date shares are awarded under the equity incentive plan, total equity incentive plan expense would be greater.
(3)	The adjustment to pro forma net income for stock options reflects the after-tax compensation expense associated with the stock options that may be granted under the equity incentive plan expected to be adopted following the offering. If the equity incentive plan is approved by shareholders, a number of shares equal to 10% of the number of shares sold in the offering (102,000, 120,000, 138,000 and 158,700 shares at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively) will be reserved for future issuance upon the exercise of stock options that may be granted under the plan. Using the Black-Scholes option-pricing formula, the options are assumed to have a value of $3.84 for each option, based on the following assumptions: exercise price, $10.00; trading price on date of grant, $10.00; dividend yield, 0%; expected life, 10 years; expected volatility, 21.83%; and risk-free interest rate, 2.97%. Because there currently is no market for Fraternity Community Bancorp common stock, the assumed expected volatility is based on the SNL Index for all publicly-traded thrifts. The dividend yield is assumed to be 0% because there is no history of dividend payments and the board of directors has not expressed an intention to commence dividend payments upon completion of the offering. It is assumed that stock options granted under the equity incentive plan vest 20% per year, that compensation expense is recognized on a straight-line basis over each vesting period so that 20% of the value of the options awarded is an amortized expense during each year, that 25% of the options awarded are non-qualified options and that the combined federal and state income tax rate is 34%. If the fair market value per share is different than $10.00 per share on the date options are awarded under the equity incentive plan, or if the assumptions used in the option-pricing formula are different from those used in preparing this pro forma data, the value of the stock options and the related expense would be different. Applicable accounting standards do not prescribe a specific valuation technique to be used to estimate the fair value of employee stock options. Fraternity Community Bancorp may use a valuation technique other than the Black-Scholes option-pricing formula and that technique may produce a different value. The issuance of authorized but unissued shares of common stock to satisfy option exercises instead of shares repurchased in the open market would dilute the ownership interests of existing shareholders by approximately 9.09%.
(4)	The number of shares used to calculate pro forma net income per share is equal to the total number of shares to be outstanding upon completion of the offering, less the number of shares purchased by the employee stock ownership plan not committed to be released within six months or one year following the offering. The number of shares used to calculate pro forma shareholders’ equity per share equals the total number of shares to be outstanding upon completion of the offering.

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Our Business

General

     Fraternity Community Bancorp, a Maryland corporation, was incorporated in October 2010 to become the holding company for Fraternity Federal Savings and Loan Association upon completion of the conversion. Before the completion of the conversion, Fraternity Community Bancorp has not engaged in any significant activities other than organizational activities. Following completion of the conversion, Fraternity Community Bancorp’s business activity will be the ownership of the outstanding capital stock of Fraternity Federal Savings and Loan Association. Fraternity Community Bancorp will not own or lease any property but will instead use the premises, equipment and other property of Fraternity Federal Savings and Loan Association with the payment of appropriate rental fees, as required by applicable law and regulations, under the terms of an expense allocation agreement that Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association will enter into upon completion of the conversion. The expense allocation agreement generally provides that Fraternity Community Bancorp will pay to Fraternity Federal Savings and Loan Association, on a quarterly basis, fees for its use of Fraternity Federal Savings and Loan Association’s premises, furniture, equipment and employees in an amount to be determined by the board of directors of Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association. Such fees shall not be less than the fair market value received for such goods or services. In addition, Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association will also enter into a tax allocation agreement upon completion of the conversion as a result of their status as members of an affiliated group under the Internal Revenue Code. The tax allocation agreement generally provides that Fraternity Community Bancorp will file consolidated federal tax income returns with Fraternity Federal Savings and Loan Association and its subsidiaries. The tax allocation agreement also formalizes procedures for allocating the consolidated tax liability of the group among its members and establishes procedures for the future payments by Fraternity Federal Savings and Loan Association to Fraternity Community Bancorp for tax liabilities attributable to Fraternity Federal Savings and Loan Association and its subsidiaries. In the future, Fraternity Community Bancorp may acquire or organize other operating subsidiaries; however, there are no current plans, arrangements, agreements or understandings, written or oral, to do so.

     Founded in 1913, Fraternity Federal Savings and Loan Association is a community-oriented financial institution, dedicated to serving the financial service needs of customers and businesses within its market area, which consists of the Greater Baltimore area. We offer a variety of deposit products and provide loans secured by real estate located in our market area. Our real estate loans consist primarily of one- to four-family mortgage loans, as well as commercial real estate loans, land loans, home equity lines of credit and residential construction loans. We also offer consumer loans, and to a much lesser extent, commercial business loans. We currently operate out of our corporate headquarters and main office in the Baltimore and full-service branch offices located in Ellicott City, Cockeysville and Hampstead, Maryland. We are subject to extensive regulation, examination and supervision by the Office of Thrift Supervision, our primary federal regulator, and the Federal Deposit Insurance Corporation, our deposit insurer. At June 30, 2010, we had total assets of $167.9 million, total deposits of $125.8 million and total equity of $16.6 million.

     Our website address is www.fraternityfed.com. Information on our website should not be considered a part of this prospectus.

Market Area

   We are headquartered in Baltimore, Maryland. We consider our lending market to consist of the Greater Baltimore area, which consists of Baltimore City and the surrounding Counties of Baltimore, Carroll, Howard, Harford and Anne Arundel in Maryland, although almost all of our deposits come from our branch office locations in Baltimore City and Baltimore, Carroll and Howard Counties. The economy of our market area is a diverse cross section of employment sectors, with a mix of services, manufacturing, wholesale/retail trade, federal and local government, health care facilities and finance related employment. This diversification helped to mitigate the impact of the economic recession experienced over the last two years, as Maryland’s seasonable adjusted unemployment rose from 4.6% in August of 2008 to 7.3% by September of 2010, which remained well below the national seasonably adjusted unemployment rate which rose from 6.2% in August of 2008 to 9.6% by August of

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2010 (Source: Maryland Department of Labor, Licensing and Regulation). Select employers in the Baltimore metropolitan area include Johns Hopkins University, Johns Hopkins Hospital and Health System, University of Maryland Health System, University of Maryland, Baltimore, and LifeBridge Health. Other large employers in Baltimore City include Constellation Energy, Legg Mason, Verizon, and the U.S. Social Security Administration. In Howard County, the largest employers include the Johns Hopkins Applied Physics Laboratory, Northrop Grumman, Verizon Wireless and SAIC while Carroll County’s largest employers include the Carroll County Hospital, Springfield Hospital Center, Random House, EMA/Fairhaven Retirement Communities and McDaniel College.

     Demographic and economic growth trends provide key insight into the health of our market area. The following table sets forth information regarding the distribution of our loans and deposits and demographic information for the counties in our market area, including Baltimore City, and the State of Maryland. The demographic information is based on published statistics of the U.S. Census Bureau.

	Baltimore			Baltimore			Carroll			Howard
	City			County			County			County			Maryland
Loans by County (in millions) (1)	$	24.7		$	64.9		$	4.3		$	6.6		$	115.6
Deposits by County (in millions) (1)		20.8			46.6			4.0			56.1			127.6
Unemployment rate (2)		11.5			8.1			6.8			5.7			7.6
Median household income (3)	$	40,087		$	63,078		$	78,348		$	76,620		$	70,482
Population growth (decline) (4)		(2.1	)%		4.7	%		12.7	%		10.9	%		7.6	%

(1)	At June 30, 2010
(2)	June 2010
(3)	For 2010
(4)	From April 2000 to July 2009

     If the population of Baltimore City continues to decline, it could negatively affect our deposit and loan volumes. However, we maintain only a single branch in Baltimore City, and Baltimore City accounted for only 16.3% of our total deposits and 20.7% of our total loans at June 30, 2010. As a result, we expect the adverse effect on our loan and deposit volumes of any future population declines in Baltimore City to be limited.

Competition

     We face significant competition for the attraction of deposits and origination of loans. Our most direct competition for deposits has historically come from the many financial institutions operating in our primary market area and from other financial service companies such as securities brokerage firms, credit unions and insurance companies. We also face competition for investors’ funds from money market funds, mutual funds and other corporate and government securities. At June 30, 2010, which is the most recent date for which data is available from the Federal Deposit Insurance Corporation, we held approximately 0.28% of the deposits in Baltimore County, Maryland, 0.13% of the deposits in Carroll County, Maryland, 1.21% of the deposits in Howard County and 0.10% of the deposits in Baltimore City. This data does not reflect deposits held by credit unions with which we also compete. In addition, banks owned by large national and regional holding companies and other community-based banks also operate in our primary market area. Most of these institutions are larger than us and, therefore, may have greater resources.

     Our competition for loans comes primarily from financial institutions, including credit unions, in our primary market area and from other financial service providers, such as mortgage companies and mortgage brokers. Competition for loans also comes from non-depository financial services companies entering the mortgage market, such as insurance companies, securities companies and specialty finance companies.

     We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Technological advances, for example, have lowered barriers to entry, allowed banks to expand their geographic reach by providing services over the Internet, and made it possible for non-depository institutions to offer products and services that traditionally have been provided by banks. Changes in federal law now permit affiliation among banks, securities firms and insurance

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companies, which promotes a competitive environment in the financial services industry. Competition for deposits and the origination of loans could limit our growth in the future.

Lending Activities

     General. The largest segment of our loan portfolio is real estate mortgage loans, consisting primarily of one- to four-family mortgage loans, and, to a lesser extent, commercial real estate loans, land loans, home equity lines of credit and residential construction loans. We also offer consumer loans and, to a limited extent, commercial business loans. We originate one- to four-family mortgage loans primarily for sale in the secondary market, with servicing released. We generally retain in our portfolio all adjustable-rate loans we originate, as well as shorter-term, fixed-rate one- to four-family loans. Loans we sell consist primarily of longer-term, fixed-rate one- to four-family mortgage loans.

     We intend to continue to emphasize one- to four-family lending, while also seeking to expand our commercial real estate lending activities with a focus on serving small businesses and emphasizing relationship banking in our primary market area. We do not offer, and have not offered, sub-prime or no-documentation mortgage loans. While we have originated a limited amount of Alt-A mortgage loans in the past, we no longer offer Alt-A mortgage loans.

     The following is a description of the loans we offer and our lending policies. On occasion, as described below, we may choose to originate a loan that does not conform in every particular with our loan policies. However, such exceptions are extremely rare and immaterial. Any exceptions to our loan policies must be approved by the individuals or committee having authority to approve a comparable loan that conformed fully with our lending policies. For information regarding loan approval procedures and authority, see “— Loan Underwriting — Loan Approval Procedures and Authority.”

     One- to Four-Family Mortgage Loans. At June 30, 2010, we had $89.6 million in one- to four-family mortgage loans, which represented 75.0% of our total loan portfolio. Our origination of one- to four-family mortgage loans enables borrowers to purchase or refinance existing homes located in our primary market area.

     Our one- to four-family mortgage lending policies and procedures generally conform to secondary market guidelines. We offer a mix of adjustable-rate mortgage loans and fixed-rate mortgage loans with terms of up to 40 years, although we have never originated any such loans with a term exceeding 30 years. Borrower demand for adjustable-rate loans compared to fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, and the difference between the interest rates and loan fees offered for fixed-rate mortgage loans as compared to an initially discounted interest rate and loan fees for multi-year adjustable-rate mortgages. The relative amount of fixed-rate mortgage loans and adjustable-rate mortgage loans that can be originated at any time is largely determined by the demand for each in a competitive environment. We determine the loan fees, interest rates and other provisions of mortgage loans based on our own pricing criteria and competitive market conditions.

     While one- to four-family real estate loans are normally originated with 15- or 30-year terms, such loans typically remain outstanding for substantially shorter periods because borrowers often prepay their loans in full either upon sale of the property pledged as security or upon refinancing the original loan. Therefore, average loan maturity is a function of, among other factors, the level of purchase and sale activity in the real estate market, prevailing interest rates and the interest rates payable on outstanding loans on a regular basis. We do not offer one- to four-family mortgage loans with negative amortization, and we have made a very limited number of interest only one- to four-family mortgage loans in cases where the borrower had unusually favorable income or collateral characteristics.

     Interest rates and payments on our adjustable-rate mortgage loans adjust for periods ranging from one year to up to 10 years, with most adjusting annually after an initial fixed period that, in most cases, is five or seven years. Interest rates and payments on our adjustable-rate loans are indexed to the one-year U.S. Treasury Bill rate or LIBOR.

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     We make owner occupied one- to four-family real estate loans with loan-to-value ratios of up to 95%. Loans with loan-to-value ratios in excess of 80% require private mortgage insurance. In addition, under current lending policies, non-owner occupied one- to four-family real estate loan-to-value ratios may not exceed 80%. We require all properties securing mortgage loans to be appraised by a board-approved independent appraiser. We also require title insurance on all first mortgage loans. Borrowers must obtain hazard insurance, and flood insurance is required for all loans located in flood hazard areas. We generally do not make loans known as subprime loans, and we have made only a limited amount of Alt-A loans.

     Included in one- to four-family mortgage loans are second mortgage loans. Second mortgage loans are made at fixed rates for terms of up to 15 years. We do not offer second mortgage loans with loan-to-value ratios exceeding 80%, including any first mortgage loan balance, except when there are exceptional income or credit characteristics on the loan. Second mortgage loans totaled $2.8 million at June 30, 2010 and represented 2.5% of one- to four-family mortgage loans at such date.

     In order to provide financing for low- and moderate-income and first-time homebuyers, we participate in the Healthy Neighborhoods program under which a consortium of local financial institutions that make loans to low- and moderate-income individuals for home purchases and improvements. Our commitment under this program is $1 million in loans.

     Home Equity Lines of Credit. We offer home equity lines of credit, all of which are adjustable-rate loans with terms up to 15 years, although in the past we offered terms of up to 30 years. We do not originate home equity loans with loan-to-value ratios exceeding 80%, including any first mortgage loan balance, although in the past we originated home equity lines of credit with loan-to-value ratios of up to 85% where there were exceptional income or credit characteristics on the loan. At June 30, 2010, home equity lines of credit totaled $13.0 million, or 10.9% of our total loan portfolio.

     Residential Construction Loans. We originate construction loans for one- to four-family homes. At June 30, 2010, residential construction loans totaled $8.9 million, which represented 7.4% of our total loan portfolio. We originate fixed- and adjustable-rate loans to individuals and to builders to finance the construction of residential dwellings. Our construction loans generally are interest-only loans that provide for the payment of only interest during the construction phase, which is usually up to 12 months. At the end of the construction phase, the loan generally converts to a permanent mortgage loan. Loans generally can be made with a maximum loan to value ratio of 80% on residential construction, based on appraised value as if complete. Before making a commitment to fund a construction loan, we require an appraisal of the property by an independent licensed appraiser. We also will generally require an inspection of the property before disbursement of funds during the term of the construction loan.

     Included in our residential construction loan portfolio are speculative construction loans. At June 30, 2010, we had $5.8 million in speculative construction loans outstanding. Such loans were for the building of luxury residences. We determined to make these speculative construction loans because of the higher yields on such loans compared to conforming loans for the construction of owner-occupied, one- to four-family residences and to reduce our interest rate risk. As a result of the deterioration in local economic conditions in 2009 and 2010, certain of our speculative construction borrowers experienced difficulties selling the completed residences. At June 30, 2010, we had two speculative construction loans totaling $1.8 million that were nonperforming. Subsequent to June 30, 2010, we foreclosed on the collateral securing those loans. At June 30, 2010, all three remaining speculative construction loans, totaling $3.9 million, were performing in accordance with their terms, although we have extended the terms of two of these loans. Of our three remaining speculative construction loans, one was classified as substandard, and the other two were classified as special mention in accordance with a policy we adopted in 2009 of classifying all speculative construction loans as special mention. In light of current market conditions, we have discontinued speculative construction lending.

     At June 30, 2010, our largest residential construction loan was a $1.6 million speculative construction loan secured by a custom built luxury home. The home is substantially completed and is listed for sale. This loan was performing at June 30, 2010, although we have extended the term of the loan.

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     Commercial Real Estate Loans. We offer fixed- and adjustable-rate mortgage loans secured by a variety of commercial real estate, such as small office buildings, warehouses and retail properties. We originate a variety of fixed- and adjustable-rate commercial real estate loans generally with rates fixed for 10 years and which amortize over terms of from ten to 25 years. Our commercial real estate loans are callable after an initial ten year term. Adjustable-rate loans are typically based on the one-year U.S. Treasury Bill or Prime Rate as published in The Wall Street Journal plus a specified percentage over the initial rate of interest. Loans are secured by first mortgages, and amounts generally do not exceed 75% of the property’s appraised value. We require all properties securing commercial real estate loans to be appraised by a board-approved independent licensed appraiser. Commercial real estate loans also are supported by personal guarantees.

   As of June 30, 2010, our largest commercial real estate loan was $700,000 and was secured by a mixed commercial use building. This loan was performing in accordance with its terms at June 30, 2010.

     Land Loans. We originate loans to individuals and developers for the purpose of building one- to four-family properties. At June 30, 2010, land loans totaled $3.9 million, which represented 3.2% of our total loan portfolio. Land loans, which generally are offered for terms of up to 15 years with rates that adjust annually after an initial period of up to five years, are indexed to the prime rate as reported in The Wall Street Journal or a U.S. Treasury bill rate plus a negotiated margin. We limit the loan-to-value ratio to a maximum of 80%, except where there are exceptional credit circumstances on the loan. At June 30, 2010, our largest land loan had an outstanding balance of $495,000. This loan was a nonaccrual loan at June 30, 2010.

     Consumer Loans. We offer consumer loans as an accommodation to our customers and do not emphasize this type of lending. We have made a variety of consumer loans, including automobile loans and unsecured lines of credit. At June 30, 2010, consumer loans totaled $54,000, or less than 0.1% of our total loan portfolio. The procedures for underwriting consumer loans include an assessment of the applicant’s payment history on other debts and ability to meet existing obligations and payments on the proposed loan.

Loan Underwriting

     Adjustable-Rate Loans. While we anticipate that adjustable-rate loans will better offset the adverse effects of an increase in interest rates as compared to fixed-rate mortgages, an increased monthly mortgage payment required of adjustable-rate loan borrowers in a rising interest rate environment could cause an increase in delinquencies and defaults. The marketability of the underlying property also may be adversely affected in a high interest rate environment. In addition, although adjustable-rate mortgage loans make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits.

     Non-Owner Occupied One- to Four-Family Real Estate Loans. Loans secured by investment properties represent a unique credit risk to us and, as a result, we adhere to special underwriting guidelines. Of primary concern in non-owner occupied real estate lending is the consistency of rental income of the property. Payments on loans secured by rental properties often depend on the maintenance of the property and the payment of rent by its tenants. Payments on loans secured by rental properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject to adverse conditions in the real estate market or the economy. We generally require collateral on these loans to be a first mortgage along with an assignment of rents and leases, although we might accept a second mortgage where the combined loan-to-value ratio is low.

     Commercial Real Estate Loans. Loans secured by commercial real estate generally have larger balances and involve a greater degree of risk than one- to four-family mortgage loans. Of primary concern in commercial real estate lending is the borrower’s creditworthiness and the feasibility and cash flow potential of the project. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject to adverse conditions in the real estate market or the economy. We apply what we believe to be conservative underwriting standards when originating commercial loans and seek to limit our exposure to lending concentrations to related borrowers, types of business and geographies, as well as seeking to participate with other banks in both buying and selling larger loans of this nature. To monitor cash flows on income properties, we normally require borrowers and loan guarantors, if any, to provide

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annual financial statements on commercial real estate loans. In reaching a decision on whether to make a commercial real estate loan, we consider and review a global cash flow analysis of the borrower and consider the net operating income of the property, the borrower’s expertise, credit history and profitability, and the value of the underlying property. An environmental survey or environmental risk insurance is obtained when the possibility exists that hazardous materials may have existed on the site, or the site may have been impacted by adjoining properties that handled hazardous materials.

     Construction and Land Loans. Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction and the estimated cost of construction. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, we may be required to advance funds beyond the amount originally committed to permit completion of the building. If the estimate of value proves to be inaccurate, we may be confronted, at or before the maturity of the loan, with a building having a value which is insufficient to assure full repayment if liquidation is required. If we are forced to foreclose on a building before or at completion due to a default, we may be unable to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs. In addition, speculative construction loans, which are loans made to home builders who, at the time of loan origination, have not yet secured an end buyer for the home under construction, typically carry higher risks than those associated with traditional construction loans. These increased risks arise because of the risk that there will be inadequate demand to ensure the sale of the property within an acceptable time. As a result, in addition to the risks associated with traditional construction loans, speculative construction loans carry the added risk that the builder will have to pay the property taxes and other carrying costs of the property until an end buyer is found. Land and land development loans have substantially similar risks to speculative construction loans. To monitor cash flows on speculative construction properties, we require borrowers and loan guarantors, if any, to provide annual financial statements and, in reaching a decision on whether to make a speculative construction loan, we consider and review a global cash flow analysis of the borrower and consider the borrower’s expertise, credit history and profitability. We also disburse funds on a percentage-of-completion basis following an inspection by a third party inspector or qualified bank personnel.

     Consumer Loans and Home Equity Lines of Credit. Consumer loans may entail greater risk than do one- to four-family mortgage loans, particularly in the case of consumer loans that are secured by assets that depreciate rapidly, such as motor vehicles. In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower. In the case of home equity loans, real estate values may be reduced to a level that is insufficient to cover the outstanding loan balance after accounting for the first mortgage loan balance. Consumer loan collections depend on the borrower’s continuing financial stability, and therefore are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

     Loan Approval Procedures and Authority. Our lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by our board of directors and management. Certain of our executive officers have been granted individual lending limits, which vary depending on the type of loan. All loans secured by one- to four-family residences that conform with secondary market guidelines may be approved by either of our Chairman, Chief Executive Officer and Chief Financial Officer or our President and Chief Operating Officer. All other loans must be approved by the full Board of Directors prior to a commitment being made. All loan originations are reviewed for quality control and oversight purposes by our Loan Committee, which consists of any two of our directors and typically is comprised of two non-management directors.

     Loans to One Borrower. The maximum amount that we may lend to one borrower and the borrower’s related entities is limited, by regulation, to 15% of our unimpaired capital and surplus. At June 30, 2010, our regulatory limit on loans-to-one-borrower was $2.5 million. This limit will increase upon completion of this offering and the contribution of 50% of the net offering proceeds to Fraternity Federal Savings and Loan Association. At June 30, 2010, our largest lending relationship was $2.5 million, and all loans in that relationship were performing according to their original terms at that date. The loans are secured by various properties,

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including one- to four-family investment properties and commercial properties, including office buildings and mixed-use properties, as well as the borrower’s principal residence.

     Loan Commitments. We issue commitments for one- to four-family mortgage and commercial mortgage loans conditioned upon the occurrence of certain events. Commitments to originate mortgage loans are legally binding agreements to lend to our customers. Most of our loan commitments expire after 30 days. See note 11 to notes to consolidated financial statements appearing elsewhere in this prospectus.

Investment Activities

     We have legal authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various government-sponsored agencies and of state and municipal governments, mortgage-backed securities and certificates of deposit of federally insured institutions. Within certain regulatory limits, we also may invest a portion of our assets in other permissible securities. As a member of the Federal Home Loan Bank of Atlanta, we also are required to maintain an investment in Federal Home Loan Bank of Atlanta stock.

     At June 30, 2010, our investment portfolio consisted primarily of U.S. government agency securities and mortgage-backed securities available-for-sale. We also had $1.1 million in private label mortgage-backed securities. In addition to our investment portfolio, at June 30, 2010, we maintained a $1.6 million investment, at cost, in Federal Home Loan Bank of Atlanta common stock.

     Our primary investment objectives are: (i) to provide and maintain liquidity within the guidelines of the Office of Thrift Supervision’s regulations, (ii) to fully employ the available funds of Fraternity Federal Savings and Loan Association; (iii) to earn an average rate of return on invested funds competitive with comparable institutions; (iv) to manage interest rate risk; and (v) to limit risk. Our board of directors has the overall responsibility for the investment portfolio, including approval of the investment policy. Our President and Chief Executive Officer are responsible for the implementation policy and monitoring our investment performance. Our board of directors reviews the status of our investment portfolio on an annual basis, or more frequently if warranted.

Deposit Activities and Other Sources of Funds

     General. Deposits, borrowings and loan repayments are the major sources of our funds for lending and other investment purposes. Scheduled loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general interest rates and money market conditions.

     Deposit Accounts. Deposits are attracted from within our primary market area through the offering of a broad selection of deposit instruments, including noninterest-bearing demand deposits (such as checking accounts), interest-bearing demand accounts (such as NOW and money market accounts), passbook accounts and certificates of deposit. Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors. In determining the terms of our deposit accounts, we consider the rates offered by our competition, our liquidity needs, profitability to us, matching deposit and loan products and customer preferences and concerns. We generally review our deposit mix and pricing weekly. Our deposit pricing strategy has typically been to offer competitive rates on all types of deposit products, and to periodically offer special rates in order to attract deposits of a specific type or term.

     Borrowings. We had $22.8 million in borrowings at June 30, 2010, consisting of advances from the Federal Home Loan Bank of Atlanta to supplement our investable funds. The Federal Home Loan Bank functions as a central reserve bank providing credit for member financial institutions. As a member, we are required to own capital stock in the Federal Home Loan Bank of Atlanta and are authorized to apply for advances on the security of such stock and certain of our mortgage loans and other assets (principally securities which are obligations of, or guaranteed by, the United States), provided certain standards related to creditworthiness have been met. Advances are made under several different programs, each having its own interest rate and range of maturities. Depending on the program, limitations on the amount of advances are based either on a fixed percentage of an institution’s net worth, the Federal Home Loan Bank’s assessment of the institution’s creditworthiness, collateral value and level of Federal Home Loan Bank stock ownership. We may also utilize securities sold under agreements to repurchase and

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overnight repurchase agreements to supplement our supply of investable funds and to meet deposit withdrawal requirements. We had unused borrowing capacity of approximately $27.5 million with the Federal Home Loan Bank of Atlanta as of June 30, 2010.

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Properties

     We conduct our business through our main office and branch offices. The following table sets forth certain information relating to these facilities as of June 30, 2010.

								Net Book Value
			Approximate			Lease		at		Deposits at
	Year		Square		Owned/	Expiration		June 30, 2010		June 30, 2010
Location	Opened		Footage		Leased	Date		(in thousands)		(in thousands)
Main Office:
764 Washington Boulevard		1913		10,663	Owned		N/A	$	279	$	20,820
Baltimore, Maryland 21230
Branch Offices:
Scotts Corner Shopping Center		1995		3,000	Leased		1/31/2015		N/A		46,642
10283 York Road
Cockeysville, Maryland 21030
Normandy Shopping Center		1964		3,388	Leased		4/30/2016		N/A		56,083
8460 Baltimore National Pike
Ellicott City, Maryland 21403
Green Mount Station		2009		2,400	Leased		9/30/2024		N/A		4,025
1631 N. Main Street
Hampstead, Maryland 21074

Personnel

     As of June 30, 2010, we had 33 full-time employees and one part-time employees, none of whom is represented by a collective bargaining unit. We believe our relationship with our employees is good.

Legal Proceedings

     Periodically, there may be various claims and lawsuits against us, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

Subsidiaries

     Fraternity Federal Savings and Loan Association has one active subsidiary, 764 Washington Boulevard, LLC (the “LLC”). The LLC was established in order to hold and manage real estate owned. The LLC had no assets at June 30, 2010. In addition, Fraternity Federal Savings and Loan Association has an inactive subsidiary, Fraternity Insurance Agency Incorporated, which had been licensed to sell insurance products on an agency basis.

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Management’s Discussion and Analysis of
Financial Condition and Results of Operations

     The objective of this section is to help potential investors understand our views on our results of operations and financial condition. You should read this discussion in conjunction with the consolidated financial statements and the notes to consolidated financial statements that appear at the end of this prospectus.

Operating Strategy

     Historically, we have operated as a traditional savings and loan association, attracting deposits and investing those funds primarily in one- to four-family mortgage loans and investment securities. Our objective is to build on our historic strengths of customer loyalty and high asset quality, and gradually grow our balance sheet with assets and liabilities that allow us to increase our net interest margin while reducing our exposure to risk from interest rate fluctuations. Our operating strategy includes the following:

• building on our strengths as a community-oriented financial institution;

• improving our net interest margin and earnings and reducing our interest rate risk by increasing commercial real estate loans;

• emphasizing lower cost core deposits to reduce funding costs;

• generating higher non-interest income by selling loans in the secondary market;

• adding a new branch in our existing market area or a contiguous county within the next three years; and

• expanding our market share within our primary market area.

     Building on our strengths as a community-oriented financial institution

     We have operated continuously as a community-oriented financial institution since we were established in 1913. We are committed to meeting the financial needs of the communities in which we operate, and we are dedicated to providing quality personal service to our customers. We provide a broad range of consumer and business financial services through our network of branches and will continually seek out ways to improve convenience, safety and service through our product offerings.

     Over the years, we have developed a core of loyal customers, and our product mix concentrating on time, savings and checking deposits and one- to four-family mortgage loans have allowed us to maintain strong asset quality. We intend to continue to retain these strengths while gradually growing our balance sheet with assets and liabilities that allow us to increase our net interest margin while reducing our exposure to risk from interest rate fluctuations.

     Improving our net interest margin and earnings and reducing our interest rate risk by increasing commercial real estate loans

     Our strategic plan calls for us to grow our balance sheet by emphasizing assets and liabilities that allow us to increase our net interest margin while reducing our exposure to risk from interest rate fluctuations.

     With respect to our assets, our strategy has been, and continues to be, to increase the percentage of assets invested in commercial real estate loans, which tend to have higher yields than traditional one- to four-family mortgage loans and which have shorter terms to maturity or adjustable interest rates. We intend to continue to emphasize one- to four-family mortgage lending, while also seeking to expand our commercial real estate lending activities with a focus on serving small businesses and emphasizing relationship banking in our primary market area.

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See “Risk Factors—Risks Related to Our Business—Our increased focus on commercial real estate lending may expose us to increased lending risks.”

     Commercial real estate loans provide us with the opportunity to earn more income because they tend to have higher interest rates than one- to four-family mortgage loans. In addition, these loans are beneficial for interest rate risk management because they typically have shorter terms and adjustable interest rates. There are many commercial properties and businesses located in our market area, and with the additional capital raised in the offering we intend to pursue the larger lending relationships associated with these opportunities. Though our current staff is sufficient to facilitate growth, we may seek to add additional expertise in our commercial loan department.

     With respect to liabilities, our strategy is to seek to increase transaction and money market accounts, as well as certificates of deposit of various terms. We value these types of deposits because they represent longer-term customer relationships and a lower cost of funding compared to longer-term certificates of deposit. We seek transaction and money market deposits through competitive products and pricing and targeted advertising. In addition, we offer business checking accounts for our commercial customers, and we will seek to leverage the relationships we build as we expand our commercial real estate lending to generate low cost business checking deposits from these customers.

     Emphasizing lower cost core deposits to reduce funding costs

     We seek to increase net interest income by controlling costs of funding rather than maximizing asset yields because originating loans with high yields often involves greater credit risk. Historically, a high percentage of our deposit accounts have been higher balance, higher costing certificates of deposits. We will continue to seek to reduce our dependence on high cost deposits in favor of stable low cost demand deposits. We have utilized additional product offerings, technology and a focus on customer service in working toward this goal. Over time, we will also seek to replace maturing, high cost, long-term Federal Home Loan Bank advances with core deposits.

     Generating higher noninterest income by selling loans in the secondary market

     Currently, we sell most of our one- to four-family fixed-rate loan originations in the secondary market, and we earned $32,000, $224,000 and $28,000 from such sales during the six months ended June 30, 2010 and the years ended December 31, 2009 and 2008, respectively. We will seek to increase our originations of one- to four-family loans to generate further income from loan sales.

     Adding a new branch in our existing market area or a contiguous county within the next three years

     We intend to add a new branch in our existing market area within the next three years, although we have no current plans or commitments regarding a specific additional branch office.

     Expanding our market share within our primary market area

     We intend to expand our market share in our primary market area through enhancing the efforts of our staff in marketing additional products and services to our customers. We believe that we have a solid infrastructure in place that will allow us to grow assets and liabilities without adding materially to our noninterest expenses.

Overview

     Income. Our primary source of pre-tax income is net interest income. Net interest income is the difference between interest income, which is the income that we earn on our loans and investment securities, and interest expense, which is the interest that we pay on our deposits. Other significant sources of pre-tax income are service charges (mostly from service charges on deposit accounts). We also recognize income from the sale of securities.

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     Allowance for Loan Losses. The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. We evaluate the need to establish allowances against losses on loans on a monthly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings.

     Expenses. The noninterest expenses we incur in operating our business consists of salaries and employee benefits expenses, occupancy expenses, advertising expenses, data processing expenses, directors fees and other general and administrative expenses including, among others, federal deposit insurance premiums and Office of Thrift Supervision assessments, stationery and postage expenses and other miscellaneous expenses. Following the offering, our noninterest expenses are likely to increase as a result of expenses of shareholder communications and meetings and expenses related to additional accounting services.

     Salaries and employee benefits expenses consist primarily of salaries, wages and bonuses paid to our employees, payroll taxes and expenses for health insurance, retirement plans and other employee benefits. Following the offering, we will recognize additional annual employee compensation expenses stemming from the adoption of new equity benefit plans. We cannot determine the actual amount of these new stock-related compensation and benefit expenses at this time because applicable accounting practices require that they be based on the fair market value of the shares of common stock at specific points in the future. For an illustration of these expenses, see “Pro Forma Data.”

     Occupancy expenses, which are the fixed and variable costs of buildings and equipment, consist primarily of depreciation charges, rental expenses, furniture and equipment expenses, maintenance, real estate taxes and costs of utilities. Depreciation of premises and equipment is computed using a combination of accelerated and straight-line methods based on the useful lives of the related assets, which range from three to 40 years.

     Data processing expenses are the fees we pay to third parties for processing customer information, deposits and loans.

     Federal deposit insurance premiums are payments we make to the Federal Deposit Insurance Corporation for insurance of our deposit accounts, and Office of Thrift Supervision assessments are semi-annual assessments we pay to our primary regulator.

Critical Accounting Policies

     We consider accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. The following represent our critical accounting policies:

     Allowance for Loan Losses. The allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Among the material estimates required to establish the allowance are: loss exposure at default; the amount and timing of future cash flows on impaired loans; value of collateral; and determination of loss factors to be applied to the various elements of the portfolio. All of these estimates are susceptible to significant change. Management reviews the level of the allowance monthly and establishes the provision for loan losses based upon an evaluation of the portfolio, past loss experience, current economic conditions and other factors related to the collectability of the loan portfolio. Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic or other conditions differ substantially from the assumptions used in making the evaluation. In addition, the Office of Thrift Supervision, as an integral part of its examination process, periodically reviews our allowance for loan losses and may require us to recognize adjustments to the allowance based on its judgments about information available to it at the time of its examination. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings. See note 3 of the notes to the consolidated financial statements included in this prospectus.

     Other-Than-Temporary Impairment. Management evaluates securities for other-than-temporary impairment (“OTTI”) on a quarterly basis, and more frequently when economic or market conditions warrant such

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an evaluation. The investment securities portfolio is evaluated for OTTI by segregating the portfolio into two general segments and applying the appropriate OTTI model. Investment securities classified as available for sale or held-to-maturity are generally evaluated for OTTI under Statement of Financial Accounting Standards ASC 320, Accounting for Certain Investments in Debt and Equity Securities.

     In determining OTTI under the ASC 320 model, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

     When OTTI occurs the amount of the OTTI recognized in earnings depends on whether we intend to sell the security or it is more likely than not we will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss. If an entity intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the OTTI shall be separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors is recognized in other comprehensive income, net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

Balance Sheet Analysis

     Assets. At June 30, 2010, our assets totaled $167.9 million, an increase of $900,000, or 0.5%, from total assets of $167.0 million at December 31, 2009. The increase in assets during the six-month period was primarily due to a $6.2 million, or 45%, increase in total cash and cash equivalents. These increases were offset, in part, by a $4.5 million, or 18.5%, decrease in investment securities and a $1.3 million, or 7.8%, decrease in net loans.

     At December 31, 2009, our assets totaled $167.0 million, a decrease of $3.7 million, or 2.2%, from total assets of $170.7 million at December 31, 2008. The decrease in assets during the year ended December 31, 2009 was primarily due to a $16.7 million, or 12%, decrease in net loans. This decrease was offset, in part, by an $8.1 million, or 5%, increase in investment securities and a $2.5 million, or 2%, increase in cash and cash equivalents.

     Loans. Our primary lending activity is the origination of loans secured by real estate. Our loans secured by real estate consist primarily of one- to four-family mortgage loans. We also originate lines of credit, residential construction loans, commercial real estate loans and land loans. Our non-real estate loans consist of consumer loans, and, to a very limited extent, commercial business loans.

     The largest portion of the loan portfolio consists of one- to-four family mortgage loans. Most of our one- to four-family mortgage loans are owner occupied, but this category also includes loans secured by single-family investment properties. One- to four-family mortgage loans totaled $89.6 million, or 74.5%, $89.3 million, or 73.8%, and $108.7 million, or 79.5%, of the total loan portfolio, at June 30, 2010 and December 31, 2009 and 2008, respectively. The $19.1 million, or 17%, decrease in one- to four-family mortgage loans during the year ended December 31, 2009 was primarily a result of our decision to sell most newly originated fixed-rate one- to four-family loans due to the low rates prevailing on such loans in 2009.

     Lines of credit, all of which are secured by one- to four-family residential properties, totaled $13.0 million, and represented 10.8% of total loans, at June 30, 2010, compared to $12.3 million, or 10.2% of total loans, at December 31, 2009, and $13.2 million, or 9.6% of total loans, at December 31, 2008.

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     Residential construction loans totaled $8.9 million, and represented 7.45% of total loans, at June 30, 2010, compared to $10.4 million, or 8.64% of total loans, at December 31, 2009 and $7.7 million, or 5.62% of total loans, at December 31, 2008. We increased our residential construction loans by $2.7 million, or 35%, during the year ended December 31, 2009 as we made disbursements on several larger loans for the construction of custom built luxury homes, including speculative construction loans to builders. During the six months ended June 30, 2010, we reduced residential construction loans by $1.6 million, or 14%, as we determined in light of market conditions to discontinue originations of speculative construction loans.

     Commercial real estate loans totaled $4.0 million and represented 3.37% of total loans at June 30, 2010, compared to $4.2 million, or 3.49% of total loans, at December 31, 2009 and $3.6 million, or 2.63% of total loans, at December 31, 2008. We offer a variety of commercial real estate loans to owner occupants and investors. Our commercial real estate loans include loans secured by office buildings, dental offices, small retail buildings and warehouses.

     Land loans totaled $3.8 million, or 3.26% of total loans, at June 30, 2010, compared to $3.9 million, or 3.23% of total loans, at December 31, 2009 and $3.5 million, or 2.63% of total loans, at December 31, 2008. Most of our land loans represent loans for the purchase of land that eventually will be used for the construction of owner-occupied residential property.

     Our non-real estate loans consist of consumer loans and, to a very limited extent, commercial loans. While we offer a variety of consumer loans, we do not emphasize this type of lending and generally make consumer loans as an accommodation to our existing customers. Consumer loans totaled $54,000 at June 30, 2010, representing less than 0.1% of the loan portfolio, and consisted of automobile loans, unsecured loans and miscellaneous other loans.

     At June 30, 2010, our commercial loans consisted of two unsecured operating lines of credit. We generally do not originate loans secured by equipment and receivables. Commercial loans totaled $28,000, representing less than 0.1% of total loans, at June 30, 2010.

     The following table sets forth the composition of our loan portfolio at the dates indicated.

							At December 31,
	At June 30, 2010						2009						2008
	Amount			Percent			Amount			Percent			Amount			Percent
	(Unaudited)
Real estate-mortgage:
One-to four-family	$	89,616,716			75.45	%	$	89,312,560			74.37	%	$	108,696,059			79.60	%
Lines of credit		13,043,637			10.98			12,305,473			10.25			13,154,109			9.63
Commercial		4,001,867			3.37			4,197,266			3.50			3,594,160			2.63
Residential construction		8,864,409			7.46			10,437,002			8.69			7,723,822			5.66
Land		3,822,076			3.22			3,939,295			3.28			3,535,871			2.59
Total real estate loans		119,348,705			100.49	%		120,191,596			100.09	%		136,704,021			100.11	%
Consumer loans		53,966			0.05	%		33,511			0.03	%		42,456			0.03	%
Commercial loans		27,794			0.02			26,688			0.02			28,794			0.02
Total loans		81,760			0.07	%		60,199			0.05	%		71,250			0.05	%
Less:
Deferred loan origination costs (fees), net		144,355			0.12	%		116,718			0.10	%		44,049			0.03	%
Allowance for loan losses		(804,500	)		(0.68	)		(276,621	)		(0.23	)		(272,121	)		(0.20	)
Net loans	$	118,770,320			100.00	%	$	120,091,892			100.00	%	$	136,547,199			100.00	%

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Loan Maturity

     The following table sets forth certain information at December 31, 2009 regarding the dollar amount of loan principal repayments becoming due during the periods indicated. The table does not include any estimate of prepayments which significantly shorten the average life of all loans and may cause our actual repayment experience to differ from that shown below. Demand loans having no stated schedule of repayments and no stated maturity are reported as due in one year or less.

	At December 31, 2009
	One- to		Lines
	Four-Family		of				Residential		Land		Consumer		Commercial		Total
	Loans		Credit		Commercial		Construction		Loans		Loans		Loans		Loans
Amounts due in:
One year or less	$	6,140,936	$	12,305,473	$	1,773,481	$	9,074,718	$	3,509,177	$	9,750	$	26,688	$	32,840,223
More than one year to two years		5,689,113		—		—		—		110,962		14,054		—		5,814,129
More than two years to three years		4,509,865		—		629,061		—		319,156		2,788		—		5,460,870
More than three years to five years		12,559,380		—		456,665		—		—		4,193		—		13,020,238
More than five years to ten years		19,528,105		—		1,056,198		313,800		—		—		—		20,898,103
More than ten years to fifteen years		9,142,930		—		—		—		—		—		—		9,142,930
More than fifteen years		31,742,232		—		281,861		1,048,484		—		2,725		—		33,075,302
Total	$	89,312,561	$	12,305,473	$	4,197,266	$	10,437,002	$	3,939,295	$	33,510	$	26,688	$	120,251,795

Fixed vs. Adjustable Rate Loans

     The following table sets forth the dollar amount of all loans at December 31, 2009 that are due after December 31, 2010, and that have either fixed interest rates or floating or adjustable interest rates. The amounts shown below exclude unearned loan origination fees and deferred loan costs.

			Floating or
			Adjustable
	Fixed Rates		Rates		Total
Real estate loans:
One- to four-family	$	62,933,635	$	20,237,990	$	83,171,625
Lines of credit		—		—		—
Commercial		1,474,177		949,608		2,423,785
Residential construction		1,362,284		—		1,362,284
Land		—		430,118		430,118
Consumer loans		23,760		—		23,760
Commercial loans		—		—		—
Total	$	65,793,856	$	21,617,716	$	87,411,572

     Scheduled contractual principal repayments of loans do not reflect the actual life of such assets. The average life of loans is substantially less than their contractual terms because of prepayments. In addition, due-on-sale clauses on loans generally give us the right to declare a loan immediately due and payable in the event, among other things, that the borrower sells the real property subject to the mortgage and the loan is not repaid. The average life of mortgage loans tends to increase when current mortgage loan market rates are substantially higher than rates on existing mortgage loans and, conversely, decrease when current mortgage loan market rates are substantially lower than rates on existing mortgage loans.

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Loan Activity

     The following table shows loans originated, purchased and sold during the periods indicated.

	Six Months Ended June 30,						Year Ended December 31,
	2010			2009			2009			2008
	(Unaudited)
Total loans at beginning of period	$	120,251,795		$	136,775,271		$	136,775,271		$	131,311,060
Loans originated:
Real estate loans:
One-to-four-family		6,207,500			20,872,300			29,531,000			16,363,345
Lines of credit		3,298,567			2,931,034			4,566,336			7,771,292
Commercial real estate		535,000			700,000			700,000			1,537,500
Residential construction		2,627,900			1,870,300			5,602,300			6,083,950
Land		196,000			428,000			428,000			1,416,250
Commercial		16,025			5,684			16,918			29,945
Consumer		39,650			15,200			31,700			27,050
Total loans originated		12,920,642			26,822,518			40,876,254			33,229,332
Loans purchased:
Real estate loans:
One-to four-family		8,782			120,095			248,161			223,849
Lines of credit		—			—			—			—
Commercial real estate		—			—			—			—
Residential construction		—			—			—			—
Land		—			—			—			—
Commercial		—			—			—			—
Consumer		—			—			—			—
Total loans purchased		8,782			120,095			248,161			223,849
Deduct:
Loan principal repayments		(10,920,707	)		(22,416,097	)		(36,422,227	)		(19,634,615	)
Loan sales		(2,493,207	)		(17,167,706	)		(21,179,204	)		(8,354,355	)
Charge-offs		(336,840	)		(3,960	)		(46,460	)		—
Net loan activity		(821,330	)		(12,645,150	)		(16,523,476	)		5,464,211
Total loans at end of period	$	119,430,465		$	124,130,121		$	120,251,795		$	136,775,271

     Loan originations come from a number of sources. In addition to leads generated by our loan officer, our primary sources of loan originations are realtor relationships, existing customers, walk-in traffic, advertising and referrals from customers.

     Based on market conditions, we may chose to sell newly originated one- to four-family mortgage loans. In recent periods we have elected to sell almost all newly originated conforming fixed-rate one- to four-family real estate loans and to hold in our portfolio shorter-term fixed-rate loans and adjustable-rate loans. Generally, loans are sold to investors on a servicing released basis.

     During the year ended December 31, 2009, the amount of loans sold increased by $17.1 million, or 558.6%, primarily as the result of our decision to sell most newly originated fixed-rate, one-to four-family loans due to low rates prevailing on such loans in 2009. Loan sales decreased by $14.5 million, or 598.7%, during the six months ended June 30, 2010 as compared to the six months ended June 30, 2009, due to the decline in loan originations during the 2010 period.

     We have not purchased loan participation interests in recent years and purchased minimal amounts of one-to four-family real estate loans since 2008. All such loans purchased were originated through a community development program called the “Healthy Neighborhood” Program.

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Securities

     At June 30, 2010, we had $19.6 million of securities available-for-sale, as compared to $24.1 million at December 31, 2009 and $8.8 million at December 31, 2008. Securities available for sale at June 30, 2010 consisted of U.S. government agency securities and mortgage-backed securities. Most of our U.S. government agency securities and mortgage-backed securities are mortgage-backed securities issued by Freddie Mac or Fannie Mae or guaranteed by Ginnie Mae, although at June 30, 2010 we held two “private label” mortgage-backed securities with an amortized cost of $1.1 million. We had unrealized losses on those two mortgage-backed securities totaling $59,000 at June 30, 2010, although the securities continue to perform as expected and at June 30, 2010 we had the intent and ability to hold these securities to maturity.

     At December 31, 2008 , we had $7.4 million of securities held-to-maturity, consisting of mortgage-backed securities issued by Freddie Mac or Fannie Mae or guaranteed by Ginnie Mae. During the year ended December 31, 2009, we reclassified all held-to-maturity securities as available-for-sale. We held no securities classified as held-to-maturity at December 31, 2009 or June 30, 2010.

     Our securities portfolio is used to invest excess funds for increased yield and manage interest rate risk. At June 30, 2010, we also held a $1.6 million investment in the common stock of the Federal Home Loan Bank of Atlanta. A portion of this investment is required in order to collateralize borrowings from the Federal Home Loan Bank of Atlanta, and the investment is periodically increased by stock dividends paid by the Federal Home Loan Bank of Atlanta. At June 30, 2010, we held no stock in Fannie Mae and Freddie Mac, nor have we held stock in these entities throughout the periods presented.

     Our securities available-for-sale decreased by $4.5 million, or 19%, from $24.1 million at December 31, 2009 to $19.6 million at June 30, 2010, as we invested cash flow resulting from payments on and maturities of mortgage-backed and U.S. government agency securities into liquid assets due to the historically low yields available on mortgage-backed securities.

     The following table sets forth the amortized costs and fair values of our investment securities at the dates indicated.

					At December 31,
	At June 30, 2010				2009				2008
	Amortized		Fair		Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value		Cost		Value
	(Unaudited)
Investment available-for-sale:
Obligations of U.S. government agencies	$	13,775,389	$	13,866,373	$	12,310,007	$	12,197,840	$	3,616,516	$	3,653,401
Mortgage-backed securities		4,308,003		4,320,191		10,399,230		10,485,170		5,210,762		4,872,214
Bank notes		1,476,669		1,462,940		1,425,882		1,443,100		—		—
Investment held-to-maturity:
Mortgage-backed securities		—		—		—		—		7,446,849		7,566,468
Total securities	$	19,560,061	$	19,649,504	$	24,135,119	$	24,116,110	$	16,274,127	$	16,092,083

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     The following table sets forth the stated maturities and weighted average yields of investment securities at June 30, 2010. Certain mortgage-backed securities have adjustable interest rates and will reprice annually within the various maturity ranges. These repricing schedules are not reflected in the table below. Weighted average yield calculations on investments available for sale do not give effect to changes in fair value that are reflected as a component of equity. At June 30, 2010, we did not have any security (other than U.S. government agency securities) that exceeded 10% of our total equity at that date.

						More than One Year					More than Five Year					More Than
	One Year or Less					To Five Years					To Tem Years					Ten Years					Total
			Weighted					Weighted					Weighted					Weighted					Weighted
	Carrying		Average			Carrying		Average			Carrying		Average			Carrying		Average			Carrying		Average
	Value		Yield			Value		Yield			Value		Yield			Value		Yield			Value		Yield
Investments (available-for-sale):
U.S. government agencies	$	—		—	%	$	2,000,000		2.63	%	$	10,487,582		2.75	%	$	1,287,807		4.08	%	$	13,775,389		2.86	%
Mortgage-backed securities		—		—			16,891		4.88			328,221		4.91			3,962,891		4.37			4,308,003		4.41
Bank notes		485,880		7.25			990,789		3.52			—		—			—		—			1,476,669		4.75
Investments (held-to-maturity)		—		—			—		—			—		—			—		—			—		—
Total securities	$	485,880		7.25	%	$	3,007,680		2.94	%	$	10,815,803		2.81	%	$	5,250,698		4.30	%	$	19,560,061		3.34	%

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     Bank Owned Life Insurance. We invest in bank owned life insurance to provide us with a funding source for our benefit plan obligations. Bank owned life insurance also generally provides us non-interest income that is non-taxable. Federal regulations generally limit our investment in bank owned life insurance to 25% of our Tier 1 capital plus our allowance for loan losses at the time of investment. This investment is accounted for using the cash surrender value method and is recorded at the amount that can be realized under the insurance policies at the balance sheet date. At June 30, 2010, December 31, 2009 and December 31, 2008, the aggregate cash surrender value of these policies was $4.1 million, $4.0 million and $2.3 million, respectively.

     Ground Rents. Ground rents represent the value of long-term leases with respect to land we own underlying residential properties. Ground leases amounted to $864,000, $864,000 and $885,000 at June 30, 2010 and at December 31, 2009 and 2008, respectively. We intend to let our portfolio of ground leases run off over time as the homeowners redeem leases.

     Deposits. We accept deposits primarily from individuals and businesses who are located in our primary market area. We rely on competitive pricing, customer service, account features and the location of our branch offices to attract and retain deposits. Deposits serve as the primary source of funds for our lending and investment activities. Interest-bearing deposit accounts offered include time deposits, which are certificates of deposit, passbook accounts, individual NOW accounts and money market accounts. Noninterest-bearing accounts consist of free checking and commercial checking accounts. To a limited extent, we also have utilized brokered deposits.

     The following table sets forth average balances and average rates of our deposit products for the periods indicated. For purposes of this table, average balances have been calculated using daily balances.

						For the Year Ended December 31,
	For the Six Months Ended					2009					2008
	June 30, 2010							Weighted					Weighted
	Average		Weighted			Average		Average			Average		Average
	Balance		Average Rate			Balance		Rate			Balance		Rate
	(Unaudited)
Non-interest-bearing demand deposits	$	1,666,506		—	%	$	793,257		—	%	$	872,334		—	%
Interest bearing deposits:
Time deposits		104,089,795		2.62			106,430,744		2.91			107,753,532		3.95
NOW and money market		4,833,988		0.25			4,382,658		0.25			4,058,549		0.35
Passbook		12,496,837		0.56			12,472,224		0.54			13,682,034		0.90
Brokered deposits		2,308,853		4.28			2,324,574		4.28			383,841		4.28
Total	$	125,395,979		2.33		$	126,403,457		2.58		$	126,750,290		3.49

The following table sets forth the balances of our deposit accounts at the dates indicated.

						Year Ended December 31,
	At June 30, 2010					2009					2008
	Amount		Percent			Amount		Percent			Amount		Percent
	(Unaudited)
Noninterest-bearing deposits	$	948,381		0.75	%	$	759,607		0.60	%	$	684,761		0.55	%
Interest-bearing deposits:
Time deposits		104,835,829		83.36			105,705,790		83.93			104,679,251		83.80
NOW and money market		4,951,701		3.94			4,637,116		3.68			4,489,967		3.59
Passbook		12,735,858		10.13			12,500,646		9.92			12,753,294		10.21
Brokered deposits		2,288,623		1.82			2,356,734		1.87			2,305,414		1.85
Total interest-bearing deposits		124,812,011		99.25			125,200,286		99.40			124,227,926		99.45
Total deposits	$	125,760,392		100.00	%	$	125,959,893		100.00	%	$	124,912,687		100.00	%

     Balances in noninterest-bearing deposits increased by approximately $75,000, or 10.9%, from $685,000 at December 31, 2008 to $760,000 at December 31, 2009, and by $264,000, or 38.5%, to $948,000 at June 30, 2010, as we were successful in increasing our checking deposits from commercial customers.

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     The following table indicates the amount of jumbo certificates of deposit with balances of $100,000 or greater by time remaining until maturity as of June 30, 2010, none of which are brokered deposits.

Maturity Period at June 30, 2010	Amount
	(Unaudited)
Three months or less	$	2,921,773
Over three through six months		2,724,488
Over six through twelve months		11,251,496
Over twelve months		12,947,261
Total	$	29,845,018

     The following table sets forth time deposits classified by rates at the dates indicated.

			At December 31,
	At June 30, 2010		2009		2008
	(Unaudited)
0.00 - 1.00%	$	3,817,376	$	1,263,930	$	—
1.01 - 2.00		41,171,123		29,421,599		—
2.01 - 3.00		19,690,414		22,406,778		10,112,736
3.01 - 4.00		14,905,550		22,661,398		45,766,843
4.01 - 5.00		27,259,699		32,004,693		45,798,532
5.01 - 6.00		175,236		176,777		4,992,400
Total	$	107,019,398	$	107,935,175	$	106,670,510

     The following table sets forth the amount and maturities of time deposits at June 30, 2010 (unaudited).

	Amount Due
											Percent of
			More Than		More Than						Total
	Less Than		One Year to		Two Years to		More Than				Time
	One Year		Two Years		Three Years		Three Years		Total		Deposits
0.00 - 1.00%	$	3,817,376	$	—	$	—	$	—	$	3,817,376		3.57	%
1.01 - 2.00%		34,629,259		4,355,932		2,185,931		—		41,171,123		38.47
2.01 - 3.00%		3,162,421		6,248,531		6,139,554		4,139,908		19,690,414		18.40
3.01 - 4.00%		7,452,126		4,863,986		367,265		2,222,173		14,905,550		13.93
4.01 - 5.00%		8,811,797		8,532,941		6,003,158		3,911,803		27,259,700		25.47
5.01 - 6.00%		—		—		—		175,236		175,236		0.16
Total	$	57,872,978	$	24,001,390	$	14,695,908	$	10,449,120	$	107,019,398		100.00	%

     The following table sets forth deposit activity for the periods indicated.

	Six Months Ended						Year Ended
	June 30,						December 31,
	2010			2009			2009			2008
	(Unaudited)
Beginning balance	$	125,959,893		$	124,912,687		$	124,912,687		$	133,134,406
Increase (decrease) before interest credited		(942,602	)		(631,958	)		(2,126,343	)		(12,794,308	)
Interest credited		1,395,465			1,887,932			3,589,677			4,572,589
Internal deposit accounts		(652,364	)		—			(416,128	)		—
Net increase (decrease) in deposits		(199,501	)	$	1,255,974			1,047,206			(8,221,719	)
Ending balance	$	125,760,392		$	126,168,661		$	125,959,893		$	124,912,687

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     Borrowings. We use borrowings from the Federal Home Loan Bank of Atlanta to supplement our supply of funds for loans and investments and for interest rate risk management. The following table sets forth information regarding our Federal Home Loan Bank advances for the periods presented.

	Six Months Ended						Year Ended
	June 30,						December 31,
	2010			2009			2009			2008
Maximum amount of Federal Home Loan Bank advances outstanding at any month end during the period	$	27,888,889		$	28,305,556		$	28,305,556		$	28,750,000
Average Federal Home Loan Bank advances outstanding during the period	$	24,486,111		$	24,000,000		$	23,493,056		$	25,520,834
Weighted average interest rate during the period		3.78	%		3.13	%		3.17	%		3.50	%
Balance outstanding at end of period	$	22,750,000		$	23,083,333		$	22,916,667		$	28,416,667
Weighted average interest rate at end of period		3.91	%		3.20	%		3.20	%		2.98	%

     Equity. Equity decreased by $345,000, or 2.0%, to $16.6 million at June 30, 2010 from $17.0 million at December 31, 2009 primarily as the result of a net loss of $411,000 for the six months ended June 30, 2010. Equity increased by $517,000, or 3.1%, to $17.0 million at December 31, 2009 from $16.5 million at December 31, 2008 as the result of net income of $343,000 for the year ended December 31, 2009.

Results of Operations for the Six Months Ended June 30, 2010 and 2009

     Overview. We had a net loss of $411,000 for the six months ended June 30, 2010, as compared to net income of $214,000 for the six months ended June 30, 2009. The decrease in net income between the periods was primarily due to a provision for loan losses of $865,000 during the six months ended June 30, 2010, as compared to a $51,000 provision for the same period in 2009. Also contributing to the decline in net income during the six months ended June 30, 2010 was an increase of $260,000, or 14.4%, in non-interest expenses.

     Net Interest Income. Net interest income increased by $103,000, or 5.8%, from $1.8 million for the six months ended June 30, 2009 to $1.9 million for the six months ended June 30, 2010. The increase in net interest income is primarily attributable to a 19 basis point increase in our interest rate spread from 1.79% for the six months ended June 30, 2009 to 1.98% for the six months ended June 30, 2010, offset, in part, by an $11.3 million, or 9%, decrease in the average balance of loans receivable net. During the six months ended June 30, 2010, we also were able to take advantage of decreasing market interest rates to reduce our cost of funds while limiting the decrease in yields earned on our other interest-earning assets.

     Interest on loans receivable, net decreased by $507,000, or 13.1%, from $3.9 million for the six months ended June 30, 2009 to $3.4 million for the six months ended June 30, 2010, due to an $11.3 million, or 9%, decrease in the average balance of loans and a 39 basis point decrease in the average yield. The decrease in the average balance of loans reflected our decision to sell a greater portion of our fixed-rate one- to four-family loan originations during the year ended December 31, 2009 due to the low rates available on those loans. The decrease in the average yield on loans was attributable to a decrease in prevailing market interest rates during the year ended December 31, 2009.

     Interest on investment securities available-for-sale increased by $59,000, or 15%, for the six months ended June 30, 2010 as compared to the six months ended June 30, 2009, as a $6.5 million, or 38%, increase in the average balance of investment securities available-for-sale more than offset a 79 basis point decrease in the average yield.

     Interest on cash and cash equivalents remained low by historical standards during the six months ended June 30, 2010 and 2009 due to the historically low prevailing market rates during those periods.

     During the six months ended June 30, 2010, we were able to reduce interest paid on deposits primarily as the result of time deposits being rolled over at lower rates in response to general declines in market interest rates and decreases in the cost of other deposits due to a decline in market rates. Interest on time deposits decreased by $600,000, or 24%, from $2.5 million for the six months ended June 30, 2009, to $1.9 million for the six months ended June 30, 2010, as a 94 basis point decrease in the average cost of time deposits more than offset a $1.9

56

million, or 1.8%, decrease in the average balance of time deposits. During the six months ended June 30, 2010, we were able to take advantage of declining interest rates to reprice maturing certificates of deposit at lower rates. Interest on brokered deposits remained stable at $49,000 for the six months ended June 30, 2010 and 2009, as both the average balance of, and average rate earned on, brokered deposits remained stable. Interest on NOW and money market accounts remained stable during the six months ended June 30, 2010 as compared to the six months ended June 30, 2009, as a $577,000, or 13.5%, increase in the average balance was offset by a 3 basis point decrease in the average cost of NOW and money market accounts. Interest on passbook accounts decreased by $10, 000, or 22%, from $45,000 for the six months ended June 30, 2009 to $34,000 for the six months ended June 30, 2010, due primarily to a 16 basis point decrease in the average rate paid on passbook accounts. The average balance of passbook accounts decreased slightly during the six months ended June 30, 2010, as compared to the same period in 2009.

     Interest on other interest-bearing liabilities, which consist of Federal Home Loan Bank advances, decreased by $8,000, or 2%, during the six months ended June 30, 2010 as compared to the six months ended June 30, 2009, primarily due to a 15 basis point decrease in the average cost of other interest-bearing liabilities. At June 30, 2010, we had $22.8 million of Federal Home Loan Bank advances. See note 8 of Notes to Consolidated Financial Statements for a schedule of the amounts, rates and maturities of our Federal Home Loan Bank advances.

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     Average Balances and Yields. The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Average balances have been calculated using monthly balances, and nonaccrual loans are included in average balances only. Amortization of net deferred loan fees are included in interest income on loans and are insignificant. No tax equivalent adjustments were made. Nonaccruing loans have been included in the table as loans carrying a zero yield.

	At June 30,			Six Months Ended June 30,
	2010			2010							2009
						Interest							Interest
	Yield/			Average		and		Yield/			Average		and		Yield/
	Cost			Balance		Dividends		Cost			Balance		Dividends		Cost
	(Unaudited)
Assets:
Cash and cash equivalents		0.15	%	$	16,235,002	$	15,021		0.19	%	$	13,418,516	$	6,767		0.10	%
Loans receivable net		5.65			119,871,686		3,355,586		5.60			131,225,844		3,862,758		5.89
Investment securities available-for-sale (1)		4.57			23,877,056		446,326		3.74			17,309,468		392,382		4.53
Other interest-earning assets		0.94			6,428,959		31,263		0.97			4,832,711		24,899		1.03
Total interest-earning assets		4.66			166,412,703		3,848,196		4.62			166,786,539		4,286,806		5.14
Noninterest-earning assets		—			2,569,545		—		—			1,449,572		—		—
Total assets		4.58		$	168,982,248		3,848,196		4.55		$	168,236,111		4,286,806		5.10
Liabilities and equity:
Time deposits		2.71		$	104,089,795		1,419,682		2.73		$	106,016,709		1,942,927		3.67
NOW and money market		0.24			4,833,988		5,982		0.25			4,257,243		5,981		0.28
Passbook		0.54			12,496,837		34,243		0.55			12,595,358		44,571		0.71
Brokered deposits		4.31			2,308,853		49,287		4.27			2,314,264		49,290		4.26
Other interest-bearing liabilities (Federal Home Loan Bank advances)		3.94			24,486,111		448,306		3.66			24,000,000		456,745		3.81
Total interest-bearing liabilities		2.65			148,215,584		1,957,500		2.64			149,183,574		2,499,514		3.35
Noninterest-earning liabilities		—			3,735,251		—		—			2,247,942		—		—
Total liabilities		2.59			151,950,835		1,957,500		2.58			151,431,516		2,499,514		3.30
Total equity		—			17,031,413		—		—			16,804,595		—		—
Total liabilities and equity		2.34		$	168,982,248		1,957,500		2.32		$	168,236,111		2,499,514		2.97
Net interest income						$	1,890,696						$	1,787,292
Interest rate spread		1.99	%						1.98	%						1.79	%
Net interest margin									2.27	%						2.14	%
Ratio of average interest-earning assets to average interest-bearing liabilities									112.28	%						111.80	%

(1) Investment securities available-for-sale are presented at fair market value.

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     Rate/Volume Analysis. The following table sets forth the effects of changing rates and volumes on our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. Changes attributable to changes in both rate and volume have been allocated proportionally based on the absolute dollar amounts of change in each.

	Six Months Ended June 30, 2010
	Compared to Six Months Ended
	June 30, 2009
	Increase (Decrease Due To)
	Volume			Rate			Net
Assets:
Cash and cash equivalents	$	5,975		$	2,279		$	8,254
Loans receivable, net		(180,950	)		(326,222	)		(507,172	)
Investment securities		(69,601	)		128,443			58,842
Other interest-earning assets		(7,231	)		8,698			1,467
Total interest-earning assets		(251,806	)		(186,803	)		(438,609	)
Liabilities:
Time deposits		(496,502	)		(26,743	)		(523,245	)
NOW and money market		(726	)		727			1
Passbook		(10,056	)		(272	)		(10,328	)
Brokered deposits		112			(115	)		(3	)
Other interest-bearing liabilities		(17,353	)		8,914			(8,439	)
Total interest-bearing liabilities		(524,525	)		(17,489	)		(542,014	)
Net change in interest income	$	272,718		$	(169,313	)	$	103,405

     Provision for Loan Losses. We maintain an allowance at a level necessary to absorb management’s best estimate of probable loan losses in the portfolio. Management considers, among other factors, historical loss experience, type and amount of loans, borrower concentrations and current conditions of the economy. In addition, the allowance considers the level of loans which management monitors as a result of inconsistent repayment patterns. Management has identified commercial real estate loans as an area for expected increased lending. Such loans carry a higher degree of credit risk than our historical single-family lending.

     Our provision for loan losses was $865,000 for the six months ended June 30, 2010, compared to a provision of $51,000 for the six months ended June 30, 2009. At June 30, 2010, the allowance for loan losses was $805,000, or 0.7% of the total loan portfolio, compared to $277,000, or 0.2% of the total loan portfolio, at December 31, 2009.

     Management also reviews individual loans for which full collectibility may not be reasonably assured and considers, among other matters, the estimated fair value of the underlying collateral. This evaluation is ongoing and results in variations in our provision for loan losses.

     Non-accrual loans amounted to $3.3 million and $1.0 million at June 30, 2010 and December 31, 2009, respectively. Net loan charge-offs amounted to $338,000 during the six months ended June 30, 2010, compared to $4,000 during the six months ended June 30, 2009.

     Although management utilizes its best judgment in providing for losses, there can be no assurance that they will not have to change its allowance for loan losses in subsequent periods. Management will continue to monitor the allowance for loan losses and make additional provisions to the allowance as appropriate.

     An analysis of the changes in the allowance for loan losses, non-performing loans and classified loans is presented under “—Risk Management—Analysis of Non-Performing and Classified Assets” and “—Risk Management—Analysis and Determination of the Allowance for Loan Losses.”

     Non-interest Income. Total non-interest income decreased by $67,000, or 17.8%, from $378,000 for the six months ended June 30, 2009 to $311,000 for the six months ended June 30, 2010. The decrease primarily

59

reflected a decrease of $143,000, or 81.3%, in gain on sale of loans in 2009, as we elected to sell most newly originated fixed-rate one- to four-family loans due to the low rate prevailing on such loans. Also contributing to the decrease in non-interest income was a decrease of $52,000, or 52.9%, in gain on sale of investments, as we sold various securities to lock in gains, including mortgage-backed securities on which we anticipated prepayments in a declining interest rate environment.

     Non-interest Expenses. Total non-interest expenses increased by $260,000, or 14.4%, from $1.8 million for the six months ended June 30, 2009 to $2.1 million for the six months ended June 30, 2010. The increase primarily was attributable to increases of $134,000, or 13.6%, $27,000, or 8.9%, and $78,000, or 22.9%, in salaries and employee benefits, occupancy expenses and other general and administrative expenses, respectively, as a result of the opening of our new branch office in Hampstead, Maryland in September 2009.

     Income Tax Expense. We had an income tax benefit of $317,000 during the six months ended June 30, 2010, due to our incurring a net loss during that period. We had income tax expense of $95,000 during the six months ended June 30, 2009, resulting in an effective tax rate of 34% for that period.

Results of Operations for the Years Ended December 31, 2009 and 2008

     Overview. We had net income of $343,000 for the year ended December 31, 2009, as compared to net income of $8,000 for the year ended December 31, 2008. The increase in net income in 2009 was primarily due to a $330,000, or 10.5%, increase in net interest income, as we were able to increase our interest rate spread in a declining interest rate environment. Also contributing to the increase in net income was a $370,000, or 114.6%, increase in non-interest income, which was primarily due to a $196,000, or 701.3%, increase in gain on sale of loans and a $137,000, or 150.3%, increase in gain on sale of investments.

     Net Interest Income. Our net interest income benefited from falling interest rates during the year ended December 31, 2009. Net interest income increased by $330,000, or 10.5%, from $3.1 million for the year ended December 31, 2008 to $3.4 million for the year ended December 31, 2009. The increase in net interest income is primarily attributable to a 46 basis point improvement in our interest rate spread, from 1.48% for the year ended December 31, 2008 to 1.74% for the year ended December 31, 2009, as we were able to take advantage of decreasing market interest rates during the year ended December 31, 2009, to reduce our cost of funds while limiting the decrease in yields earned on our other interest-earning assets. The improvement in our interest rate spread during the year ended December 31, 2009 was offset, in part, by a $1.8 million, or 1.1%, decrease in the average volume of interest-earning assets, due primarily to our decision to sell most newly originated fixed-rate one- to four-family loans due to the low rates prevailing on such loans in 2009.

     Interest on loans receivable, net decreased by $442,000, or 5.7%, from $7.8 million for the year ended December 31, 2008 to $7.4 million for the year ended December 31, 2009, due to a $9.1 million, or 6.5%, decrease in the average balance of loans more than offset a 6 basis point increase in the average yield. The decrease in the average balance of loans reflected our decision to sell a greater portion of our fixed-rate one- to four-family loan originations during 2009 due to the low rates available on those loans. The increase in the average yield on loans occurred as we reinvested loan payments and repayments in higher yielding loans such as speculative construction loans.

     Interest on investment securities available-for-sale increased by $45,000, or 5.7%, for the year ended December 31, 2009 as compared to the year ended December 31, 2008, as a $3.4 million, or 21.1%, increase in the average balance of investment securities available-for-sale more than offset a 63 basis point decrease in the average yield. The increase in the average balance of investment securities available-for-sale reflected the proceeds from loan sales into U.S. government agency securities.

     Interest on cash and cash equivalents decreased by $259,000, or 95.9%, from $270,000 for the year ended December 31, 2008 to $11,000 for the year ended December 31, 2009, as the yield on cash and cash equivalents fell from 2.20% for the year ended December 31, 2008 to .05% for the year ended December 31, 2009, reflecting the historically low market rates prevailing during 2009.

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     During the year ended December 31, 2009, we were able to reduce interest paid on deposits primarily as the result of time deposits being rolled over at lower rates in response to general declines in market interest rates and decreases in the cost of other deposits due to a decline in market rates. Interest on time deposits decreased by $1.0 million, or 21.3%, from $4.7 million for the year ended December 31, 2008, to $3.7 million for the year ended December 31, 2009, primarily due to an 87 basis point decrease in the average cost of time deposits and, to a lesser extent, a $1.3 million, or 1.2%, decrease in the average balance of time deposits. During the year ended December 31, 2009, we were able to take advantage of declining interest rates to reprice maturing certificates of deposit at lower rates. Interest on brokered deposits increased from $11,000 for the year ended December 31, 2008 to $100,000 for the year ended December 31, 2009, as we accepted brokered deposits in late 2008 as part of our efforts to lengthen the average term of our deposits, and brokered deposits were available at that time at favorable rates. Interest on NOW and money market accounts decreased by $25,000, or 67.6%, from $37,000 during for the year ended December 31, 2008 to $12,000 for the year ended December 31, 2009, as a 63 basis point decrease in the average cost of NOW and money market accounts more than offset a $324,000, or 8.0%, increase in the average balance of NOW and money market accounts. Interest on passbook accounts decreased by $113,000, or 59.2%, from $191,000 for the year ended December 31, 2008 to $78,000 for the year ended December 31, 2009, due primarily to a 78 basis point decrease in the average rate paid on passbook accounts. The average balance of passbook accounts decreased by $1.2 million, or 8.8%, during the year ended December 31, 2009, as compared to the prior year.

     Interest on other interest-bearing liabilities, which consist of Federal Home Loan Bank advances, decreased by $13,000, or 1.4%, during the year ended December 31, 2009 as compared to the year ended December 31, 2008, as a $1.1 million decrease in the average balance of other interest-bearing liabilities more than offset a 26 basis point increase in the average cost of other interest-bearing liabilities . The increase in the average cost of other interest-bearing liabilities occurred as we elected to roll over maturing short-term, low cost advances for longer terms at higher rates.

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     Average Balances and Yields. The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented. Average balances have been calculated using monthly balances, and nonaccrual loans are included in average balances only. Amortization of net deferred loan fees are included in interest income on loans and are insignificant. No tax equivalent adjustments were made. Nonaccruing loans have been included in the table as loans carrying a zero yield.

	Year Ended December 31
	2009							2008
			Interest							Interest
	Average		and		Yield/			Average		and		Yield/
	Balance		Dividends		Cost			Balance		Dividends		Cost
Assets:
Cash and cash equivalents	$	15,009,423	$	10,953		0.07	%	$	12,254,289	$	270,099		2.20	%
Loans receivable net		126,464,432		7,372,112		5.83			135,357,320		7,814,228		5.77
Investment securities available-for-sale (1)		19,614,289		838,433		4.27			16,201,821		793,512		4.90
Other interest-earning assets		5,479,978		50,334		0.92			4,565,861		115,207		2.52
Total interest-earning assets		166,568,122		8,271,832		4.97			168,379,291		8,993,046		5.34
Noninterest-earning assets		1,594,639		—		—			1,445,142		—		—
Total assets		168,162,761		8,271,832		4.92			169,824,433		8,993,046		5.30
Liabilities and equity:
Time deposits		106,430,744		3,700,750		3.48			107,753,532		4,689,258		4.35
NOW and money market		4,382,658		11,731		0.27			4,058,549		36,719		0.90
Passbook		12,472,224		78,193		0.63			13,682,034		191,247		1.40
Brokered deposits		2,324,574		100,001		4.30			383,841		11,352		2.96
Other interest-bearing liabilities (Federal Home Loan Bank advances)		23,493,056		914,690		3.89			25,520,834		927,601		3.63
Total interest-bearing liabilities		149,103,256		4,805,365		3.22			151,398,790		5,856,177		3.87
Noninterest-earning liabilities		2,168,808		—		—			1,931,859		—		—
Total liabilities		151,272,064		4,805,365		3.18			153,330,649		5,856,177		3.82
Total equity		16,890,697		—		—			16,493,784		—		—
Total liabilities and equity	$	168,162,761		4,805,365		2.86		$	169,824,433		5,856,177		3.45
Net interest income			$	3,466,467						$	3,136,869
Interest rate spread						1.74	%						1.48	%
Net interest margin						2.08	%						1.86	%
Ratio of average interest-earning assets to average interest-bearing liabilities						111.71	%						111.22	%

(1) Investment securities available-for-sale are presented at fair market value.

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     Rate/Volume Analysis. The following table sets forth the effects of changing rates and volumes on our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. Changes attributable to changes in both rate and volume have been allocated proportionally based on the absolute dollar amounts of change in each.

	Year Ended December 31, 2009
	Compared to Year Ended
	December 31, 2008
	Increase (Decrease Due To)
	Volume			Rate			Net
Assets:
Cash and cash equivalents	$	(261,499	)	$	2,353		$	(259,146	)
Investment securities		(122,210	)		167,131			44,921
Loans receivable, net		76,286			(518,402	)		(442,116	)
Other interest-earning assets		(80,599	)		15,726			(64,873	)
Total interest-earning assets		(388,023	)		(333,192	)		(721,215	)
Liabilities:
Time deposits		(967,404	)		(21,116	)		(988,520	)
NOW and money market		(29,016	)		4,029			(24,987	)
Passbook		(99,915	)		(13,138	)		(113,053	)
Brokered deposits		32,480			56,170			88,650
Other interest-bearing liabilities		63,186			(76,088	)		(12,902	)
Total interest-bearing liabilities		(1,000,669	)		(50,143	)		(1,050,812	)
Change in net interest income	$	612,646		$	(283,049	)	$	329,597

     Provision for Loan Losses. We maintain an allowance at a level necessary to absorb management’s best estimate of probable loan losses in the portfolio. Management considers, among other factors, historical loss experience, type and amount of loans, borrower concentrations and current conditions of the economy. In addition, the allowance considers the level of loans which management monitors as a result of inconsistent repayment patterns. Management has identified commercial real estate loans as an area for expected increased lending. Such loans carry a higher degree of credit risk than our historical single-family lending.

     Our provision for loan losses increased from $5,000 for the year ended December 31, 2008 to $51,000 for the year ended December 31, 2009. At December 31, 2009, the allowance for loan losses was $277,000 or 0.2% of the total loan portfolio, compared to $272,000, or 0.2% of the total loan portfolio, at December 31, 2008.

     Management also reviews individual loans for which full collectibility may not be reasonably assured and considers, among other matters, the estimated fair value of the underlying collateral. This evaluation is ongoing and results in variations in our provision for loan losses.

     Nonaccrual loans amounted to $1,033,000 and $187,000 at December 31, 2009 and 2008, respectively. Net loan charge-offs amounted to $46,000 during the year ended December 31, 2009, compared to $0 during the year ended December 31, 2008.

     Although management utilizes its best judgment in providing for losses, there can be no assurance that they will not have to change its allowance for loan losses in subsequent periods. Management will continue to monitor the allowance for loan losses and make additional provisions to the allowance as appropriate.

     An analysis of the changes in the allowance for loan losses, nonperforming loans and classified loans is presented under “—Risk Management—Analysis of Nonperforming and Classified Assets” and “—Risk Management—Analysis and Determination of the Allowance for Loan Losses.”

     Non-interest Income. Total non-interest income increased by $370,000, or 114.6%, from $323,000 for the year ended December 31, 2008 to $693,000 for the year ended December 31, 2009. The increase primarily reflected an increase of $196,368, or 801.3%, in gain on sale of loans in 2009, as we elected to sell most newly

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originated fixed-rate one- to four-family loans due to low rates prevailing on such loans. The increase also reflected an increase of $137,000, or 150%, in gain on sale of investments, as we sold various securities to lock in gains, including mortgage-backed securities on which we anticipated prepayments in a declining interest rate environment. Also contributing to the increase in non-interest income was a $45,000, or 37%, increase in income on bank-owned life insurance.

     Non-interest Expenses. Total non-interest expenses increased by $47,000, or 1.3%. The increase in non-interest expenses included increases of $125,000, or 7%, $31,000, or 5%, and $192,000, or 40%, in salaries and employee benefits, occupancy expenses and other general and administrative expenses, respectively, as a result of the opening of our new branch office in Hampstead, Maryland in September 2009. Partly offsetting these increases was the absence in 2009 of a $299,000 expense we incurred in 2008 related to the termination of our pension plan.

     Income Tax Expense. We recorded an income tax benefit of $153,000 during the year ended December 31, 2008 as a result of our incurring a $145,000 loss before provision (benefit) for income taxes for 2008. The tax benefit for the year ended December 31, 2008 was primarily the result of nontaxable income generated by Fraternity Federal Savings and Loan Association investment in bank-owned life insurance. We had income tax expense of $119,000 for the year ended December 31, 2009, resulting in an effective tax rate of 25.7% for that year.

Risk Management

     Overview. Managing risk is an essential part of successfully managing a financial institution. Our most prominent risk exposures are credit risk, interest rate risk and market risk. Credit risk is the risk of not collecting the interest and/or the principal balance of a loan or investment when it is due. Interest rate risk is the potential reduction of interest income as a result of changes in interest rates. Market risk arises from fluctuations in interest rates that may result in changes in the values of financial instruments, such as available-for-sale securities that are accounted for on a mark-to-market basis. Other risks that we face are operational risk, liquidity risks and reputation risk. Operational risks include risks related to fraud, regulatory compliance, processing errors, technology and disaster recovery. Liquidity risk is the possible inability to fund obligations to depositors, lenders or borrowers. Reputation risk is the risk that negative publicity or press, whether true or not, could cause a decline in our customer base or income.

     Credit Risk Management. Our strategy for credit risk management focuses on having well-defined credit policies and uniform underwriting criteria and providing prompt attention to potential problem loans. We do not offer, and have not offered, sub-prime or no-documentation mortgage loans and have made only a limited amount of Alt A mortgage loans.

     When a borrower fails to make a required loan payment, we take a number of steps to have the borrower cure the delinquency and restore the loan to current status. When the loan becomes 15 day past due, a late notice is sent to the borrower. When the loan becomes 30 days past due, a more formal letter is sent. Between 15 and 30 days past due, telephone calls are also made to the borrower. After 30 days, we regard the borrower in default. Between 30 and 45 days delinquent, the borrower may be sent a letter from our attorney and we may commence collection proceedings. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure sale, the real property securing the loan generally is sold at foreclosure. Management informs the board of directors monthly of the amount of loans delinquent more than 30 days, all loans in foreclosure and repossessed property that we own.

     Analysis of Nonperforming and Classified Assets. We consider repossessed assets and loans that are 90 days or more past due to be nonperforming assets. Loans are generally placed on nonaccrual status when they become 90 days delinquent, at which time the accrual of interest ceases and the allowance for any uncollectible accrued interest is established and charged against interest income. Typically, payments received on a nonaccrual loan are first applied to the outstanding principal balance. In addition, we consider certain nonagency mortgage-backed securities as nonperforming due to ratings downgrades and cash flow concerns.

     Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned until it is sold. When property is acquired it is recorded at the lower of its cost, which is the unpaid

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balance of the loan plus foreclosure costs, or fair market value at the date of foreclosure. Any holding costs and declines in fair value after acquisition of the property result in charges against income.

     The following table provides information with respect to our nonperforming assets at the dates indicated.

	At
	June 30,			At December 31,
	2010			2009			2008
Nonperforming loans:
Real estate loans:
One-to four-family	$	960,061		$	340,551		$	—
Lines of credit		—			59,499			—
Commercial		—			—			—
Residential construction		1,804,118			632,549			—
Land		494,999			—			—
Commercial		—			—			—
Consumer		—			—			187,000
Total	$	3,259,178		$	1,032,601		$	187,000
Accruing loans past due 90 days or more:
Real estate loans:
One-to four-family		—			706,000			—
Lines of credit		—			—			—
Commercial		—			—			—
Residential construction		—			—			—
Land		—			—			—
Commercial		—			—			—
Consumer		—			—			—
Total	$	—		$	706,000		$	—
Total of nonperforming loans and accruing loans 90 days or more past due	$	3,259,178		$	1,738,601		$	187,000
Assets acquired through foreclosure		—			—			—
Total nonperforming assets	$	3,259,178		$	1,738,601		$	187,000
Total of nonperforming loans and accruing loans past due 90 days or more to total loans		2.72	%		1.44	%		0.14	%
Total nonperforming loans to total assets		1.94			0.62	%		0.11	%
Total nonperforming assets to total assets		1.94			1.04	%		0.11	%

     At June 30, 2010, nonaccrual one- to four-family loans consisted of a $542,000 loan secured by an owner-occupied property, a $306,000 loan secured by an owner occupied property that was subsequently foreclosed on, an $82,000 loan secured by an investment property, two loans totaling $8,000 originated under the Healthy Neighborhood Program and a $22,000 loan subsequently foreclosed on and sold at no loss. At June 30, 2010, nonaccrual residential construction loans consisted of two speculative construction loans.

     For further information on our methodology for establishing specific valuation allowances, see “—Analysis and Determination of the Allowance for Loan Losses — Specific Valuation Allowance.”

     We occasionally modify loans to extend the term or make other concessions to help borrowers stay current on their loan and to avoid foreclosure. We do not forgive principal or interest on loans or modify the interest rates on loans to rates that are below market rates. At June 30, 2010 and December 31, 2009, we did not have any modified loans, which are also referred to as troubled debt restructurings.

     Interest income that would have been recorded for the six months ended June 30, 2010 and the year ended December 31, 2009 had nonaccrual loans been current according to their original terms, amounted to approximately $174,000 and $40,000, respectively. Interest income of $0 and $0 related to nonaccrual loans was included in interest income for the six months ended June 30, 2010 and the year ended December 31, 2009, respectively.

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     At June 30, 2010, we had no real estate owned.

     Classified Assets. Federal regulations require us to review and classify our assets on a regular basis. In addition, the Office of Thrift Supervision has the authority to identify problem assets and, if appropriate, require them to be classified. There are three classifications for problem assets; substandard, doubtful and loss. “Substandard assets” must have one or more defined weakness and are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. “Doubtful assets” have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified “loss” is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. The regulations also provide for a “special mention” category, described as assets which do not currently expose an institution to a sufficient degree of risk to warrant classification but do possess credit deficiencies or potential weaknesses deserving close attention. When we classify an asset as substandard or doubtful we may establish a specific allowance for loan losses. If we classify an asset as loss, we charge off an amount equal to 100% of the portion of the asset classified loss.

     The following table shows the aggregate amounts of our classified and criticized assets at the dates indicated.

	At June 30,		At December 31,
	2010		2009		2008
	(Unaudited)
Special mention assets	$	2,312,650	$	8,862,000	$	—
Substandard assets		5,245,903		2,624,000		174,000
Doubtful assets		—		81,000		187,000
Total classified and criticized assets	$	7,558,553	$	11,567,000	$	361,000

     Classified and criticized assets include loans that are classified due to factors other than payment delinquencies, such as lack of current financial statements and other required documentation, insufficient cash flows or other deficiencies, and, therefore are not included as nonperforming assets. Other than as disclosed in the above tables, there are no other loans where management has serious doubts about the ability of the borrowers to comply with the present loan repayment terms. Also included in classified and criticized assets are delinquent ground rents and certain nonagency mortgage-backed securities that have experienced rating downgrades or cash flow deficiencies.

     The decrease in our classified assets at June 30, 2010 compared to December 31, 2009 was due to $3.0 million in loans being brought current by borrowers and a $1.2 million loan being reclassified as owner-occupied rather than speculative when the owner of the property elected to use it as his residence. The $1.2 million loan has been performing according to its terms but was classified at December 31, 2009 as special mention in accordance with our policy, adopted in 2009, of classifying all speculative construction loans as special mention. In addition, a $750,000 residential construction loan that had been classified as special mention at December 31, 2009 was repaid during the six months ended June 30, 2010. Of the $7.6 million of substandard assets at June 30, 2010, $3.3 million were nonaccrual loans. See "— Analysis of Nonperforming and Classified Assets.”

     Special mention assets increased from $0 at December 31, 2008 to $8.9 million at December 31, 2009. The increase occurred as a result of our decision in 2009 to adopt a policy of classifying all speculative construction loans as special mention assets.

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

									At December 31,
	At June 30, 2010								2009								2008
	30 – 89 Days				90 Days or More				30 – 89 Days				90 Days or More				30 – 89 Days				90 Days or More
	Number		Principal		Number		Principal		Number		Principal		Number		Principal		Number		Principal		Number		Principal
	of		Balance		of		Balance		of		Balance		of		Balance		of		Balance		of		Balance
	Loans		of Loans		Loans		of Loans		Loans		of Loans		Loans		of Loans		Loans		of Loans		Loans		of Loans
Real estate loans:
One-to four-family		7	$	646,000		6	$	960,000		15	$	2,450,000		6	$	1,047,000		4	$	174,000		—	$	—
Lines of credit		2		50,000		—		—		2		55,000		1		59,000		—		—		—		—
Commercial		—		—		—		—		—		—		—		—		—		—		—		—
Residential construction		—		—		2		1,804,000		—		—		1		633,000		—		—		—		—
Land		—		—		1		495,000		—		—		—		—		—		—		—		—
Consumer		—		—		—		—		1	$	1,000		—		—		—		—		—		—
Commercial		—		—		—		—		—		—		—		—		—		—		—		—
Total		9	$	696,000		9	$	3,259,000		18	$	2,506,000		8	$	1,739,000		4	$	174,000		—	$	—

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Analysis and Determination of the Allowance for Loan Losses

     The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. We evaluate the need to establish allowances against losses on loans on a monthly basis, and any adjustments must be approved quarterly by the Board. When additional allowances are necessary, a provision for loan losses is charged to earnings. Our methodology for assessing the appropriateness of the allowance for loan losses is reviewed periodically by the board of directors. The board of directors also reviews the allowance for loan losses established on a quarterly basis.

     General Valuation Allowance. We establish a general valuation allowance for loans that should be adequate to reserve for the estimated credit losses inherent in each segment of our loan portfolio, given the facts and circumstances as of the valuation date for all loans in the portfolio that have not been classified. The allowance is based on our average annual rate of net charge offs experienced over the previous four quarters on each segment of the portfolio and is adjusted for current qualitative factors. If historical loss data is not available for a segment, the estimates used will be based on various components such as industry averages. For purposes of determining the estimated credit losses, the loan portfolio is segmented as follows: (i) one- to four-family first mortgage real estate loans; (ii) one- to four-family second mortgage real estate loans; (iii) one- to four-family home equity lines of credit; (iv) commercial loans; (v) speculative construction loans; (vi) other construction loans; (vii) land loans; and (viii) consumer loans. Qualitative factors that are considered in determining the adequacy of the allowance for loan losses are as follows: (i) trends of delinquent and nonaccrual loans; (ii) economic factors; (iii) concentrations of credit; (iv) changes in the nature and volume of the loan portfolio; and (v) changes in lending staff and loan policies.

     Specific Valuation Allowance. All adversely classified loans meeting the following loan balance thresholds are individually reviewed: (i) speculative construction loans; (ii) commercial loans greater than $500,000; (iii) land loans greater than $500,000; (iv) all other loans greater than $1.5 million and (v) any other nonperforming loans. Any portion of the recorded investment in excess of the fair value of the collateral less the disposition costs is charged off against the allowance for loan losses.

     We charge off 100% of the assets or portions thereof classified as loss. The amount of the loss will be the excess of the recorded investment in the loan over the fair value of collateral less disposition costs estimated on the date that a probable loss is identified. Management obtains updated appraisals with respect to loans secured by real estate.

     All other adversely classified loans as well as special mention and watch loans are reviewed monthly. Our historical loss experience in each category of loans is utilized in determining the allowance for that group. The determined loss factor in each loan category may be adjusted for qualitative factors as determined by management.

     At June 30, 2010, there were no loans that were delinquent or restructured or modified as the result of being underwritten with limited or no documentation.

     Unallocated Valuation Allowance. Our allowance for loan losses methodology also includes an unallocated component to reflect the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the loan portfolio.

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     The following table sets forth the breakdown of the allowance for loan losses by loan category at the dates indicated. The allocation of the allowance to each category is not necessarily indicative of future losses and does not restrict the use of the allowance to absorb losses in any category.

									At December 31,
	At June 30, 2010								2009								2008
						% of								% of								% of
			% of			Loans in					% of			Loans in					% of			Loans in
			Allowance			Category					Allowance			Category					Allowance			Category
			to Total			to Total					to Total			to Total					to Total			to Total
	Amount		Allowance			Loans			Amount		Allowance			Loans			Amount		Allowance			Loans
Real estate loans:
One-to four-family	$	178,009		22.13	%		74.47	%	$	91,335		33.02	%		73.71	%	$	110,461		40.59	%		78.93	%
Lines of credit		206,089		25.62			10.84			132,257		47.81			10.16			96,179		35.34			9.55
Commercial		93,573		11.63			3.33			20,986		7.59			3.46			1,776		0.65			2.61
Residential construction		245,333		30.50			7.37			18,795		6.79			8.61			60,006		22.05			5.61
Land		76,442		9.50			3.18			7,879		2.85			3.25			—		—			2.57
Consumer		1,569		.19			0.80			1,166		0.42			0.78			—		—			0.71
Commercial		—		—			0.02			—		—			0.02			—		—			0.02
Unallocated		3,485		0.43			—			4,203		1.52			—			3,699		1.36			—
Total	$	804,500		100.00	%		100.00	%	$	276,621		100.00	%		100.00	%	$	272,121		100.00	%		100.00	%

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     Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and our results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Furthermore, while we believe we have established our allowance for loan losses in conformity with generally accepted accounting principles, there can be no assurance that the Office of Thrift Supervision, in reviewing our loan portfolio, will not require us to increase our allowance for loan losses. The Office of Thrift Supervision may require us to increase our allowance for loan losses based on judgments different from ours. In addition, because future 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. Any material increase in the allowance for loan losses may adversely affect our financial condition and results of operation.

     Analysis of Loan Loss Experience. The following table sets forth an analysis of the allowance for loan losses for the periods indicated.

	Six Months Ended						Year Ended
	June 30,						December 31,
	2010			2009			2009			2008
	(Unaudited)
Allowance for loan losses at beginning of period		276,621			272,121			272,121			267,121
Charge-offs:
Real estate loans:
One-to four-family		—			—			—			—
Lines of credit		207,124			—			42,500			—
Commercial		—			—			—			—
Residential construction		112,500			—			—			—
Land		11,250			—			—			—
Commercial		—			—			—			—
Consumer		6,786			3,960			3,960			—
Total charge-offs		337,660			3,960			46,460			—
Recoveries		820			—			—			—
Net charge-offs		336,841			3,960			46,460			—
Provision for loan losses		864,719			50,960			50,960			5,000
Allowance at end of period	$	804,500		$	319,121			276,621		$	272,121
Allowance for loan losses to total loans at the end of the period		0.67	%		0.26	%		0.23	%		0.20	%
Net charge-offs to average loans outstanding during the period		0.28	%		—	%		0.04	%		—	%

     During the six months ended June 30, 2010, we had charge-offs totaling $338,000. Of this amount, $207,000 related to two home equity lines of credit, and $113,000 was attributable to two speculative construction loans.

     Interest Rate Risk Management. We manage the interest rate sensitivity of our interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment. Deposit accounts typically react more quickly to changes in market interest rates than mortgage loans because of the shorter maturities of deposits. As a result, sharp increases in interest rates may adversely affect our earnings while decreases in interest rates may beneficially affect our earnings. To reduce the potential volatility of our earnings, we have sought to improve the match between asset and liability maturities and rates, while maintaining an acceptable interest rate spread. Our strategy for managing interest rate risk emphasizes adjusting our loan mix by adding more loans with variable rates and adjusting our investment portfolio mix and duration. Specifically, over the past several years we have sought to shorten the average term of our loan portfolio by emphasizing the origination of one- to four-family fixed-rate loans with ten year terms. In addition, at June 30, 2010, we had $13.0 million of home equity lines of credit, all of which reprice monthly. We also had $20.1 million of cash and cash equivalents that reprice in the very near term. With respect to liabilities, we have had some success in the current low interest rate environment in increasing our longer-term certificates of deposit, as our customers have been willing to purchase longer-term certificates of deposit in exchange for increased yield, while, conversely, decreasing our short-term certificates of deposit.

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     We currently do not participate in hedging programs, interest rate swaps or other activities involving the use of derivative financial instruments.

     During the year ended December 31, 2007, we sold $9.5 million of low yielding loans in order to reduce our interest rate risk profile and to enhance future earnings through the reinvestment of the proceeds from such loan sales into higher yielding assets. The loans sold were long-term, fixed-rate, one- to four-family mortgage loans with an average yield of 4.8%. Initially, we reinvested the proceeds from this sale into interest-bearing deposits in other banks, and eventually we seek to reinvest the proceeds into jumbo one- to four-family mortgage loans, which generally carry higher yields than our conforming one- to four-family mortgage loans. The effect of this transaction was to shorten the average maturity of our interest-earning assets, thereby reducing our interest rate risk.

     We have an Asset/Liability Management Committee, which includes members of management selected by the board of directors and one non-management director, to communicate, coordinate and control all aspects involving asset/liability management. The committee establishes and monitors the volume, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals.

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

     Net Portfolio Value Analysis. We currently use the net portfolio value analysis prepared by the Office of Thrift Supervision to review our level of interest rate risk. This analysis measures interest rate risk by capturing changes in net portfolio value of our cash flows from assets, liabilities and off-balance sheet items, based on a range of assumed changes in market interest rates. Net portfolio value represents the market value of portfolio equity and is equal to the market value of assets minus the market value of liabilities, with adjustments made for off-balance sheet items. These analyses assess the risk of loss in market risk-sensitive instruments in the event of a sudden and sustained 100 to 300 basis point increase or 100 basis point decrease in market interest rates with no effect given to any steps that we might take to counter the effect of that interest rate movement. In addition to the net portfolio value analysis prepared by the Office of Thrift Supervision, we utilize other interest rate risk software to help us manage interest rate risk.

     The following table, which is based on information that we provide to the Office of Thrift Supervision, presents the change in our net portfolio value at June 30, 2010 that would occur in the event of an immediate change in interest rates based on Office of Thrift Supervision assumptions, with no effect given to any steps that we might take to counteract that change.

									Net Portfolio Value as % of
	Estimated Net Portfolio Value								Portfolio Value of Assets
Basis Point												Basis Point
Change in Rates	Amount		Change			% Change			NPV Ratio			Change
300	$	14,861,000	$	(418,000	)		(26.72	)%		9.02	%	(255		) bp
200		17,457,000		(2,822,000	)		(13.92	)		10.33			(124	)
100		19,516,000		(763,000	)		(3.76	)		11.31			(26	)
0		20,279,000		—			—			11.57			—
(100)		19,969,000		(310,000	)		(1.53	)		11.32			(25	)

     The Office of Thrift Supervision uses various assumptions in assessing interest rate risk. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates and the market values of certain assets under differing interest rate scenarios, among others. As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate mortgage loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Further, if there is a change in interest rates,

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

     Liquidity Management. Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds available to meet short-term liquidity needs consist of deposit inflows, loan repayments and maturities and sales of investment securities. 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.

     We regularly adjust our investments in liquid assets available to meet short-term liquidity needs based upon our assessment of (i) expected loan demand, (ii) expected deposit flows, (iii) yields available on interest-earning deposits and securities and (iv) the objectives of our asset/liability management policy. We do not have long-term debt or other financial obligations that would create long-term liquidity concerns.

     Our most liquid assets are cash and cash equivalents and interest-bearing deposits. The level of these assets depends on our operating, financing, lending and investing activities during any given period. At June 30, 2010, cash and cash equivalents totaled $20.1 million. Securities classified as available-for-sale, amounting to $19.6 million at June 30, 2010, provides an additional sources of liquidity. In addition, at June 30, 2010, we had the ability to borrow a total of approximately $27.4 million from the Federal Home Loan Bank of Atlanta. At June 30, 2010, we had $22.8 million in Federal Home Loan Bank advances outstanding. For additional liquidity, if needed, we have a $3.0 million line of credit with another bank, on which we had no outstanding balance at June 30, 2010.

     At June 30, 2010 we had $1.1 million in commitments to extend credit outstanding. Certificates of deposit due within one year of June 30, 2010 totaled $58 million, or 54% of certificates of deposit. We believe the large percentage of certificates of deposit that mature within one year reflects customers’ hesitancy to invest their funds for long periods due to the recent low interest rate environment and local competitive pressures. If these maturing deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit and borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before June 30, 2011. We believe, however, based on past experience, that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

     The following table presents certain of our contractual obligations as of December 31, 2009.

	As of December 31, 2009
			Less than		One to		Three to		More Than
Contractual Obligations	Total		One Year		Three Years		Five Years		Five Years
Operating lease obligations	$	805,536	$	232,831	$	302,760	$	270,245	$	—
Federal Home Loan Bank advances and other borrowings		22,916,667		336,000		7,580,667		—	$	15,000,000
Total	$	23,722,503	$	568,831	$	7,883,724	$	270,245	$	15,000,000

     Our primary investing activities are the origination of loans and the purchase of securities. Our primary financing activity is activity in deposit accounts. Deposit flows are affected by the overall level of interest rates, the interest rates and product offered by us and our local competitors and other factors. We generally manage the pricing of our deposits to be competitive. Occasionally, we offer promotional rates on certain deposit products to attract deposits.

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Financing and Investing Activities

     Capital Management. We are subject to various regulatory capital requirements administered by the Office of Thrift Supervision, 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, 2010, we exceeded all of our regulatory capital requirements and were considered “well capitalized” under regulatory guidelines. See “Regulation and Supervision—Regulation of Federal Savings Associations—Capital Requirements,” “Regulatory Capital Compliance” and note 13 of the notes to consolidated financial statements included in this prospectus.

     The capital from the offering will significantly increase our liquidity and capital resources. Over time, the initial level of liquidity will be reduced as net proceeds from the stock offering are used for general corporate purposes, including the funding of lending activities. Our financial condition and results of operations will be enhanced by the capital from the offering, resulting in increased net interest-earning assets and income. However, the large increase in equity resulting from the capital raised in the offering will, initially, have an adverse impact on our return on equity. Following the offering, we may use capital management tools such as cash dividends and common share repurchases. However, under Office of Thrift Supervision regulations, we will not be allowed to repurchase any shares during the first year following the offering, except to fund the restricted stock awards under the equity benefit plan after its approval by shareholders, unless extraordinary circumstances exist and we receive regulatory approval.

     Off-Balance Sheet Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments, unused lines of credit and letters of credit. For information about our loan commitments, unused lines of credit and letters of credit, see note 11 of the notes to consolidated financial statements.

     For the six months ended June 30, 2010 and the year ended December 31, 2009, we did not engage in any off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Impact of Recent Accounting Pronouncements

     Accounting Standards Codification. The Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) became effective on July 1, 2009. At that date, ASC became FASB’s officially recognized source of authoritative United States (“U.S.”) generally accepted accounting principles (“GAAP”) applicable to all public and non-public, non-governmental entities, superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”) and related literature. Rules and interpretive releases of the United States Securities and Exchange Commission under the authority of federal securities laws are also sources of authoritative GAAP for Securities and Exchange Commission registrants. All other accounting literature is considered non-authoritative. The switch to ASC affects the way companies refer to U.S. GAAP in financial statements and accounting policies. Citing particular content in the ASC involves specifying the unique numeric path to the content through the Topic, Subtopic, Section and Paragraph structure.

     Accounting Standards Updates (“ASU”) No. 2009-16, “Transfers and Servicing (Topic- 860)-Accounting for Transfers of Financial Assets” amends prior accounting guidance to enhance reporting about transfers of financial assets, including securitizations, and where companies have continuing exposure to the risks related to transferred financial assets. ASU 2009-16 also requires additional disclosures about all continuing involvement with transferred financial assets including information about gains and losses resulting from transfers during the period. The provisions of ASU 2009-16 became effective on January 1, 2010 and did not have a significant impact on our consolidated results of operations or financial position.

     ASU No. 2009-17, “Consolidations (Topic 810)-Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” amends prior guidance to change how a company determines when an entity that is sufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated.

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The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. ASU 2009-17 requires additional disclosures about the reporting entity’s involvement with variable interest entities and any significant changes in risk exposure due to that involvement as well as its affect on the entity’s financial statements. As further discussed below, ASU No. 2010-10, “Consolidations (Topic 810),” deferred the effective date of ASU 2009-17 for a reporting entity’s interests in investment companies. The provisions of ASU 2009-17 became effective on January 1, 2010 and they did not have a material impact on our consolidated results of operations or financial position.

     ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820)-Improving Disclosures About Fair Value Measurements” requires expanded disclosures related to fair value measurements including (i) the amounts of significant transfers of assets or liabilities between Levels 1 and 2 of the fair value hierarchy and the reasons for the transfers, (ii) the reasons for transfers of assets or liabilities in or out of Level 3 of the fair value hierarchy, with significant transfers disclosed separately, (iii) the policy for determining when transfers between the levels of the fair value hierarchy are recognized and (iv) for recurring fair value measurements of assets and liabilities in Level 3 of the fair value hierarchy, a gross presentation of information about purchases, sales, issuances and settlements. ASU 2010-06 further clarifies that (i) companies should provide fair value measurement disclosures for each class of assets and liabilities (rather than major category), which would generally be a subset of assets or liabilities within a line item in the statement of financial position and (ii) companies should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and non-recurring fair value measurements for each class of assets and liabilities included in Levels 2 and 3 of the fair value hierarchy. ASU No. 2010-06 requires the disclosures related to the gross presentation of purchases, sales, issuances and settlements of assets and liabilities included in Level 3 of the fair value hierarchy beginning January 1, 2011. The remaining disclosure requirements and clarifications made by ASU 2010-06 became effective on January 1, 2010. The adoption of ASU No. 2010-06 did not have a material impact on our consolidated results of operations or financial position.

     ASU No. 2010-10, “Consolidations (Topic 810)-Amendments for Certain Investment Funds” defers the effective date of the amendments to the consolidation requirements made by ASU 2009-17 to a company’s interest in an entity (i) that has all of the attributes of an investment company, as specified under ASC Topic 946, “Financial Services-Investment Companies,” or (ii) for which it is industry practice to apply measurement principles of financial reporting that are consistent with those in ASC Topic 946. As a result of the deferral, companies are not required to apply the ASU 2009-17 amendments to the Subtopic 810-10 consolidation requirements to its interest in an entity that meets the criteria to qualify for the deferral. ASU 2010-10 also clarifies that any interest held by a related party should be treated as though it is an entity’s own interest when evaluating the criteria for determining whether such interest represents a variable interest. ASU 2010-10 also clarifies that companies should not use a quantitative calculation as the sole basis for evaluating whether a decision maker’s or service provider’s fee is variable interest. The provisions of ASU 2010-10 became effective as of January 1, 2010 and did not have a material impact on our consolidated results of operations or financial position.

     ASU No. 2010-11, “Derivatives and Hedging (Topic 815)-Scope Exception Related to Embedded Credit Derivatives” clarifies that the only form of an embedded credit derivative that is exempt from the embedded derivative bifurcation requirement are those that relate to the subordination of one financial instrument to another. Entities that have contracts containing an embedded credit derivative feature in a form other than subordination may need to separately account for the embedded credit derivative feature. The provisions of ASU 2010-11 became effective on July 1, 2010. We do not anticipate that it will have a material impact on our consolidated results of operations or financial position.

     In April 2010, the FASB issued ASU 2010-18, “Receivables (Subtopic 310) — Effect of a Loan Modification When the Loan is Part of a Pool that is Accounted for as a Single Asset.” This guidance addresses diversity in practice on whether a loan that is part of a pool of loans accounted for as a single asset should be removed from that pool upon modification that would constitute a troubled debt restructuring or remain in the pool after modification. The guidance also clarifies that modifications of loans that are accounted for within a pool do not result in the removal of those loans from the pool even if the modification of those loans would otherwise be considered a troubled debt restructuring. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if the expected cash flows for the pool change. The amendments in

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this update do not require any additional disclosures and are effective for modifications of loans accounted for within pools occurring in the first interim or annual period ending on or after July 15, 2010. This guidance is not expected to have a significant impact on our consolidated financial statements.

     In July 2010, the FASB issued ASU 2010-20, “Receivables (Subtopic 310)-Disclosures About the Credit Quality of Financing Receivables and the Allowance for Credit Losses.” The main objective of ASU 2010-20 is to provide financial statement users greater transparency about an entity’s allowance for credit losses and the credit quality of its financing receivables. Existing disclosure guidance was amended to require an entity to provide a greater level of disaggregated information about the credit quality of its financing receivables and its allowance for credit losses. In addition, the amendments in ASU 2010-20 require an entity to disclose credit quality indicators, past due information, and modifications of its financing receivables. These improvements will help financial statement users assess an entity’s credit risk exposures and its allowance for credit losses. ASU 2010-20 is effective for interim or annual periods ending on or after December 31, 2010. Since ASU 2010-20 only requires enhanced disclosures, management does not expect the adoption of this statement to have a material impact on our consolidated financial statements or results of operations.

Effect of Inflation and Changing Prices

     The consolidated financial statements and related financial data presented in this prospectus have been prepared according to generally accepted accounting principles in the United States, which require the measurement of financial positions and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution’s performance than do general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

Our Management

Board of Directors

     The board of directors of Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association are each comprised of five persons who are elected for terms of three years, approximately one-third of whom are elected annually. The same individuals comprise the boards of directors of Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association.

     Three of our five directors are independent under the current listing standards of the Nasdaq Stock Market. The two directors who are not independent under such standards are Thomas K. Sterner, who serves as Chairman, Chief Executive Officer and Chief Financial Officer of Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association, and Richard C. Schultze, who serves as President and Chief Operating Officer of Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association.

     Information regarding the directors is provided below. Unless otherwise stated, each person has held his or her current occupation for the last five years. Ages presented are as of June 30, 2010. The starting year of service as a director relates to service on the board of directors of Fraternity Federal Savings and Loan Association.

     The following directors have terms ending in 2011:

     Michael P. O’Shea has been the President and Chief Executive Officer of O’Shea Lumber Company since 1971. Director since 2002. Age 67.

     Mr. O’Shea provides the Board with significant management, strategic and operational knowledge through his experience as President and Chief Executive Officer of O’Shea Lumber Company. In addition, Mr. O’Shea provides the Board of Directors with valuable insight regarding Fraternity Federal Savings and Loan Association’s

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market area through his experience as President and Chief Executive Officer of O’Shea Lumber Company over the past 39 years.

     Richard C. Schultze has served with Fraternity Federal Savings and Loan Association since 1990 and has been our President and Chief Operating Officer since 1993. Director since 1993. Age 55.

     Through his affiliation with Fraternity Federal Savings and Loan Association for over 20 years and with over 32 years in the banking industry, Mr. Schultze brings in-depth knowledge and understanding of the banking business and our history, operations and customer base. In addition, Mr. Schultze has been a resident of Fraternity Federal Savings and Loan Association’s market area for many years and is an active member of the community. Mr. Schultze’s active involvement in the community has helped him establish a network of contacts that greatly assists us in our marketing efforts.

     The following directors have terms ending in 2012:

     William D. Norton is the co-founder of and has served as an Executive Vice President of Red Bag Solutions since March 2002. In addition to co-founding Red Bag Solutions, Mr. Norton has been a Managing Member of Waste Processing Solutions Service Co. since May 2010. Director since 2003. Age 63.

     Mr. Norton has lived in Fraternity Federal Savings and Loan Association’s market area for many years and has developed extensive ties to the market area. Additionally, Mr. Norton’s management experience as a small business owner of two other companies in the local area have provided him with leadership experience and expertise that is valuable to the Board of Directors.

     Thomas K. Sterner has served with Fraternity Federal Savings and Loan Association since January 1988 and has been our Chairman of the Board and Chief Executive Officer since 1993. He also serves as our Chief Financial Officer. Director since 1993. Age 51.

     Mr. Sterner’s over 31 years of banking experience, including 22 years with Fraternity Federal Savings and Loan Association, have provided him with strong leadership and managerial skills, as well as a deep understanding of the financial industry. In addition, Mr. Sterner’s knowledge of all aspects of our business and its history, combined with his success and strategic vision, position him well to serve as our Chairman, Chief Executive Officer and Chief Financial Officer.

     The following director has a term ending in 2013:

     William J. Baird, Jr. began his career with Armco Steel as an industrial engineer and in 1963 became a Partner in an engineering consulting business which he then sold in 1976. At that time, he started a risk management insurance consulting firm which, after several mergers, became part of the Willis Group, a global risk consulting/brokerage operation where he held several senior management positions. He retired in 1995. Mr. Baird has been involved in numerous for-profit and not-for profit organizations over 50 years, including service on the boards of directors of three hospitals, two universities, three private businesses and numerous charities. Director since 2009. Age 70.

     Mr. Baird provides extensive management experience in both large and small firm settings as well as critical experience in risk management related matters. In addition, Mr. Baird’s continued involvement in community organizations and local matters is a vital component of a well rounded board.

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Executive Officers

     The executive officers of Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association are elected annually by the board of directors and serve at the board’s discretion. The executive officers of Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association are:

Name	Position
Thomas K. Sterner	Chairman of the Board, Chief Executive Officer and Chief Financial Officer of Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association
Richard C. Schultze	President and Chief Operating Officer of Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association

Meetings and Committees of the Board of Directors

     We conduct business through meetings of our board of directors and its committees. During the year ended December 31, 2009, the board of directors of Fraternity Federal Savings and Loan Association met 28 times. As Fraternity Community Bancorp was incorporated in October 2010, the board of directors of Fraternity Community Bancorp did not meet during the year ended December 31, 2009.

     In connection with the formation of Fraternity Community Bancorp, the board of directors established Audit, Compensation and Nominating Committees.

     The Audit Committee consists of Michael P. O’Shea, William D. Norton and William J. Baird, Jr. The Audit Committee is responsible for providing oversight relating to our financial statements and financial reporting process, systems of internal accounting and financial controls, internal audit function, annual independent audit and the compliance and ethics programs established by management and the board. Each member of the Audit Committee is independent in accordance with the listing standards of the Nasdaq Stock Market. The board of directors of Fraternity Community Bancorp has designated William D. Norton as an audit committee financial expert under the rules of the Securities and Exchange Commission.

     The Compensation Committee consists of Michael P. O’Shea, William D. Norton and William J. Baird, Jr. The Compensation Committee is responsible for human resources policies, salaries and benefits, incentive compensation, executive development and management succession planning. Each member of the Compensation Committee is independent in accordance with the listing standards of the Nasdaq Stock Market.

     The Nominating Committee consists of Michael P. O’Shea, William D. Norton and William J. Baird, Jr. The Nominating Committee is responsible for identifying individuals qualified to become board members and recommending a group of nominees for election as directors at each annual meeting of shareholders, ensuring that the board and its committees have the benefit of qualified and experienced independent directors, and developing a set of corporate governance policies and procedures. Each member of the Nominating Committee is independent in accordance with the listing standards of the Nasdaq Stock Market.

     Each of Fraternity Community Bancorp’s committees listed above operates under a written charter, which governs its composition, responsibilities and operations.

Corporate Governance Policies and Procedures

     In addition to having established committees of the board of directors, Fraternity Community Bancorp has also adopted certain policies to govern the activities of both Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association, including a code of business conduct and ethics.

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     The code of business conduct and ethics, which applies to all employees and directors, addresses conflicts of interest, the treatment of confidential information, general employee conduct and compliance with applicable laws, rules and regulations. In addition, the code of business conduct and ethics is designed to deter wrongdoing and to promote honest and ethical conduct, the avoidance of conflicts of interest, full and accurate disclosure and compliance with all applicable laws, rules and regulations.

Executive Compensation

Summary Compensation Table

     The following information is furnished for our principal executive officer and the next most highly compensated executive officer whose total compensation for the year ended December 31, 2009 exceeded $100,000. These individuals are referred to in this prospectus as “named executive officers.”

							All Other
Name and Principal Position	Year		Salary		Bonus		Compensation (1)		Total
Thomas K. Sterner		2009	$	193,744	$	21,500	$	41,335	$	256,579
Chairman of the Board, Chief Executive Officer and Chief Financial Officer
Richard C. Schultze		2009		193,744		21,500		38,333		253,577
President and Chief Operating Officer

(1) Details of the amounts disclosed in the “All Other Compensation” column are provided in the table below:

	Mr. Sterner		Mr. Schultze
Employer matching contribution to 401(k) plan	$	9,024	$	11,003
Contributions under deferred compensation arrangement		9,750		9,750
Directors fees		22,561		17,580
Total	$	41,335	$	38,333

Employment Agreements and Severance Plan

     Current Employment Agreement. On September 15, 2009, Fraternity Federal Savings and Loan Association entered into employment agreements with Messrs. Sterner and Schultze. Each of the agreements contain the same general terms, except for the employment positions with each of the executives. The agreements provide for a three-year term, subject to annual renewal by the board of directors for an additional year beyond the then-current expiration date. As extended, the term of the agreements currently expires on September 15, 2013. Under the agreements, the current annual base salary for each of Messrs. Sterner and Schultze is $205,368. We may modify the amount of the base salaries under the agreements from time to time and will review the salaries not less than annually. We may also pay Messrs. Sterner and Schultze discretionary bonuses. The executives also participate in all standard benefit plans and programs we sponsor for employees or other officers.

     In addition to providing for base salary and other benefits, the employment agreements incorporate the terms of a deferred compensation program originally established in 2004. Pursuant to that program, we contribute to a trust for the benefit of each of the executives $812.50 each month. Each executive is fully vested in these contributions, plus any earnings on the contributions. Following their termination of employment, the trust will pay the accumulated benefit to Messrs. Sterner and Schultze weekly over a 15-year period. However, upon a change in control, the trust will pay the accumulated benefits in a single lump sum payment.

     Under the employment agreements, if we terminate Messrs. Sterner’s or Schultze’s employment for “cause,” as that term is defined in the agreements, they will not receive any compensation for any period of time after the termination date. If we terminate the executives’ employment without cause, we will continue to pay their base salary for 36 months. In addition, we will continue health and life insurance benefits for the executive and his dependents until the earlier of (i) the date the executive turns age 65, (ii) his death or (iii) 36 months from his

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termination. We will also provide the severance payment and benefits to the executives if they voluntarily terminate employment for “good reason.” Under the agreement, the executives have good reason to terminate employment upon (i) a material diminution of base salary, (ii) a material diminution of authorities, duties or responsibilities or (iii) a relocation of place of employment by more than 30 miles.

     If we, or our successor, terminate Messrs. Sterner’s or Schultze’s employment during the term of the employment agreements following a change in control or if they voluntarily terminate employment with us or our successor during the term of the agreements for “good reason” (as described above) following a change in control, they will receive a lump sum severance benefit equal to 2.99 times their average taxable income for the five taxable years preceding the change in control. In addition, we will continue health and life insurance benefits for the executive and his dependents until the earlier of (i) the date the he turns age 65, (ii) his death or (iii) 36 months from his termination.

     Proposed Employment Agreements. Upon completion of the conversion, Fraternity Community Bancorp expects to enter into separate employment agreements with each of Messrs. Sterner and Schultze on the same general terms as contained in the agreements with Fraternity Federal Savings and Loan Association.

     Employee Severance Compensation Plan. In connection with the conversion, we expect to adopt an employee severance plan to provide benefits to eligible employees who terminate employment in connection with or following a change in control. Employees become eligible for severance benefits under the plan if they complete a minimum of one year of service and do not enter into a separate employment or change in control agreement. Under the severance plan, if, within twelve months after a change in control, an employee’s employment involuntarily terminates, or if an employee voluntarily terminates employment without being offered continued employment in a comparable position, the terminated employee would receive a severance payment equal to two weeks of base compensation for each year of service up to a maximum of 52 weeks of base compensation and with a minimum of four (4) weeks base compensation. Based solely on compensation levels and years of service at June 30, 2010, and assuming that a change in control occurred on June 30, 2010, and all eligible employees became entitled to severance payments, the aggregate payments due under the severance plan would equal approximately $388,000.

Benefit Plans

     401(k) Plan. We maintain the Fraternity Federal Savings and Loan Association 401(k) Plan, a tax-qualified defined contribution plan, for all employees of Fraternity Federal Savings and Loan Association who satisfy the plan’s eligibility requirements. Participants become eligible to participate in the plan on the first day of the month that coincides with or next follows the date they complete one year of employment. Eligible employees may contribute up to 50% of their compensation to the plan on a pre-tax basis, subject to limitations imposed by the Internal Revenue Code. For 2010, the salary deferral contribution limit is $16,500; provided, however, that participants over age 50 may contribute an additional $5,500 to the plan. Participants are always 100% vested in their salary deferral contributions. In addition to salary deferral contributions, the plan provides that we will make a safe harbor matching contribution equal to 100% of the participant’s deferrals, not to exceed 4% of the participant’s salary, plus 50% of the next 2% of the participant’s elective contributions. In addition, we currently make monthly basic contributions equal to 3% of each participant’s compensation. Participants are 100% vested in employer contributions under the plan. The plan allows participants to take loans and other in-service distributions in accordance with certain requirements set forth in the plan. Participants have individual accounts under the plan and may direct the investment of their accounts among a variety of investment funds. In connection with the offering, we expect to add another investment alternative, the Fraternity Community Bancorp Stock Fund (the “Stock Fund”), which will permit participants to use their 401(k) plan funds to purchase Fraternity Community Bancorp common stock in the offering as an investment under the 401(k) plan. Unlike the employee stock ownership plan, the 401(k) plan does not have priority subscription rights to purchase common stock in the offering. A 401(k) plan participant who elects to purchase common stock in the offering through self-directed purchases within the plan will receive the same subscription priority, and be subject to the same purchase limitations, as if the participant had elected to purchase the common stock using funds outside the plan. See “The Conversion and Stock Offering—Subscription Offering and Subscription Rights” and "—Limitations on the Purchase of Shares.” The Stock Fund trustee will purchase common stock in the offering on behalf of plan participants, to the extent that shares are available. Participants will direct the trustee regarding the voting of shares purchased for their plan accounts through the Stock Fund.

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     Employee Stock Ownership Plan. In connection with the conversion, Fraternity Federal Savings and Loan Association has adopted an employee stock ownership plan for eligible employees. Eligible employees will participate in the employee stock ownership plan as of the first day of the month following or coincident with their completion of one year of service.

     We may engage an independent third party to act as trustee of the plan or we may appoint certain directors or officers to serve as trustees of the plan. The trustees, on behalf of the employee stock ownership plan, will subscribe for up to 8% of the number of shares of common stock sold in the conversion 81,600, 96,000, 110,400 and 126,960 shares at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively). The purchase of common stock by the employee stock ownership plan in the offering will comply with all applicable Office of Thrift Supervision regulations. The trustees will fund the stock purchase for the plan through a loan from Fraternity Community Bancorp equal to 100% of the aggregate purchase price of the common stock. The plan will repay the loan principally through contributions to the employee stock ownership plan by Fraternity Federal and any dividends paid on common stock held by the plan over an expected 12-year term of the loan. We anticipate that the fixed interest rate for the will equal the prime rate, as published in the Wall Street Journal, on the closing date of the offering. See “Pro Forma Data.”

     The trustee will hold the shares purchased by the employee stock ownership plan in a loan suspense account, and will release the shares from the suspense account on a pro rata basis as Fraternity Federal Savings and Loan Association repays the loan. The trustee will allocate the shares released among active participants on the basis of each active participant’s proportional share of compensation. Participants will vest in their employee stock ownership plan allocations at the rate of 33.3% per year beginning after two years of service. Participants will be credited with past service for vesting purposes under the employee stock ownership plan. Participants will become fully vested upon age 65, death or disability, a change in control, or termination of the plan. Generally, participants will receive distributions from the employee stock ownership plan upon separation from service. The plan reallocates any unvested shares of common stock forfeited upon termination of employment among the remaining participants in the plan.

     Participants may direct the plan trustee how to vote the shares of common stock credited to their accounts. The plan trustee will vote all unallocated shares and allocated shares for which participants do not provide instructions on any matter in the same ratio as it votes those shares for which participants provide instructions, subject to fulfillment of its fiduciary responsibilities as trustee.

     Under applicable accounting requirements, Fraternity Federal Savings and Loan Association will record a compensation expense for a leveraged employee stock ownership plan at the fair market value of the shares when they are committed to be released from the suspense account to participants’ accounts under the plan.

Equity Incentive Plans

     Future Equity Incentive Plan. Following the conversion, Fraternity Community Bancorp plans to adopt an equity incentive plan that will provide for grants of stock options and restricted stock. In accordance with applicable regulations, we anticipate that the plan, if adopted within the first year after the offering, will authorize a number of stock options equal to 10% of the shares sold in the conversion stock offering and a number of shares of restricted stock equal to 4% of the shares sold in the offering. Therefore, the number of shares reserved under the plan, if adopted within that one-year period, will range from 142,800 shares, assuming 1,020,000 shares are sold in the offering at the minimum of the offering range, to 193,200 shares, assuming 1,380,000 shares are sold in the offering at the maximum of the offering range. If we adopt the equity incentive plan more than one year after completion of the offering, we would not be subject to Office of Thrift Supervision regulations limiting the awards we may make under the plan or certain other requirements applicable to the plan implemented within the first year of conversion. We may fund the plan with shares we purchase in the open market or with authorized, but unissued shares, of common stock. We may also establish a trust to hold shares subject to the terms of the plan. In determining the source of shares transferred to participants of the plan, we will consider our financial condition and results of operations, capital requirements, economic conditions and whether sufficient shares are available for purchase in the open market. The equity incentive plan will comply with all applicable required Office of Thrift Supervision regulations except to the extent waived by the Office of Thrift Supervision.

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Nonqualified Deferred Compensation

     Deferred Compensation Arrangement. Each month, we contribute $812.50 to a trust for the benefit of Messrs. Sterner and Schultze. The trust will pay the accumulated benefit of these contributions, plus any earnings on the contributions, to Messrs. Sterner and Schultze either in a lump sum upon a change in control or over a 15-year period following the executive’s termination from employment. For more information on this benefit see Employment Agreements and Severance Plan — Current Employment Agreement.

     Existing Supplemental Executive Retirement Plan. On September 15, 2009, Fraternity Federal established a supplemental executive retirement plans for the benefit of Messrs. Sterner and Schultze. Under the plans, if Mr. Sterner or Mr. Schultze terminates employment after attaining age 65, we will pay an annual retirement benefit of $90,115 for Mr. Sterner or $65,196 for Mr. Schultze for 15 years (the “Normal Retirement Benefit”). If either executive terminates employment before attaining age 65, we will pay him a reduced retirement benefit equal to the amount we have accrued to date toward his Normal Retirement Benefit (the “Early Retirement Benefit”) in equal monthly installments for 15 years. If either executive terminates employment at any time following a change in control, regardless of age, we will pay him a lump sum benefit equal to the present value of his Normal Retirement Benefit. If either executive dies while employed with Fraternity Federal Savings and Loan Association, we will pay his beneficiaries a single lump sum benefit equal to the lesser of $1.0 million or a portion of the insurance proceeds from a life insurance policy on the life of the applicable executive pursuant to the terms of a death benefit plan agreement we have entered into with each executive. If an executive dies after terminating employment and while receiving payments under the plan, we will pay his beneficiaries a lump sum payment equal to the present value of remaining scheduled payments under the plan.

     Proposed Excess Benefit Supplemental Executive Retirement Plan. Following the conversion, we intend to implement a supplemental executive retirement plan to provide for supplemental retirement benefits with respect to the employee stock ownership plan and 401(k) plan. The plan will provide participating executives with benefits otherwise limited by other provisions of the Internal Revenue Code or the terms of the employee stock ownership plan loan. Specifically, the plan will provide benefits to eligible individuals (those designated by our board of directors) that cannot be provided under the employee stock ownership plan or 401(k) plan as a result of the limitations imposed by the Internal Revenue Code, but that would have been provided under those plans but for such limitations. In addition to providing for benefits lost under tax-qualified plans as a result of limitations imposed by the Internal Revenue Code, the new plan will also provide supplemental benefits to designated individuals upon a change of control before the complete scheduled repayment of the employee stock ownership plan loan. Generally, upon a change in control, the supplemental executive retirement plan will provide the participant with a benefit equal to the benefit the individual would have received under the employee stock ownership plan had he remained employed throughout the term of the employee stock ownership plan loan less the benefits actually provided under the employee stock ownership on behalf of the participant. An individual’s benefit under the supplemental executive retirement plan will become payable upon a separation from service.

Director Compensation

     The following table provides the compensation received by individuals, who are not executive officers, who served as directors of Fraternity Federal Savings and Loan Association during the 2009 fiscal year. Since the formation of Fraternity Community Bancorp, no directors have received compensation for service as a director of Fraternity Community Bancorp.

	Fees Earned or
	Paid in Cash		Total
William J. Baird, Jr.	$	3,780	$	3,780
William D. Norton	$	20,457	$	20,456
Michael P. O’Shea	$	20,226	$	20,225

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     Meeting Fees for Non-Employee Directors. The following table sets forth the applicable fees that are paid to our non-employee directors for their service on the board of directors of Fraternity Federal Savings and Loan Association. Members of the board of directors of Fraternity Community Bancorp will not receive additional fees for service on the Company’s board of directors.

Board of Directors of Fraternity Federal Savings and Loan Association:
Fee for each board meeting attended	$	630
Additional fee for each asset and liability committee and loan committee meeting attended		125

Director Retirement Policy

     In 2009, Fraternity Federal established a director retirement policy under which Messrs. O’Shea and Norton participate. Pursuant to that policy, each director will receive an annual retirement benefit of $16,000, payable for 10 years, beginning upon his retirement at age 75.

Transactions with Fraternity Federal Savings and Loan Association

     Loans and Extensions of Credit. The Sarbanes-Oxley Act of 2002 generally prohibits loans by publicly traded companies to its executive officers and directors. However, the Sarbanes-Oxley Act contains a specific exemption from such prohibition for loans by banks to their executive officers and directors in compliance with federal banking regulations. Federal regulations generally require that all loans or extensions of credit to executive officers and directors of insured institutions must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and must not involve more than the normal risk of repayment or present other unfavorable features, although federal regulations allow us to make loans to executive officers and directors at reduced interest rates if the loan is made under a benefit program generally available to all other employees that does not give preference to any executive officer or director over any other employee.

     In addition, loans made to a director or executive officer in an amount that, when aggregated with the amount of all other loans to the person and his or her related interests, are in excess of the greater of $25,000 or 5% of Fraternity Federal Savings and Loan Association’s capital and surplus, up to a maximum of $500,000, must be approved in advance by a majority of the disinterested members of the board of directors. See “Regulation and Supervision — Regulation of Federal Savings Banks — Transactions with Related Parties.”

     The outstanding balance of loans extended by Fraternity Federal Savings and Loan Association to its executive officers and directors and related parties was $814,000 at June 30, 2010, or approximately 3.1% of pro forma shareholders’ equity assuming that 1,200,000 shares are sold in the offering at the midpoint of the offering range. Such loans were made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to Fraternity Federal Savings and Loan Association, and did not involve more than the normal risk of collectibility or present other unfavorable features when made. All loans were performing according to their original terms at June 30, 2010.

     Other Transactions. Since January 1, 2008, there have been no transactions and there are no currently proposed transactions in which we were or are to be a participant and the amount involved exceeds $120,000, and in which any of our executive officers and directors had or will have a direct or indirect material interest.

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Indemnification for Directors and Officers

     Fraternity Community Bancorp’s articles of incorporation provide that Fraternity Community Bancorp shall indemnify its directors and officers, whether serving the Fraternity Community Bancorp or at its request any other entity, to the fullest extent required or permitted by the general laws of the State of Maryland, including the advance of expenses under the procedures required, and other employees and agents to such extent as shall be authorized by the board of directors or Fraternity Community Bancorp’s bylaws and as permitted by law. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of Fraternity Community Bancorp pursuant to its articles of incorporation or otherwise, Fraternity Community Bancorp has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

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Subscriptions by Executive Officers and Directors

     The following table presents certain information as to the proposed purchases of common stock by our directors and executive officers, including their associates, if any, as defined by applicable regulations. No individual has entered into a binding agreement to purchase these shares and, therefore, actual purchases could be more or less than indicated. Directors and executive officers and their associates may not purchase in the aggregate more than 32% of the shares sold in the offering. Like all of our depositors, our directors and officers have subscription rights based on their deposits. For purposes of the following table, sufficient shares are assumed to be available to satisfy subscriptions in all categories. All directors and officers as a group would own 4.4% of our outstanding shares at the minimum of the offering range and 3.3% of our outstanding shares at the maximum of the offering range.

	Proposed Purchases of Stock in the Offering
					Percent of Common
					Stock Outstanding at
	Number of				Minimum of Offering
Name	Shares		Dollar Amount		Range
Directors:
William J. Baird, Jr.		2,500	$	25,000		0.2	%
William D. Norton		5,000		50,000		0.5
Michael P. O’Shea		2,500		25,000		0.2
Richard C. Schultze		15,000		150,000		1.5
Thomas K. Sterner		20,000		200,000		2.0
All directors and executive officers as a group (5 persons)		45,000	$	450,000		4.4	%

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Regulation and Supervision

General

     Fraternity Federal Savings and Loan Association is subject to extensive regulation, examination and supervision by the Office of Thrift Supervision, as its primary federal regulator, and the Federal Deposit Insurance Corporation, as its deposits insurer. Fraternity Federal Savings and Loan Association is a member of the Federal Home Loan Bank System, and its deposit accounts are insured up to applicable limits by the Deposit Insurance Fund managed by the Federal Deposit Insurance Corporation. Fraternity Federal Savings and Loan Association must file reports with the Office of Thrift Supervision and the Federal Deposit Insurance Corporation concerning its activities and financial condition in addition to obtaining regulatory approval before entering into certain transactions such as mergers with, or acquisitions of, other financial institutions. There are periodic examinations by the Office of Thrift Supervision and, under certain circumstances, the Federal Deposit Insurance Corporation, to evaluate Fraternity Federal Savings and Loan Association’s safety and soundness and compliance with various regulatory requirements. This regulatory structure is intended primarily for the protection of the insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such policies, whether by the Office of Thrift Supervision, the Federal Deposit Insurance Corporation or Congress, could have a material adverse impact on Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association and their operations. Fraternity Community Bancorp, as a savings and loan holding company, will be required to file certain reports with, is subject to examination by, and otherwise must comply with the rules and regulations of the Office of Thrift Supervision. Fraternity Community Bancorp will also be subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

     The Dodd-Frank Act, signed by the President on July 21, 2010, provides for the regulation and supervision of federal savings associations like Fraternity Federal Savings and Loan Association to be transferred to the Office of the Comptroller of the Currency, the agency that regulates national banks. The Office of The Comptroller of the Currency will assume primary responsibility for implementing and enforcing many of the laws and regulations applicable to federal savings associations. The transfer will occur over a transition period of up to one year, subject to a possible six month extension. At the same time, the responsibility for supervising savings and loan holding companies like Fraternity Community Bancorp will be transferred to the Federal Reserve Board. The Dodd-Frank Act also provides for the creation of a new agency, the Consumer Financial Protection Bureau, as an independent bureau of the Federal Reserve Board, to take over the implementation of federal consumer financial protection and fair lending laws from the depository institution regulators. However, institutions of $10 billion or fewer in assets will continue to be examined for compliance with such laws and regulations by, and subject to the enforcement authority of, the prudential regulator rather than the Consumer Financial Protection Bureau.

     The material regulatory requirements that are or will be applicable to Fraternity Federal Savings and Loan Association and Fraternity Community Bancorp are described below. This description of statutes and regulations is not intended to be a complete explanation of such statutes and regulations and their effects on Fraternity Federal Savings and Loan Association and Fraternity Community Bancorp.

Regulation of Federal Savings Association

     Business Activities. Federal law and regulations, primarily the Home Owners’ Loan Act and the regulations of the Office of Thrift Supervision, govern the activities of federal savings associations, such as Fraternity Federal Savings and Loan Association. These laws and regulations delineate the nature and extent of the activities in which federal savings associations may engage. In particular, certain lending authority for federal savings associations, e.g., commercial, nonresidential real property loans and consumer loans, is limited to a specified percentage of the institution’s capital or assets.

     The Dodd-Frank Act authorizes depository institutions to pay interest on demand deposits effective July 31, 2011. Depending upon competitive responses, that change could have an adverse impact on Fraternity Federal Savings and Loan Association’s interest expense.

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     Branching. Federal savings associations are authorized to establish branch offices in any state or states of the United States and its territories, subject to the approval of the Office of Thrift Supervision.

     Capital Requirements. The Office of Thrift Supervision’s capital regulations require federal savings institutions to meet three minimum capital standards: a 1.5% tangible capital to total assets ratio, a 4% leverage ratio (3% for institutions receiving the highest rating on the CAMELS examination rating system) and an 8% risk-based capital ratio. In addition, the prompt corrective action standards discussed below establish, in effect, a minimum 2% tangible capital standard, a 4% leverage ratio (3% for institutions receiving the highest rating on the CAMELS system) and, together with the risk-based capital standard itself, a 4% Tier 1 risk-based capital standard. The Office of Thrift Supervision regulations also require that, in meeting the tangible, leverage and risk-based capital standards, institutions must generally deduct investments in and loans to subsidiaries engaged in activities as principal that are not permissible for national banks.

     The risk-based capital standard requires federal savings institutions to maintain Tier 1 (core) and total capital (which is defined as core capital and supplementary capital) to risk-weighted assets of at least 4% and 8%, respectively. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, recourse obligations, residual interests and direct credit substitutes, are multiplied by a risk-weight factor of 0% to 1,250%, assigned by the Office of Thrift Supervision capital regulation based on the risks believed inherent in the type of asset. Core (Tier 1) capital is defined as common shareholders’ equity (including retained earnings), certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries, less intangibles other than certain mortgage servicing rights and credit card relationships. The components of supplementary capital currently include cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock, the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and up to 45% of unrealized gains on available-for-sale equity securities with readily determinable fair market values. Overall, the amount of supplementary capital included as part of total capital cannot exceed 100% of core capital.

     The Office of Thrift Supervision also has authority to establish individual minimum capital requirements in appropriate cases upon a determination that an institution’s capital level is or may become inadequate in light of the particular circumstances. At June 30, 2010, Fraternity Federal Savings and Loan Association met each of these capital requirements. See note 13 of the notes to consolidated financial statements included in this prospectus.

     Prompt Corrective Regulatory Action. The Office of Thrift Supervision is required to take certain supervisory actions against undercapitalized institutions, the severity of which depends upon the institution’s degree of undercapitalization. Generally, a savings institution that has a ratio of total capital to risk-weighted assets of less than 8%, a ratio of Tier 1 (core) capital to risk-weighted assets of less than 4% or a ratio of core capital to total assets of less than 4% (3% or less for institutions with the highest examination rating) is considered to be “undercapitalized.” A savings institution that has a total risk-based capital ratio of less than 6%, a Tier 1 capital ratio of less than 3% or a leverage ratio that is less than 3% is considered to be “significantly undercapitalized” and a savings institution that has a tangible capital to assets ratio equal to or less than 2% is deemed to be “critically undercapitalized.” Subject to a narrow exception, the Office of Thrift Supervision is required to appoint a receiver or conservator within specified time frames for an institution that is “critically undercapitalized.” An institution must file a capital restoration plan with the Office of Thrift Supervision within 45 days of the date it receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Compliance with the plan must be guaranteed by any parent holding company in the amount of the lesser of 5% of the association’s total assets when it became undercapitalized or the amount necessary to achieve full compliance at the time the association first failed to comply. In addition, numerous mandatory supervisory actions become immediately applicable to an undercapitalized institution, including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions and expansion. “Significantly undercapitalized” and “critically undercapitalized” institutions are subject to more extensive mandatory regulatory actions. The Office of Thrift Supervision could also take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and directors. At June 30, 2010, Fraternity Federal Savings and Loan Association was considered “well capitalized” under these regulations.

     Loans to One Borrower. Federal law provides that savings institutions are generally subject to the limits on loans to one borrower applicable to national banks. Subject to certain exceptions, a savings institution may

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not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capital and surplus. An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by specified readily-marketable collateral. See “Our Business — Lending Activities — Loans to One Borrower.”

     Standards for Safety and Soundness. As required by statute, the federal banking agencies have adopted Interagency Guidelines Establishing Standards for Safety and Soundness. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the Office of Thrift Supervision determines that a savings institution fails to meet any standard prescribed by the guidelines, the Office of Thrift Supervision may require the institution to submit an acceptable plan to achieve compliance with the standard.

     Limitation on Capital Distributions. Office of Thrift Supervision regulations impose limitations upon all capital distributions by a savings institution, including cash dividends, payments to repurchase its shares and payments to shareholders of another institution in a cash-out merger. Under the regulations, an application to and the prior approval of the Office of Thrift Supervision is required before any capital distribution if the institution does not meet the criteria for “expedited treatment” of applications under Office of Thrift Supervision regulations (i.e., generally, examination and Community Reinvestment Act ratings in the two top categories), the total capital distributions for the calendar year exceed net income for that year plus the amount of retained net income for the preceding two years, the institution would be undercapitalized following the distribution or the distribution would otherwise be contrary to a statute, regulation or agreement with the Office of Thrift Supervision. If an application is not required, the institution must still provide prior notice to the Office of Thrift Supervision of the capital distribution if it is a subsidiary of a holding company, like Fraternity Federal Savings and Loan Association will be upon the completion of the conversion. If Fraternity Federal Savings and Loan Association’s capital were ever to fall below its regulatory requirements or the Office of Thrift Supervision notified it that it was in need of increased supervision, its ability to make capital distributions could be restricted. In addition, the Office of Thrift Supervision could prohibit a proposed capital distribution that would otherwise be permitted by the regulation, if the agency determines that such distribution would constitute an unsafe or unsound practice.

     Qualified Thrift Lender Test. Federal law requires savings institutions to meet a qualified thrift lender test. Under the test, a savings association is required to either qualify as a “domestic building and loan association” under the Internal Revenue Code or maintain at least 65% of its “portfolio assets” (total assets less: (i) specified liquid assets up to 20% of total assets; (ii) intangibles, including goodwill; and (iii) the value of property used to conduct business) in certain “qualified thrift investments” (primarily residential mortgages and related investments, including certain mortgage-backed securities) in at least nine months out of each 12-month period.

     A savings institution that fails the qualified thrift lender test is subject to certain operating restrictions. The Dodd-Frank Act also makes noncompliance with the qualified thrift lender test subject to agency enforcement action for a violation of law and a basis for dividend restrictions. As of June 30, 2010, Fraternity Federal Savings and Loan Association maintained 95.01% of its portfolio assets in qualified thrift investments and, therefore, met the qualified thrift lender test.

     Transactions with Related Parties. Fraternity Federal Savings and Loan Association’s authority to engage in transactions with “affiliates” is limited by Office of Thrift Supervision regulations and Sections 23A and 23B of the Federal Reserve Act as implemented by the Federal Reserve Board’s Regulation W. The term “affiliates” for these purposes generally means any company that controls or is under common control with an institution. Fraternity Community Bancorp and any of its non-savings institution subsidiaries would be affiliates of Fraternity Federal Savings and Loan Association. In general, transactions with affiliates must be on terms that are as favorable to the institution as comparable transactions with non-affiliates. In addition, certain types of transactions are restricted to 10% of an institution’s capital and surplus with any one affiliate and 20% of capital and surplus with all affiliates. Collateral in specified amounts must usually be provided by affiliates in order to receive loans from an institution. In addition, savings institutions are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies and no savings institution may purchase the securities of any affiliate other than a subsidiary.

     The Sarbanes-Oxley Act of 2002 generally prohibits a company from making loans to its executive officers and directors. However, that act contains a specific exception for loans by a depository institution to its executive

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officers and directors in compliance with federal banking laws. Under such laws, Fraternity Federal Savings and Loan Association’s authority to extend credit to executive officers, directors and 10% shareholders (“insiders”), as well as entities such persons control, is limited. The law restricts both the individual and aggregate amount of loans Fraternity Federal Savings and Loan Association may make to insiders based, in part, on Fraternity Federal Savings and Loan Association’s capital position and requires certain board approval procedures to be followed. Such loans must be made on terms substantially the same as those offered to unaffiliated individuals and not involve more than the normal risk of repayment. There is an exception for loans made pursuant to a benefit or compensation program that is widely available to all employees of the institution and does not give preference to insiders over other employees. There are additional restrictions applicable to loans to executive officers. For information about transactions with our directors and officers, see “Our Management —Transactions with Fraternity Federal Savings and Loan Association.”

     Enforcement. The Office of Thrift Supervision has primary enforcement responsibility over federal savings institutions and has the authority to bring actions against the institution and all institution-affiliated parties, including shareholders, and any attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution. Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors to institution of receivership, or conservatorship. Civil penalties cover a wide range of violations and can amount to $25,000 per day, or even $1 million per day in especially egregious cases. The Federal Deposit Insurance Corporation has authority to recommend to the Director of the Office of Thrift Supervision that enforcement action be taken with respect to a particular savings institution. If action is not taken by the Director, the Federal Deposit Insurance Corporation has authority to take such action under certain circumstances. Federal law also establishes criminal penalties for certain violations.

     The Office of the Comptroller of the Currency will assume the enforcement authority of the Office of Thrift Supervision as part of the Dodd-Frank Act regulatory restructuring.

     Assessments. Federal savings associations are required to pay assessments to the Office of Thrift Supervision to fund its operations. The general assessments, paid on a semi-annual basis, are based upon the savings institution’s total assets, including consolidated subsidiaries, as reported in the institution’s latest quarterly thrift financial report, the institution’s financial condition and the complexity of its asset portfolio. The Office of the Comptroller of the Currency also funds its operations through assessments on regulated institutions.

     Insurance of Deposit Accounts. Fraternity Federal Savings and Loan Association’s deposits are insured up to applicable limits by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation. Under the Federal Deposit Insurance Corporation’s risk-based assessment system, insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other factors, with less risky institutions paying lower assessments. An institution’s assessment rate depends upon the category to which it is assigned, and certain potential adjustments established by Federal Deposit Insurance Corporation regulations. Effective April 1, 2009, assessment rates range from seven to 77.5 basis points of assessable deposits. Beginning January 1, 2011, assessment rates will range from 10 to 80.5 basis points of assessable deposits. The Federal Deposit Insurance may adjust the scale uniformly from one quarter to the next, except that no adjustment can deviate more than three basis points from the base scale without notice and comment. No institution may pay a dividend if in default of the federal deposit insurance assessment.

     The Federal Deposit Insurance Corporation imposed on all insured institutions a special emergency assessment of five basis points of total assets minus Tier 1 capital (as of June 30, 2009), capped at ten basis points of an institution’s deposit assessment base, in order to cover losses to the Deposit Insurance Fund. That special assessment, in the amount of $76,000, was collected on September 30, 2009. The Federal Deposit Insurance Corporation provided for similar assessments during the final two quarters of 2009, if deemed necessary. However, in lieu of further special assessments, the Federal Deposit Insurance Corporation required insured institutions to prepay estimated quarterly risk-based assessments for the fourth quarter of 2009 through the fourth quarter of 2012. Such amount was $629,000 for the Fraternity Federal Savings and Loan Association. The estimated assessments, which include an assumed annual assessment base increase of 5%, were recorded as a prepaid expense asset as of December 30, 2009. As of December 31, 2009, and each quarter thereafter, a charge to earnings will be recorded for each regular assessment with an offsetting credit to the prepaid asset.

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     Due to the recent difficult economic conditions, deposit insurance per account owner has been raised to $250,000. That limit was made permanent by the Dodd-Frank Act. In addition, the Federal Deposit Insurance Corporation adopted an optional Temporary Liquidity Guarantee Program by which, for a fee, noninterest bearing transaction accounts would receive unlimited insurance coverage until June 30, 2010, subsequently extended to December 31, 2010, with an additional possible extension up to December 31, 2011, and certain senior unsecured debt issued by institutions and their holding companies between October 13, 2008 and October 31, 2009 would be guaranteed by the Federal Deposit Insurance Corporation through June 30, 2012, or in some cases, December 31, 2012. Fraternity Federal Savings and Loan Association opted to participate in the unlimited noninterest bearing transaction account coverage and in the unsecured debt guarantee program. The Dodd-Frank Act extended the unlimited coverage for certain noninterest bearing transaction accounts until December 31, 2012.

     In addition to the assessment for deposit insurance, institutions are required to make payments on bonds issued in the late 1980s by the Financing Corporation to recapitalize a predecessor deposit insurance fund. That payment is established quarterly and during the four quarters ended June 30, 2010 averaged 1.04 basis points of assessable deposits. These financing corporation payments will continue until the bonds mature in 2017 through 2019.

     The Dodd-Frank Act increased the minimum target Deposit Insurance Fund ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured deposits. The Federal Deposit Insurance Corporation must seek to achieve the 1.35% ratio by September 30, 2020. Insured institutions with assets of $10 billion or more are supposed to fund the increase. The Dodd-Frank Act eliminated the 1.5% maximum fund ratio, instead leaving it to the discretion of the Federal Deposit Insurance Corporation.

     The Federal Deposit Insurance Corporation has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of Fraternity Federal Savings and Loan Association. Management cannot predict what insurance assessment rates will be in the future.

     Insurance of deposits may be terminated by the Federal Deposit Insurance Corporation upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or regulatory condition imposed in writing. The management of Fraternity Federal Savings and Loan Association does not know of any practice, condition or violation that might lead to termination of deposit insurance.

     Federal Home Loan Bank System. Fraternity Federal Savings and Loan Association is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank provides a central credit facility primarily for member institutions. Fraternity Federal Savings and Loan Association, as a member of the Federal Home Loan Bank of Atlanta, is required to acquire and hold shares of capital stock in that Federal Home Loan Bank. At June 30, 2010, Fraternity Federal Savings and Loan Association complied with this requirement with an investment in Federal Home Loan Bank stock of $1.6 million.

     The Federal Home Loan Banks are required to provide funds for the resolution of insolvent thrifts in the late 1980s and to contribute funds for affordable housing programs. These requirements, or general results of operations, could reduce or eliminate the dividends that the Federal Home Loan Banks pay to their members and result in the Federal Home Loan Banks imposing a higher rate of interest on advances to their members. If dividends are reduced, or interest on future Federal Home Loan Bank advances increased, our net interest income could also be reduced. In fact, Federal Home Loan Bank dividends have been significantly reduced over the past two years from previous levels.

     Community Reinvestment Act. Under the Community Reinvestment Act, as implemented by Office of Thrift Supervision regulations, a savings association has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The Community Reinvestment Act does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the Community Reinvestment Act. The Community Reinvestment Act requires the Office of Thrift Supervision, in connection with its

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examination of a savings association, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution.

     The Community Reinvestment Act requires public disclosure of an institution’s rating and requires the Office of Thrift Supervision to provide a written evaluation of an association’s Community Reinvestment Act performance utilizing a four-tiered descriptive rating system.

     Fraternity Federal Savings and Loan Association received a “satisfactory” rating as a result of its most recent Community Reinvestment Act assessment.

Other Regulations

     Interest and other charges collected or contracted for by Fraternity Federal Savings and Loan Association are subject to state usury laws and federal laws concerning interest rates. Fraternity Federal Savings and Loan Association’s operations are also subject to federal laws applicable to credit transactions, such as the:

• Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

• Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

• Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

• Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies;

• Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and

• Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

     The operations of Fraternity Federal Savings and Loan Association also are subject to the:

• Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

• Electronic Funds Transfer Act and Regulation E promulgated thereunder, which governs automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;

• Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;

• Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (referred to as the “USA PATRIOT Act”), which significantly expands the responsibilities of financial institutions, including savings and loan associations, in preventing the use of the U.S. financial system to fund terrorist activities. Among other provisions, it requires financial institutions operating in the United States to develop new anti-money laundering compliance programs, due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to

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supplement existing compliance requirements, also applicable to financial institutions, under the Bank Secrecy Act and the Office of Foreign Assets Control Regulations; and

•

The Gramm-Leach-Bliley Act which places limitations on the sharing of consumer financial information with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of personal financial information with unaffiliated third parties.

Federal Reserve System

     The Federal Reserve Board regulations require savings institutions to maintain noninterest earning reserves against their transaction accounts (primarily Negotiable Order of Withdrawal (“NOW”) and regular checking accounts). The regulations generally provide that reserves be maintained against aggregate transaction accounts as follows: a 3% reserve ratio is assessed on net transaction accounts up to and including $55.2 million; a 10% reserve ratio is applied above $55.2 million. The first $10.7 million of otherwise reservable balances (subject to adjustments by the Federal Reserve Board) are exempted from the reserve requirements. The amounts are adjusted annually. Fraternity Federal Savings and Loan Association complies with the foregoing requirements.

Holding Company Regulation

     General. Fraternity Community Bancorp will be a unitary savings and loan holding company within the meaning of federal law, will register with the Office of Thrift Supervision and be subject to Office of Thrift Supervision regulations, examinations, supervision, reporting requirements and regulations. In addition, the Office of Thrift Supervision will have enforcement authority over Fraternity Community Bancorp and its non-savings institution subsidiaries. Among other things, this authority permits the Office of Thrift Supervision to restrict or prohibit activities that are determined to be a serious risk to Fraternity Federal Savings and Loan Association. As a savings and loan holding company, new Fraternity Community Bancorp will be able to engage only in activities permitted to a financial holding company and those permitted for a multiple savings and loan holding company, which includes non-banking activities that have been determined to be permissible for bank holding companies. As part of the Dodd-Frank Act regulatory restructuring, the Office of Thrift Supervision’s authority over savings and loan holding companies will be transferred to the Federal Reserve Board, which is the agency that regulates bank holding companies.

     The Gramm-Leach-Bliley Act of 1999 provided that no company may acquire control of a savings institution after May 4, 1999 unless it engages only in the financial activities permitted for financial holding companies under the law or for multiple savings and loan holding companies as described below. Further, the Gramm-Leach-Bliley Act specifies that existing savings and loan holding companies may only engage in such activities. Upon any non-supervisory acquisition by Fraternity Community Bancorp of another savings institution or savings association that meets the qualified thrift lender test and is deemed to be a savings institution by the Office of Thrift Supervision, Fraternity Community Bancorp would become a multiple savings and loan holding company (if the acquired institution is held as a separate subsidiary) and would generally be limited to activities permissible for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, subject to the prior approval of the Office of Thrift Supervision, and certain activities authorized by Office of Thrift Supervision regulation. However, the Office of Thrift Supervision has issued an interpretation concluding that multiple savings and loan holding companies may also engage in activities permitted for financial holding companies.

     A savings and loan holding company is prohibited from, directly or indirectly, acquiring more than 5% of the voting stock of another savings institution or savings and loan holding company, without prior written approval of the Office of Thrift Supervision, and from acquiring or retaining control of a depository institution that is not insured by the Federal Deposit Insurance Corporation. In evaluating applications by holding companies to acquire savings institutions, the Office of Thrift Supervision considers the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the deposit insurance funds, the convenience and needs of the community and competitive factors.

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     The Office of Thrift Supervision may not approve any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions: (i) the approval of interstate supervisory acquisitions by savings and loan holding companies; and (ii) the acquisition of a savings institution in another state if the laws of the state target savings institution specifically permit such acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

     Savings and loan holding companies are not currently subject to specific regulatory capital requirements. The Dodd-Frank Act, however, requires the Federal Reserve Board to promulgate consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to institutions themselves. There is a five year transition period before the capital requirements will apply to savings and loan holding companies. The Dodd-Frank Act also extends the “source of strength” doctrine to savings and loan holding companies. The regulatory agencies must issue regulations requiring that all bank and savings and loan holding companies serve as a source of strength to their subsidiary depository institutions.

     Fraternity Federal Savings and Loan Association must notify the Office of Thrift Supervision 30 days before declaring any dividend to Fraternity Community Bancorp. In addition, the financial impact of a holding company on its subsidiary institution is a matter that is evaluated by the Office of Thrift Supervision and the agency has authority to order cessation of activities or divestiture of subsidiaries deemed to pose a threat to the safety and soundness of the institution.

     Acquisition of Control. Under the federal Change in Bank Control Act, a notice must be submitted to the Office of Thrift Supervision if any person (including a company), or group acting in concert, seeks to acquire “control” of a savings and loan holding company or savings association. An acquisition of “control” can occur upon the acquisition of 10% or more of the voting stock of a savings and loan holding company or savings institution or as otherwise defined by the Office of Thrift Supervision. Under the Change in Bank Control Act, the Office of Thrift Supervision has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the anti-trust effects of the acquisition. Any company that so acquires control would then be subject to regulation as a savings and loan holding company.

Regulatory Restructuring Legislation

     On July 21, 2010, President Obama signed the Dodd-Frank Act, which is legislation that restructures the regulation of depository institutions. In addition to eliminating the Office of Thrift Supervision and creating the Consumer Financial Protection Bureau, the Dodd-Frank Act, among other things, requires changes in the way that institutions are assessed for deposit insurance, mandates the imposition of consolidated capital requirements on savings and loan holding companies, requires that originators of securitized loans retain a percentage of the risk for the transferred loans, reduces the federal preemption afforded to federal savings associations and contains a number of reforms related to mortgage origination. Many of the provisions of the Dodd-Frank Act require the issuance of regulations before their impact on operations can be assessed by management. However, there is a significant possibility that the Dodd-Frank Act will, at a minimum, result in increased regulatory burden and increase compliance and possibly interest expense costs for Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association.

Federal Securities Laws

     Fraternity Community Bancorp has filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 for the registration of the common stock to be issued in the offering. Upon completion of the offering, Fraternity Community Bancorp’s common stock will be registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Fraternity Community Bancorp will be subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934, as amended.

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     The registration, under the Securities Act of 1933, as amended, of the shares of common stock to be issued in the offering does not cover the resale of those shares. Shares of common stock purchased by persons who are not affiliates of Fraternity Community Bancorp may be resold without registration. Shares purchased by an affiliate of Fraternity Community Bancorp will be subject to the resale restrictions of Rule 144 under the Securities Act of 1933, as amended. If Fraternity Community Bancorp meets the current public information requirements of Rule 144, each affiliate of Fraternity Community Bancorp that complies with the other conditions of Rule 144, including those that require the affiliate’s sale to be aggregated with those of other persons, would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of 1% of the outstanding shares of Fraternity Community Bancorp or the average weekly volume of trading in the shares during the preceding four calendar weeks. In the future, Fraternity Community Bancorp may permit affiliates to have their shares registered for sale under the Securities Act of 1933, as amended.

Sarbanes-Oxley Act of 2002

     The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. As directed by the Sarbanes-Oxley Act of 2002, Fraternity Community Bancorp’s Chief Executive Officer and Chief Financial Officer will be required to certify that Fraternity Community Bancorp’s quarterly and annual reports do not contain any untrue statement of a material fact. The rules adopted by the Securities and Exchange Commission under the Sarbanes-Oxley Act of 2002 have several requirements, including having the Chief Executive Officer and Chief Financial Officer certify that: he is responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal controls; he has made certain disclosures to our auditors and the audit committee of the board of directors about our internal controls; and he has included information in our quarterly and annual reports about his evaluation and whether there have been significant changes in our internal controls or in other factors that could significantly affect internal controls. Fraternity Community Bancorp will be subject to further reporting and audit requirements beginning with the year ending March 31, 2011 under the requirements of the Sarbanes-Oxley Act. Fraternity Community Bancorp will prepare policies, procedures and systems designed to comply with these regulations to ensure compliance with these regulations.

Federal and State Taxation

Federal Income Taxation

     General. We report our income on a fiscal year basis using the accrual method of accounting. The federal income tax laws apply to us in the same manner as to other corporations with some exceptions, including particularly our reserve for bad debts discussed below. The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to us. Our federal income tax returns have not been audited during the last five years. For its 2009 fiscal year, Fraternity Federal Savings and Loan Association’s maximum statutory federal income tax rate was 34%.

     Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association will enter into a tax allocation agreement. Because Fraternity Community Bancorp will own 100% of the issued and outstanding capital stock of Fraternity Federal Savings and Loan Association after the completion of the conversion, Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association will be members of an affiliated group within the meaning of Section 1504(a) of the Internal Revenue Code, of which group Fraternity Community Bancorp will be the common parent corporation. As a result of this affiliation, Fraternity Federal Savings and Loan Association may be included in the filing of a consolidated federal income tax return with Fraternity Community Bancorp and, if a decision to file a consolidated tax return is made, the parties agree to compensate each other for their individual share of the consolidated tax liability and/or any tax benefits provided by them in the filing of the consolidated federal income tax return.

     Bad Debt Reserves. For fiscal years beginning before June 30, 1996, thrift institutions that qualified under certain definitional tests and other conditions of the Internal Revenue Code were permitted to use certain favorable provisions to calculate their deductions from taxable income for annual additions to their bad debt reserve. A reserve could be established for bad debts on qualifying real property loans, generally secured by interests in real

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property improved or to be improved, under the percentage of taxable income method or the experience method. The reserve for nonqualifying loans was computed using the experience method. Federal legislation enacted in 1996 repealed the reserve method of accounting for bad debts and the percentage of taxable income method for tax years beginning after 1995 and require savings institutions to recapture or take into income certain portions of their accumulated bad debt reserves.

     Distributions. If Fraternity Federal Savings and Loan Association makes “non-dividend distributions” to Fraternity Community Bancorp, the distributions will be considered to have been made from Fraternity Federal Savings and Loan Association’s unrecaptured tax bad debt reserves, including the balance of its reserves as of December 31, 1987, to the extent of the “non-dividend distributions,” and then from Fraternity Federal Savings and Loan Association’s supplemental reserve for losses on loans, to the extent of those reserves, and an amount based on the amount distributed, but not more than the amount of those reserves, will be included in Fraternity Federal Savings and Loan Association’s taxable income. Non-dividend distributions include distributions in excess of Fraternity Federal Savings and Loan Association’s current and accumulated earnings and profits, as calculated for federal income tax purposes, distributions in redemption of stock, and distributions in partial or complete liquidation. Dividends paid out of Fraternity Federal Savings and Loan Association’s current or accumulated earnings and profits will not be so included in Fraternity Federal Savings and Loan Association’s taxable income.

     The amount of additional taxable income triggered by a non-dividend is an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution. Therefore, if Fraternity Federal Savings and Loan Association makes a non-dividend distribution to Fraternity Community Bancorp, approximately one and one-half times the amount of the distribution not in excess of the amount of the reserves would be includable in income for federal income tax purposes, assuming a 34% federal corporate income tax rate. Fraternity Federal Savings and Loan Association does not intend to pay dividends that would result in a recapture of any portion of its bad debt reserves.

State Taxation

     The state of Maryland imposes an income tax of approximately 8.25% on income measured substantially the same as federally taxable income. The State of Maryland currently assesses a personal property tax for December 2000 and forward.

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The Conversion and Stock Offering

     Our board of directors has approved the plan of conversion. The Office of Thrift Supervision also has conditionally approved the plan of conversion, but its approval does not constitute a recommendation or endorsement of the plan of conversion by the agency.

General

     On September 14, 2010, the board of directors of Fraternity Federal Savings and Loan Association unanimously adopted the plan of conversion according to which Fraternity Federal Savings and Loan Association will convert from a federally chartered mutual savings and loan association to a federally chartered stock savings and loan association and become a wholly owned subsidiary of Fraternity Community Bancorp, a newly formed Maryland corporation. On October 18, 2010, the board of directors of Fraternity Community Bancorp unanimously adopted the plan of conversion. Fraternity Community Bancorp will offer 100% of its common stock to qualifying depositors and borrowers of Fraternity Federal Savings and Loan Association in a subscription offering and, if necessary, to members of the general public through a community offering and/or a syndicate of registered broker-dealers. The completion of the offering depends on market conditions and other factors beyond our control. We can give no assurance as to the length of time that will be required to complete the sale of the common stock. If we experience delays, significant changes may occur in the appraisal of Fraternity Federal Savings and Loan Association, which would require a change in the offering range. A change in the offering range would result in a change in the net proceeds realized by Fraternity Community Bancorp from the sale of the common stock. If the offering is terminated, Fraternity Federal Savings and Loan Association would be required to charge all offering expenses against current income. The Office of Thrift Supervision approved our plan of conversion, subject to the fulfillment of certain conditions.

     The following is a brief summary of the pertinent aspects of the conversion. A copy of the plan of conversion is available from Fraternity Federal Savings and Loan Association upon request and is available for inspection at the offices of Fraternity Federal Savings and Loan Association and at the Office of Thrift Supervision. The plan of conversion is also filed as an exhibit to the registration statement that we have filed with the Securities and Exchange Commission. See “Where You Can Find More Information.”

Reasons for the Conversion

     The primary reasons for the conversion and related stock offering are to:

• increase the capital of Fraternity Federal Savings and Loan Association to support future lending;

• enhance profitability and earnings through reinvesting and leveraging the proceeds, primarily through traditional lending and investing activities;

• support future branching activities and/or the acquisition of financial services companies; and

• implement equity compensation plans to retain and attract qualified directors, officers and staff to enhance our current incentive-based compensation programs.

     As a stock holding company, Fraternity Community Bancorp will have greater flexibility than Fraternity Federal Savings and Loan Association now has in structuring mergers and acquisitions, including the consideration paid in a transaction. Our current mutual savings association structure, by its nature, limits our ability to offer any common stock as consideration in a merger or acquisition. Our new stock holding company structure will enhance our ability to compete with other bidders when acquisition opportunities arise by better enabling us to offer stock or cash consideration, or a combination of the two. We currently do not have any agreement or understanding as to any specific acquisition.

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Effects of Conversion to Stock Form

     General. Each depositor in a mutual savings association has both a deposit account in the institution and a pro rata ownership interest in the net worth of the institution based upon the balance in his or her account. However, this ownership interest is tied to the depositor’s account and has no value separate from such deposit account. Furthermore, this ownership interest may only be realized in the unlikely event that the institution is liquidated. In such event, the depositors of record at that time, as owners, would be able to share in any residual surplus and reserves after payment of other claims, including claims of depositors to the amounts of their deposits. Any depositor who opens a deposit account obtains a pro rata ownership interest in the net worth of the institution without any additional payment beyond the amount of the deposit. A depositor who reduces or closes his or her account receives a portion or all of the balance in the account but nothing for his or her ownership interest in the net worth of the institution, which is lost to the extent that the balance in the account is reduced.

     When a mutual savings association converts to stock form, depositors lose all rights to the net worth of the mutual savings association, except the right to claim a pro rata share of funds representing the liquidation account established in connection with the conversion. Additionally, permanent nonwithdrawable capital stock is created and offered to depositors which represents the ownership of the institution’s net worth. The common stock of Fraternity Community Bancorp is separate and apart from deposit accounts and cannot be and is not insured by the Federal Deposit Insurance Corporation or any other governmental agency. Certificates are issued to evidence ownership of the permanent stock. The stock certificates are transferable, and therefore the stock may be sold or traded if a purchaser is available with no effect on any deposit account the seller may hold in the institution.

     No assets of Fraternity Community Bancorp will be distributed in connection with the conversion other than the payment of those expenses incurred in connection with the conversion.

     Continuity. While the conversion is being accomplished, the normal business of Fraternity Federal Savings and Loan Association will continue without interruption, including being regulated by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation. After the conversion, Fraternity Federal Savings and Loan Association will continue to provide services for depositors and borrowers under current policies by its present management and staff.

     The directors of Fraternity Federal Savings and Loan Association at the time of the conversion will serve as directors of Fraternity Federal Savings and Loan Association after the conversion. The initial directors of Fraternity Community Bancorp are composed of the individuals who serve on the board of directors of Fraternity Federal Savings and Loan Association. All officers of Fraternity Federal Savings and Loan Association at the time of conversion will retain their positions after the conversion.

     Deposit Accounts and Loans. Fraternity Federal Savings and Loan Association’s deposit accounts, account balances and existing Federal Deposit Insurance Corporation insurance coverage of deposit accounts will not be affected by the conversion. Furthermore, the conversion will not affect the loan accounts, loan balances or obligations of borrowers under their individual contractual arrangements with Fraternity Federal Savings and Loan Association.

     Effect on Voting Rights. Voting rights in Fraternity Federal Savings and Loan Association, as a mutual savings association, belong to its depositor and borrower members. After the conversion, depositors and borrowers will no longer have voting rights in Fraternity Federal Savings and Loan Association and, therefore, will no longer be able to elect directors of Fraternity Federal Savings and Loan Association or control its affairs. Instead, Fraternity Community Bancorp, as the sole shareholder of Fraternity Federal Savings and Loan Association, will possess all voting rights in Fraternity Federal Savings and Loan Association. The holders of the common stock of Fraternity Community Bancorp will possess all voting rights in Fraternity Community Bancorp. Depositors and borrowers of Fraternity Federal Savings and Loan Association will not have voting rights after the conversion except to the extent that they become shareholders of Fraternity Community Bancorp by purchasing common stock.

     Liquidation Account. In the unlikely event of a complete liquidation of Fraternity Federal Savings and Loan Association before the conversion, each depositor in Fraternity Federal Savings and Loan Association would receive a pro rata share of any assets of Fraternity Federal Savings and Loan Association remaining after payment of

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claims of all creditors, including the claims of all depositors up to the withdrawal value of their accounts. Each depositor would receive a pro rata share of the remaining assets in the same proportion as the value of his or her deposit account to the total value of all deposit accounts in Fraternity Federal Savings and Loan Association at the time of liquidation.

     After the conversion, holders of withdrawable deposits in Fraternity Federal Savings and Loan Association, including certificates of deposit, will not be entitled to share in any residual assets upon liquidation of Fraternity Federal Savings and Loan Association. However, under applicable regulations, Fraternity Federal Savings and Loan Association will, at the time of the conversion, establish a liquidation account in an amount equal to its total equity as of the date of the latest statement of financial condition contained in the final prospectus relating to the conversion.

     Fraternity Federal Savings and Loan Association will maintain the liquidation account after the conversion for the benefit of eligible account holders and supplemental eligible account holders who retain their savings accounts in Fraternity Federal Savings and Loan Association. Each eligible account holder and supplemental account holder will, with respect to each deposit account held, have a related inchoate interest in a sub-account portion of the liquidation account balance.

     The initial sub-account balance for a savings account held by an eligible account holder or a supplemental eligible account holder will be determined by multiplying the opening balance in the liquidation account by a fraction of which the numerator is the amount of the holder’s “qualifying deposit” in the deposit account and the denominator is the total amount of the “qualifying deposits” of all eligible or supplemental eligible account holders. The initial subaccount balance will not be increased, but it will be decreased as provided below.

     If the deposit balance in any deposit account of an eligible account holder or supplemental eligible account holder at the close of business on any annual closing day of Fraternity Federal Savings and Loan Association (which is December) after June 30, 2009 or [SERD], is less than the lesser of the deposit balance in a deposit account at the close of business on any other annual closing date after June 30, 2009 or [SERD], or the amount of the “qualifying deposit” in a savings account on June 30, 2009 or [SERD], then the subaccount balance for a savings account will be adjusted by reducing the subaccount balance in an amount proportionate to the reduction in the savings balance. Once reduced, the subaccount balance will not be subsequently increased, notwithstanding any increase in the savings balance of the related savings account. If any savings account is closed, the related subaccount balance will be reduced to zero.

     Upon a complete liquidation of Fraternity Federal Savings and Loan Association, each eligible account holder and supplemental account holder will be entitled to receive a liquidation distribution from the liquidation account in the amount of the then current adjusted subaccount balance(s) for deposit account(s) held by the holder before any liquidation distribution may be made to shareholders. No merger, consolidation, bulk purchase of assets with assumptions of savings accounts and other liabilities or similar transactions with another federally insured institution in which Fraternity Federal Savings and Loan Association is not the surviving institution will be considered to be a complete liquidation. In any of these transactions, the liquidation account will be assumed by the surviving institution.

     In the unlikely event Fraternity Federal Savings and Loan Association is liquidated after the conversion, depositors will be entitled to full payment of their deposit accounts before any payment is made to Fraternity Community Bancorp as sole shareholder of Fraternity Federal Savings and Loan Association. There are no plans to liquidate either Fraternity Federal Savings and Loan Association or Fraternity Community Bancorp in the future.

Material Income Tax Consequences

     In connection with the conversion, we have received an opinion of counsel with respect to federal tax laws that no gain or loss will be recognized by account holders receiving subscription rights, except to the extent, if any, that subscription rights are deemed to have fair market value on the date such rights are issued. We believe that the tax opinion summarized below addresses all material federal income tax consequences that are generally applicable to persons receiving subscription rights.

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     Kilpatrick Stockton LLP has issued an opinion to us that, for federal income tax purposes:

• the conversion of Fraternity Federal Savings and Loan Association from the mutual to the stock form of organization will qualify as a reorganization within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code, and no gain or loss will be recognized by account holders and no gain or loss will be recognized by Fraternity Federal Savings and Loan Association by reason of such conversion;

• no gain or loss will be recognized by Fraternity Community Bancorp upon the sale of shares of common stock in the offering;

• it is more likely than not that the fair market value of the non-transferable subscription rights to purchase shares of common stock of Fraternity Community Bancorp to be issued to eligible account holders, supplemental eligible account holders and other members is zero and, accordingly, that no income will be realized by eligible account holders, supplemental eligible account holders and other members upon the issuance to them of the subscription rights or upon the exercise of the subscription rights; and

• it is more likely than not that the tax basis to the holders of shares of common stock purchased in the stock offering pursuant to the exercise of the subscription rights will be the amount paid therefor, and that the holding period for such shares of common stock will begin on the date of completion of the stock offering.

     The reasoning in support of Kilpatrick Stockton LLP’s statements set forth in the third and fourth bullet points above is set forth below. Whether subscription rights have a market value for federal income tax purposes is a question of fact, depending upon all relevant facts and circumstances. According to our counsel, the Internal Revenue Service will not issue rulings on whether subscription rights have a market value. Counsel has also advised us that they are unaware of any instance in which the Internal Revenue Service has taken the position that nontransferable subscription rights have a market value. Counsel also noted that the subscription rights will be granted at no cost to the recipients, will be nontransferable and of short duration, and will afford the recipients the right only to purchase our common stock at a price equal to its estimated fair market value, which will be the same price as the purchase price for the unsubscribed shares of common stock.

     Unlike a private letter ruling issued by the Internal Revenue Service, an opinion of counsel is not binding on the Internal Revenue Service and the Internal Revenue Service could disagree with the conclusions reached in the opinion. If there is a disagreement, no assurance can be given that the conclusions reached in an opinion of counsel would be sustained by a court if contested by the Internal Revenue Service.

     Fraternity Federal Savings and Loan Association also has received an opinion from Stegman & Company that, assuming the conversion does not result in any federal income tax liability to Fraternity Federal Savings and Loan Association, its account holders, or Fraternity Community Bancorp, implementation of the plan of conversion will not result in any Maryland income tax liability to those entities or persons.

     The opinions of Kilpatrick Stockton LLP and of Stegman & Company are filed as exhibits to the registration statement that we have filed with the Securities and Exchange Commission. See “Where You Can Find More Information.”

Subscription Offering and Subscription Rights

     Under the plan of conversion, we have granted rights to subscribe for Fraternity Community Bancorp common stock to the following persons in the following order of priority:

• Persons with deposits in Fraternity Federal Savings and Loan Association with balances aggregating $50 or more (“qualifying deposits”) as of the close of business on June 30, 2009

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(“eligible account holders”). For this purpose, deposit accounts include all savings, time and demand accounts.

• Our employee stock ownership plan.

• Persons with qualifying deposits in Fraternity Federal Savings and Loan Association as of the close of business on [SERD] (“supplemental eligible account holders”) other than our officers and directors and their associates.

• Depositors and borrowers of Fraternity Federal Savings and Loan Association as of the close of business on [RECORD DATE], who are neither eligible nor supplemental eligible account holders (collectively, “other members”).

     The amount of common stock that any person may purchase will depend on the availability of the common stock after satisfaction of all subscriptions having priority rights in the subscription offering and to the maximum and minimum purchase limitations set forth in the plan of conversion. See “— Limitations on Purchases of Shares.” All persons on a joint account will be counted as a single depositor for purposes of determining the maximum amount that may be subscribed for by owners of a joint account.

     We will strive to identify your ownership in all accounts, but cannot guarantee we will identify all accounts in which you have an ownership interest.

     Category 1: Eligible Account Holders. Subject to the purchase limitations as described below under “— Limitations on Purchases of Shares,” each eligible account holder has the right to subscribe for up to the greater of:

• $250,000 of common stock (which equals 25,000 shares);

• one-tenth of 1% of the total offering of common stock; or

• 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares of common stock to be sold by a fraction of which the numerator is the amount of qualifying deposits of the eligible account holder and the denominator is the total amount of qualifying deposits of all eligible account holders.

     If there are insufficient shares to satisfy all subscriptions by eligible account holders, shares first will be allocated so as to permit each subscribing eligible account holder, if possible, to purchase a number of shares sufficient to make the person’s total allocation equal 100 shares or the number of shares actually subscribed for, whichever is less. After that, unallocated shares will be allocated among the remaining subscribing eligible account holders whose subscriptions remain unfilled in the proportion that the amounts of their respective qualifying deposits bear to the total qualifying deposits of all remaining eligible account holders whose subscriptions remain unfilled. Unless waived by the Office of Thrift Supervision, subscription rights of eligible account holders who are also executive officers or directors of Fraternity Federal Savings and Loan Association or their associates will be subordinated to the subscription rights of other eligible account holders to the extent attributable to increased deposits in Fraternity Federal Savings and Loan Association in the one-year period preceding June 30, 2009.

     To ensure a proper allocation of stock, each eligible account holder must list on his or her stock order form all deposit accounts in which such eligible account holder had an ownership interest at June 30, 2009. Failure to list an account, or providing incorrect information, could result in the loss of all or part of a subscriber’s stock allocation.

     Category 2: Tax-Qualified Employee Benefit Plans. Our tax-qualified employee benefit plans (other than our 401(k) plan) have the right to purchase up to 10% of the shares of common stock sold in the offering. As a tax-qualified employee benefit plan, our employee stock ownership plan intends to purchase a number of shares equal to 8% of the shares sold in the offering. Subscriptions by the employee stock ownership plan will not

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be aggregated with shares of common stock purchased by any other participants in the offering, including subscriptions by our officers and directors, for the purpose of applying the purchase limitations in the plan of conversion. If eligible account holders subscribe for all of the shares being sold, no shares will be available for our tax-qualified employee benefit plans. However, if we increase the number of shares offered above the maximum of the offering range, the employee stock ownership plan will have a first priority right to purchase any shares exceeding that amount up to 10% of the common stock issued in the offering. If the plan’s subscription is not filled in its entirety, the employee stock ownership plan may purchase shares in the open market or may purchase shares directly from us with the approval of the Office of Thrift Supervision.

     Category 3: Supplemental Eligible Account Holders. Subject to the purchase limitations as described below under "— Limitations on Purchases of Shares,” each supplemental eligible account holder has the right to subscribe for up to the greater of:

• $250,000 of common stock (which equals 25,000 shares);

• one-tenth of 1% of the total offering of common stock; or

• 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares of common stock to be sold by a fraction of which the numerator is the amount of qualifying deposits of the supplemental eligible account holder and the denominator is the total amount of qualifying deposits of all supplemental eligible account holders.

     If eligible account holders and the employee stock ownership plan subscribe for all of the shares being sold, no shares will be available for supplemental eligible account holders. If shares are available for supplemental eligible account holders but there are insufficient shares to satisfy all subscriptions by supplemental eligible account holders, shares first will be allocated so as to permit each subscribing supplemental eligible account holder, if possible, to purchase a number of shares sufficient to make the person’s total allocation equal 100 shares or the number of shares actually subscribed for, whichever is less. After that, unallocated shares will be allocated among the remaining subscribing supplemental eligible account holders whose subscriptions remain unfilled in the proportion that the amounts of their respective qualifying deposits bear to the total qualifying deposits of all remaining supplemental eligible account holders whose subscriptions remain unfilled.

     To ensure a proper allocation of stock, each supplemental eligible account holder must list on his or her stock order form all deposit accounts in which such supplemental eligible account holder had an ownership interest at [SERD]. Failure to list an account, or providing incorrect information, could result in the loss of all or part of a subscriber’s stock allocation.

     Category 4: Other Members. Subject to the purchase limitations as described below under "—Limitations on Purchases of Shares,” each other member has the right to purchase up to the greater of $250,000 of common stock (which equals 25,000 shares) or one-tenth of 1% of the total offering of common stock. If eligible account holders, the employee stock ownership plan and supplemental eligible account holders subscribe for all of the shares being sold, no shares will be available for other members. If shares are available for other members but there are not sufficient shares to satisfy all subscriptions by other members, shares first will be allocated so as to permit each subscribing other member, if possible, to purchase a number of shares sufficient to make the person’s total allocation equal 100 shares or the number of shares actually subscribed for, whichever is less. After that, unallocated shares will be allocated among the remaining subscribing other members in the proportion that each other member’s subscription bears to the total subscriptions of all such subscribing other members whose subscriptions remain unfilled.

     To ensure a proper allocation of stock, each other member must list on his or her stock order form all deposit accounts in which such other member had an ownership interest at [RECORD DATE]. Failure to list an account or providing incorrect information could result in the loss of all or part of a subscriber’s stock allocation.

     Expiration Date for the Subscription Offering. The subscription offering, and all subscription rights under the plan of conversion, will expire at 2:00 p.m., Eastern time, on [EXP DATE]. We will not accept orders for common stock in the subscription offering received after that time. We will make reasonable attempts to provide a

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prospectus and related offering materials to holders of subscription rights; however, all subscription rights will expire on the expiration date whether or not we have been able to locate each person entitled to subscription rights.

     Office of Thrift Supervision regulations require that we complete the sale of common stock within 45 days after the close of the subscription offering. If the sale of the common stock is not completed within that period, all funds received will be returned promptly with interest at our passbook rate and without deduction, and all withdrawal authorizations will be canceled unless we receive approval of the Office of Thrift Supervision to extend the time for completing the offering. If regulatory approval of an extension of the time period has been granted, we will notify all subscribers of the extension and of the duration of any extension that has been granted, and subscribers will have the right to modify or rescind their purchase orders. If we do not receive an affirmative response from a subscriber to any resolicitation, the subscriber’s order will be rescinded and all funds received will be returned promptly with interest and without deduction, or withdrawal authorizations will be canceled. No single extension can exceed 90 days.

     Persons in Non-Qualified States. We will make reasonable efforts to comply with the securities laws of all states in the United States in which persons entitled to subscribe for stock under the plan of conversion reside. However, we are not required to offer stock in the subscription offering to any person who resides in a foreign country or who resides in a state of the United States in which (1) only a small number of persons otherwise eligible to subscribe for shares of common stock reside; (2) the granting of subscription rights or the offer or sale of shares to such person would require that we or our officers or directors register as a broker, dealer, salesman or selling agent under the securities laws of the state, or register or otherwise qualify the subscription rights or common stock for sale or qualify as a foreign corporation or file a consent to service of process; or (3) we determine that compliance with that state’s securities laws would be impracticable for reasons of cost or otherwise.

     Restrictions on Transfer of Subscription Rights and Shares. Subscription rights are nontransferable. You may not transfer, or enter into any agreement or understanding to transfer, the legal or beneficial ownership of your subscription rights issued under the plan of conversion or the shares of common stock to be issued upon exercise of your subscription rights. Your subscription rights may be exercised only by you and only for your own account. If you exercise your subscription rights, you will be required to certify that you are purchasing shares solely for your own account and that you have no agreement or understanding regarding the sale or transfer of such shares. Federal regulations also prohibit any person from offering, or making an announcement of an offer or intent to make an offer, to purchase such subscription rights or shares of common stock before the completion of the offering.

     If you sell or otherwise transfer your rights to subscribe for common stock in the subscription offering or subscribe for common stock on behalf of another person, you may forfeit those rights and face possible further sanctions and penalties imposed by the Office of Thrift Supervision or another agency of the U.S. Government. We will pursue any and all legal and equitable remedies if we become aware of the transfer of subscription rights and will not honor orders known by us to involve the transfer of such rights.

Community Offering

     To the extent that shares remain available for purchase after satisfaction of all subscriptions received in the subscription offering, we may offer shares in a community offering to the following persons in the following order of priority:

• First priority, to natural persons and trusts of natural persons who are residents of Baltimore, Carroll and Howard Counties and Baltimore City in Maryland; and

• Second priority, to other persons to whom we deliver a prospectus.

     We will consider persons to be residents of the above listed counties if they occupy a dwelling in the county and have established an ongoing physical presence in the county that is not merely transitory in nature. We may utilize depositor or loan records or other evidence provided to us to make a determination as to whether a person is a resident of such counties. In all cases, the determination of residence status will be made by us in our sole discretion.

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     Purchasers in the community offering are eligible to purchase up to $250,000 of common stock (which equals 25,000 shares). If shares are available for preferred purchasers in the community offering but there are insufficient shares to satisfy all orders, the available shares will be allocated first to each preferred purchaser whose order we accept in an amount equal to the lesser of 100 shares or the number of shares ordered by each such subscriber, if possible. After that, unallocated shares will be allocated among the remaining preferred purchasers whose orders remain unsatisfied in the same proportion that the unfilled order of each such purchaser bears to the total unfilled orders of all such subscribers. If, after filling the orders of preferred purchasers in the community offering, shares are available for other purchasers in the community offering but there are insufficient shares to satisfy all orders, shares will be allocated in the same manner as for preferred purchasers.

     The community offering, if held, may commence concurrently with, during or after the subscription offering and will terminate no later than 45 days after the close of the subscription offering unless extended by us, with approval of the Office of Thrift Supervision. If we receive regulatory approval for an extension, all purchasers will be notified of the extension and of the duration of any extension that has been granted, and will have the right to confirm, increase, decrease or rescind their orders. If we do not receive an affirmative response from a purchaser to any resolicitation, the purchaser’s order will be rescinded and all funds received will be promptly returned with interest and without deduction.

     The opportunity to purchase shares of common stock in the community offering is subject to our right to reject orders, in whole or part, either at the time of receipt of an order or as soon as practicable following the expiration date of the offering. If your order is rejected in part, you will not have the right to cancel the remainder of your order.

Syndicated Offering

     If feasible, our Board of Directors may decide to offer for sale shares of common stock not subscribed for or purchased in the subscription and community offerings in a syndicated offering, subject to such terms, conditions and procedures as we may determine, in a manner that will achieve a wide distribution of our shares of common stock. We retain the right to accept or reject in whole or in part any orders in the syndicated offering. Unless the Office of Thrift Supervision permits otherwise, accepted orders for Fraternity Community Bancorp common stock in the syndicated offering will first be filled up to a maximum of two percent (2%) of the shares sold in the offering, and thereafter any remaining shares will be allocated on an equal number of shares basis per order until all shares have been allocated. Unless the syndicated offering begins during the community offering, the syndicated offering will begin as soon as possible after the completion of the subscription and community offerings.

     If a syndicated offering is held, Sandler O’Neill + Partners, L.P. will serve as sole book-running manager, and each firm will assist us in selling our common stock on a best efforts basis. Neither Sandler O’Neill + Partners, L.P. nor any registered broker-dealer will have any obligation to take or purchase any shares of the common stock in the syndicated offering. The syndicated offering will be conducted in accordance with certain Securities and Exchange Commission rules applicable to best efforts offerings. Under these rules, Sandler O’Neill + Partners, L.P. or the other broker-dealers participating in the syndicated offering generally will accept payment for shares of common stock to be purchased in the syndicated offering through a sweep arrangement, provided we have received subscriptions to meet the minimum of the offering range, under which a customer’s brokerage account at the applicable participating broker-dealer will be debited in the amount of the purchase price for the shares of common stock that such customer wishes to purchase in the syndicated offering on the settlement date. Participating broker-dealers will only sell to customers who have accounts at the participating broker-dealer and who authorize the broker-dealer to debit their accounts. Customers who authorize participating broker-dealers to debit their brokerage accounts are required to have the funds for the payment in their accounts on, but not before, the settlement date. Certain investors may pay Sandler O’Neill + Partners, L.P. for shares purchased in the syndicated offering on the settlement date through the services of the Depository Trust Company on a delivery versus payment basis. The closing of the syndicated offering is subject to conditions set forth in an agency agreement among Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association on one hand and Sandler O’Neill + Partners, L.P., as representative of the several agents, on the other hand. If and when all the conditions for the closing are met, funds for common stock sold in the syndicated offering, less fees and commissions payable, will be delivered promptly to us. Normal customer ticketing will be used for order placement.

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     If for any reason we cannot affect a syndicated offering of shares of common stock not purchased in the subscription and community offerings, or in the event that there are a significant number of shares remaining unsold after such offerings, we will try to make other arrangements for the sale of unsubscribed shares, if possible. The Office of Thrift Supervision, the Securities and Exchange Commission and Financial Industry Regulatory Authority must approve any such arrangements.

Limitations on Purchases of Shares

     In addition to the purchase limitations described above under “Subscription Offering and Subscription Rights,” “— Community Offering,” the plan of conversion provides for the following purchase limitations:

• Except for our employee stock ownership plan, no person may purchase in the aggregate more than $250,000 of the common stock, or 25,000 shares sold in the offering.

• No person, either alone or together with associates of or persons acting in concert with such person, may purchase more than $400,000 of the common stock, or 40,000 shares sold in the offering.

• Our tax-qualified employee benefit plans are entitled to purchase up to 10.0% of the shares sold in the conversion. As a tax-qualified employee benefit plan, our employee stock ownership plan intends to purchase 8.0% of the shares sold in the offering.

• Each subscriber must subscribe for a minimum of 25 shares.

• Our directors and executive officers, together with their associates, may purchase in the aggregate up to 32% of the common stock sold in the offering.

     We may, in our sole discretion, increase the individual or aggregate purchase limitation to up to 5% of the shares of common stock sold in the offering. If we decide to increase the purchase limitations, persons who subscribed for the maximum number of shares of common stock will be given the opportunity to increase their subscriptions accordingly, subject to the rights and preferences of any person who has priority subscription rights.

     If we increase the maximum purchase limitation to 5% of the shares of common stock sold in the offering, we may further increase the maximum purchase limitation to 9.99%, provided that orders for common stock exceeding 5% of the shares of common stock sold in the offering may not exceed in the aggregate 10% of the total shares of common stock sold in the offering.

     The plan of conversion defines “acting in concert” to mean knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not by an express agreement; or a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. In general, a person who acts in concert with another party will also be deemed to be acting in concert with any person who is also acting in concert with that other party. We may presume that certain persons are acting in concert based upon, among other things, joint account relationships or the fact that persons share a common address (whether or not related by blood or marriage) or may have filed joint Schedules 13D or 13G with the Securities and Exchange Commission with respect to other companies. For purposes of the plan of conversion, our directors are not deemed to be acting in concert solely by reason of their Board membership.

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     The plan of conversion defines “associate,” with respect to a particular person, to mean:

• a corporation or organization other than Fraternity Community Bancorp or Fraternity Federal Savings and Loan Association or a majority-owned subsidiary of Fraternity Community Bancorp or Fraternity Federal Savings and Loan Association of which a person is a senior officer or partner or is, directly or indirectly, the beneficial owner of 10% or more of any class of equity securities of such corporation or organization;

• a trust or other estate in which a person has a substantial beneficial interest or as to which a person serves as a trustee or a fiduciary; and

• any person who is related by blood or marriage to such person and who lives in the same home as such person or who is a director or senior officer of Fraternity Community Bancorp or Fraternity Federal Savings and Loan Association or any of their subsidiaries.

     For example, a corporation of which a person serves as an officer would be an associate of that person and, therefore, all shares purchased by the corporation would be included with the number of shares that the person could purchase individually under the aggregate purchase limitation described above. We have the right in our sole discretion to reject any order submitted by a person whose representations we believe to be false or who we otherwise believe, either alone or acting in concert with others, is violating or circumventing, or intends to violate or circumvent, the terms and conditions of the plan of conversion. Directors and officers are not treated as associates of each other solely by virtue of holding such positions. We have the sole discretion to determine whether prospective purchasers are “associates” or “acting in concert.”

Marketing Arrangements

     We have retained Sandler O’Neill + Partners, L.P. to consult with and advise and assist us, on a best efforts basis, in the distribution of shares in the offering. Sandler O’Neill + Partners, L.P. is a broker-dealer registered with the Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority. Sander O’Neill + Partners, L.P. will assist us in the conversion by acting as marketing agent with respect to the subscription offering and will represent us as placement agent on a best efforts basis in the sale of the common stock in the community offering and syndicated offering, if held. The services that Sandler O’Neill + Partners, L.P. will provide include, but are not limited to:

• Consulting as to the financial and securities market implications of the plan of conversion and any related corporate documents;

• Reviewing with the board of directors the financial impact of the offering on Fraternity Community Bancorp, based upon the independent appraiser’s appraisal of the common stock;

• Reviewing all offering documents, including the prospectus, stock order forms and related offering materials;

• Assisting in the design and implementation of a marketing strategy for the offering;

• Assisting management in scheduling and preparing for meetings with potential investors in the offering; and

• Providing such other general advice and assistance as we may request to promote the successful completion of the offering.

     For its services performed as marketing agent, if the offering is consummated, Sandler O’Neill + Partners, L.P. is entitled to receive a fee equal to the greater of 1.00% of the aggregate actual purchase price of the shares of common stock sold in the subscription and community offerings (excluding shares sold to certain persons) and $160,000. Regardless of whether the offering is consummated, or if Sandler O’Neill + Partners, L.P.’s engagement

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is terminated for certain specified reasons, Sandler O’Neill + Partners, L.P. is entitled to be reimbursed for its reasonable out of pocket expenses (including legal fees) up to a maximum of $75,000 incurred in connection with its engagement and for fees and expenses incurred on behalf of Fraternity Community Bancorp. In recognition of the long lead times involved in the offering process, Fraternity Community Bancorp has made an advance payment of $25,000 to Sandler O’Neill + Partners, L.P., which shall be credited against any fees or reimbursement of expenses and refunded to the extent it exceeds the actual amount due.

     In the event that common stock is sold through a group of broker-dealers in a syndicated offering, we will pay (i) a management fee of 1.00% of the aggregate dollar amount of the common stock sold in the syndicated offering, and (ii) a selling concession not to exceed 6.00% of the actual purchase price of each security sold in the syndicated offering, which shall be allocated to dealers in accordance with the actual number of shares of common stock sold by such dealers. Sandler O’Neill + Partners, L.P. will serve as sole book-running manager of the syndicated offering and will be reimbursed for all reasonable out of pocket expenses, including attorney’s fees, if the offering is not completed.

     We have also engaged Sandler O’Neill + Partners, L.P. to act as our conversion agent in connection with the stock offering. In its role as conversion agent, Sandler O’Neill + Partners, L.P. will assist us in the stock offering as follows:

• consolidation of accounts and vote calculation;

• design and preparation of proxy and stock order forms;

• organization and supervision of the stock information center;

• proxy solicitation and special meeting services; and

• subscription order processing and stock allocation services.

     For all these services, Sandler O’Neill + Partners, L.P. will receive a fee of $20,000, which is payable as follows: (i) a nonrefundable $10,000 fee payable upon execution of the engagement letter; and (ii) the balance upon completion or termination of the offering, as the case may be. In addition to its fee, Sandler O’Neill + Partners, L.P. will be reimbursed for its reasonable out-of-pocket expenses incurred in connection with its engagement as conversion agent up to $25,000.

     Sandler O’Neill + Partners, L.P. has not prepared any report or opinion constituting a recommendation or advice to us or to persons who subscribe for stock, nor has it prepared an opinion as to the fairness to us of the purchase price or the terms of the stock to be sold. Sandler O’Neill + Partners, L.P. expresses no opinion as to the prices at which common stock to be issued may trade.

     We have also agreed to indemnify Sandler O’Neill + Partners, L.P.. against liabilities and expenses, including legal fees, incurred in connection with certain claims or litigation arising out of or based upon untrue statements or omissions contained in the offering materials for the common stock, including liabilities under the Securities Act of 1933 and the performance of Sandler O’Neill + Partners, L.P. of its services in connection with the conversion.

Description of Sales Activities

     Fraternity Community Bancorp will offer the common stock in the subscription offering and community offering by the distribution of this prospectus and through activities conducted at the stock information center. The stock information center is expected to operate during normal business hours throughout the subscription offering and any community offering. It is expected that at any particular time one or more Sandler O’Neill + Partners, L.P. employees will be working at the stock information center. Employees of Sandler O’Neill + Partners, L.P. will be responsible for responding to questions regarding the conversion and the offering and processing stock orders.

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     Sales of common stock will be made by registered representatives affiliated with Sandler O’Neill + Partners, L.P. or by the selected dealers managed by Sandler O’Neill + Partners, L.P. Fraternity Federal Savings and Loan Association’s officers and employees may participate in the offering in clerical capacities, providing administrative support in effecting sales transactions or, when permitted by state securities laws, answering questions of a mechanical nature relating to the proper execution of the order form. Fraternity Federal Savings and Loan Association’s officers may answer questions regarding our business when permitted by state securities laws. Other questions of prospective purchasers, including questions as to the advisability or nature of the investment, will be directed to registered representatives. Fraternity Federal Savings and Loan Association’s officers and employees have been instructed not to solicit offers to purchase common stock or provide advice regarding the purchase of common stock.

     No officer, director or employee of Fraternity Federal Savings and Loan Association will be compensated, directly or indirectly, for any activities in connection with the offer or sale of common stock in the offering.

     None of Fraternity Federal Savings and Loan Association’s personnel participating in the offering is registered or licensed as a broker or dealer or an agent of a broker or dealer. Fraternity Federal Savings and Loan Association’s personnel will assist in the above-described sales activities under an exemption from registration as a broker or dealer provided by Rule 3a4-l promulgated under the Securities Exchange Act of 1934, as amended. Rule 3a4-l generally provides that an “associated person of an issuer” of securities will not be deemed a broker solely by reason of participation in the sale of securities of the issuer if the associated person meets certain conditions. These conditions include, but are not limited to, that the associated person participating in the sale of an issuer’s securities not be compensated in connection with the offering at the time of participation, that the person not be associated with a broker or dealer and that the person observe certain limitations on his or her participation in the sale of securities. For purposes of this exemption, “associated person of an issuer” is defined to include any person who is a director, officer or employee of the issuer or a company that controls, is controlled by or is under common control with the issuer.

Procedure for Purchasing Shares in the Subscription and Community Offerings

     Use of Order Forms. To purchase shares in the subscription offering, a properly completed and executed order form must be received (not postmarked) by us at the address printed at the top of the stock order form or at our stock information center, by 2:00 p.m., Eastern time, on [EXP DATE]. Your order form must be accompanied by full payment for all of the shares subscribed for or include appropriate authorization in the space provided on the order form for withdrawal of full payment from a deposit account with Fraternity Federal Savings and Loan Association. To purchase shares in the community offering, you must deliver a properly completed and executed order form to us, accompanied by the required payment for each share subscribed for, before the community offering terminates, which may be on, or at any time after, the end of the subscription offering. Our interpretation of the terms and conditions of the plan of conversion and of the acceptability of the order forms will be final.

     To ensure that your stock purchase eligibility and priority are properly identified, you must list all accounts on the order form, giving all names in each account and the account number. We will strive to identify your ownership in all accounts, but cannot guarantee we will identify all accounts in which you have an ownership interest. Failure to list all of your accounts may result in fewer shares being allocated to you than if all of your accounts were listed.

     We need not accept order forms that are received after the expiration of the subscription offering or community offering, as the case may be, or that are executed defectively or that are received without full payment or without appropriate withdrawal instructions. In addition, we are not obligated to accept orders submitted on photocopied or facsimilied stock order forms. We have the right to waive or permit the correction of incomplete or improperly executed order forms, but do not represent that we will do so. Under the plan of conversion, our interpretation of the terms and conditions of the plan of conversion and of the order form will be final. Once received, an executed order form may not be modified, amended or rescinded without our consent unless the offering has not been completed within 45 days after the end of the subscription offering.

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     The reverse side of the order form contains a regulatorily mandated certification form. We will not accept order forms where the certification form is not executed. By executing and returning the certification form, you will be certifying that you received this prospectus and acknowledging that the common stock is not a deposit account and is not insured or guaranteed by the federal government. You also will be acknowledging that you received disclosure concerning the risks involved in this offering. The certification form could be used as support to show that you understand the nature of this investment.

     To ensure that each purchaser in the subscription and community offering receives a prospectus at least 48 hours before the end of the subscription and community offering, as required by Rule 15c2-8 under the Securities Exchange Act of 1934, as amended, no prospectus will be mailed any later than five days before that date or hand delivered any later than two days before that date. Execution of the order form will confirm receipt or delivery under Rule 15c2-8. Order forms will be distributed only when preceded or accompanied by a prospectus.

     Payment for Shares. Payment for subscriptions may be made by check, bank draft or money order, or by authorization of withdrawal from deposit accounts maintained with Fraternity Federal Savings and Loan Association. Funds received before the completion of the offering will be maintained in a segregated account at Fraternity Federal Savings and Loan Association. All checks, bank drafts and money orders must be made payable to the Fraternity Community Bancorp segregated account in compliance with Securities and Exchange Commission Rule 15c2-4. However, we will not maintain more than one account. All subscriptions received will bear interest at Fraternity Federal Savings and Loan Association’s passbook savings rate, which is subject to change at any time and is currently _____% per annum. Subscribers’ funds will be transmitted to the segregated account no later than noon of the next business day where they will be invested in investments that are permissible under Securities and Exchange Commission Rule 15c2-4. Appropriate means by which withdrawals may be authorized are provided on the order form. No wire transfers or third party checks will be accepted. Interest will be paid on payments made by check, bank draft or money order at our passbook rate from the date payment is received at the stock information center until the completion or termination of the offering. Payment in cash will not be accepted unless the cash is converted into a bank check or money order. If payment is made by authorization of withdrawal from deposit accounts, the funds authorized to be withdrawn from a deposit account will continue to accrue interest at the contractual rates until completion or termination of the offering, but a hold will be placed on the funds, making them unavailable to the depositor until completion or termination of the offering. When the offering is completed, the funds received in the offering will be used to purchase the shares of common stock ordered. The shares of common stock issued in the offering cannot and will not be insured by the Federal Deposit Insurance Corporation or any other government agency. If the offering is not consummated for any reason, all funds submitted will be promptly refunded with interest and without deduction as described above.

     If a subscriber authorizes us to withdraw the amount of the purchase price from his or her deposit account, we will do so as of the completion of the offering, though the account must contain the full amount necessary for payment at the time the subscription order is received. We will waive any applicable penalties for early withdrawal from certificate accounts. If the remaining balance in a certificate account is reduced below the applicable minimum balance requirement at the time funds are actually transferred under the authorization, the certificate will be canceled at the time of the withdrawal, without penalty, and the remaining balance will earn interest at our passbook rate.

     The employee stock ownership plan will not be required to pay for the shares subscribed for at the time it subscribes, but will pay for shares of common stock subscribed for upon the completion of the offering; provided that there is in force from the time of its subscription until the completion of the offering a loan commitment from an unrelated financial institution or from us to lend to the employee stock ownership plan, at that time, the aggregate purchase price of the shares for which it subscribed.

     We may, in our sole discretion, permit institutional investors to submit irrevocable orders together with the legally binding commitment for payment and to thereafter pay for such shares of common stock for which they subscribe in the community offering at any time before the 48 hours before the completion of the offering. This payment may be made by wire transfer.

     Our individual retirement accounts do not permit investment in common stock. A depositor interested in using his or her individual retirement account funds to purchase common stock must do so through a self-directed individual retirement accounts. Since we do not offer those accounts, we will allow a depositor to make a trustee-to-

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trustee transfer of the individual retirement account funds to a trustee offering a self-directed individual retirement account program with the agreement that the funds will be used to purchase our common stock in the offering. There will be no early withdrawal or Internal Revenue Service interest penalties for such transfers. The new trustee would hold the common stock in a self-directed account in the same manner as we now hold the depositor’s individual retirement account funds. An annual administrative fee may be payable to the new trustee. You may use funds currently in an independent, self-directed individual retirement account to purchase stock by having your trustee complete and return the subscription form together with a check payable to Fraternity Community Bancorp before the expiration of the subscription offering. Depositors interested in using funds in an individual retirement account with us to purchase common stock should contact the stock information center as soon as possible so that the necessary forms may be forwarded for execution and returned before the subscription offering ends. In addition, federal laws and regulations require that officers, directors and 10% shareholders who use self-directed individual retirement account funds to purchase shares of common stock in the subscription offering, make purchases for the exclusive benefit of individual retirement accounts.

How We Determined the Offering Range and the $10.00 Per Share Purchase Price

     Federal regulations require that the aggregate purchase price of the securities sold in connection with the offering be based upon our estimated pro forma value, as determined by an independent appraisal. We have retained Feldman Financial Advisors, Inc., which is experienced in the evaluation and appraisal of business entities, to prepare the independent appraisal. Feldman Financial Advisors will receive fees totaling $32,500 for its appraisal services, plus $5,000 for each appraisal valuation update other than the required final valuation update at closing, and a maximum of $1,000 for reimbursement of out-of-pocket expenses. We have agreed to indemnify Feldman Financial Advisors and its employees and affiliates for certain costs and expenses, including reasonable legal fees arising out of, related to, or based upon the offering and due to any misstatement or untrue statement or intentional omission by Fraternity Federal Savings and Loan Association. We have not paid any fees to Feldman Financial Advisors during the past three fiscal years.

     Feldman Financial Advisors prepared the appraisal taking into account the pro forma impact of the offering. For its analysis, Feldman Financial Advisors undertook substantial investigations to learn about our business and operations. We supplied financial information, including annual financial statements, information on the composition of assets and liabilities, and other financial schedules. In addition to this information, Feldman Financial Advisors reviewed our conversion application as filed with the Office of Thrift Supervision and our registration statement as filed with the Securities and Exchange Commission. Furthermore, Feldman Financial Advisors visited our facilities and had discussions with our management. Feldman Financial Advisors did not perform a detailed individual analysis of the separate components of our assets and liabilities. We did not impose any limitations on Feldman Financial Advisors in connection with its appraisal.

     In connection with its appraisal, Feldman Financial Advisors reviewed the following factors, among others:

• our present and projected operating results and financial condition;

• the economic and demographic conditions of our primary market area;

• pertinent historical financial and other information relating to Fraternity Federal Savings and Loan Association;

• a comparative evaluation of our operating and financial statistics with those of other thrift institutions;

• the proposed price per share;

• the aggregate size of the offering of common stock;

• the impact of the conversion on our capital position and earnings potential; and

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• the trading market for securities of comparable institutions and general conditions in the market for such securities.

     Consistent with Office of Thrift Supervision appraisal guidelines, Feldman Financial Advisors’ analysis utilized three selected valuation procedures, the price/tangible book method, the price/core earnings method, and the price/assets method, all of which are described in its report. Feldman Financial Advisors’ appraisal report is filed as an exhibit to the registration statement that we have filed with the Securities and Exchange Commission. See “Where You Can Find More Information.” Feldman Financial Advisors placed the greatest emphasis on the price/tangible book method in estimating pro forma market value, as Fraternity Federal Savings and Loan Association recorded negative core earnings for the most recent 12-month period. Feldman Financial Advisors compared the pro forma price/tangible book ratio for Fraternity Community Bancorp to the same ratios for a peer group of comparable companies. The peer group included publicly traded companies listed on a major exchange (not organized in a mutual holding company structure or subject to an announced or rumored transaction) with:

• total assets of less than $625 million;

• net loans of 50% or more of total assets;

• tangible equity to assets greater than 6.0%; and

• a return on average assets for the last 12-month period of 0.20% or less.

     As indicated in its appraisal, Feldman Financial Advisors compared the operating characteristics of Fraternity Federal Savings and Loan Association to those of the peer group to determine Fraternity Federal Savings and Loan Association’s relative strengths and weaknesses as compared to the peer group companies. Feldman Financial Advisors then derived benchmark pricing ratios for the price/tangible book value and price/assets ratios based on the comparative group medians. Investors tend to make decisions to purchase thrift conversion stocks and more seasoned thrift issues based upon consideration of core earnings profitability and price/tangible book value comparisons. Generally, the price/earnings ratio is an important valuation ratio in the current thrift stock environment for companies reporting core profitability. In cases where companies are reporting negative core earnings, as is the case with Fraternity Federal Savings and Loan Association and the peer group companies, the price/tangible book value ratio becomes a key determinant of the estimate of Fraternity Community Bancorp’s pro forma market value. Feldman Financial Advisors reviewed the core earnings of Fraternity Federal Savings and Loan Association and the peer group companies to apply the pricing methodology related to core earnings. As both Fraternity Federal Savings and Loan Association and most of the peer group companies recorded core losses, no meaningful comparison or conclusions were derived for purposes of establishing a price/core earnings ratio.

     Feldman Financial Advisors’ appraisal concluded that the Fraternity Community Bancorp’s pro forma market value should be discounted relative to the peer group companies on a price/tangible book value and a price/assets basis because of factors associated with liquidity of the issue, stock market conditions, and the new issue discount. Individual discounts and premiums are not necessarily additive and may, to some extent, offset or overlay each other. Currently, converting thrifts are often valued at discounts to peer institutions relative to price/tangible book value and price/assets.

     The peer group selected by Feldman Financial Advisors is comprised solely of companies traded on Nasdaq.

     On the basis of the analysis in its report, Feldman Financial Advisors has advised us that, in its opinion, as of October 12, 2010, our estimated pro forma market value, was within the valuation range of $10,200,000 and $13,800,000 with a midpoint of $12,000,000.

     In determining the estimated pro forma market value of Fraternity Community Bancorp, Feldman Financial Advisors employed the comparative company approach and considered, among others, the following pricing ratios: price-to-earnings per share, price-to-book value per share and price-to-tangible book value per share. As Fraternity Federal Savings and Loan Association and the majority of peer group companies recorded negative earnings for the last 12-month period, price-to-earnings ratios were not meaningful. The following table presents a summary of

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selected pricing ratios for Fraternity Community Bancorp, for the peer group companies and for all publicly traded thrifts. Compared to the average pricing ratios of the peer group, Fraternity Community Bancorp’s pro forma pricing ratios at the maximum of the offering range indicated discount of 8.5% on a price-to-book value basis and 11.5% on a price to tangible book value basis. Such amounts represent the difference between the price-to-book value ratio or the price to tangible book value ratio of the peer group and the comparable ratio for Fraternity Community Bancorp, assuming completion of the offering at the maximum of the offering range, expressed as a percentage of the applicable peer group ratio.

	Price to Book			Price to Tangible
	Value Ratio (1)			Book Value Ratio (1)(2)
Fraternity Community Bancorp (pro forma):
Minimum		41.1	%		41.1	%
Midpoint		45.4			45.4
Maximum		49.3			49.3
Maximum, as adjusted		53.2			53.2
Peer Group:
BCSB Bancorp, Inc.		59.4			59.5
Central Federal Corporation		40.5			41.1
Citizens Community Bancorp, Inc.		39.9			45.1
CMS Bancorp, Inc.		87.8			87.8
First Advantage Bancorp		66.0			66.0
First Clover Leaf Financial Corp.		58.2			69.5
First Federal of Northern Michigan Bcrp.		29.3			30.3
GS Financial Corp.		42.9			42.9
Hampden Bancorp, Inc.		75.1			75.1
WSB Holdings, Inc.		40.1			40.1
Average		53.9			55.7
Median		50.5			52.3
All publicly traded thrifts:
Average		73.0			80.9
Median		74.2			77.5

(1)	Ratios are based on book value and tangible book value as of June 30, 2010, and share prices as of October 12, 2010.
(2)	Tangible book value is book value less intangible assets, such as goodwill or core deposit intangibles.

     The pro forma information presented under “Pro Forma Data” reflects an estimated expense for the equity incentive plan that may be adopted by Fraternity Community Bancorp and the resulting effect on the pro forma price-to-earnings multiples for Fraternity Community Bancorp.

     Our board of directors reviewed Feldman Financial Advisors’ appraisal report, including the methodology and the assumptions used by Feldman Financial Advisors, and determined that the valuation range was reasonable and adequate. Assuming that the shares are sold at $10.00 per share in the conversion, the estimated number of shares would be between 1,020,000 at the minimum of the valuation range and 1,380,000 at the maximum of the valuation range, with a midpoint of 1,200,000. The purchase price of $10.00 per share was determined by us, taking into account, among other factors, the requirement under Office of Thrift Supervision regulations that the common stock be offered in a manner that will achieve the widest distribution of the stock and desired liquidity in the common stock after the offering.

     Since the outcome of the offering relates in large measure to market conditions at the time of sale, it is not possible for us to determine the exact number of shares that we will issue at this time. The offering range may be amended, with the approval of the Office of Thrift Supervision, if necessitated by developments following the date of the appraisal in, among other things, market conditions, our financial condition or operating results, regulatory guidelines or national or local economic conditions.

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     If, upon completion of the subscription offering, at least the minimum number of shares are subscribed for, Feldman Financial Advisors, after taking into account factors similar to those involved in its prior appraisal, will determine its estimate of our pro forma market value as of the close of the subscription offering. If, as a result of regulatory considerations, demand for the shares or changes in market conditions, Feldman Financial Advisors determines that our pro forma market value has increased, we may sell up to 1,587,000 shares without any further notice to you.

     No shares will be sold unless Feldman Financial Advisors confirms that, to the best of its knowledge and judgment, nothing of a material nature has occurred that would cause it to conclude that the actual total purchase price of the shares on an aggregate basis was materially incompatible with its appraisal. If, however, the facts do not justify that statement, we may either: terminate the stock offering and promptly return all funds without deduction; set a new offering range, notify all subscribers and give them the opportunity to place a new order for shares of Fraternity Community Bancorp common stock; or take such other actions as may be permitted by the Office of Thrift Supervision. If the offering is terminated all subscriptions will be cancelled and subscription funds will be returned promptly with interest and without deduction, and holds on funds authorized for withdrawal from deposit accounts will be released or reduced. If Feldman Financial Advisors establishes a new valuation range, it must be approved by the Office of Thrift Supervision.

     In formulating its appraisal, Feldman Financial Advisors relied upon the truthfulness, accuracy and completeness of all documents we furnished to it. Feldman Financial Advisors also considered financial and other information from regulatory agencies, other financial institutions, and other public sources, as appropriate. While Feldman Financial Advisors believes this information to be reliable, Feldman Financial Advisors does not guarantee the accuracy or completeness of the information and did not independently verify the consolidated financial statements and other data provided by us nor independently value our assets or liabilities. The appraisal is not intended to be, and must not be interpreted as, a recommendation of any-kind as to the advisability of purchasing shares of common stock. Moreover, because the appraisal must be based on many factors that change periodically, there is no assurance that purchasers of shares in the offering will be able to sell shares after the offering at prices at or above the purchase price.

     Copies of the appraisal report of Feldman Financial Advisors, including any amendments to the report, and the detailed memorandum of the appraiser setting forth the method and assumptions for such appraisal are available for inspection at our main office and the other locations specified under “Where You Can Find More Information.”

Delivery of Certificates

     Certificates representing the common stock sold in the subscription and community offerings will be mailed by our transfer agent to the persons whose subscriptions or orders are filled at the addresses of such persons appearing on the stock order form as soon as practicable following completion of the offering. We will hold certificates returned as undeliverable until claimed by the persons legally entitled to the certificates or otherwise disposed of in accordance with applicable law. Until certificates for common stock are available and delivered to subscribers, subscribers may not be able to sell their shares, even though trading of the common stock may have commenced. All shares of Fraternity Community Bancorp common stock sold in the syndicated offering will be in book entry form, and physical certificates will not be issued.

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Restrictions on Repurchase of Stock

     Under Office of Thrift Supervision regulations, we may not for a period of one year from the date of the completion of the offering repurchase any of our common stock from any person, except (1) in an offer made to all shareholders to repurchase the common stock on a pro rata basis, approved by the Office of Thrift Supervision; (2) the repurchase of qualifying shares of a director; or (3) repurchases to fund restricted stock plans or tax-qualified employee stock benefit plans. Where extraordinary circumstances exist, the Office of Thrift Supervision may approve the open market repurchase of up to 5% of our common stock during the first year following the offering. To receive such approval, we must establish compelling and valid business purposes for the repurchase to the satisfaction of the Office of Thrift Supervision. Furthermore, repurchases of any common stock are prohibited if they would cause Fraternity Federal Savings and Loan Association’s regulatory capital to be reduced below the amount required under the regulatory capital requirements imposed by the Office of Thrift Supervision.

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Restrictions on Transfer of Shares After the Conversion Applicable to Officers and Directors

     Common stock purchased in the offering will be freely transferable, except for shares purchased by our directors and executive officers.

     Shares of common stock purchased by our directors and executive officers may not be sold for a period of one year following the offering, except upon the death of the shareholder or unless approved by the Office of Thrift Supervision. Shares purchased by these persons in the open market after the offering will be free of this restriction. Shares of common stock issued to directors and executive officers will bear a legend giving appropriate notice of the restriction and, in addition, we will give appropriate instructions to our transfer agent with respect to the restriction on transfers. Any shares issued to directors and executive officers as a stock dividend, stock split or otherwise with respect to restricted common stock will be similarly restricted.

     Persons affiliated with us, including our directors and executive officers, received subscription rights based only on their deposits with Fraternity Federal Savings and Loan Association as account holders. Any purchases made by persons affiliated with us for the explicit purpose of meeting the minimum of the offering must be made for investment purposes only, and not with a view towards redistribution. Furthermore, as set forth above, Office of Thrift Supervision regulations restrict sales of common stock purchased in the offering by directors and executive officers for a period of one year following the offering.

     Purchases of outstanding shares of our common stock by directors, officers, or any person who becomes an executive officer or director after adoption of the plan of conversion, and their associates, during the three-year period following the offering may be made only through a broker or dealer registered with the Securities and Exchange Commission, except with the prior written approval of the Office of Thrift Supervision. This restriction does not apply, however, to negotiated transactions involving more than 1% of our outstanding common stock or to the purchase of stock under stock benefit plans.

     We have filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933, as amended, for the registration of the common stock to be issued in the offering. This registration does not cover the resale of the shares. Shares of common stock purchased by persons who are not affiliates of us may be resold without registration. Shares purchased by an affiliate of us will have resale restrictions under Rule 144 of the Securities Act of 1933, as amended. If we meet the current public information requirements of Rule 144, each affiliate of ours who complies with the other conditions of Rule 144, including those that require the affiliate’s sale to be aggregated with those of certain other persons, would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of 1% of our outstanding shares or the average weekly volume of trading in the shares during the preceding four calendar weeks. We may make future provision to permit affiliates to have their shares registered for sale under the Securities Act of 1933, as amended, under certain circumstances.

Interpretation, Amendment and Termination

     To the extent permitted by law, all interpretations by us of the plan of conversion will be final; however, such interpretations have no binding effect on the Office of Thrift Supervision. The plan of conversion provides that, if deemed necessary or desirable, we may substantively amend the plan of conversion as a result of comments from regulatory authorities or otherwise.

     Completion of the offering requires the sale of all shares of the common stock within 90 days following approval of the plan of conversion by the Office of Thrift Supervision, unless an extension is granted by the Office of Thrift Supervision. If this condition is not satisfied, the plan of conversion will be terminated and we will continue our business as a federal mutual savings association. We may terminate the plan of conversion at any time.

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Restrictions on the Acquisition of
Fraternity Community Bancorp and
Fraternity Federal Savings and Loan Association

General

     Fraternity Federal Savings and Loan Association’s plan of conversion provides for the conversion of Fraternity Federal Savings and Loan Association from the mutual to the stock form of organization and, as part of the conversion, the adoption of a new federal stock charter and bylaws by Fraternity Federal Savings and Loan Association’s members. The plan of conversion also provides for the concurrent formation of a holding company. As described below and elsewhere in this document, certain provisions in Fraternity Community Bancorp’s articles of incorporation and bylaws may have anti-takeover effects. In addition, provisions in Fraternity Federal Savings and Loan Association’s federal stock charter and bylaws may also have anti-takeover effects. Finally, Maryland corporate law and regulatory restrictions may make it difficult for persons or companies to acquire control of either Fraternity Community Bancorp or Fraternity Federal Savings and Loan Association.

Anti-takeover Provisions in Fraternity Community Bancorp’s Articles of Incorporation and Bylaws

     Fraternity Community Bancorp’s articles of incorporation and bylaws contain provisions that could make more difficult an acquisition of Fraternity Community Bancorp by means of a tender offer, proxy contest or otherwise. Some provisions will also render the removal of the incumbent board of directors or management of Fraternity Community Bancorp more difficult. These provisions may have the effect of deterring a future takeover attempt that is not approved by the directors of Fraternity Community Bancorp, but which Fraternity Community Bancorp shareholders may deem to be in their best interests or in which shareholders may receive a substantial premium for their shares over then current market prices. As a result, shareholders who might desire to participate in such a transaction may not have the opportunity to do so. The following description of these provisions is only a summary and does not provide all of the information contained in Fraternity Community Bancorp’s articles of incorporation and bylaws. See “Where You Can Find More Information” for information on where to obtain a copy of these documents.

     Limitation on Voting Rights. Our articles of incorporation provide that in no event will any record owner of any outstanding common stock which is beneficially owned, directly or indirectly, by a person who, as of any record date for the determination of shareholders entitled to vote on any matter, beneficially owns in excess of 10% of the then-outstanding shares of common stock, be entitled, or permitted to any vote in respect of the shares held in excess of the limit. This limitation does not apply to any director or officer acting solely in their capacities as directors and officers, or any employee benefit plans of Fraternity Community Bancorp or any subsidiary or a trustee of a plan.

     Board of Directors

     Classified Board. Our board of directors is divided into three classes as nearly as equal in number as possible. The shareholders elect one class of directors each year for a term of three years. The classified board makes it more difficult and time consuming for a shareholder group to fully use its voting power to gain control of the board of directors without the consent of the incumbent board of directors of Fraternity Community Bancorp.

     Filling of Vacancies; Removal. Our bylaws provide that any vacancy occurring in the board of directors, including a vacancy created by an increase in the number of directors, may be filled only by a vote of a majority of the directors then in office. A person elected to fill a vacancy on the board of directors will serve for the remainder of the full term of the class of directors in which the vacancy occurred and until his or her successor shall have been elected and qualified. Our articles of incorporation provide that a director may be removed from the board of directors before the expiration of his or her term only for cause and only upon the vote of a majority of the shares entitled to vote in the election of directors. These provisions make it more difficult for shareholders to remove directors and replace them with their own nominees.

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     Qualification. Our bylaws provide that to be eligible to serve on the board of directors a person must not: (1) be under indictment for, or ever have been convicted of, a criminal offense involving dishonesty or breach of trust and the penalty for such offense could be imprisonment for more than one year, (2) be a person against whom a banking agency has, within the past ten years, issued a cease and desist order for conduct involving dishonesty or breach of trust and that order is final and not subject to appeal, or (3) have been found either by a regulatory agency whose decision is final and not subject to appeal or by a court to have (i) breached a fiduciary duty involving personal profit, or (ii) committed a willful violation of any law, rule or regulation governing banking, securities, commodities or insurance, or any final cease and desist order issued by a banking, securities, commodities or insurance regulatory agency. These provisions contained in our bylaws may prevent shareholders from nominating themselves or persons of their choosing for election to the board of directors.

     Elimination of Cumulative Voting. Our articles of incorporation provide that no shares will be entitled to cumulative voting. The elimination of cumulative voting makes it more difficult for a shareholder group to elect a director nominee.

     Special Meetings of Shareholders. Our shareholders must act only through an annual or special meeting. Special meetings of shareholders may only be called by the Chairman, the President, by two-thirds of the total number of directors or by the Corporate Secretary upon the written request of the holders of a majority of all the shares entitled to vote at a meeting. The limitations on the calling of special meetings of shareholders may have the effect of delaying consideration of a shareholder proposal until the next annual meeting.

     Amendment of Articles of Incorporation. Our articles of incorporation provide that certain amendments to our articles of incorporation relating to a change in control of us must be approved by at least 75% of the outstanding shares entitled to vote.

     Advance Notice Provisions for Shareholder Nominations and Proposals. Our bylaws establish an advance notice procedure for shareholders to nominate directors or bring other business before an annual meeting of shareholders. A person may not be nominated for election as a director unless that person is nominated by or at the direction of our board of directors or by a shareholder who has given appropriate notice to us before the meeting. Similarly, a shareholder may not bring business before an annual meeting unless the shareholder has given us appropriate notice of the shareholder’s intention to bring that business before the meeting. Our Secretary must receive notice of the nomination or proposal not less than 90 days before the date of the annual meeting; provided, however, that if less than 100 days’ notice of prior public disclosure of the date of the meeting is given or made to the shareholders, notice by the shareholder to be timely must be received not later than the close of business on the 10^th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A shareholder who desires to raise new business must provide us with certain information concerning the nature of the new business, the shareholder, the shareholder’s ownership of Fraternity Community Bancorp and the shareholder’s interest in the business matter. Similarly, a shareholder wishing to nominate any person for election as a director must provide us with certain information concerning the nominee and the proposing shareholder.

     Advance notice of nominations or proposed business by shareholders gives our board of directors time to consider the qualifications of the proposed nominees, the merits of the proposals and, to the extent deemed necessary or desirable by our board of directors, to inform shareholders and make recommendations about those matters.

     Authorized but Unissued Shares of Capital Stock. Following the offering, we will have authorized but unissued shares of common and preferred stock. Our articles of incorporation authorize the board of directors to establish one or more series of preferred stock and, for any series of preferred stock, to determine the terms and rights of the series, including voting rights, dividend rights, conversion and redemption rates, and liquidation preferences. Such shares of common and preferred stock could be issued by the board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise.

     Business Combinations with Interested Shareholders. Under Maryland law, “business combinations” between Fraternity Community Bancorp and an interested shareholder or an affiliate of an interested

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shareholder are prohibited for five years after the most recent date on which the interested shareholder becomes an interested shareholder. These business combinations include a merger, consolidation, statutory share exchange or, in circumstances specified in the statute, certain transfers of assets, certain stock issuances and transfers, liquidation plans and reclassifications involving interested shareholders and their affiliates or issuance or reclassification of equity securities. Maryland law defines an interested shareholder as: (1) any person who beneficially owns 10% or more of the voting power of Fraternity Community Bancorp’s voting stock after the date on which Fraternity Community Bancorp had 100 or more beneficial owners of its stock; or (2) an affiliate or associate of Fraternity Community Bancorp at any time after the date on which Fraternity Community Bancorp had 100 or more beneficial owners of its stock who, within the two-year period before the date in question, was the beneficial owner of 10% or more of the voting power of the then-outstanding voting stock of Fraternity Community Bancorp. A person is not an interested shareholder under the statute if the board of directors approved in advance the transaction by which the person otherwise would have become an interested shareholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.

     After the five-year prohibition, any business combination between Fraternity Community Bancorp and an interested shareholder generally must be recommended by the board of directors of Fraternity Community Bancorp and approved by the affirmative vote of at least: (1) 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of Fraternity Community Bancorp and (2) two-thirds of the votes entitled to be cast by holders of voting stock of Fraternity Community Bancorp other than shares held by the interested shareholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested shareholder. These super-majority vote requirements do not apply if Fraternity Community Bancorp’s common shareholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested shareholder for its shares.

Restrictions in Fraternity Federal Savings and Loan Association’s Federal Stock Charter and Bylaws

     Although the board of directors of Fraternity Federal Savings and Loan Association is not aware of any effort that might be made to obtain control of Fraternity Federal Savings and Loan Association after its conversion to the stock form of ownership, the board of directors believes it is appropriate to adopt certain provisions permitted by federal regulations that may have the effect of deterring a future takeover attempt that is not approved by Fraternity Federal Savings and Loan Association’s board of directors. The following description of these provisions is only a summary and does not provide all of the information contained in Fraternity Federal Savings and Loan Association’s proposed federal stock charter and bylaws.

     Beneficial Ownership Limitation. Fraternity Federal Savings and Loan Association’s charter provides that, for a period of five years from the date of the conversion, no person, other than Fraternity Community Bancorp, may acquire directly or indirectly the beneficial ownership of more than 10% of any class of any equity security of Fraternity Federal Savings and Loan Association. If a person acquires shares in violation of this provision, all shares beneficially owned by such person in excess of 10% will be considered “excess shares” and will not be counted as shares entitled to vote or counted as voting shares in connection with any matters submitted to the shareholders for a vote.

     Board of Directors

     Classified Board. Fraternity Federal Savings and Loan Association’s board of directors is divided into three classes as nearly as equal in number as possible. The shareholders elect one class of directors each year for a term of three years. The classified board makes it more difficult and time consuming for a shareholder group to fully use its voting power to gain control of the board of directors without the consent of the incumbent board of directors of Fraternity Federal Savings and Loan Association.

     Filling of Vacancies; Removal. The bylaws provide that any vacancy occurring in the board of directors, including a vacancy created by an increase in the number of directors, may be filled by a vote of a majority of the remaining directors although less than a quorum of the board of directors then in office. A person elected to fill a vacancy on the board of directors will serve until the next election of directors by the shareholders.

116

Fraternity Federal Savings and Loan Association’s bylaws provide that a director may be removed from the board of directors before the expiration of his or her term only for cause and only upon the vote of the holders of at least a majority of the outstanding shares of voting stock. These provisions make it more difficult for shareholders to remove directors and replace them with their own nominees.

     Elimination of Cumulative Voting. The charter of Fraternity Federal Savings and Loan Association does not provide for cumulative voting with respect to the election of directors. The elimination of cumulative voting makes it more difficult for a shareholder group to elect a director nominee.

     Authorized but Unissued Shares of Capital Stock. Following the conversion, Fraternity Federal Savings and Loan Association will have authorized but unissued shares of common and preferred stock. Fraternity Federal Savings and Loan Association’s charter authorizes the board of directors to establish one or more series of preferred stock and, for any series of preferred stock, to determine the terms and rights of the series, including voting rights, conversion rates, and liquidation preferences. Such shares of common and preferred stock could be issued by the board of directors to render more difficult or to discourage an attempt to obtain control of Fraternity Federal Savings and Loan Association by means of a merger, tender offer, proxy contest or otherwise.

Regulatory Restrictions

     Office of Thrift Supervision Regulations. Regulations of the Office of Thrift Supervision provide that, for a period of three years following the date of the completion of the conversion, no person, acting singly or together with associates in a group of persons acting in concert, will directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of any class of any equity security of Fraternity Community Bancorp without the prior written approval of the Office of Thrift Supervision. Where any person, directly or indirectly, acquires beneficial ownership of more than 10% of any class of any equity security of Fraternity Community Bancorp without the prior written approval of the Office of Thrift Supervision, the securities beneficially owned by such person in excess of 10% will not be voted by any person or counted as voting shares in connection with any matter submitted to the shareholders for a vote, and will not be counted as outstanding for purposes of determining the affirmative vote necessary to approve any matter submitted to the shareholders for a vote.

     Change in Bank Control Act. The acquisition of 10% or more of the common stock outstanding may trigger the provisions of the Change in Bank Control Act, a federal law. The Office of Thrift Supervision has also adopted a regulation under the Change in Bank Control Act which generally requires persons who at any time intend to acquire control of a federally chartered savings association, including a converted savings and loan association such as Fraternity Federal Savings and Loan Association, to provide 60 days prior written notice and certain financial and other information to the Office of Thrift Supervision.

     The 60-day notice period does not commence until the information is deemed to be substantially complete. Control for the purpose of this Act exists in situations in which the acquiring party has voting control of at least 25% of any class of Fraternity Community Bancorp’s voting stock or the power to direct the management or policies of Fraternity Community Bancorp. However, under Office of Thrift Supervision regulations, “control” is presumed to exist where the acquiring party has voting control of at least 10% of any class of Fraternity Community Bancorp’s voting securities if specified “control factors” are present. The statute and underlying regulations authorize the Office of Thrift Supervision to disapprove a proposed acquisition on certain specified grounds.

Description of Fraternity Community Bancorp Capital Stock

The common stock of Fraternity Community Bancorp will represent nonwithdrawable capital, will not be an account of any type, and will not be insured by the Federal Deposit Insurance Corporation or any other government agency.

General

     Fraternity Community Bancorp is authorized to issue 15 million (15,000,000) shares of common stock having a par value of $0.01 per share and one million (1,000,000) shares of preferred stock having a par value of

117

$0.01 per share. Each share of Fraternity Community Bancorp’s common stock will have the same relative rights as, and will be identical in all respects with, each other share of common stock. Upon payment of the purchase price for the common stock, as required by the plan of conversion, all stock will be duly authorized, fully paid and nonassessable. Fraternity Community Bancorp will not issue any shares of preferred stock in the conversion.

Common Stock

     Dividends. Under applicable law, Fraternity Community Bancorp can pay dividends on its common stock if, after giving effect to the distribution, it would be able to pay its indebtedness as the indebtedness comes due in the usual course of business and its total assets exceed the sum of its liabilities and the amount needed, if Fraternity Community Bancorp were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of any holders of capital stock who have a preference upon dissolution. The holders of common stock of Fraternity Community Bancorp will be entitled to receive and share equally in dividends as may be declared by the board of directors of Fraternity Community Bancorp out of funds legally available for dividends. If Fraternity Community Bancorp issues preferred stock, the holders of the preferred stock may have a priority over the holders of the common stock with respect to dividends. See “Our Dividend Policy” and “Regulation and Supervision.”

     Voting Rights. After the conversion, the holders of common stock of Fraternity Community Bancorp will possess exclusive voting rights in Fraternity Community Bancorp. They will elect Fraternity Community Bancorp’s board of directors and act on other matters as are required to be presented to them under Maryland law or as are otherwise presented to them by the board of directors. Except as discussed under “Restrictions on the Acquisition of Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association—Restrictions in Fraternity Community Bancorp’s Articles of Incorporation and Bylaws—Limitations on Voting Rights,” each holder of common stock will be entitled to one vote per share and will not have any right to cumulate votes in the election of directors. If Fraternity Community Bancorp issues preferred stock, holders of Fraternity Community Bancorp preferred stock may also possess voting rights.

     Liquidation. If there is any liquidation, dissolution or winding up of Fraternity Federal Savings and Loan Association, Fraternity Community Bancorp, as the sole holder of Fraternity Federal Savings and Loan Association’s capital stock, would be entitled to receive all of Fraternity Federal Savings and Loan Association’s assets available for distribution after payment or provision for payment of all debts and liabilities of Fraternity Federal Savings and Loan Association, including all deposit accounts and accrued interest. Upon liquidation, dissolution or winding up of Fraternity Community Bancorp, the holders of its common stock would be entitled to receive all of the assets of Fraternity Community Bancorp available for distribution after payment or provision for payment of all its debts and liabilities. If Fraternity Community Bancorp issues preferred stock, the preferred stock holders may have a priority over the holders of the common stock upon liquidation or dissolution.

     Preemptive Rights; Redemption. Holders of the common stock of Fraternity Community Bancorp will not be entitled to preemptive rights with respect to any shares that may be issued. The common stock cannot be redeemed.

Preferred Stock

     Fraternity Community Bancorp will not issue any preferred stock in the conversion and it has no current plans to issue any preferred stock after the conversion. Preferred stock may be issued with designations, powers, preferences and rights as the board of directors may from time to time determine. The board of directors can, without shareholder approval, issue preferred stock with voting, dividend, liquidation and conversion rights that could dilute the voting strength of the holders of the common stock and may assist management in impeding an unfriendly takeover or attempted change in control.

118

Transfer Agent and Registrar

     The transfer agent and registrar for our common stock will be                                                             .

Registration Requirements

     We have registered our common stock with the Securities and Exchange Commission under Section 12(b) of the Securities Exchange Act of 1934, as amended, and will not deregister our common stock for a period of at least three years following the offering. As a result of registration, the proxy and tender offer rules, insider trading reporting and restrictions, annual and periodic reporting and other requirements of that statute will apply.

Legal and Tax Opinions

     The legality of our common stock has been passed upon for us by Kilpatrick Stockton LLP, Washington, D.C. The federal tax consequences of the conversion have been opined upon by Kilpatrick Stockton LLP and the state tax consequences of the conversion have been opined upon by Stegman & Company. Kilpatrick Stockton LLP and Stegman & Company have consented to the references to their opinions in this prospectus. Certain legal matters will be passed upon for Sandler O’Neill + Partners, L.P. by SNR Denton US LLP.

Experts

     The consolidated financial statements of Fraternity Federal Savings and Loan Association as of December 31, 2009 and 2008, and for each of the years in the two-year period ended December 31, 2009 included in this prospectus and in the registration statement have been audited by Stegman & Company, an independent registered public accounting firm, as stated in its report appearing herein and elsewhere in the registration statement (which report expresses an unqualified opinion), and has been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

     Feldman Financial Advisors has consented to the summary in this prospectus of its report to us setting forth its opinion as to our estimated pro forma market value and to the use of its name and statements with respect to it appearing in this prospectus.

Where You Can Find More Information

     We have filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933, as amended, that registers the common stock offered in the stock offering. This prospectus forms a part of the registration statement. The registration statement, including the exhibits, contains additional relevant information about us and our common stock. The rules and regulations of the Securities and Exchange Commission allow us to omit certain information included in the registration statement from this prospectus. You may read and copy the registration statement at the Securities and Exchange Commission’s public reference room at 100 F Street, NE, Room 1580, Washington, DC 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the Securities and Exchange Commission’s public reference rooms. The registration statement also is available to the public from commercial document retrieval services and at the Internet World Wide Website maintained by the Securities and Exchange Commission at http://www.sec.gov.

     Fraternity Federal Savings and Loan Association has filed an application for approval of the plan of conversion with the Office of Thrift Supervision. This prospectus omits certain information contained in the application. The application may be inspected, without charge, at the offices of the Office of Thrift Supervision, 1700 G Street, NW, Washington, DC 20552 and at the offices of the Regional Director of the Office of Thrift Supervision at the Southeast Regional Office of the Office of Thrift Supervision, 1475 Peachtree Street, NE, Atlanta, Georgia 30309.

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     A copy of the plan of conversion and Fraternity Community Bancorp’s articles of incorporation and bylaws are available without charge from Fraternity Federal Savings and Loan Association.

     The appraisal report of Feldman Financial Advisors has been filed as an exhibit to our registration statement and to our application to the Office of Thrift Supervision. The appraisal report was filed electronically with the Securities and Exchange Commission and is available on its website as described above. The appraisal report also is available at the public reference room of the Securities and Exchange Commission and the offices of the Office of Thrift Supervision as described above.

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Index to Consolidated Financial Statements
of Fraternity Federal Savings and Loan Association

	Page
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Statements of Financial Condition as of June 30, 2010 (unaudited) and December 31, 2009 and 2008	F-2
Consolidated Statements of Income and Retained Earnings for the Six Months Ended June 30, 2010 and 2009 (unaudited) and the Years Ended December 31, 2009 and 2008	F-3
Consolidated Statements of Comprehensive Income for the Six Months Ended June 30, 2010 and 2009 (unaudited) and the Years Ended December 31, 2009 and 2008	F-4
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009 (unaudited) and the Years Ended December 31, 2009 and 2008	F-5
Notes to Consolidated Financial Statements	F-7

****

     All schedules are omitted as the required information either is not applicable or is included in the financial statements or related notes. Separate financial statements for Fraternity Community Bancorp have not been included in this prospectus because Fraternity Community Bancorp, which has engaged only in organizational activities to date, has no significant assets, contingent or other liabilities, revenues or expenses.

121

[LETTERHEAD OF STEGMAN & COMPANY]

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
Fraternity Federal Savings and Loan Association, Inc.
Baltimore, Maryland

     We have audited the consolidated statements of financial condition of Fraternity Federal Savings and Loan Association and subsidiary (the “Association”) as of December 31, 2009 and 2008, and the related consolidated statements of income and retained earnings, comprehensive income and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Association’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Association is not required to have, nor were we engaged to perform, an audit of the internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Association’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Fraternity Federal Savings and Loan Association and subsidiary as of December 31, 2009 and 2008, and the consolidated results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

/s/ Stegman & Company

Baltimore, Maryland
May 14, 2010

F - 1

FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	June 30,		December 31,			December 31,
	2010		2009			2008
	(unaudited)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	2,846,485	$	4,400,585		$	2,574,151
Interest-bearing deposits in other banks		17,288,095		9,506,968			8,864,633
Total cash and cash equivalents		20,134,580		13,907,553			11,438,784
Investment securities:
Available-for-sale — at fair value		19,649,504		24,116,110			8,525,615
Held-to-maturity — at amoritized cost (fair value approximates $-0-, $-0- and $8,356,400, respectively)		—		—			7,446,849
Loans — net of allowance for loan losses of $804,500, $276,621 and $272,121, respectively		118,770,320		120,091,892			136,547,199
Investment in bank-owned life insurance		4,079,167		3,983,719			2,319,216
Property and equipment, net		798,600		812,357			699,268
Federal Home Loan Bank stock — at cost — restricted		1,562,400		1,353,700			1,597,300
Ground rents — net of valuation allowance		863,837		863,994			885,245
Accrued interest receivable		687,040		722,443			669,631
Deferred income taxes		—		—			94,694
Other assets		1,382,688		1,123,892			464,666
TOTAL ASSETS	$	167,928,136	$	166,975,660		$	170,688,467
LIABILITIES AND EQUITY
Liabilities:
Deposits	$	125,760,392	$	125,959,893		$	124,912,688
Advances from the Federal Home Loan Bank		22,750,000		22,916,667			28,416,667
Advances by borrowers for taxes and insurance		1,809,866		644,217			580,310
Other liabilities		960,791		463,117			303,653
Total liabilities		151,281,049		149,983,894			154,213,318
Equity:
Retained earnings		16,592,187		17,003,434			16,660,310
Accumulated other comprehensive loss		54,900		(11,668	)		(185,161	)
Total equity		16,647,087		16,991,766			16,475,149
TOTAL LIABILITIES AND EQUITY	$	167,928,136	$	166,975,660		$	170,688,467

See accompanying notes.

F - 2

FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

	Six Months Ended June 30,						Years Ended December 31,
	2010			2009			2009			2008
	(unaudited)
INTEREST INCOME:
Interest and fees on loans:
Real estate loans	$	3,355,587		$	3,862,759		$	7,372,112		$	7,814,228
Interest and dividends on investment securities		464,244			397,148			851,620			1,117,400
Income from ground rents owned		28,366			26,899			48,099			61,417
Total interest income		3,848,197			4,286,806			8,271,831			8,993,045
INTEREST EXPENSE:
Interest on deposits		1,509,194			2,042,769			3,890,675			4,928,576
Interest on borrowings		448,306			456,745			914,690			927,601
Total interest expense		1,957,500			2,499,514			4,805,365			5,856,177
NET INTEREST INCOME		1,890,697			1,787,292			3,466,466			3,136,868
PROVISION FOR LOAN LOSSES		864,719			50,960			50,960			5,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		1,025,978			1,736,332			3,415,506			3,131,868
NON-INTEREST INCOME:
Loss on sale of fixed assets		—			(2,977	)		(2,977	)		—
Gain on sale of investments		150,461			98,384			228,705			91,375
Income on bank-owned life insurance		95,448			66,163			164,503			119,216
Gain on sale of loans		32,978			176,127			224,368			28,000
Other income		32,030			40,556			78,164			84,180
Total non-interest income		310,917			378,253			692,763			322,771
NON-INTEREST EXPENSES:
Salaries and employee benefits		1,123,988			989,551			2,006,969			1,881,620
Occupancy expenses		324,674			298,120			607,803			576,858
Advertising		26,872			24,432			47,977			64,453
Data processing expense		124,201			110,018			226,510			211,418
Directors fees		48,148			43,618			88,180			88,780
Pension termination expense		—			—			—			299,944
Other general and administrative expenses		417,496			339,623			669,038			476,720
Total non-interest expenses		2,065,379			1,805,362			3,646,477			3,599,793
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES		(728,484	)		309,223			461,792			(145,154	)
PROVISION (BENEFIT) FOR INCOME TAXES:		(317,237	)		94,835			118,668			(153,178	)
NET (LOSS) INCOME		(411,247	)		214,388			343,124			8,024
RETAINED EARNINGS AT BEGINNING OF PERIOD		17,003,434			16,660,310			16,660,310			16,652,286
RETAINED EARNINGS AT END OF PERIOD	$	16,592,187		$	16,874,698		$	17,003,434		$	16,660,310

See accompanying notes.

F - 3

FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	June 30,						December 31,
	2010			2009			2009			2008
	(unaudited)
NET (LOSS) INCOME	$	(411,247	)	$	214,388		$	343,124		$	8,024
OTHER COMPREHENSIVE INCOME ON AVAILABLE-FOR-SALE INVESTMENTS:
Unrealized gains (losses) arising during period, net of income tax		172,367			64,123			217,880			(198,150	)
Less reclassification adjustment for gains net of taxes		(105,799	)		(39,359	)		(138,732	)		(55,428	)
Other comprehensive income (loss) net of taxes		66,568			24,764			79,148			(253,578	)
COMPREHENSIVE INCOME (LOSS)	$	(344,679	)	$	239,152		$	422,272		$	(245,554	)

See accompanying notes.

F - 4

FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended
	June 30,			Years Ended December 31,
	2010			2009			2008
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(411,247	)	$	343,124		$	8,024
Adjustments to reconcile net income used in operating activities:
Depreciation		60,977			114,957			118,066
Gain on sale of available-for-sale securities		(150,461	)		(228,705	)		(91,375	)
Gain on sale of loans		(32,978	)		(224,368	)		(28,000	)
Loss on sale of fixed assets		—			2,977			—
Origination of loans sold		(2,418,900	)		(20,195,300	)		(3,066,148	)
Proceeds from loans sold		2,451,878			20,419,668			3,094,148
Amortization/accretion of premium/discount		11,892			—			3,083
Increase in value of bank-owned life insurance		(95,448	)		(164,503	)		(119,216	)
Deferred income taxes		—			1,191			1,917
Provision for loan losses		864,719			50,960			5,000
Changes in operating assets and liabilities:
Accrued interest receivable and other assets		(223,393	)		(758,498	)		(170,816	)
Other liabilities		498,495			252,967			(261,672	)
Net cash provided by (used in) operating activities		555,534			(385,530	)		(506,989	)
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease (increase) in loans		456,030			16,455,307			(5,455,682	)
Redemption of ground rents		159			21,251			18,525
Acquisition of property and equipment		(47,220	)		(231,023	)		(41,821	)
Purchase of:
Investment securities available-for-sale		(8,486,500	)		(20,002,550	)		(9,180,165	)
Federal Home Loan Bank stock		(208,700	)		—			(441,900	)
Bank-owned life insurance (BOLI)		—			(1,500,000	)		—
Proceeds from:
Sales and maturities investment securities available-for-sale		11,654,450			7,946,948			5,410,539
Principal paydowns on investment securities available-for-sale		1,503,793			4,309,654			759,434
Principal paydowns on investment securities held-to-maturity		—			—			1,128,378
Sale of Federal Home Loan Bank stock		—			243,600			240,000
Net cash provided by (used in) investing activities		4,872,012			7,243,187			(7,562,692	)

F - 5

Fraternity Federal Savings and Loan Association and Subsidiary

Consolidated Statements of Cash Flows (Continued)

	Six Months Ended
	June 30,			Years Ended December 31,
	2010			2009			2008
	(unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	$	(199,501	)	$	1,047,205		$	(8,221,714	)
Borrowings from the Federal Home Loan Bank		5,000,000			—			41,000,000
Repayments of Federal Home Loan Bank borrowings		(5,166,667	)		(5,500,000	)		(36,250,000	)
Increase in advances by borrowers for taxes and insurance		1,165,649			63,907			25,320
Net cash provided by (used in) financing activities		799,481			(4,388,888	)		(3,446,394	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		6,227,027			2,468,769			(11,516,075	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		13,907,553			11,438,784			22,954,859
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	20,134,580		$	13,907,553		$	11,438,784
Cash paid for interest	$	1,957,527		$	4,805,504		$	5,855,857
Cash paid for taxes	$	—		$	125,000		$	—
Transfers of investment securities from held-to-maturity to available for sale	$	—		$	4,337,231		$	—

See accompanying notes.

F - 6

FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Nature of Operations

          Fraternity Federal Savings and Loan (the “Association”) provides a full range of banking services to individuals and businesses through its main office and three branches in the Baltimore metropolitan area. Its primary deposit products are certificates of deposit and demand, savings, NOW, and money market accounts. Its primary lending products are consumer loans and real estate mortgages.

     Unaudited Interim Financial Statements

          The interim consolidated financial statements prepared by management as of June 30, 2010 and for the six months ended June 30, 2010 and 2009 are not covered by the Independent Auditors’ Report. In the opinion of management, the accompanying consolidated financial statements as of June 30, 2010 and for the six months ended June 30, 2010 and 2009 contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position at June 30, 2010, and the results of operations and cash flows for the six months ended June 30, 2010 and 2009. The results of operations for the six months ended June 30, 2010 are not necessarily indicative of the results to be expected for the full year.

     Principles of Consolidation

          The consolidated financial statements include the accounts of the Association and its wholly owned subsidiary, Fraternity Insurance Agency, Inc. (an inactive corporation). All significant intercompany accounts and transactions have been eliminated. The accounting and reporting policies of the Association conform to U.S. generally accepted accounting principles and to general practices in the banking industry.

     Use of Estimates

          The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

     Investment Securities

          Investment securities designated as available-for-sale are stated at estimated fair value based on quoted market prices. They represent those securities which management may sell as part of its asset/liability strategy or that may be sold in response to changing interest rates or liquidity needs. Unrealized holding gains and losses, net of tax, on available-for-sale securities are included in other comprehensive income. Realized gains (losses) on available-for-sale securities are included in other income and, when applicable, are reported as a reclassification adjustment in other comprehensive income. Gains and losses on the sale of available-for-sale securities are recorded on the trade date and are determined by

F - 7

the specific identification method. The amortization of premiums and the accretion of discounts are recognized in interest income using methods approximating the interest method over the term of the security.

          Investment securities designated as held-to-maturity are stated at amortized cost and adjusted for premiums and discounts that are recognized in interest income using methods in approximating the interest method over the period of maturity.

     Restricted Stock Investment

          The Association, as a member of the Federal Home Loan Bank System, is required to maintain an investment in capital stock of the Federal Home Loan Bank of Atlanta (“FHLB”) in varying amounts based on balances of outstanding home loans and on amounts borrowed from the FHLB. Because no ready market exists for this stock and it has no quoted market value, the Association investment in this stock is carried at cost.

     Loans Held for Sale

          Loans originated for sale are carried at the lower of aggregate cost or market value. Market value is based on commitments from investors. Gains and losses on sales are determined using the specific identification method.

     Loans Receivable

          Loans are stated at the principal amount outstanding net of unearned income. Interest income on loans is accrued at the contractual rate on the principal amount outstanding. When scheduled principal and interest payments are past due 90 days or more, the accrual of interest income is discontinued and recognized only as collected. Accrual of interest resumes when the loan is brought current and the borrower demonstrates an ability to service the debt on a current basis.

          Loan origination fees and qualifying deferred loan costs are being deferred, and the net amount is amortized over the contractual life of the loan as an adjustment to the loan’s yield. The computation on a per loan basis was based on salaries of loan officers, employees associated with originating loans and loan volume.

     Allowance for Loan Losses

          The allowance for loan losses is maintained at a level which, in management’s judgment, is adequate to absorb loan losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, and trends in historical loss experience, specific impaired loans, and economic conditions. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. The allowance is increased by a provision for loan losses, which is charged to expense, and reduced by charge-offs, net of recoveries. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.

          While management uses all available information to recognize credit losses in accordance with U.S. generally accepted accounting principles, future increases or decreases to the allowance may be necessary based on several factors such as changes in local economic conditions affecting the Association’s customers, the payment performance of individual loans, portfolio seasoning, changes in collateral values, and reviews of loan relationships. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Association’s allowance for credit losses. Such examinations could result in the Association recognizing additions to this allowance based on the regulators’ judgments about information available to them at the time of their examination.

F - 8

          A loan is considered impaired when it is probable that the Association will be unable to collect scheduled payments. Factors in determining impairment include payment status, collateral value and probability of collection. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

     Bank-Owned Life Insurance

          The Association purchased single premium life insurance policies on certain employees of the Association. The net cash surrender value of those policies is included in the accompanying statement of financial position. Appreciation in the value of the insurance policies is classified in non-interest income.

     Premises and Equipment

          Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the various classes of assets from the respective dates of acquisition. The useful lives for the principal classes of assets are:

Buildings and improvements	30 - 40 years
Furniture, fixtures and equipment	3 - 20 years
Leasehold improvements	10 years

          Expenditures for maintenance, repairs and minor renewals are expensed as incurred. Expenditures for additions, improvements and replacements are added to premises and equipment accounts. The cost of retirements and other dispositions is removed from both the asset and accumulated depreciation accounts.

     Income Taxes

          Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of available-for-sale securities, allowance for loan losses, accumulated depreciation, deferred loan fees, and accrued employee benefits for financial and income tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets and liabilities are reflected at income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

     Advertising

          Advertising costs are expensed as incurred. Advertising expense was $47,977 and $64,453 for the years ended December 31, 2009 and 2008, respectively. Advertising expense was $26,872 and $24,432 for the six months ended June 30, 2010 and 2009, respectively.

     Cash and Cash Equivalents

          The Association considers all cash and due from banks and interest-bearing deposits in other banks having original maturities of three months or less to be cash equivalents for purposes of the statement of cash flows.

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     Financial Statement Presentation

          Certain reclassifications have been made to the financial statement presentation to conform with the current year’s method of presentation. Such reclassifications had no effect on net income.

     Recent Accounting Pronouncements

          Financial Accounting Standards Board (“FASB”) Accounting Standards Board (“ASC”) Topic 320, “Investments — Debt and Equity Securities.” New authoritative accounting guidance under ASC Topic 320, “Investments — Debt and Equity Securities,” (i) changes existing guidance for determining whether an impairment is other than temporary to debt securities and (ii) replaces the existing requirement that the entity’s management assert it has both the intent and ability to hold an impaired security until recovery with a requirement that management assert: (a) it does not have the intent to sell the security; and (b) it is more likely than not it will not have to sell the security before recovery of its cost basis. Under ASC Topic 320, declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income. The Association adopted the provisions of the new authoritative accounting guidance under ASC Topic 320 during the first quarter of 2009. Adoption of the new guidance did not significantly impact the Association’s financial statements.

          FASB ASC Topic 820, “Fair Value Measurements and Disclosures.” ASC Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of ASC Topic 820 became effective for the Association on January 1, 2008 for financial assets and financial liabilities and on January 1, 2009 for non-financial assets and non-financial liabilities (see Note 14 — Fair Value Measurements).

          Additional new authoritative accounting guidance under ASC Topic 820 affirms that the objective of fair value when the market for an asset is not active is the price that would be received to sell the asset in an orderly transaction, and clarifies and includes additional factors for determining whether there has been a significant decrease in market activity for an asset when the market for that asset is not active. ASC Topic 820 requires an entity to base its conclusion about whether a transaction was not orderly on the weight of the evidence. The new accounting guidance amended prior guidance to expand certain disclosure requirements. The Association adopted the new authoritative accounting guidance under ASC Topic 820 during 2009. Adoption of the new guidance did not significantly impact the Association’s financial statements.

          Further new authoritative accounting guidance (Accounting Standards Update No. 2009-5) under ASC Topic 820 provides guidance for measuring the fair value of a liability in circumstances in which a quoted price in an active market for the identical liability is not available. In such instances, a reporting entity is required to measure fair value utilizing a valuation technique that uses (i) the quoted price of the identical liability when traded as an asset, (ii) quoted prices for similar liabilities when traded as assets, or (iii) another valuation technique that is consistent with the existing principles of ASC Topic 820, such as an income approach or market approach. The new authoritative accounting guidance also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability.

          The foregoing new authoritative accounting guidance under ASC Topic 820 became effective for the Association’s financial statements for 2009 and did not have a significant impact on the Association’s financial statements.

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          FASB ASC Topic 855, “Subsequent Events.” New authoritative accounting guidance under ASC Topic 855, “Subsequent Events,” establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. ASC Topic 855 defines (i) the period after the balance sheet date during which a reporting entity’s management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and (iii) the disclosures an entity should make about events or transactions that occurred after the balance sheet date. The new authoritative accounting guidance under ASC Topic 855 became effective for the Association’s financial statements for 2009 and did not have a significant impact on the Association’s financial statements.

          FASB ASC Topic 860, “Transfers and Servicing.” New authoritative accounting guidance under ASC Topic 860, “Transfers and Servicing,” amends prior accounting guidance to enhance reporting about transfers of financial assets, including securitizations, and where companies have continuing exposure to the risks related to transferred financial assets. The new authoritative accounting guidance eliminates the concept of a “qualifying special-purpose entity” and changes the requirements for derecognizing financial assets. The new authoritative accounting guidance also requires additional disclosures about all continuing involvements with transferred financial assets including information about gains and losses resulting from transfers during the period. The new authoritative accounting guidance under ASC Topic 860 became effective January 1, 2010 and did not have a significant impact on the Association’s financial statements.

     Credit Risk

          The Association has deposits in other financial institutions in excess of amounts insured by the Federal Deposit Insurance Corporation (FDIC).

     Subsequent Events

          The Association has evaluated subsequent events through May 14, 2010 — the date the financial statements were available to be issued.

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2. INVESTMENT SECURITIES

          The amortized cost and fair values of investment securities are as follows:

	June 30, 2010 (unaudited)
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available-for-sale:
Bank notes	$	1,476,669	$	9,510	$	23,239	$	1,462,940
Obligations of U.S. Government agencies		13,775,389		90,984		—		13,866,373
Mortgage-backed securities		4,308,003		80,563		68,375		4,320,191
	$	19,560,061	$	181,057	$	91,614	$	19,649,504
Held-to-maturity:
Mortgage-backed securities	$	—	$	—	$	—	$	—

	December 31, 2009
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available-for-sale:
Bank notes	$	1,425,882	$	7,218	$	—	$	1,433,100
Obligations of U.S. Government agencies		12,310,007		10,687		122,854		12,197,840
Mortgage-backed securities		10,399,230		200,651		114,711		10,485,170
	$	24,135,119	$	218,556	$	237,565	$	24,116,110
Held-to-maturity:
Mortgage-backed securities	$	—	$	—	$	—	$	—

	December 31, 2008
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available-for-sale:
Obligations of U.S. Government agencies	$	3,616,516	$	36,885	$	—	$	3,653,401
Mortgage-backed securities		5,210,762		88,399		426,947		4,872,214
	$	8,827,278	$	125,284	$	426,947	$	8,525,615
Held-to-maturity:
Mortgage-backed securities	$	7,446,849	$	119,619	$	—	$	7,566,468

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          The amortized cost and fair value of debt securities at December 31, 2009 and June 30, 2010 by contractual maturities are shown below. Expected maturities may differ from contractual maturities because borrowers may have to call or repay obligations with or without call or prepayment penalties.

	June 30, 2010 (unaudited)
	Available-for-Sale
	Amortized		Fair
	Cost		Value
Due in one year through five years	$	3,493,560	$	3,493,280
Due in five years through ten years		10,815,803		10,897,488
Due after ten years		5,250,698		5,258,736
	$	19,560,061	$	19,649,504

	December 31, 2009
	Available-for-Sale
	Amortized		Fair
	Cost		Value
Due in one year through five years	$	3,432,582	$	3,448,453
Due in five years through ten years		6,200,268		6,290,126
Due after ten years		14,502,269		14,377,531
	$	24,135,119	$	24,116,110

          The Association recognized gains on sales of available-for-sale securities of $228,705 and $91,375 for the years ended December 31, 2009 and 2008, respectively. The Association recognized gains on sales of available-for-sale securities of $150,461 and $98,384 for the six months ended June 30, 2010 and 2009, respectively.

          Securities with unrealized losses, segregated by length of impairment, as of June 30, 2010 and December 31, 2009 were as follows:

	Less than 12 Months				More than 12 Months				Total
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
June 30, 2010 (unaudited)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Available-for sale:
Bank Notes	$	967,550	$	23,239	$	—	$	—	$	967,550	$	23,239
Obligation of U.S. Government Agencies		—		—		—		—		—		—
Mortgage-backed securities		1,009,846		203		489,653		68,172		1,499,499		68,375
	$	1,977,396	$	23,442	$	489,653	$	68,172	$	2,467,049	$	91,614

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	Less than 12 Months				More than 12 Months				Total
	Estimated		Unrealized		Estimated		Unrealized		Estimated		Unrealized
December 31, 2009	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Available-for sale:
Bank Notes	$	—	$	—	$	—	$	—	$	—	$	—
Obligation of U.S. Government Agencies		6,160,950		122,854		—		—		6,160,950		122,854
Mortgage-backed securities		1,342,931		13,199		1,202,956		101,512		2,545,887		114,711
	$	7,503,881	$	136,053	$	1,202,956	$	101,512	$	8,706,837	$	237,565

          Declines in the fair value of investment securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income. In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Association to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in cost.

          Furthermore, as of June 30, 2010, management does not have the intent to sell any of the securities classified as available-for-sale in the table above and believes that it is more likely than not that the Association will not have to sell any such securities before a recovery of cost. The unrealized losses are largely due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. Management does not believe any of the securities are impaired due to reasons of credit quality. Accordingly, as of June 30, 2010, management believes the impairments detailed in the table above are temporary and no impairment loss has been realized in the Association’s consolidated income statement.

          Effective December 31, 2009 the Association transferred all of the investment securities in its held-to-maturity portfolio to available for sale. The tranfer resulted in a positive adjustment to accumulated other comprehensive loss in the amount of $94,345, net of related income taxes.

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3. LOANS AND ALLOWANCE FOR LOAN LOSSES

     Loans and allowance for loan losses consisted of the following:

	June 30,			December 31,			December 31,
	2010			2009			2008
	(unaudited)
Real Estate Loans:
One-to-four family	$	89,616,716		$	89,312,560		$	108,696,059
Lines of Credit		13,043,637			12,305,473			13,154,109
Commercial		4,001,867			4,197,266			3,594,160
Residential Construction		8,864,409			10,437,002			7,723,822
Land		3,822,076			3,939,296			3,535,873
Total Real Estate Loans		119,348,705			120,191,597			136,704,023
Consumer Loans		53,966			33,510			42,454
Commercial Loans		27,794			26,688			28,794
Total Loans		119,430,465			120,251,795			136,775,271
Less:
Allowance for loan losses		(804,500	)		(276,621	)		(272,121	)
Deferred loan fees and costs (net)		144,355			116,718			44,049
Total loans and allowance for loan losses	$	118,770,320		$	120,091,892		$	136,547,199

     Transactions in the allowance for loan losses are as follows:

	Six Months Ended June 30,						Years Ended December 31,
	2010			2009			2009			2008
	(unaudited)			(unaudited)
Beginning of year	$	276,621		$	272,121		$	272,121		$	267,121
Charge-offs, net		(336,840	)		(3,960	)		(46,460	)		—
Provision charged to expense		864,719			50,960			50,960			5,000
End of year	$	804,500		$	319,121		$	276,621		$	272,121

     The balance of impaired loans is $822,747 and $-0- as of December 31, 2009 and 2008, respectively. The balance of impaired loans is $2,240,990 and $2,489,623 as of June 30, 2010 and 2009, respectively.

     Non-Performing/Past Due Loans — Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations, which typically occurs when principal or interest payments are more than 90 days past due. Non-accrual loans totalled $1,035,000 at December 31, 2009 and $187,000 at December 31, 2008. Non-accrual loans totalled $3,259,000 at June 30, 2010 and $268,000 at June 30, 2009. Accruing loans past due more than 90 days totalled $706,000 at December 31, 2009 and $ -0- at December 31, 2008. Accruing loans past due more than 90 days totalled $0 at June 30, 2010 and 2009.

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     Impaired Loans — Impaired loans were as follows:

	June 30,		December 31,
	2010		2009		2008
	(unaudited)
Balance of impaired loans with no allocated allowance	$	2,240,990	$	822,747	$	—
Balance of impaired loans with an allocated allowance		—		—		—
Total recorded investment in impaired loans	$	2,240,990	$	822,747	$	—
Amount of the allowance allocated to impaired loans	$	—	$	—	$	—

     The impaired loans included in the table above were primarily comprised of collateral dependent residential real estate loans. No interest income was recognized on these loans subsequent to their classification as impaired.

     Aggregate loans to executive officers, directors and their associates, including companies in which they have partial ownership interest, did not exceed 5% of equity as of June 30, 2010, or December 31, 2009 and 2008. Such loans were made under terms and conditions substantially the same as loans made to parties not affiliated with the Association. Loans to such borrowers are summarized as follows:

	June 30,			December 31,
	2010			2009			2008
	(unaudited)
Beginning of year	$	819,907		$	1,096,069		$	1,115,831
New loans		—			220,000			—
Repayments		(5,518	)		(496,162	)		(19,762	)
End of year	$	814,389		$	819,907		$	1,096,069

     As of December 31, 2009 and 2008, respectively, $16,983,168 and $21,043,336 of loans receivable are being serviced for the benefit of others. As of June 30, 2010 and 2009, respectively, $14,089,356 and $18,899,544 of loans receivable are being serviced for the benefit of others. The amount of compensation received by the Association approximates the cost of servicing the assets. Accordingly, no servicing asset or liability has been recorded. Service fee revenue recognized in 2009 and 2008 was $52,959 and $55,351, respectively. Service fee revenue recognized for the six-months ended June 30, 2010 and 2009 was $20,947 and $28,879, respectively.

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4. ACCRUED INTEREST RECEIVABLE

     Accrued interest receivable was as follows:

	June 30,		December 31,
	2010		2009		2008
	(unaudited)
FDIC — insured CDs	$	1,633	$	1,470	$	—
Obligations of U.S. Government agencies		147,682		76,244		29,619
Mortgage-backed securities		17,610		49,021		51,691
Loans		519,100		595,708		586,321
Dividends		1,015		—		2,000
Total	$	687,040	$	722,443	$	669,631

5. GROUND RENTS

     The carrying value of ground rents was as follows:

	June 30,			December 31,
	2010			2009			2008
	(unaudited)
Ground rents at cost	$	909,337		$	909,494		$	929,345
Less valuation allowance		(45,500	)		(45,500	)		(44,100	)
Net ground rents	$	863,837		$	863,994		$	885,245

     Based on the analysis of the ground rents owned by the Association, management has determined that the valuation allowance is adequate as of June 30, 2010.

6. PREMISES AND EQUIPMENT

     Premises and equipment consisted of the following:

	June 30,		December 31,
	2010		2009		2008
	(unaudited)
Land	$	170,773	$	170,773	$	170,773
Land improvements		27,284		27,284		27,284
Building		968,520		949,761		835,630
Furniture, fixtures, and equipment		755,510		739,572		649,407
Leasehold improvements		164,278		151,755		151,755
Automobiles		79,152		79,152		81,356
		2,165,517		2,118,297		1,916,205
Less accumulated depreciation and amortization		1,366,917		1,305,940		1,216,937
Net book value of premises and equipment	$	798,600	$	812,357	$	699,268

     Depreciation expense amounted to $114,957 and $118,066 for the years ended December 31, 2009 and 2008, respectively. Depreciation expense amounted to $60,977 and $55,474 for the six months ended June 30, 2010 and 2009, respectively.

F - 17

     The Association is obligated under noncancelable lease agreements for three branches. The leases each contain renewal options and provide that the Association pay property taxes, insurance and maintenance costs. Total rent expense under operating leases for the years ended December 31, 2009 and 2008 was $207,384 and $193,316, respectively. Total rent expense for the six months ended June 30, 2010 and 2009 was $121,633 and $107,752, respectively.

     Future minimum lease payments under leases having initial or remaining noncancelable leases:

2011	$	167,610
2012		136,545
2013		142,000
2014		128,245
2015		8,036

7. DEPOSIT ACCOUNTS

     Deposit accounts by type are as follows:

	June 30,		December 31,
	2010		2009		2008
	(unaudited)
Demand	$	948,381	$	759,607	$	684,761
Passbook		12,735,858		12,500,646		12,753,294
NOW accounts		3,248,080		2,822,422		2,783,410
Money market funds		1,703,621		1,814,694		1,706,557
Certificates of deposit		104,835,829		105,705,790		104,679,252
Brokered deposits		2,288,623		2,356,734		2,305,414
Total	$	125,760,392	$	125,959,893	$	124,912,688

     The following tables present contractual maturities of certificate accounts:

	As of June 30, 2010 (unaudited)
									2014 and
	2010		2011		2012		2013		thereafter
Certificates of Deposit	$	24,489,059	$	47,577,863	$	14,129,301	$	12,322,438	$	6,317,168

	As of December 31, 2009
									2014 and
	2010		2011		2012		2013		thereafter
Certificates of Deposit	$	53,149,986	$	27,031,482	$	12,701,678	$	7,101,853	$	5,720,791

     Certificates of deposit and other time deposits in denominations of more than $250,000 totalled $2,521,556 and $3,999,443 as of December 31, 2009 and 2008, respectively. Certificates of deposit and other time deposits in denominations of more than $250,000 totalled $3,643,821 and $3,290,728 as of June 30, 2010 and 2009, respectively.

     The Association held deposits of $248,718 for related parties at December 31, 2009. The Association held deposits of $257,894 for related parties at June 30, 2010.

F - 18

8. BORROWED FUNDS

     Total advances outstanding from the Federal Home Loan Bank (FHLB) were $22,916,667 and $28,416,667 as of December 31, 2009 and 2008, respectively. Total advances from the Federal Home Loan Bank were $22,750,000 as of June 30, 2010. The total amount available under the line of credit at December 31, 2009 was approximately $27,400,000. The total amount available under the line of credit at June 30, 2010 was approximately $27,600,000. Advances are summarized as follows:

				June 30,		December 31,
Year of	Interest			2010		2009		2008
Maturity	Rate			Amount		Amount		Amount
				(unaudited)
2009		2.84	%	$	—	$	—	$	166,667
2009		0.88	%		—		—		5,000,000
2011		4.40	%		5,000,000		5,000,000		5,000,000
2011		2.72	%		250,000		416,667		750,000
2012		3.32	%		2,500,000		2,500,000		2,500,000
2017		4.28	%		5,000,000		5,000,000		5,000,000
2018		3.94	%		5,000,000		5,000,000		5,000,000
2018		3.38	%		5,000,000		5,000,000		5,000,000
				$	22,750,000	$	22,916,667	$	28,416,667

     Interest is paid monthly with principal due at maturity except one of the notes where principal and interest are paid monthly. Interest expense on advances from the FHLB amounted to $914,687 and $927,589 for the years ended December 31, 2009 and 2008, respectively. Interest expense on advances from the FHLB amounted to $448,305 and $456,744 for the six months ended June 30, 2010 and 2009, respectively.

     Pursuant to collateral agreements with the FHLB, advances are secured by all stock in the FHLB and qualifying first and second mortgage loans.

9. INCOME TAXES

     A reconciliation between income tax expense and taxes computed at the statutory federal rate is as follows:

	June 30,						December 31,
	2010			2009			2009			2008
	(unaudited)			(unaudited)
Statutory federal tax rate		(34.0	)%		34.0	%		34.0	%		(34.0	)%
Increases (decreases) in tax resulting from:
State franchise tax, net of federal income tax benefit		(5.3	)		3.7			1.2			0.0
Non-taxable on bank-owned life insurance		(4.5	)		(7.3	)		(12.1	)		(56.2	)
Other		0.3			0.3			2.6			(15.3	)
		(43.5	)%		30.7	%		25.7	%		(105.5	)%

F - 19

     The deferred tax effects of temporary differences between financial and taxable income are as follows:

	December 31,
	2009			2008
Depreciation	$	(16,662	)	$	1,720
Loan fee income		(28,668	)		(4,226	)
Deferred compensation		35,186			952
Allowance for loan losses		1,775			2,952
Ground rents		—			655
Net operating loss		9,560			(136	)
Deferred income tax expense	$	1,191		$	1,917

     Net deferred income taxes consisted of the following:

	June 30,			December 31,
	2010			2009			2008
	(unaudited)
Deferred income tax assets:
Provision for loan losses	$	50,299		$	50,299		$	48,524
Ground rents		655			655			655
Deferred compensation		72,718			72,718			37,532
State net operating loss		9,560			9,560			—
Unrealized holding losses on available-for-sale securities		—			7,342			116,502
		133,232			140,574			203,213
Deferred income tax liabilities:
Depreciation	$	84,041		$	84,041		$	67,379
Loan Fee income		46,046			46,046			17,378
FHLB stock dividend		23,762			23,762			23,762
Unrealized gains on available-for-sale securities		34,543			—			—
		188,392			153,849			108,519
Net deferred tax (liability) asset	$	(55,160	)	$	(13,275	)	$	94,694

10. EMPLOYEE RETIREMENT PLANS

     During 2008 the Association terminated its defined benefit pension plan and eliminated any future liability for benefits. Expense related to this termination totalled $299,944 and is included in the 2008 statement of operations.

     The Association also sponsors an employee 401(k) savings and investment plan. The plan covers substantially all employees meeting age and service requirements and provides for both employee and employer matching contributions under Safe Harbor provisions. Expenses related to this plan for the years ended December 31, 2009 and 2008 was $57,651 and $59,899, respectively. Expenses related to this plan for the six months ended June 30, 2010 and 2009 was $31,124 and $29,757, respectively.

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11. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

     The Association is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers consisting of commitments to extend credit. This involves, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated statements of financial condition.

     The Association’s exposure to credit loss in the event of non-performance by the other party for commitments to extend credit is represented by the contractual notional amount of those instruments. The Association uses the same credit policies in making commitments as it does for on-balance sheet instruments.

     Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Association evaluates each customer’s creditworthiness on a case-by-case basis. The amount and type of collateral obtained, if deemed necessary by the Association upon extension of credit, varies and is based on management’s credit evaluation of the counterparty.

     The Association had commitments to originate mortgages of $2,577,800 and $980,200, secured by dwelling units, at December 31, 2009 and 2008, respectively. The Association had commitments to originate mortgages of $1,105,000 and $774,050, secured by dwelling units, at June 30, 2010 and 2009, respectively. Additionally, the Association had unfunded lines of credit totalling $13,145,037 and $13,133,757 as of December 31, 2009 and 2008, respectively. The Association had unfunded lines of credit totalling $13,419,383 and $13,198,766 as of June 30, 2010 and 2009, respectively.

12. DEFERRED COMPENSATION

     The Association has entered into deferred compensation agreements with two of its executive officers. Under the terms of the agreements, which consist of both a defined contribution component and a defined benefit component, the Association is obligated to provide annual benefits for the officers or their beneficiaries, after the officer’s death, disability, or retirement. For the defined benefit component the estimated present value to be paid is being accrued over the period from the effective date of the agreements until the full eligibility dates of the participants. The expense incurred for these plans for the years ended December 31, 2009 and 2008 was $87,422 and $19,500, respectively. The expense incurred for these plans for the six months ended June 30, 2010 and 2009 was $47,807 and $29,750, respectively.

13. REGULATORY MATTERS

     The Association is subject to various regulatory capital requirements administered by its primary federal regulator, the Office of Thrift Supervision (OTS). Failure to meet the minimum regulatory capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that if undertaken, could have a direct material effect on the Association and the consolidated financial statements. Under the regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Association must meet specific capital guidelines involving quantitative measures of the Association’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Association’s capital amounts and classification under the prompt corrective action guidelines are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

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     Quantitative measures established by regulation to ensure capital adequacy require the Association to maintain minimum amounts and ratios of: total risk-based capital and Tier I capital and Tier I capital to risk-weighted assets (as defined in the regulations), Tier I capital to adjusted total assets (as defined), and tangible capital to adjusted total assets (as defined).

     As of June 30, 2010, December 31, 2009 and 2008 (the most recent notification from the OTS), the Association was categorized as well capitalized under the regulatory framework for prompt corrective action. The following table details the Association’s capital position:

						For Capital Adequacy
						Purposes and to be
						Adequately Capitalized
						Under the Prompt Corrective
	Actual					Action Provisions
	Amount		Ratio			Amount		Ratio
	(dollars in thousands)					(dollars in thousands)
As of June 30, 2010 (unaudited)
Total Risk-Based Capital (to Risk-Weighted Assets)	$	17,405		18.79	%	$	7,411		8.0	%
Tier I Capital (to Risk-Weighted Assets)	$	16,555		17.87	%	$	3,706		4.0	%
Tier I Capital (to Adjusted Total Assets)	$	16,555		9.87	%	$	5,033		3.0	%
Tangible Capital (to Adjusted Total Assets)	$	16,555		9.87	%	$	2,516		1.5	%
As of December 31, 2009
Total Risk-Based Capital (to Risk-Weighted Assets)	$	17,326		18.69	%	$	7,416		8.0	%
Tier I Capital (to Risk-Weighted Assets)	$	17,003		18.34	%	$	3,708		4.0	%
Tier I Capital (to Adjusted Total Assets)	$	17,003		10.19	%	$	5,006		3.0	%
Tangible Capital (to Adjusted Total Assets)	$	17,003		10.19	%	$	2,503		1.5	%
As of December 31, 2008
Total Risk-Based Capital (to Risk-Weighted Assets)	$	16,976		18.35	%	$	7,401		8.0	%
Tier I Capital (to Risk-Weighted Assets)	$	16,660		18.01	%	$	3,700		4.0	%
Tier I Capital (to Adjusted Total Assets)	$	16,660		9.75	%	$	5,126		3.0	%
Tangible Capital (to Adjusted Total Assets)	$	16,660		9.75	%	$	2,563		1.5	%

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14. FAIR VALUE MEASUREMENTS

     Effective January 1, 2008, the Company adopted FASB guidance on Fair Value Measurements which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This guidance applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. In this standard, the FASB clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, the guidance establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy is as follows:

Level 1 Inputs — Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date.

Level 2 Inputs — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 Inputs — Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

     The following table presents the Association’s assets measured at fair value on a recurring basis:

			Quoted
			Prices in		Significant
			Active Markets		Other		Significant
	Fair Value		for Identical		Observable		Unobservable
	at June 30, 2010		Assets		Inputs		Inputs
	(unaudited)		(Level 1)		(Level 2)		(Level 3)
Available-for-sale securities	$	19,649,504	$	—	$	19,649,504	$	—
Total assets measured at fair value	$	19,649,504	$	—	$	19,649,504	$	—

			Quoted
			Prices in		Significant
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
	at December 31, 2009		(Level 1)		(Level 2)		(Level 3)
Available-for-sale securities	$	24,116,110	$	—	$	24,116,110	$	—
Total assets measured at fair value	$	24,116,110	$	—	$	24,116,110	$	—

F - 23

     Securities classified as available-for-sale are reported at fair value utilizing Level 2 Inputs. For these securities, the Association obtains fair values from an independent pricing service and safekeeping custodians. The observable data may include dealer quotes, cash flows, U.S. Treasury yield curve, trading levels, credit information, and the terms and conditions of the security, among other things.

     Financial Instruments Measured on a Nonrecurring Basis

     The Association may be required, from time to time, to measure certain other financial assets and liabilities at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. For assets measured at fair value on a nonrecurring basis as of June 30, 2010, the following table provides the level of valuation assumptions used to determine each adjustment and the carrying value of the assets:

					Significant
					Other		Significant
			Quoted		Observable		Unobservable
	Fair Value		Prices		Inputs		Inputs
	at June 30, 2010		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	2,240,990	$	—	$	—	$	2,240,990

					Significant
					Other		Significant
			Quoted		Observable		Unobservable
	Fair Value		Prices		Inputs		Inputs
	at December 31, 2009		(Level 1)		(Level 2)		(Level 3)
Impaired Loans	$	822,747	$	—	$	—	$	822,747

     Loans for which it is probable that the Association will not collect all principal and interest due according to contractual terms are measured for impairment in accordance with FASB guidance. Allowable methods for estimating fair value include using the fair value of the collateral for collateral dependent loans or, where a loan is determined not to be collateral dependent, using the discounted cash flow method. In our determination of fair value, we have categorized both methods of valuation as estimates based on Level 3 inputs.

     If the impaired loan is identified as collateral dependent, then the fair value method measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal or utilizing some other method of valuation for the collateral and applying a discount factor to the value based on our loan review policy and procedures.

     If the impaired loan is determined not to be collateral dependent, then the discounted cash flow method is used. This method requires the impaired loan to be recorded at the present value of expected future cash flows discounted at the loan’s effective interest rate. The effective interest rate of a loan is the contractual interest rate adjusted for any net deferred loan fees or costs, premiums, or discounts existing at origination or acquisition of the loan.

F - 24

15. FAIR VALUE OF FINANCIAL INSTRUMENTS

     Fair value estimates, methods, and assumptions are set forth below for the Association’s financial instruments as of December 31, 2009 and 2008.

	June 30, 2010 (unaudited)				December 31, 2009				December 31, 2008
	Carrying		Estimated		Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value		Value		Fair Value
Assets:
Cash and cash equivalents	$	20,134,580	$	20,134,580	$	13,907,553	$	13,907,553	$	11,438,784	$	11,438,784
Securities — available-for-sale		19,649,504		19,649,504		24,116,110		24,116,110		8,525,615		8,525,615
Securities — held-to-maturity		—		—		—		—		7,446,849		7,566,468
Loans		119,574,820		123,173,624		120,368,513		122,239,029		136,819,320		138,532,552
Fed Home Loan Bank stock		1,562,400		1,562,400		1,353,700		1,353,700		1,597,300		1,597,300
Accrued interest receivable		687,040		687,040		722,443		722,443		669,631		669,631
Investment in bank-owned life insurance		4,079,167		4,079,167		3,983,719		3,983,719		2,319,216		2,319,216
Liabilities:
Deposit accounts and advances by borrowers		127,570,258		129,370,334		126,604,110		128,413,988		125,492,998		126,451,070
Advances from the FHLB		22,750,000		23,172,311		22,916,667		22,997,847		28,416,667		28,438,595

	June 30,		December 31,		December 31,
	2010		2009		2008
	(unaudited)
Off-Balance Sheet Instruments:
Commitments to extend credit	$	1,105,000	$	2,577,800	$	980,200
Unused lines of credit	$	13,419,383	$	13,145,037	$	13,133,757

          (a) Cash and Cash Equivalents — The carrying amount for cash on hand and in banks approximates fair value due to the short maturity of these instruments.

          (b) Securities — The fair value of securities excluding Federal Home Loan Bank stock, is based on bid prices received from an external pricing service or bid quotations received from securities dealers.

          (c) Loans — Loans were segmented into portfolios with similar financial characteristics. Loans were also segmented by type such as residential, multifamily and non-residential, construction and land, second mortgage loans, commercial, and consumer. Each loan category was further segmented by fixed and adjustable rate interest terms and performing and nonperforming categories. The fair value of residential loans was calculated by discounting anticipated cash flows based on weighted-average contractual maturity, weighted-average coupon, and discount rate.

          The fair value for nonperforming loans was determined by reducing the carrying value of nonperforming loans by the Company’s historical loss percentage for each specific loan category.

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          (d) Federal Home Loan Bank Stock — The fair value of Federal Home Loan Bank stock approximates its carrying value based on the redemption provisions of the Federal Home Loan Bank.

          (e) Accrued Interest Receivable — The carrying amounts of accrued interest approximate the fair values.

          (f) Investments in Bank-Owned Life Insurance — The fair value of the insurance contracts approximates the carrying value.

          (g) Deposits and Advances by Borrowers — The fair value of deposits with no stated maturity, such as noninterest bearing deposits, interest-bearing NOW accounts, money market and statement savings accounts, is deemed to be equal to the carrying amounts. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate for certificates of deposit was estimated using the rate currently offered for deposits of similar remaining maturities.

          (h) Advances from the FHLB — Fair values are estimated by discounting carrying values using a cash flow approach based on market rates as of June 30, 2010 and December 31, 2009.

          (i) Off-Balance Sheet Financial Instruments — The Company’s adjustable rate commitments to extend credit move with market rates and are not subject to interest rate risk. The rates and terms of the Company’s fixed rate commitments to extend credit are competitive with others in the various markets in which the Company operates. The fair values of these instruments are immaterial.

          (j) Limitations — Fair value estimates are made at a specific point in time, based on relevant market information and information about financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect estimates.

F - 26

You should rely only on the information contained in this prospectus. Neither Fraternity Community Bancorp nor Fraternity Federal Savings and Loan Association has authorized anyone to provide you with different information. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered by this prospectus to any person or in any jurisdiction in which an offer or solicitation is not authorized or in which the person making an offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make an offer or solicitation in those jurisdictions. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of common stock.

[LOGO]

(Proposed Holding Company for Fraternity Federal Savings and Loan Association)

1,380,000 Shares
(Anticipated Maximum, Subject to Increase
to up to 1,587,000 Shares)

COMMON STOCK

Prospectus

Sandler O’Neill + Partners, L.P.

Until ___________, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

     The following table sets forth our anticipated expenses of the offering:

SEC filing fee (1)	$	2,000
OTS filing fee		12,000
FINRA filing fee (1)		3,000
EDGAR, printing, postage and mailing		75,000
Blue Sky fees and expenses		20,000
Legal fees and expenses		285,000
Accounting fees and expenses		30,000
Appraiser’s fees and expenses		38,500
Marketing firm expenses (including legal fees)		250,000
Conversion agent fees and expenses		30,000
Business plan fees and expenses		30,000
Transfer agent and registrar fees and expenses		10,000
Certificate printing		7,500
Miscellaneous		7,000
TOTAL	$	800,000

(1) Based on the registration of $15.9 million of common stock.

Item 14. Indemnification of Directors and Officers.

     The Articles of Incorporation of Fraternity Community Bancorp, Inc. provides as follows:

     NINTH: The Corporation shall indemnify (A) its directors and officers, whether serving the Corporation or at its request any other entity, to the fullest extent required or permitted by the general laws of the State of Maryland now or hereafter in force, including the advance of expenses under the procedures required, and (B) other employees and agents to such extent as shall be authorized by the Board of Directors or the Corporation’s Bylaws and be permitted by law. The foregoing rights of indemnification shall not be exclusive of any rights to which those seeking indemnification may be entitled. The Board of Directors may take such action as is necessary to carry out these indemnification provisions and is expressly empowered to adopt, approve and amend from time to time such Bylaws, resolutions or contracts implementing such provisions or such further indemnification arrangements as may be permitted by law. No amendment of the Articles of Incorporation of the Corporation shall limit or eliminate the right to indemnification provided hereunder with respect to acts or omissions occurring prior to such amendment or repeal.

Item 15. Recent Sales of Unregistered Securities.

     None.

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Item 16. Exhibits and Financial Statement Schedules.

The exhibits filed as a part of this Registration Statement are as follows:

(a) List of Exhibits

Exhibit	Description	Location
1.1	Engagement Letter by and between Fraternity Federal Savings and Loan Association and Sandler O’Neill & Partners, L.P., as marketing agent	Filed herewith
1.2	Draft Agency Agreement	Filed herewith
2.0	Plan of Conversion, as amended	Filed herewith
3.1	Articles of Incorporation of Fraternity Community Bancorp, Inc.	Filed herewith
3.2	Bylaws of Fraternity Community Bancorp, Inc.	Filed herewith
4.0	Specimen Common Stock Certificate of Fraternity Community Bancorp, Inc.	Filed herewith
5.0	Form of Opinion of Kilpatrick Stockton LLP re: Legality	Filed herewith
8.1	Form of Opinion of Kilpatrick Stockton LLP re: Federal Tax Matters	Filed herewith
8.2	Form of Opinion of Stegman & Company re: State Tax Matters	Filed herewith
10.1	Fraternity Federal Savings and Loan Association Employees’ 401(k) Plan and Trust	To be filed by amendment
10.2	Form of Fraternity Federal Savings and Loan Association Employee Stock Ownership Plan and Trust Agreement	Filed herewith
10.3	Form of Employee Stock Ownership Plan Loan Agreement, Pledge Agreement and Promissory Note	Filed herewith
10.4	+Employment Agreement between Fraternity Federal Savings and Loan Association and Thomas K. Sterner	Filed herewith
10.5	+Employment Agreement between Fraternity Federal Savings and Loan Association and Richard C. Schultze	Filed herewith
10.6	+Supplemental Executive Retirement Plan Agreement between Fraternity Federal Savings and Loan Association and Thomas K. Sterner	Filed herewith

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Exhibit	Description	Location
10.7	+Supplemental Executive Retirement Plan Agreement between Fraternity Federal Savings and Loan Association and Richard C. Schultze	Filed herewith
10.8	+Rabbi Trust Agreement	Filed herewith
10.9	+Form of Employment Agreement between Fraternity Community Bancorp, Inc. and each of Thomas K. Sterner and Richard C. Schultze	To be filed by amendment
10.10	+Form of Supplemental Executive Retirement Plan	Filed herewith
10.11	+Form of Fraternity Federal Savings and Loan Association Employee Severance Compensation Plan	Filed herewith
10.12	+ Form of Fraternity Federal Savings and Loan Association Deferred Compensation Plan	To be filed by amendment
23.1	Consent of Kilpatrick Stockton LLP	Contained in Exhibits 5.0 and 8.1
23.2	Consent of Stegman & Company	Filed herewith
23.3	Consent of Feldman Financial Advisors, Inc.	Filed herewith
24.0	Powers of Attorney	Included on signature page
99.1	Appraisal Report of Feldman Financial Advisors, Inc.	Filed herewith
99.2	Draft of Marketing Materials	Filed herewith
99.3	Draft of Subscription Order Form and Instructions	Filed herewith

⁺ Management contract or compensation plan or arrangement.

(b) Financial Statement Schedules

All schedules have been omitted as not applicable or not required under the rules of Regulation S-X.

Item 17. Undertakings.

     The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i)	To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii)	To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the forgoing,

II-3

any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

(iii)

To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2)	That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3)	To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4)	That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(5)	That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(6)	That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

     The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i)	Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii)	Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii)	The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

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(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

     The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

     Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Baltimore, State of Maryland on October 29, 2010.

Fraternity Community Bancorp, Inc.
By:	/s/ Thomas K. Sterner
	Thomas K. Sterner
	Chairman of the Board, Chief Executive Officer and Chief Financial Officer

POWER OF ATTORNEY

     We, the undersigned directors and officers of Fraternity Community Bancorp, Inc. (the “Company”) hereby severally constitute and appoint Thomas K. Sterner with full power of substitution, our true and lawful attorney-in-fact and agent, to do any and all things in our names in the capacities indicated below which said Thomas K. Sterner may deem necessary or advisable to enable Fraternity Community Bancorp, Inc. to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with the registration statement on Form S-1 of Fraternity Community Bancorp, Inc., including specifically but not limited to, power and authority to sign for us in our names in the capacities indicated below, the registration statement and any and all amendments (including post-effective amendments) thereto; and we hereby ratify and confirm all that said Thomas K. Sterner shall lawfully do or cause to be done by virtue thereof.

     Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Name	Title	Date
/s/ Thomas K. Sterner Thomas K. Sterner	Chairman of the Board, Chief Executive Officer and Chief Financial Officer (principal executive officer and principal financial and accounting officer)	October 29, 2010
/s/ Richard C. Schultze Richard C. Schultze	President, Chief Operating Officer and Director	October 29, 2010
/s/ William J. Baird, Jr. William J. Baird, Jr.	Director	October 29, 2010
/s/ William D. Norton William D. Norton	Director	October 29, 2010
/s/ Michael P. O’Shea Michael P. O’Shea	Director	October 29, 2010

EX-1.1

Exhibit 1.1

[LETTERHEAD OF SANDLER O’NEILL & PARTNERS, L.P.]

October 15, 2010

Board of Directors
Fraternity Federal Savings & Loan Association
764 Washington Boulevard
Baltimore, MD 21230

Attention:  Mr. Thomas K. Sterner
Chairman & Chief Executive Officer

Ladies and Gentlemen:

     Sandler O’Neill & Partners, L.P. (“Sandler O’Neill”) is pleased to assist Fraternity Federal Savings & Loan Association (the “Bank”) with the Bank’s proposed conversion from mutual to stock form (the “Conversion”), including the offer and sale of certain shares of the common stock (the “Common Stock”) of the proposed new holding company for the Bank (the “Holding Company” and collectively with the Bank, the “Company”) to the Bank’s eligible account holders in a Subscription Offering and, under certain circumstances, to members of the Bank’s community in a Direct Community Offering and to the general public in a Syndicated Community Offering (collectively, the “Offering”). This letter agreement (the “Agreement”) is to confirm the terms and conditions of our engagement.

OFFERING SERVICES

     Sandler O’Neill will act as exclusive marketing agent for the Company in the Offering. We will work with the Company’s management, counsel, accountants and other advisors on the Offering and anticipate that our services will include the following, each as may be necessary and as the Company may reasonably request:

1.	Consulting as to the financial and securities marketing implications of any aspect of the Plan of Conversion (the “Plan”) or related corporate documents;
2.	Reviewing with the Board of Directors the financial impact of the Offering on the Company, based upon the independent appraiser’s appraisal of the Common Stock;
3.	Reviewing all offering documents, including the Prospectus, stock order forms and

Board of Directors
Fraternity Federal Savings & Loan Association
October 15, 2010
Page 2

	related offering materials (it being understood that preparation and filing of such documents will be the responsibility of the Company and its counsel);
4.	Assisting in the design and implementation of a marketing strategy for the Offering;
5.	Assisting the Company’s management in scheduling and preparing for meetings with potential investors and broker-dealers in connection with the Offering; and
6.	Providing such other general advice and assistance as may be requested to promote the successful completion of the Offering.

SUBSCRIPTION AND DIRECT COMMUNITY OFFERING FEES

     If the Conversion is consummated, the Company agrees to pay Sandler O’Neill for its services hereunder a fee of one percent (1.00%) of the aggregate Actual Purchase Price of the shares of Common Stock sold in the Subscription Offering and Direct Community Offering, excluding in each case shares purchased by (i) any employee benefit plan of the Company established for the benefit of their respective directors, officers and employees, (ii) any charitable foundation established by the Company (or any shares contributed to such a charitable foundation), and (iii) any director, officer or employee of the Company or members of their immediate families; provided, however, that the aggregate fee payable pursuant to this paragraph shall not be less than $160,000. For purposes of this letter, the term “Actual Purchase Price” shall mean the price at which the shares of the Common Stock are sold in the Offering.

     If (i) Sandler O’Neill’s engagement hereunder is terminated for any of the reasons provided for under the second paragraph of the section of this letter captioned “Definitive Agreement,” or (ii) the Offering is terminated by the Company, no fees shall be payable by the Company to Sandler O’Neill hereunder; however, the Company shall reimburse Sandler O’Neill for its reasonable out-of-pocket expenses (including legal fees) incurred in connection with its engagement hereunder and for any fees and expenses incurred by Sandler O’Neill on behalf of the Company pursuant to the second paragraph under the section captioned “Costs and Expenses” below.

     All fees payable to Sandler O’Neill hereunder shall be payable in cash at the time of the closing of the Conversion. In recognition of the long lead times involved in the conversion process, the Company agrees to make advance payments to Sandler O’Neill of $25,000 upon execution of this letter and $25,000 upon commencement of the mailing of offering materials to the Company’s depositors, which shall be credited against any fees or reimbursement of expenses payable hereunder. In the event that the advance payment exceeds the amount due in payment of fees and reimbursement of expenses hereunder, the excess shall be refunded to the Company.

Board of Directors
Fraternity Federal Savings & Loan Association
October 15, 2010
Page 3

SYNDICATED COMMUNITY OFFERING

     If any shares of Common Stock remain available after the expiration of the Subscription Offering and Direct Community Offering, at the request of the Company and subject to the continued satisfaction of the conditions set forth in the second paragraph under the caption “Definitive Agreement” below, Sandler O’Neill will seek to form a syndicate of registered dealers to assist in the sale of such Common Stock in a Syndicated Community Offering on a best efforts basis, subject to the terms and conditions set forth in a selected dealers agreement. With respect to any shares of the Common Stock sold by Sandler O’Neill or any other FINRA member firm in the Syndicated Community Offering, the Company agrees to pay: (a) the sales commission payable to such firms under the selected dealer agreement, and (b) a management fee to Sandler O’Neill of one percent (1.00%) of the aggregate Actual Purchase Price of the shares of Common Stock sold in the Syndicated Community Offering. Sandler O’Neill will endeavor to limit the aggregate fees to be paid by the Company under any such selected dealers agreements to an amount competitive with gross underwriting discounts charged at such time for underwritings of comparable amounts of stock sold at a comparable price per share in a similar market environment, which shall not exceed 6.0% of the aggregate Actual Purchase Price of the shares sold in the Syndicated Community Offering. Sandler O’Neill will endeavor to distribute the Common Stock among dealers in a fashion that best meets the distribution objectives of the Company and the requirements of the Plan, which may result in limiting the allocation of stock to certain selected dealers. It is understood that in no event shall Sandler O’Neill or any other broker-dealer be obligated to act as a selected dealer or to take or purchase any shares of the Common Stock in the Offering.

COSTS AND EXPENSES

     In addition to any fees that may be payable to Sandler O’Neill hereunder and the expenses to be borne by the Company pursuant to the following paragraph, the Company agrees to reimburse Sandler O’Neill, upon request made from time to time, for its reasonable out-of-pocket expenses incurred in connection with its engagement hereunder, regardless of whether the Offering is consummated, including, without limitation, legal fees and expenses, advertising, promotional, and travel expenses, up to a maximum of $75,000; provided, however, that Sandler O’Neill shall document such expenses to the reasonable satisfaction of the Company. In the event that a resolicitation of subscribers is required, this expense cap shall be increased to $100,000. The provisions of this paragraph are not intended to apply to or in any way impair the indemnification provisions of this letter.

     As is customary, the Company will bear all other expenses incurred in connection with Offering, including, without limitation, (i) the cost of obtaining all securities and bank regulatory approvals, including any required FINRA filing fees; (ii) the cost of printing and distributing the

Board of Directors
Fraternity Federal Savings & Loan Association
October 15, 2010
Page 4

offering materials; (iii) the costs of blue sky qualification (including fees and expenses of blue sky counsel) of the shares in the various states; (iv) listing fees; and (v) all fees and disbursements of the Company’s counsel, accountants, conversion agent and other advisors. In the event Sandler O’Neill incurs any such fees and expenses on behalf of the Company, the Company will reimburse Sandler O’Neill for such fees and expenses whether or not the Offering is consummated.

DUE DILIGENCE REVIEW

     Sandler O’Neill’s obligation to perform the services contemplated by this Agreement shall be subject to the satisfactory completion of such investigation and inquiries relating to the Company and its directors, officers, agents and employees, as Sandler O’Neill and its counsel in their sole discretion may deem appropriate under the circumstances. In this regard, the Company agrees that, at its expense, it will make available to Sandler O’Neill all information which Sandler O’Neill requests, and will allow Sandler O’Neill the opportunity to discuss with the Company’s management the financial condition, business and operations of the Company. The Company acknowledge that Sandler O’Neill will rely upon the accuracy and completeness of all information received from the Company and its directors, trustees, officers, employees, agents, independent accountants and counsel.

BLUE SKY MATTERS

     Sandler O’Neill and the Company agree that the Company’s counsel shall serve as counsel with respect to blue sky matters in connection with the Offering. The Company will cause such counsel to prepare a Blue Sky Memorandum related to the Offering, including Sandler O’Neill’s participation therein, and shall furnish Sandler O’Neill a copy thereof addressed to Sandler O’Neill or upon which such counsel shall state Sandler O’Neill may rely.

CONFIDENTIALITY

     Except as contemplated in connection with the performance of its services under this agreement, as authorized by the Company or as required by law or regulation or legal process, Sandler O’Neill agrees that it will treat as confidential all material, non-public information relating to the Company obtained in connection with its engagement hereunder (whether or not the Offering is consummated) (the “Confidential Information”); provided, however, that Sandler O’Neill may disclose such information to its agents and advisors who are assisting or advising Sandler O’Neill in performing its services hereunder who have agreed to be bound by the terms and conditions of this paragraph. As used in this paragraph, the term “Confidential Information” shall not include information which (i) is or becomes generally available to the public other than as a result of a

Board of Directors
Fraternity Federal Savings & Loan Association
October 15, 2010
Page 5

disclosure by Sandler O’Neill, (ii) was available to Sandler O’Neill on a non-confidential basis prior to its disclosure to Sandler O’Neill by the Company, or (iii) becomes available to Sandler O’Neill on a non-confidential basis from a person other than the Company who is not otherwise known to Sandler O’Neill to be bound not to disclose such information pursuant to a contractual, legal or fiduciary obligation.

     The Company hereby acknowledges and agrees that the financial models and presentations used by Sandler O’Neill in performing its services hereunder have been developed by and are proprietary to Sandler O’Neill and are protected under applicable copyright laws. The Company agrees that it will not reproduce or distribute all or any portion of such models or presentations without the prior written consent of Sandler O’Neill.

INDEMNIFICATION

     Since Sandler O’Neill will be acting on behalf of the Bank and the Holding Company in connection with the Conversion, the Holding Company and the Bank agree to indemnify and hold Sandler O’Neill and its affiliates and their respective partners, directors, officers, employees, agents and controlling persons within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934 (Sandler O’Neill and each such person being an “Indemnified Party”) harmless from and against any and all losses, claims, damages and liabilities, joint or several, to which such Indemnified Party may become subject under applicable federal or state law, or otherwise, related to or arising out of the Offering or the engagement of Sandler O’Neill pursuant to, or the performance by Sandler O’Neill of the services contemplated by, this letter, and will reimburse any Indemnified Party for all expenses (including reasonable legal fees and expenses) as they are incurred, including expenses incurred in connection with the investigation of, preparation for or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party; provided, however, that the Bank and the Holding Company will not be liable in any such case to the extent that any such loss, claim, damage, liability or expense (i) arises out of or is based upon any untrue statement of a material fact or the omission of a material fact required to be stated therein or necessary to make not misleading any statements contained in any final prospectus, or any amendment or supplement thereto made in reliance on and in conformity with written information furnished to the Company by Sandler O’Neill expressly for use therein, or (ii) is primarily attributable to the gross negligence, willful misconduct or bad faith of Sandler O’Neill. If the foregoing indemnification is unavailable for any reason, the Bank and the Holding Company agree to contribute to such losses, claims, damages, liabilities and expenses in the proportion that its financial interest in the Conversion bears to that of Sandler O’Neill.

     The Company agrees to notify Sandler O’Neill promptly of the assertion against it or any other person of any claim or the commencement of any action or proceeding relating to any transaction contemplated by this Agreement.

Board of Directors
Fraternity Federal Savings & Loan Association
October 15, 2010
Page 6

DEFINITIVE AGREEMENT

     Sandler O’Neill and the Company agree that (a) except as set forth in clause (b), the foregoing represents the general intention of the Company and Sandler O’Neill with respect to the services to be provided by Sandler O’Neill in connection with the Offering, which will serve as a basis for Sandler O’Neill commencing activities, and (b) the only legal and binding obligations of the Company and Sandler O’Neill with respect to the subject matter hereof shall be (1) the Company’s obligation to reimburse costs and expenses pursuant to the section captioned “Costs and Expenses,” (2) those set forth under the captions “Confidentiality” and “Indemnification,” and (3) as set forth in a duly negotiated and executed definitive Agency Agreement to be entered into prior to the commencement of the Offering relating to the services of Sandler O’Neill in connection with the Offering. Such Agency Agreement shall be in form and content satisfactory to Sandler O’Neill, the Company and their respective counsel and shall contain standard indemnification provisions consistent herewith.

     Sandler O’Neill’s execution of such Agency Agreement shall also be subject to (i) Sandler O’Neill’s satisfaction with its investigation of the Company’s business, financial condition and results of operations, (ii) preparation of offering materials that are satisfactory to Sandler O’Neill and its counsel, (iii) compliance with all relevant legal and regulatory requirements to the reasonable satisfaction of Sandler O’Neill’s counsel, (iv) agreement that the price established by the independent appraiser is reasonable and (v) market conditions at the time of the proposed offering. Sandler O’Neill may terminate this Agreement if such Agency Agreement is not entered into prior to June 30, 2011.

     This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and can be altered only by written consent signed by the parties. This Agreement shall be construed and enforced in accordance with the laws of the State of New York, without regard to the conflicts of laws principles.

Board of Directors
Fraternity Federal Savings & Loan Association
October 15, 2010
Page 7

     Please confirm that the foregoing correctly sets forth our agreement by signing and returning to Sandler O’Neill the duplicate copy of this letter enclosed herewith.

Very truly yours, Sandler O’Neill & Partners, L.P.
By:	Sandler O’Neill & Partners Corp.,
	the sole general partner
By:	/s/ Catherine A. Lawton
	Catherine A. Lawton
	An Officer of the Corporation

Accepted and agreed to as of the date first above written: Fraternity Federal Savings & Loan Association
	By:	/s/ Thomas K. Sterner
		Thomas K. Sterner
		Chairman & Chief Executive Officer

EX-1.2

Exhibit 1.2

Up to 1,380,000 Shares
(subject to increase up to 1,587,000 shares
in the event of an increase in the pro forma market value
of the Company’s Common Stock)

FRATERNITY COMMUNITY BANCORP, INC.
(a Maryland corporation)

Common Stock
(par value $0.01 per share)

AGENCY AGREEMENT

[Date]

Sandler O’Neill & Partners, L.P.
919 Third Avenue, 6th Floor
New York, New York 10022

Ladies and Gentlemen:

     Fraternity Community Bancorp, Inc., a Maryland corporation (the “Company”), and Fraternity Federal Savings and Loan Association, a federal savings bank (the “Bank”), hereby confirm their agreement with Sandler O’Neill & Partners, L.P. (“Sandler O’Neill” or the “Agent”) with respect to the offer and sale by the Company of up to 1,380,000 shares of the Common Stock, par value $0.01 per share (the “Common Stock”) (subject to increase up to 1,587,000 shares in the event of an increase in the pro forma market value of the Common Stock). The shares of Common Stock to be sold by the Company are hereinafter called the “Securities.”

     The Securities are being offered for sale in accordance with the plan of conversion (the “Plan”) adopted by the Board of Directors of the Bank, pursuant to which the Bank intends to convert from a federally chartered mutual savings bank to a federally chartered stock savings bank and issue all of its outstanding capital stock to the Company. Pursuant to the Plan, the Company is offering the Securities to the Bank’s tax qualified employee benefit plans, including the Employee Stock Ownership Plan (the “ESOP”) (collectively, the “Employee Plans”) and to qualifying depositors and borrowers of the Bank, in a subscription offering (the “Subscription Offering”). To the extent Securities are not subscribed for in the Subscription Offering, such Securities may be offered to certain members of the general public, with preference given to persons and trusts for the benefit of persons residing in Baltimore County, Carroll County, Howard County and Baltimore City, Maryland, in a direct community offering (the “Community Offering”). The Community Offering may be commenced concurrently with, during or after, the Subscription Offering. It is currently anticipated that any Securities not subscribed for in the Subscription and Community Offerings will be offered, subject to Section 2 hereof, by a syndicate of broker-dealers in a syndicated community offering (the “Syndicated Offering”); provided, however, that the Community Offering may occur concurrently with the Subscription Offering and the Syndicated Offering. The Subscription and Community Offerings and the Syndicated Community Offering, as each may be extended or reopened from time to time, are hereinafter referred to collectively as the “Offerings.” The conversion of the Bank from mutual to stock form, the acquisition of all of the to be issued and outstanding capital stock of the Bank by the Company and the Offerings are hereinafter referred to collectively as the “Conversion.” It is acknowledged that the number of Securities to be sold in the Conversion may be increased or decreased as described in the Prospectus (as hereinafter defined). If the number of Securities is increased or decreased in accordance with the Plan, the term “Securities” shall mean such greater or lesser number, where applicable.

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     The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-1 (No. 333-[          ]), including a related prospectus, for the registration of the Securities under the Securities Act of 1933, as amended (the “Securities Act”), has filed such amendments thereto, if any, and such amended prospectuses as may have been required to the date hereof by the Commission in order to declare such registration statement effective, and will file such additional amendments thereto and such amended prospectuses and prospectus supplements as may hereafter be required. Such registration statement (as amended to date, if applicable, and as from time to time amended or supplemented hereafter) and the prospectuses constituting a part thereof (including in each case all documents incorporated or deemed to be incorporated by reference therein and the information, if any, deemed to be a part thereof pursuant to the rules and regulations of the Commission under the Securities Act, as from time to time amended or supplemented pursuant to the Securities Act or otherwise (the “Securities Act Regulations”)), are hereinafter referred to as the “Registration Statement” and the “Prospectus,” respectively, except that if any revised prospectus shall be used by the Company in connection with the Offerings which differs from the Prospectus on file at the Commission at the time the Registration Statement becomes effective (whether or not such revised prospectus is required to be filed by the Company pursuant to Rule 424(b) or (c) of the Securities Act Regulations), the term “Prospectus” shall refer to such revised prospectus from and after the time it is first provided to the Agent for such use.

     Concurrently with the execution of this Agreement, the Company is delivering to the Agent copies of the Prospectus to be used in the Offerings. Such prospectus contains information with respect to the Bank, the Company and the Securities.

Section 1. Representations and Warranties.

     (a) The Company and the Bank jointly and severally represent and warrant to the Agent as of the date hereof as follows:

     (i) The Registration Statement has been declared effective by the Commission, no stop order has been issued with respect thereto and no proceedings therefor have been initiated or, to the knowledge of the Company and the Bank, threatened by the Commission. At the time the Registration Statement became effective and at the Closing Time referred to in Section 2 hereof, the Registration Statement complied and will comply in all material respects with the requirements of the Securities Act and the Securities Act Regulations and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus at the date hereof does not and at the Closing Time referred to in Section 2 hereof will not include an untrue statement of a material fact or omit to state a material fact necessary in order to

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make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or Prospectus made in reliance upon and in conformity with information with respect to the Agent furnished to the Company in writing by the Agent expressly for use in the Registration Statement or Prospectus (the “Agent Information,” which the Company and the Bank acknowledge appears only in the second sentence of the section entitled “Summary-Market for Fraternity Community Bancorp, Inc.’s Common Stock,” the third sentence of the first paragraph of the section entitled “Market for the Common Stock” and the second sentence of the first paragraph of the section entitled “The Conversion and Stock Offering-Marketing Arrangements” in the Prospectus).

     (ii) At the time of filing the Registration Statement and at the date hereof, the Company was not, and is not, an ineligible issuer, as defined in Rule 405 of the Securities Act Regulations. At the time of the filing of the Registration Statement and at the time of the use of any issuer free writing prospectus, as defined in Rule 433(h) of the Securities Act Regulations, the Company met the conditions required by Rules 164 and 433 of the Securities Act Regulations for the use of a free writing prospectus. If required to be filed, the Company has filed any issuer free writing prospectus related to the Securities at the time it is required to be filed under Rule 433 of the Securities Act Regulations and, if not required to be filed, will retain such issuer free writing prospectus in the Company’s records pursuant to Rule 433(g) of the Securities Act Regulations and, if any issuer free writing prospectus is used after the date hereof in connection with the offering of the Securities, the Company will file or retain such issuer free writing prospectus as required by Rule 433 of the Securities Act Regulations.

     (iii) As of the Applicable Time, none of the Issuer-Represented General Use Free Writing Prospectuses issued at or prior to the Applicable Time and the Statutory Prospectus, all considered together (collectively, the “General Disclosure Package”), included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by the Agent expressly for use therein. As used in this paragraph and elsewhere in this Agreement:

     “Applicable Time” means each and every date when a potential purchaser submitted a subscription or otherwise committed to purchase Securities, and at the Closing Time as defined herein.

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     “Issuer-Represented Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433(h) under the Securities Act Regulations, relating to the Securities in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g) of the Securities Act Regulations. The term does not include any writing exempted from the definition of prospectus pursuant to clause (a) or (b) of Section 2(a)(10) of the Securities Act Regulations.

     “Issuer-Represented General Use Free Writing Prospectus” means any Issuer Represented Free Writing Prospectus that is intended for general distribution to prospective investors.

     “Issuer-Represented Limited-Use Free Writing Prospectus” means any Issuer Represented Free Writing Prospectus that is not an Issuer Represented General Use Free Writing Prospectus. The term Issuer-Represented Limited-Use Free Writing Prospectus also includes any “bona fide” electronic road show, as defined in Rule 433 of the Securities Act Regulations, that is made available without restriction pursuant to Rule 433(d)(8)(ii) of the Securities Act Regulations or otherwise, even though not required to be filed with the Commission.

     “Statutory Prospectus,” as of any time, means the most recent Prospectus that is included in the Registration Statement or filed pursuant to Rule 424 of the Securities Act Regulations immediately prior to the Applicable Time, including any document incorporated therein.

     (iv) Neither the Company nor the Bank will issue any Issuer-Represented Free Writing Prospectus prior to completion of the Offerings other than press releases which will not include any more information therein than permitted by the provisions of Rule 134 of the Securities Act Regulations and are otherwise not deemed a free writing prospectus as defined in Rule 405 of the Securities Act Regulations. Neither the Company nor the Bank will issue prior to completion of the Offerings any Issuer Represented Limited-Use Free Writing Prospectus without the prior written consent of the Agent, which shall not be unreasonably withheld. Each Issuer-Represented Free Writing Prospectus, as of its date of first use and at all subsequent times through the completion of the Offerings and the sale of the Securities or until any earlier date that the Company notified or notifies the Agent (as described in the next sentence), did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement, including any document incorporated by reference therein that has not been superseded or modified. If at any time following the date of first use of an Issuer-Represented Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer-Represented Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to

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make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company has notified or will notify promptly the Agent so that any use of such Issuer-Represented Free Writing Prospectus may cease until it is amended or supplemented and the Company has promptly amended or will promptly amend or supplement such Issuer-Represented Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission. The foregoing two sentences do not apply to statements in or omissions from any Issuer-Represented Free Writing Prospectus based upon and in conformity with written information furnished to the Company by the Agent specifically for use therein.

     (v) The Company has filed with the Department of the Treasury, Office of Thrift Supervision (the “OTS”), an application for approval of its acquisition of the Bank (the “Holding Company Application”) on Form H-(e)1-S promulgated under the savings and loan holding company provisions of the Home Owners’ Loan Act, as amended (“HOLA”), and the regulations promulgated thereunder. The Company has received written notice from the OTS of its approval of the Holding Company Application, such approval remains in full force and effect and no order has been issued by the OTS suspending or revoking such approval and no proceedings therefor have been initiated or, to the knowledge of the Company or the Bank, threatened by the OTS. At the date of such approval and at the Closing Time referred to in Section 2, the Holding Company Application complied and will comply in all material respects with the applicable provisions of HOLA and the regulations promulgated thereunder.

     (vi) Pursuant to the rules and regulations of the OTS governing the conversion of federally chartered mutual savings banks to stock form (the “Conversion Regulations”), the Bank has filed with the OTS an application for conversion (the “Conversion”) on Form AC, and has filed such amendments thereto and supplementary materials as may have been required to the date hereof (such application, as amended to date, if applicable, and as from time to time amended or supplemented hereafter, is hereinafter referred to as the “Conversion Application”), including a proxy statement for the special meeting of members called to approve the Plan (the “Proxy Statement”), and the Prospectus. The Board of Directors of the Bank has duly adopted the Plan and such adoption has not been rescinded or revoked. The Conversion Application, the Proxy Statement and Prospectus have been approved or declared effective by the OTS and such approvals remain in full force and effect and no order has been issued by the OTS suspending or revoking such approvals and no proceedings therefor have been initiated or, to the knowledge of the Company or the Bank, threatened by the OTS. At the date of the approval of the Conversion Application, including the Proxy Statement and Prospectus, and at the Closing Time referred to in Section 2, the Conversion Application and the Proxy Statement and Prospectus complied and will comply in all material

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respects with the applicable provisions of the Conversion Regulations and the Conversion Application was truthful and accurate in all material respects.

     (vii) At the time of their use, the Proxy Statement and any other proxy solicitation materials will comply in all material respects with the applicable provisions of the Conversion Regulations and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company and the Bank will promptly file the Prospectus and any supplemental sales literature with the Commission and the OTS. All supplemental sales literature, as of the date the Registration Statement became effective and at the Closing Time referred to in Section 2, complied and will comply in all material respects with the applicable requirements of the Conversion Regulations and, at or prior to the time of their first use, will have received all required authorizations of the OTS for use in final form.

     (viii) None of the Commission, the OTS or any state securities (“Blue Sky”) authority has, by order or otherwise, prevented or suspended the use of the Proxy Statement, the Prospectus or any supplemental sales literature authorized by the Company or the Bank for use in connection with the Offerings, and no action by or before any such governmental entity to prevent or suspend the use of the Proxy Statement, the Prospectus or any supplemental sales literature is pending, or to the best knowledge of the Company and the Bank, threatened.

     (ix) At the Closing Time referred to in Section 2, the Company and the Bank will have completed the conditions precedent to the Conversion of the Bank in accordance with the Plan, the applicable Conversion Regulations and all other applicable laws, regulations, decisions and orders, including all material terms, conditions, requirements and provisions precedent to the Conversion imposed upon the Company or the Bank by the OTS or any other regulatory authority, other than those which the regulatory authority permits to be completed after the Conversion.

     (x) Feldman Financial Advisors, Inc. (“Feldman Financial” or the “Appraiser”), which prepared the valuation of the Bank as part of the Conversion, has advised the Company and the Bank in writing that it satisfies all requirements for an appraiser set forth in the Conversion Regulations and any interpretations or guidelines issued by the OTS with respect thereto.

     (xi) Stegman & Company, who audited and reported on the financial statements of the Bank included in the Registration Statement, have advised the Company and the Bank in writing that they are independent public accountants within the meaning of the Code of Ethics of the American Institute of Certified Public Accountants (the “AICPA”), and such accountants are, with respect to the Company and the Bank,

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independent certified public accountants as required by the Securities Act and the Securities Act Regulations and such accountants are not in violation of the auditors independence requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the Securities Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder (“Exchange Act Regulations”).

     (xii) The only direct and indirect subsidiaries of the Bank are Fraternity Insurance Agency, which is currently inactive, and 764 Washington Blvd, LLC (the “Subsidiaries”). Except for the Subsidiaries, the Bank does not, directly or indirectly, control any other corporation, limited liability company, partnership, joint venture, association, trust or other business organization. Upon completion of the Conversion, the only direct subsidiary of the Company will be the Bank.

     (xiii) The financial statements and the related notes thereto included in the Registration Statement and the General Disclosure Package, including the Prospectus, present fairly the financial position of the Bank and the Subsidiaries at the dates indicated and the results of operations, retained earnings, changes in equity and cash flows for the periods specified, and comply as to form with the applicable accounting requirements of the Securities Act Regulations and the Conversion Regulations; except as otherwise stated in the Registration Statement and Prospectus, said financial statements have been prepared in conformity with accounting principles generally accepted in the United States applied on a consistent basis; and the supporting schedules and tables included in the Registration Statement and Prospectus present fairly the information required to be stated therein. The other financial, statistical and pro forma information and related notes included in the General Disclosure Package, including the Prospectus, present fairly the information shown therein on a basis consistent with the audited and unaudited financial statements included in the Prospectus, and as to the pro forma adjustments, the adjustments made therein have been consistently applied on the basis described therein. The capitalization, liabilities, assets, properties and business of the Company and the Bank conform in all material respects to the descriptions contained in the General Disclosure Package, including the Prospectus, and, none of the Company, the Bank nor the either of the Subsidiaries has any material liabilities of any kind, contingent or otherwise, except as disclosed in the Registration Statement or the Prospectus or the General Disclosure Package, including the Prospectus.

     (xiv) Since the respective dates as of which information is given in the Registration Statement and the General Disclosure Package, including the Prospectus, except as otherwise stated therein (A) there has been no material adverse change in the financial condition, results of operations, business affairs or prospects of the Company, the Bank and the Subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, (B) there has not been any material change in total assets of

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the Company or the Bank on a consolidated basis, any material increase in the aggregate amount of loans past due ninety (90) days or more, or any real estate acquired by foreclosure or loans characterized as “in substance foreclosure”; (C) none of the Company or the Bank have issued any securities or incurred any liability or obligation for borrowings other than in the ordinary course of business; and (D) except for transactions specifically referred to or contemplated in the Prospectus, there have been no transactions entered into by the Company or the Bank, other than those in the ordinary course of business consistent with past practice, which are material with respect to the Company, the Bank or the Subsidiaries considered as one enterprise.

     (xv) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Maryland, with corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and to enter into and perform its obligations under this Agreement and the transactions contemplated hereby; and the Company is duly qualified to transact business and is in good standing in the State of Maryland. The Company is not required to be qualified as a foreign corporation in any other jurisdiction in order to conduct its business. The Company will be a registered savings and loan holding company under HOLA.

     (xvi) Upon consummation of the Conversion, the issued and outstanding capital stock of the Company will be within the range as set forth in the Prospectus under “Capitalization” (except for the inclusion of subsequent issuances of Common Stock, if any, pursuant to reservations, agreements or employee benefit plans referred to under Capitalization). The authorized capital stock of the Company consists of 15,000,000 shares of Common Stock, par value $0.01 per share, and 1,000,000 shares of preferred stock, par value of $0.01 per share. No shares of Common Stock or other capital stock of the Company have been or will be issued and outstanding prior to the Closing Time referred to in Section 2; at the Closing Time, the Securities will have been duly authorized for issuance and, when issued and delivered by the Company pursuant to the Plan against payment of the consideration calculated as set forth in the Plan and stated on the cover page of the Prospectus, will be duly and validly issued and fully paid and non-assessable; the terms and provisions of the Common Stock and the other capital stock of the Company conform in all material respects to all statements relating thereto contained in the Prospectus; the certificates representing the shares of Common Stock will conform to the requirements of applicable law and regulations; and the issuance of the Securities is not subject to preemptive or other similar rights, except for subscription rights granted by the Plan in accordance with the Conversion Regulations.

     (xvii) The Bank, as of the date hereof, is a federally chartered savings bank in mutual form and upon consummation of the Conversion in accordance with the Plan will

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be a federally chartered savings bank in stock form, in both instances with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and to enter into and perform its obligations under this Agreement and the transactions contemplated hereby; the Company, the Bank and the Subsidiaries have obtained all licenses, permits and other governmental authorizations currently required for the conduct of their respective businesses or required for the conduct of their respective businesses as contemplated by the Holding Company Application, the Conversion Application and the Prospectus, except where the failure to obtain such licenses, permits or other governmental authorizations would not have a material adverse effect on the financial condition, results of operations, business affairs or prospects of the Company, the Bank and the Subsidiaries considered as one enterprise (a “Material Adverse Effect”); all such licenses, permits and other governmental authorizations are in full force and effect and the Company, the Bank and the Subsidiaries are in all material respects in compliance therewith; neither the Company, the Bank nor either of the Subsidiaries has received notice of any proceeding or action relating to the revocation or modification of any such license, permit or other governmental authorization which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, might have a Material Adverse Effect; and the Bank is validly existing and in good standing under the laws of the United States and is qualified as a foreign corporation in any jurisdiction in which the failure to so qualify would have a Material Adverse Effect.

     (xviii) The deposit accounts of the Bank are insured by the Federal Deposit Insurance Corporation (the “FDIC”) up to the applicable limits. Upon consummation of the Conversion, the liquidation account for the benefit of eligible account holders and supplemental eligible account holders of the Bank will be duly established in accordance with the requirements of the Plan and the Conversion Regulations. The Bank is a “qualified thrift lender” within the meaning of 12 U.S.C. Section 1467a(m).

     (xix) Upon consummation of the Conversion, the authorized capital stock of the Bank will be [          ] shares of common stock, par value $1.00 per share (the “Bank Common Stock”), and [          ] shares of serial preferred stock, par value $1.00 per share, and the issued and outstanding capital stock of the Bank will be [          ] shares of Bank Common Stock and no shares of Bank Common Stock have been or will be issued prior to the Closing Time referred to in Section 2; and as of the Closing Time referred to in Section 2, all of the issued and outstanding capital stock of the Bank will be duly authorized, validly issued and fully paid and nonassessable, have been issued in compliance with all federal and state securities laws and will be owned of record and beneficially by the Company. The shares of Bank Common Stock to be issued to the Company will have been duly authorized for issuance and, when issued and delivered by the Bank pursuant to the Plan, against payment of the consideration calculated as set forth

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in the Plan and as described in the Prospectus will be duly and validly issued and fully paid and nonassessable, and all such Bank Common Stock will be owned beneficially and of record by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrance or legal or equitable claim; the terms and provisions of the Bank Common Stock conform to all statements relating thereto contained in the Prospectus, and the certificates representing the shares of the Bank Common Stock will conform with the requirements of applicable laws and regulations; and the issuance of the Bank Common Stock is not subject to preemptive or similar rights; and there are no other warrants, options or rights of any kind to acquire additional shares of Bank Common Stock.

     (xx) The Subsidiaries have been duly incorporated or organized, as applicable, and are validly existing as a corporation and a limited liability company in good standing under the laws of the jurisdictions of their incorporation or organization, as applicable, have full power and authority to own, lease and operate their properties and to conduct their business as described in the Registration Statement and Prospectus, and are duly qualified to transact business and are in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify would not have a Material Adverse Effect; the activities of the Subsidiaries are permitted to subsidiaries of a federally chartered savings bank and a savings and loan holding company by the rules, regulations, resolutions and practices of the OTS; all of the issued and outstanding capital stock, if any, of the Subsidiaries has been duly authorized and validly issued, is fully paid and nonassessable and is owned by the Bank, directly, free and clear of any security interest, mortgage, pledge, lien, encumbrance or legal or equitable claim; and there are no warrants, options or rights of any kind to acquire shares of capital stock of the Subsidiaries.

     (xxi) The Company and the Bank have taken all corporate action necessary for them to execute, deliver and perform this Agreement and the transactions contemplated hereby, and this Agreement has been duly authorized, executed and delivered by, and is the valid and binding agreement of, the Company and the Bank, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency or other laws affecting the enforceability of the rights of creditors generally and judicial limitations on the right of specific performance and except as the enforceability of indemnification and contribution provisions may be limited by applicable securities laws.

     (xxii) Subsequent to the respective dates as of which information is given in the Registration Statement and the General Disclosure Package, including the Prospectus, and prior to the Closing Time, except as otherwise may be indicated or contemplated therein, neither the Company, the Bank nor the Subsidiaries will have (A) issued any securities or incurred any liability or obligation, direct or contingent, or borrowed money,

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except borrowings in the ordinary course of business consistent with past practice from the same or similar sources and in similar amounts as indicated in the Prospectus, or (B) entered into any transaction or series of transactions which are material in light of the business of the Company, the Bank and the Subsidiaries, considered as one enterprise, excluding the origination, purchase and sale of loans or the purchase or sale of investment securities or mortgaged-backed securities in the ordinary course of business consistent with past practice.

     (xxiii) No approval of any regulatory or supervisory or other public authority is required in connection with the execution and delivery of this Agreement or the issuance of the Securities that has not been obtained and a copy of which has been delivered to the Agent, except as may be required under the “blue sky” or state securities laws of various jurisdictions.

     (xxiv) Neither the Company, the Bank nor either of the Subsidiaries is in violation of its articles of incorporation, charter or articles of organization, as the case may be, or bylaws or operating agreement (and the Bank will not be in violation of its charter or bylaws in stock form upon consummation of the Conversion); and neither the Company, the Bank nor either of the Subsidiaries is in default (nor has any event occurred which, with notice or lapse of time or both, would constitute a default) in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which the Company, the Bank or either of the Subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company, the Bank or the Subsidiaries is subject, except for such defaults that would not, individually or in the aggregate, have a Material Adverse Effect.

     (xxv) The consummation of the Conversion, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein do not and will not conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, the Bank or the Subsidiaries pursuant to, any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which the Company, the Bank and the Subsidiaries is or are a party or by which it or any of them may be bound, or to which any of the property or assets of the Company, the Bank or the Subsidiaries is subject, except for such defaults that would not, individually or in the aggregate, have a Material Adverse Effect; nor will such action result in any violation of the provisions of the articles of incorporation or charter or bylaws of the Company, the Bank or either of the Subsidiaries, as the case may be, or, except for such violations that would not have a Material Adverse Effect, any applicable law, administrative regulation or administrative or court decree.

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     (xxvi) No labor dispute with the employees of the Company, the Bank or the Subsidiaries exists or, to the knowledge of the Company or the Bank, is imminent or threatened; and the Company, the Bank and the Subsidiaries are not aware of any existing or threatened labor disturbance by the employees of any of its principal suppliers or contractors which might be expected to result in any Material Adverse Effect.

     (xxvii) Each of the Company, the Bank and the Subsidiaries have good and marketable title to all properties and assets for which ownership is material to the business of the Company, the Bank or the Subsidiaries and to those properties and assets described in the General Disclosure Package, including the Prospectus, as owned by them, free and clear of all liens, charges, encumbrances or restrictions, except such as are described in the Prospectus or are not material in relation to the business of the Company, the Bank and the Subsidiaries considered as one enterprise; and all of the leases and subleases material to the business of the Company, the Bank or the Subsidiaries under which the Company, the Bank or the Subsidiaries hold properties, including those described in the General Disclosure Package, including the Prospectus, are valid and binding agreements of the Company, the Bank and the Subsidiaries in full force and effect, enforceable in accordance with their terms (except as enforceability may be limited by applicable bankruptcy, insolvency, or other laws, the rights of creditors generally and judicial limitations on the right of specific performance and except as the enforceability of indemnification and contribution provisions may be limited by applicable securities laws.

     (xxviii) None of the Company, the Bank nor either of the Subsidiaries is in violation of any directive from the Commission, the OTS or the FDIC or any other governmental entity to make any material change in the method of conducting its respective business; the Bank and the Subsidiaries have conducted and are conducting its business so as to comply with all applicable statutes, regulations and administrative and court decrees (including, without limitation, all regulations, decisions, directives and orders of the Commission, the OTS and the FDIC). Neither the Company, the Bank nor either of the Subsidiaries is subject or is party to, or has received any notice or advice that any of them may become subject or party to, any investigation with respect to any cease-and-desist order, agreement, consent agreement, memorandum of understanding or other regulatory enforcement action, proceeding or order with or by, or is a party to any commitment letter or similar undertaking to, or is subject to any directive by, or has been a recipient of any supervisory letter from, or has adopted any board resolutions at the request of, any Regulatory Agency (as defined below) that currently restricts the conduct of its business or that in any material manner relates to its capital adequacy, its credit policies, its management or its business (each, a “Regulatory Agreement”), nor has the Company, the Bank or either of the Subsidiaries been advised by any Regulatory Agency that it is considering issuing or requesting any such Regulatory Agreement; and there is

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no unresolved violation, criticism or exception by any Regulatory Agency with respect to any report or statement relating to any examinations of the Company, the Bank or the Subsidiaries which is expected to result in a Material Adverse Effect or which might materially and adversely affect the properties or assets thereof or which might adversely affect the consummation of the Conversion or the performance of this Agreement. As used herein, the term “Regulatory Agency” means any federal or state agency charged with the supervision or regulation of depositary institutions or holding companies of depositary institutions, or engaged in the insurance of depositary institution deposits, or any court, administrative agency or commission or other governmental agency, authority or instrumentality having supervisory or regulatory authority with respect to the Company, the Bank or the Subsidiaries.

     (xxix) There is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, the Bank or the Subsidiaries, threatened, against or affecting the Company, the Bank or the Subsidiaries which is required to be disclosed in the Registration Statement or the General Disclosure Package (other than as disclosed therein), or which might result in any Material Adverse Effect, or which might materially and adversely affect the properties or assets thereof or which might materially and adversely affect the consummation of the Conversion or the performance of this Agreement; all pending legal or governmental proceedings to which the Company, the Bank or either of the Subsidiaries is a party or of which any of their respective property or assets is the subject which are not described in the Registration Statement, including ordinary routine litigation incidental to the business, are considered in the aggregate not material; and there are no contracts or documents of the Company, the Bank or the Subsidiaries which are required to be filed as exhibits to the Registration Statement or the Conversion Application which have not been so filed.

     (xxx) The Company and the Bank have obtained opinions of their outside legal and tax counsel, Kilpatrick Stockton L.L.P. (“Kilpatrick Stockton”), with respect to the legality of the Securities to be issued and the federal income tax consequences of the Conversion and the Plan, copies of which are filed as exhibits to the Registration Statement; all material aspects of the aforesaid tax opinions are accurately summarized in the Prospectus under “The Conversion and Stock Offering — Material Income Tax Consequences”; the facts and representations upon which such opinions are based are truthful, accurate and complete in all material respects; and neither the Bank nor the Company has taken or will take any action inconsistent therewith.

     (xxxi) The Company and the Bank have received an opinion from Stegman & Company, with respect to the tax consequences of the Conversion under the laws of the State of Maryland; the facts and representations upon which such opinion is based are

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truthful, accurate and complete in all material respects; and neither the Bank nor the Company has taken or will take any action inconsistent therewith.

     (xxxii) The Company is not and, upon completion of the Conversion and the Offerings and sale of the Common Stock and the application of the net proceeds therefrom, will not be, required to be registered under the Investment Company Act of 1940, as amended.

     (xxxiii) All of the loans represented as assets on the most recent financial statements or in selected financial and other data of the Bank or the Company included in the General Disclosure Package, including the Prospectus, meet or are exempt from all requirements of federal, state or local law pertaining to lending, including without limitation truth in lending (including the requirements of Regulations Z and 12 C.F.R. Part 226 and 12 CFR 563.99), real estate settlement procedures, consumer credit protection, equal credit opportunity and all disclosure laws applicable to such loans, except for violations which, if asserted, would not result in a Material Adverse Effect.

     (xxxiv) To the knowledge of the Company and the Bank, with the exception of the intended loan to the ESOP by the Company to enable the ESOP to purchase shares of Common Stock in an amount of up to 8.0% of the Common Stock issued in the Conversion, none of the Company, the Bank or employees of the Bank has made any payment of funds of the Company or the Bank as a loan for the purchase of the Common Stock or made any other payment of funds prohibited by law, and no funds have been set aside to be used for any payment prohibited by law.

     (xxxv) To the knowledge of the Company, except as previously disclosed to the Agent, there are no affiliations or associations (as such terms are defined by the Financial Industry Regulatory Authority (“FINRA”)) between any member of the FINRA and any of the Company’s or Bank’s officers or directors. Neither the Company nor the Bank has: (i) issued any securities within the last 18 months (except for notes to evidence bank loans or other liabilities in the ordinary course of business or as described in the General Disclosure Package, including the Prospectus); (ii) had any dealings with respect to sales of securities within the 12 months prior to the date hereof with any member of the FINRA, or any person related to or associated with such member, other than discussions and meetings relating to the Offerings and purchases and sales of U.S. government and agency and other securities in the ordinary course of business; or (iii) engaged any intermediary between the Agent and the Company and the Bank in connection with the Offerings, and no person is being compensated in any manner for such services.

     (xxxvi) The Company, the Bank and each of the Subsidiaries each carries, or is covered by, insurance in such amounts and covering such risks as is adequate for the

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conduct of their respective businesses and the value for their respective properties as is customary for companies engaged in similar industries.

     (xxxvii) Each of the Company, the Bank and each of the Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that (a) transactions are executed in accordance with management’s general or specific authorizations; (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (c) access to assets is permitted only in accordance with management’s general or specific authorization; and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

     (xxxviii) The Company, the Bank and the Subsidiaries are in compliance in all material respects with the applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transaction Reporting Act of 1970, as amended, and the rules and regulations thereunder. The Bank has established compliance programs to ensure compliance with and is in compliance in all material respects with the requirements of the USA Patriot Act and all applicable regulations promulgated thereunder. There is no charge, investigation, action, suit or proceeding before any court, regulatory authority or governmental agency or body pending or, to the best knowledge of the Company and the Bank, threatened regarding the Bank’s compliance with the USA Patriot Act or any regulations promulgated thereunder.

     (xxxix) The Company and the Bank have not relied on Agent or its counsel for any legal, tax or accounting advice in connection with the Conversion.

     (xl) The records of eligible account holders, supplemental eligible account holders and other members are accurate and complete in all material respects.

     (xli) The Company, the Bank and each of the Subsidiaries are each in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder (“ERISA”); no “reportable event” (as defined in ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for which the Company, the Bank and the Subsidiaries, respectively, would have any liability; neither the Company, the Bank nor either of the Subsidiaries has incurred and does expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “pension plan” or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the “Code”); and each “pension plan” for which the Company, the Bank and the Subsidiaries would have any liability that is intended to be qualified

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under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.

     (xlii) Neither the Company, the Bank nor either of the Subsidiaries nor any properties owned or operated by the Company, the Bank or the Subsidiaries is in violation of or liable under any Environmental Law (as defined below), except for such violations or liabilities that, individually or in the aggregate, would not result in a Material Adverse Effect. There are no actions, suits or proceedings, or demands, claims, notices or investigations (including, without limitation, notices, demand letters or requests for information from any environmental agency) instituted or pending, or to the knowledge of the Company or the Bank threatened, relating to the liability of any property owned or operated by the Company, the Bank or the Subsidiaries, under any Environmental Law. For purposes of this subsection, the term “Environmental Law” means any federal, state, local or foreign law, statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, order, judgment, decree, injunction or agreement with any regulatory authority relating to (i) the protection, preservation or restoration of the environment (including, without limitation, air, water, vapor, surface water, groundwater, drinking water supply, surface soil, subsurface soil, plant and animal life or any other natural resource), and/or (ii) the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of any substance presently listed, defined, designated or classified as hazardous, toxic, radioactive or dangerous, or otherwise regulated, whether by type or by quantity, including any material containing any such substance as a component.

     (xliii) The Company, the Bank and the Subsidiaries have timely filed all federal, state and local income and franchise tax returns required to be filed and have made timely payments of all taxes shown as due and payable in respect of such returns, and no deficiency has been asserted with respect thereto by any taxing authority. The Company and the Bank have no knowledge of any tax deficiency which has been asserted or could be asserted against the Company, the Bank or the Subsidiaries.

     (xliv) The Company has, or will have, received all approvals required to consummate the Offerings effective as of the Closing Time referred to in Section 2 hereof.

     (xlv) The Company has filed, or will file, a registration statement for the Common Stock under Section 12(g) of the Exchange Act and such registration statement has been or will be declared effective on or prior to the Closing Time.

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     (xlvi) The Company is in compliance with the applicable provisions of the Sarbanes-Oxley Act and will use its best efforts to comply with those provisions of the Sarbanes-Oxley Act that will become effective in the future upon their effectiveness.

     (xlvii) There is no contract or other document of a character required to be described in the Registration Statement or the General Disclosure Package, including the Prospectus, or to be filed as an exhibit to the Registration Statement or Conversion Application which is not described or filed as required.

     (xlviii) At the time the Company’s securities are registered pursuant to Section 12 of the Exchange Act, the Company shall have established and will maintain disclosure controls and procedures (as such term is defined in Rule 13a-14 and 15d-14 under the Exchange Act); which (A) are designed to ensure that material information relating to the Company including its consolidated subsidiaries, is made known to the Company’s principal executive officer and its principal financial officer by others within those entities, (B) have been (or will be) evaluated for effectiveness as of a date within 90 days prior to the filing of the Company’s most recent annual or quarterly report filed with the Commission and (C) are effective in all material respects to perform the functions for which they were established. The Company’s auditors and the Audit Committee of the Board of Directors have been advised of: (i) any significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize, and report financial data and (ii) any fraud, whether or not material, that involves management or other employees who have a role in the Company’s internal controls; and such deficiencies or fraud have either been disclosed in the Prospectus and the General Disclosure Package or are not material to the Company and the Bank considered as one enterprise; and since the date of the most recent evaluation of such disclosure controls and procedures, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies, material weaknesses or fraud.

     (xlix) Except as described in the General Disclosure Package, including the Prospectus, there are no contractual encumbrances or contractual restrictions or regulatory restrictions on the ability (i) of the Company, the Bank or the Subsidiaries to pay dividends or make any other distributions on the Company’s, the Bank’s or the Subsidiaries’ capital stock (with respect to the Bank, subsequent to the Closing Time) or (ii) of the Company, the Bank or the Subsidiaries (A) to pay any indebtedness owed to the Company, the Bank or the Subsidiaries, or (B) to make any loans or advances to, or investments in, the Company, the Bank or the Subsidiaries, or (C) to transfer any of its property or assets to the Company, the Bank or the Subsidiaries.

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     (l) The Bank has properly administered all accounts for which it acts as a fiduciary, including but not limited to accounts for which it serves as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the governing documents and applicable state and federal law and regulation, except where the failure to be in compliance would not have a Material Adverse Effect. Neither the Bank nor any of its respective directors, officers or employees has committed any material breach of trust with respect to any such fiduciary account, and the accountings for each such fiduciary account are true and correct in all material respects and accurately reflect the assets of such fiduciary account in all material respects. [Applicable if the bank has fiduciary accounts.]

     (b) Any certificate signed by any officer of the Company or the Bank and delivered to either of the Agent or counsel for the Agent shall be deemed a representation and warranty by the Company or the Bank to the Agent and, for purposes of the opinion to be delivered to the Agent pursuant to Section 5(b)(2) hereof, to the counsel for the Agent as to the matters covered thereby.

Section 2. Appointment of Sandler O’Neill; Sale and Delivery of the Securities; Closing.

     On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company and the Bank hereby appoint Sandler O’Neill as their Agent to consult with and advise the Company and the Bank, and to assist the Company and the Bank with the solicitation of subscriptions and purchase orders for Securities, in connection with the Company’s sale of Common Stock in the Offerings. On the basis of the representations and warranties herein contained, and subject to the terms and conditions herein set forth, Sandler O’Neill accepts such appointment and agrees to use its best efforts to assist the Company and the Bank with the solicitation of subscriptions and purchase orders for Securities in accordance with this Agreement; provided, however, that the Agent shall not be obligated to take any action which is inconsistent with any applicable laws, regulations, decisions or orders. The services to be rendered by Sandler O’Neill pursuant to this appointment include the following: (A) as to Sandler O’Neill in the Subscription Offering and Community Offering, (i) consulting as to the financial and securities marketing implications of the Plan and related corporate documents; (ii) reviewing with the Board of Directors of the Company and the Bank the financial impact of the offering on the Company and the Bank based on the independent appraiser’s appraisal of the Common Stock; (iii) reviewing all offering documents, including the Prospectus, stock order forms and related offering materials (it being understood that preparation and filing of such documents is the sole responsibility of the Company and its counsel); (iv) assisting in the design and implementation of a marketing strategy for the offering; (v) assisting management of the Company in scheduling and preparing for meetings with potential investors in connection with the offering; and (vi) providing such other general advice and assistance as may be requested to promote the successful completion of the offering; and (B) as to Sandler

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O’Neill in the Syndicated Offering, soliciting offers to purchase the Common Stock in the Syndicated Offering.

     The appointment of the Agent hereunder shall terminate upon the earlier to occur of (a) forty-five (45) days after the last day of the Offerings, unless the Company and the Agent agree in writing to extend such period and the OTS agrees to extend the period of time in which the Securities may be sold, (b) the receipt and acceptance of subscriptions and purchase orders for all of the Securities, or (c) the completion of the Syndicated Offering.

     If any of the Securities remain available after the expiration of the Subscription Offering and Community Offering, at the request of the Company and the Bank, the Agent will seek to form a syndicate of registered brokers or dealers (“Selected Dealers”) to assist in the solicitation of purchase orders of such Securities on a best efforts basis, subject to the terms and conditions set forth in a master selling agreement (the “Selected Dealers Agreement”), substantially in the form set forth in Exhibit A to this Agreement. Sandler O’Neill will serve as sole lead manager of the Syndicated Offering. The Agent will endeavor to distribute the Securities among the Selected Dealers in a fashion that best meets the distribution objectives of the Company and the Bank and the requirements of the Plan, which may result in limiting the allocation of stock to certain Selected Dealers. It is understood that in no event shall the Agent be obligated to act as a Selected Dealer or to take or purchase any Securities.

     In the event the Company is unable to sell at least the total minimum of the Securities, as set forth on the cover page of the Prospectus, within the period herein provided, this Agreement shall terminate and the Company shall refund to any persons who have subscribed for any of the Securities the full amount which it may have received from them, together with interest as provided in the Prospectus, and no party to this Agreement shall have any obligation to the others hereunder, except for the obligations of the Company and the Bank as set forth in Sections 4, 6(a) and 7 hereof and the obligations of the Agent as provided in Sections 6(b) and 7 hereof. Appropriate arrangements for placing the funds received from subscriptions for Securities or other offers to purchase Securities in special interest-bearing accounts with the Bank until all Securities are sold and paid for were made prior to the commencement of the Subscription Offering, with provision for refund to the purchasers as set forth above, or for delivery to the Company if the total minimum of the Securities are sold.

     If at least the total minimum of Securities, as set forth on the cover page of the Prospectus, are sold, the Company agrees to issue or have issued the Securities sold and to release for delivery certificates for such Securities at the Closing Time against payment therefor by release of funds from the special interest-bearing accounts referred to above or from the release of funds from deposit accounts maintained at the Bank by subscribers in the Subscription Offering, if so directed by such subscribers. The closing shall be held at the offices of SNR Denton US LLP (“SNR Denton”), Washington, DC, at 10:00 a.m., Eastern Time, or at such other

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place and time as shall be agreed upon by the parties hereto, on a business day to be agreed upon by the parties hereto. The Company shall notify the Agent by telephone, confirmed in writing, when funds shall have been received for all the Securities. Certificates for Securities shall be delivered directly to the purchasers thereof in accordance with their directions. The hour and date upon which the Company shall release for delivery all of the Securities, in accordance with the terms hereof, is herein called the “Closing Time.”

     The Company will pay any stock issue and transfer taxes which may be payable with respect to the sale of the Securities.

     In addition to the reimbursement of the expenses specified in Section 4 hereof, (A) the Agent will receive, as compensation for its services hereunder, (i) a fee of one percent (1.00%) of the aggregate Actual Purchase Price of the shares of Common Stock sold in the Subscription Offering and Community Offering, excluding in each case shares purchased by (a) any employee benefit plan of the Company established for the benefit of their respective directors, officers and employees, (b) any charitable foundation established by the Company (or any shares contributed to such a charitable foundation), and (c) any director, officer or employee of the Company or members of their immediate families; provided, however, that the aggregate fee payable pursuant to this paragraph shall not be less than $160,000 (for purposes of this Agreement, the term “Actual Purchase Price” shall mean the price at which the Securities are sold in the Offerings). In recognition of the long lead times involved in the conversion process, the Company and the Bank will or have made advance payments of $25,000 upon execution of the engagement letter dated October 15, 2010 by and between the Agent and the Company and the Bank (“Engagement Letter Agreement”) and $25,000 upon commencement of the mailing of offering materials to the Bank’s depositors, which shall be credited against any fees or reimbursement of documented expenses actually incurred which are payable hereunder. To the extent that the actual expenses incurred or fees due hereunder aggregate less than such amount, Agent will reimburse such excess amount to the Company and the Bank; and (B) with respect to any Securities sold by the Agent or any other FINRA member firm in any Syndicated Offering, (i) a management fee to the Agent of one percent (1.00%) of the aggregate Actual Purchase Price of the Securities sold in the Syndicated Offering; and (ii) a selling concession, set forth in the Selected Dealers Agreement, not to exceed six percent (6.00%) of the aggregate Actual Purchase Price of the shares of Common Stock sold in the Syndicated Offering, which shall be allocated to dealers (including the Agent) in accordance with the actual number of shares of Common Stock sold by such dealers.

     If this Agreement is terminated by the Agent in accordance with the provisions of Section 9(a) hereof or the Conversion is terminated by the Company, no fee shall be payable by the Company and the Bank to Sandler O’Neill; provided, however, that the Company and the Bank shall reimburse the Agent for all of its documented out-of-pocket expenses actually incurred prior to termination, including the reasonable fees and disbursements of counsel for the Agent in

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accordance with the provisions of Section 4 hereof. In addition, the Company and the Bank shall be obligated to pay the fees and expenses as contemplated by the provisions of Section 4 hereof in the event of any such termination.

     All fees payable to the Agent hereunder shall be payable in immediately available funds at Closing Time, or upon the termination of this Agreement, as the case may be.

Section 3. Covenants of the Company. The Company and the Bank covenant with the Agent as follows:

     (a) The Company and the Bank will prepare and file such amendments or supplements to the Registration Statement, the Prospectus, the Conversion Application and the Proxy Statement as may hereafter be required by the Securities Act Regulations or the Conversion Regulations or as may hereafter be requested by the Agent. Following completion of the Subscription and Community Offerings, in the event of a Syndicated Offering, the Company and the Bank will (i) promptly prepare and file with the Commission a post-effective amendment to the Registration Statement relating to the results of the Offerings, any additional information with respect to the proposed plan of distribution and any revised pricing information or (ii) if no such post-effective amendment is required, will, if required, file with the Commission a prospectus or prospectus supplement containing information relating to the results of the Subscription and Community Offerings and pricing information pursuant to Rule 424 of the Securities Act Regulations, in either case in a form acceptable to the Agent. The Company and the Bank will notify the Agent immediately, and confirm the notice in writing, (i) of the effectiveness of any post-effective amendment of the Registration Statement, the filing of any supplement to the Prospectus and the filing of any amendment to the Conversion Application, (ii) of the receipt of any comments from the OTS or the Commission with respect to the transactions contemplated by this Agreement or the Plan, (iii) of any request by the Commission or the OTS for any amendment to the Registration Statement or the Conversion Application or any amendment or supplement to the Prospectus or for additional information, (iv) of the issuance by the OTS of any order suspending the Offerings or the use of the Prospectus or the initiation of any proceedings for that purpose, (v) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or suspending the use of the Prospectus or any Issuer-Represented Free Writing Prospectus or the initiation of any proceedings for that purpose, and (vi) of the receipt of any notice with respect to the suspension of any qualification of the Securities for offering or sale in any jurisdiction. The Company and the Bank will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment.

     (b) If at any time following issuance of an Issuer-Represented Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer-Represented Free Writing Prospectus conflicted or would conflict with the information contained

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in the Registration Statement or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company has notified or will notify promptly the Agent so that any use of such Issuer-Represented Free Writing Prospectus may cease until it is amended or supplemented and the Company has promptly amended or will promptly amend or supplement such Issuer-Represented Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission; provided, however, that this covenant shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by the Agent expressly for use therein.

     (c) The Company represents and agrees that, unless it obtains the prior written consent of the Agent, and the Agent represents and agrees that, unless it obtains the prior written consent of the Company, it has not made and will not make any offer relating to the Securities that would constitute an “issuer free writing prospectus,” as defined in Rule 433 of the Security Act Regulations, or that would constitute a “free writing prospectus,” as defined in Rule 405 of the Securities Act Regulations, required to be filed with the Commission. Any such free writing prospectus consented to by the Company and the Agent is hereinafter referred to as a “Permitted Free Writing Prospectus.” The Company represents that it has treated or agrees that it will treat each Permitted Free Writing prospectus as an “issuer free writing prospectus,” as defined in Rule 433 of the Security Act Regulations, and has complied and will comply with the requirements of Rule 433 applicable to any Permitted Free Writing Prospectus, including timely filing with the Commission where required, legending and record keeping. The Company represents that it has satisfied the conditions in Rule 433 to avoid a requirement to file with the Commission any electronic road show.

     (d) The Company and the Bank will give the Agent notice of their intention to file or prepare any amendment to the Holding Company Application, the Conversion Application or Registration Statement (including any post-effective amendment) or any amendment or supplement to the Prospectus (including any revised prospectus which the Company proposes for use in connection with the Syndicated Offering or otherwise which differs from the prospectus on file at the Commission at the time the Registration Statement becomes effective, whether or not such revised prospectus is required to be filed pursuant to Rule 424(b) or (c) of the Securities Act Regulations), will furnish the Agent with copies of any such amendment or supplement a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file any such amendment or supplement or use any such prospectus to which the Agent or counsel for the Agent may object.

     (e) The Company and the Bank will deliver to the Agent as many signed copies and as many conformed copies of the Holding Company Application, the Conversion Application and the Registration Statement as originally filed and of each amendment thereto (including

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exhibits filed therewith or incorporated by reference therein) as the Agent may reasonably request, and from time to time such number of copies of the Prospectus as the Agent may reasonably request.

     (f) During the period when the Prospectus is required to be delivered, the Company and the Bank will comply, at their own expense, with all requirements imposed upon them by the OTS, by the applicable Conversion Regulations, as from time to time in force, and by the OTC Bulletin Board, the Securities Act, the Securities Act Regulations, the Exchange Act, and the rules and regulations of the Commission promulgated thereunder, including, without limitation, Regulation M under the Exchange Act, so far as necessary to permit the continuance of sales or dealing in shares of Common Stock during such period in accordance with the provisions hereof and the Prospectus.

     (g) If any event or circumstance shall occur as a result of which it is necessary, in the opinion of counsel for the Agent, to amend or supplement the Prospectus in order to make the Prospectus not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, the Company and the Bank will forthwith amend or supplement the Prospectus (in form and substance satisfactory to counsel for the Agent) so that, as so amended or supplemented the Prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading, and the Company and the Bank will furnish to the Agent a reasonable number of copies of such amendment or supplement. For the purpose of this subsection, the Company and the Bank will each furnish such information with respect to itself as the Agent may from time to time reasonably request.

     (h) The Company and the Bank will take all necessary action, in cooperation with the Agent, to qualify the Securities for offering and sale under the applicable securities laws of such states of the United States and other jurisdictions as the Conversion Regulations may require and as the Agent and the Company have agreed; provided, however, that the Company and the Bank shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation in any jurisdiction in which it is not so qualified. In each jurisdiction in which the Securities have been so qualified, the Company and the Bank will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for a period of not less than one year from the effective date of the Registration Statement.

     (i) The Company authorizes Sandler O’Neill to act as agent of the Company in distributing the Prospectus to persons entitled to receive subscription rights and other persons to be offered Securities having record addresses in the states or jurisdictions set forth in a survey of the securities or “blue sky” laws of the various jurisdictions in which the Offerings will be made (the “Blue Sky Survey”).

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     (j) The Company will make generally available to its security holders as soon as practicable, but not later than 60 days after the close of the period covered thereby, an earnings statement (in form complying with the provisions of Rule 158 of the 1933 Act Regulations) covering a twelve month period beginning not later than the first day of the Company’s fiscal quarter next following the “effective date” (as defined in Rule 158 of the Securities Act Regulations) of the Registration Statement that will satisfy the provisions of Section 11(a) of the Securities Act.

     (k) During the period ending on the third anniversary of the expiration of the fiscal year during which the closing of the transactions contemplated hereby occurs, the Company will furnish to its stockholders as soon as practicable after the end of each such fiscal year an annual report (including consolidated balance sheets and consolidated statements of income, stockholders’ equity and cash flows, certified by an independent registered public accounting firm) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), consolidated summary financial information of the Company and the Bank for such quarter in reasonable detail. In addition, such annual report and quarterly consolidated summary financial information shall be made public through the issuance of appropriate press releases at the same time or prior to the time of the furnishing thereof to stockholders of the Company.

     (l) During the period ending on the third anniversary of the expiration of the fiscal year during which the closing of the transactions contemplated hereby occurs, the Company will furnish to the Agent (i) as soon as publicly available, a copy of each report or other document of the Company furnished generally to stockholders of the Company or furnished to or filed with the Commission under the Exchange Act or any national securities exchange or system on which any class of securities of the Company is listed or quoted, and (ii) from time to time, such other information concerning the Company as the Agent may reasonably request. For purposes of this paragraph, any document filed electronically with the Commission shall be deemed furnished to the Agent.

     (m) The Company and the Bank will conduct the Conversion in all material respects in accordance with the Plan, the Conversion Regulations and all other applicable regulations, decisions and orders, including all applicable terms, requirements and conditions precedent to the Conversion imposed upon the Company or the Bank by the OTS.

     (n) The Company and the Bank will use the net proceeds received by it from the sale of the Securities in the manner specified in the Prospectus under “Use of Proceeds.”

     (o) The Company will report the use of proceeds from the Offerings on its first periodic report filed with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act and on any subsequent periodic reports as may be required pursuant to Rule 463 of the Securities Act Regulations.

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     (p) The Company will maintain the effectiveness of the Exchange Act Registration Statement for not less than three years and will comply in all material respects with its filing obligations under the Exchange Act. The Company will use its best efforts to effect and maintain the listing for quotation the Common Stock on the OTC Bulletin Board for not less than three years and, once listed on the OTC Bulletin Board, the Company will comply with all applicable corporate governance standards, if any, required by the OTC Bulletin Board. The Company will file with the OTC Bulletin Board all documents and notices required by the OTC Bulletin Board of companies that have issued securities that are traded on the OTC Bulletin Board.

     (q) The Company and the Bank will take such actions and furnish such information as are reasonably requested by the Agent in order for the Agent to ensure compliance with Rule 2790 of the FINRA’s Conduct Rules and all related rules.

     (r) Other than in connection with any employee benefit plan or arrangement described in the Prospectus, the Company will not, without the prior written consent of the Agent, sell or issue, contract to sell or otherwise dispose of, any shares of Common Stock other than the Securities for a period of 180 days following the Closing Time.

     (s) During the period beginning on the date hereof and ending on the later of the third anniversary of the Closing Time or the date on which the Agent receives full payment in satisfaction of any claim for indemnification or contribution to which it may be entitled pursuant to Sections 6 or 7 made prior to the third anniversary of the Closing Time, respectively, neither the Company nor the Bank shall, without the prior written consent of the Agent, take or permit to be taken any action that could result in the Bank Common Stock becoming subject to any security interest, mortgage, pledge, lien or encumbrance.

     (t) The Company and the Bank will comply with the conditions imposed by or agreed to with the OTS in connection with its approval of the Holding Company Application and the Conversion Application.

     (u) The Company shall not deliver the Securities until the Company and the Bank have satisfied each condition set forth in Section 5 hereof, unless such condition is waived in writing by the Agent.

     (v) The Company or the Bank will furnish to Sandler O’Neill as early as practicable prior to the Closing Date, but no later than two (2) full business days prior thereto, a copy of the latest available unaudited interim financial statements of the Bank which have been read by Stegman & Company, as stated in their letters to be furnished pursuant to subsections (f) and (g) of Section 5 hereof.

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     (w) During the period in which the Prospectus is required to be delivered, each of the Company and the Bank will conduct its business in compliance in all material respects with all applicable federal and state laws, rules, regulations, decisions, directives and orders, including all decisions, directives and orders of the Commission and the OTS.

     (x) The Bank will not amend the Plan in any manner that would affect the sale of the Securities or the terms of this Agreement without the consent of the Agent.

     (y) The Company and the Bank will not, prior to the Closing Time, incur any liability or obligation, direct or contingent, or enter into any material transaction, other than in the ordinary course of business consistent with past practice, except as contemplated by the Prospectus.

     (z) The Company and the Bank will use all reasonable efforts to comply with, or cause to be complied with, the conditions precedent to the several obligations of the Agent specified in Section 5 hereof.

     (aa) The Company and the Bank will provide the Agent with any information necessary to carry out the allocation of the Securities in the event of an oversubscription, and such information will be accurate and reliable in all material respects.

     (bb) The Company and the Bank will notify the Agent when funds have been received for the minimum number of Securities set forth in the Prospectus.

Section 4. Payment of Expenses. The Company and the Bank jointly and severally agree to pay all expenses incident to the performance of their obligations under this Agreement, including but not limited to (i) the cost of obtaining all securities and bank regulatory approvals, including any required FINRA filing fees, (ii) the preparation, printing and filing of the Registration Statement, the Conversion Application and the Holding Company Application, each as originally filed and of each amendment thereto, (iii) the preparation, issuance and delivery of the certificates for the Securities to the purchasers in the Offerings, (iv) the fees and disbursements of the Company’s and the Bank’s counsel, accountants, appraiser and other advisors, (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(h) hereof, including filing fees and the fees and disbursements of the Company’s counsel in connection therewith and in connection with the preparation of the Blue Sky Survey, (vi) the printing and delivery to the Agent (in such quantities as the Agent shall reasonably request) of copies of the Registration Statement as originally filed and of each amendment thereto and the printing and delivery of the Prospectus and any amendments or supplements thereto to the purchasers in the Offerings and the Agent (in such quantities as the Agent shall reasonably request), (vii) the printing and delivery to the Agent of copies of a Blue Sky Survey, (viii) the fees and expenses incurred in connection with the listing of the Securities on the OTC Bulletin Board, and (ix) the establishment and operational expense of the conversion center. In the event

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the Agent actually incurs any such fees and expenses on behalf of the Bank or the Company, the Bank will reimburse the Agent for such fees and expenses whether or not the Conversion is consummated; provided, however, that the Agent shall not incur any substantial expenses on behalf of the Bank or the Company pursuant to this Section without the prior approval of the Bank.

     The Company and the Bank jointly and severally agree to pay certain expenses incident to the performance of the Agent’s obligations under this Agreement, regardless of whether the Conversion is consummated, including (i) the filing fees paid or incurred by the Agent in connection with all filings with the FINRA, and (ii) all reasonable documented out of pocket expenses actually incurred by the Agent relating to the Offerings, including, without limitation, advertising, promotional, syndication and travel expenses and fees and expenses of the Agent’s counsel, up to an aggregate maximum of $75,000. All fees and expenses to which the Agent is entitled to reimbursement under this paragraph of this Section 4 shall be due and payable upon receipt by the Company or the Bank of a written accounting therefor setting forth in reasonable detail the expenses actually incurred by the Agent.

Section 5. Conditions of Agent’s Obligations. The Company, the Bank and the Agent agree that the issuance and the sale of Securities and all obligations of the Agent hereunder are subject to the accuracy of the representations and warranties of the Company and the Bank herein contained as of the date hereof and the Closing Time, to the accuracy of the statements of officers and directors of the Company and the Bank made pursuant to the provisions hereof, to the performance by the Company and the Bank of their obligations hereunder, and to the following further conditions:

     (a) No stop order suspending the effectiveness of the Registration Statement shall have been issued under the Securities Act or proceedings therefor initiated or threatened by the Commission, no order suspending the Offerings or authorization for final use of the Prospectus shall have been issued or proceedings therefor initiated or threatened by the OTS and no order suspending the sale of the Securities in any jurisdiction shall have been issued.

     (b) At Closing Time, the Agent shall have received:

(1) The favorable opinion, dated as of Closing Time, of Kilpatrick Stockton, counsel for the Company and the Bank, in form and substance satisfactory to counsel for the Agent, to the effect set forth in Appendix A.

(2) The favorable opinion, dated as of Closing Time, of SNR Denton, counsel for the Agent, with respect to the matters set forth in clauses (i), (ii), (v), (vii), (viii) (solely as to preemptive rights arising by operation of law), (xv), (xvi) and (xviii) of Appendix A and such other matters as the Agent may reasonably require.

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(3) In giving their opinions required by subsections (b)(l) and (b)(2), respectively, of this Section, Kilpatrick Stockton and SNR Denton shall each additionally state that nothing has come to their attention that would lead them to believe that the Registration Statement (except for financial statements and schedules, notes to financial statements, stock valuation information and other financial or statistical data included therein or omitted therefrom, as to which counsel need make no statement), at the time it became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus (except for financial statements and schedules, notes to financial statements, stock valuation information and other financial or statistical data included therein or omitted therefrom, as to which counsel need make no statement), at the time the Registration Statement became effective or at the Closing Time, or that the General Disclosure Package as of the Applicable Time, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. To the extent not inconsistent with the assumptions, qualifications and limitations which shall be set forth in the opinion, the opinions of Kilpatrick Stockton and SNR Denton will be governed by, and shall be interpreted in accordance with, the Legal Opinion Accord (the “Accord”) of the American Bar Association Section of Business Law (1991). The clause “to counsel’s knowledge,” “to such counsel’s actual knowledge” or similar terms used in said opinion shall have the meaning set forth in the Accord for the term “Actual Knowledge.” In giving their opinions, Kilpatrick Stockton and SNR Denton may rely as to matters of fact on certificates of officers and directors of the Company and the Bank and certificates of public officials, and SNR Denton may also rely on the opinion of Kilpatrick Stockton.

     (c) At Closing Time referred to in Section 2, the Company and the Bank shall have completed in all material respects the conditions precedent to the Conversion in accordance with the Plan, the applicable Conversion Regulations and all other applicable laws, regulations, decisions and orders, including all terms, conditions, requirements and provisions precedent to the Conversion imposed upon the Company or the Bank by the OTS, or any other regulatory authority other than those which the OTS permits to be completed after the Conversion.

     (d) At Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Registration Statement and the General Disclosure Package, including the Prospectus, any material adverse change in the financial condition, results of operations, business affairs or prospects of the Company, the Bank and the Subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business consistent with past practice, and the Agent shall have received a certificate of the

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Chairman and Chief Executive Officer and the President and Chief Operating Officer of the Company and of the Bank, dated as of Closing Time, to the effect that (i) there has been no such material adverse change, (ii) there shall have been no material transaction entered into by the Company, the Bank or the Subsidiaries from the latest date as of which the financial condition of the Company or the Bank as set forth in the Registration Statement and the General Disclosure Package, including the Prospectus, other than transactions referred to or contemplated therein and transactions in the ordinary course of business consistent with past practice, (iii) neither the Company nor the Bank shall have received from the OTS or the FDIC any order or direction (oral or written) to make any material change in the method of conducting its business with which it has not complied (which order or direction, if any, shall have been disclosed to the Agent) or which materially and adversely would affect the business affairs, financial condition, results of operations or prospects of the Company or the Bank, (iv) the representations and warranties in Section 1 hereof are true and correct with the same force and effect as though expressly made at and as of the Closing Time, (v) each of the Company and the Bank has complied with all agreements and satisfied all conditions on their part to be performed or satisfied at or prior to Closing Time, (vi) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been initiated or threatened by the Commission and (vii) no order suspending the Subscription and Community Offerings or Syndicated Offering or the authorization for final use of the Prospectus has been issued and no proceedings for that purpose have been initiated or threatened by the OTS and no person has sought to obtain regulatory or judicial review of the action of the OTS in approving the Plan in accordance with the Conversion Regulations nor has any person sought to obtain regulatory or judicial review of the action of the OTS in approving the Holding Company Application.

     (e) At the Closing Time, the Agent shall have received a certificate of the Chairman and Chief Executive Officer and the President and Chief Operating Officer of the Company and of the Bank, dated as of Closing Time, to the effect that (i) they have reviewed the contents of the Registration Statement and the Prospectus and the General Disclosure Package; (ii) based on their knowledge, the Registration Statement and the General Disclosure Package, including the Prospectus, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which such statements were made, not misleading; (iii) based on their knowledge, the financial statements and other financial information included in the Registration Statement and the Prospectus and the General Disclosure Package fairly present the financial condition and results of operations of the Bank as of and for the dates and periods covered by the Registration Statement and the Prospectus; (iv) they are responsible for establishing and maintaining internal controls; (v) they have designed such internal controls to ensure that material information relating to the Company and the Bank is made known to them; (vi) they have evaluated the effectiveness of their internal controls; and (vii) they have disclosed to Stegman & Company and the audit committee (A) all significant deficiencies in the design or operation of internal controls

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which could adversely affect the Company’s and the Bank’s ability to record, process, summarize, and report financial data, and have identified for the Company’s and the Bank’s auditors any material weaknesses in internal controls and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s and the Bank’s internal controls.

     (f) At the time of the execution of this Agreement, the Agent shall have received from Stegman & Company a letter dated such date, in form and substance satisfactory to the Agent, to the effect that (i) they are independent public accountants with respect to the Company and the Bank within the meaning of the Code of Ethics of the American Institute of Certified Public Accountants, the Securities Act, the Securities Act Regulations, and the Conversion Regulations and they are registered with the PCAOB, they are not in violation of the auditor independence requirements of the Sarbanes-Oxley Act; (ii) it is their opinion that the financial statements and supporting schedules included in the Registration Statement and covered by their opinion therein comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the Securities Act Regulations; (iii) based upon limited procedures as agreed upon by the Agent and Stegman & Company set forth in detail in such letter, nothing has come to their attention which causes them to believe that (A) the unaudited financial statements and supporting schedules of the Bank included in the Registration Statement and the General Disclosure Package, including the Prospectus, do not comply as to form in all material respects with the applicable accounting requirements of the Securities Act, the Securities Act Regulations and the Conversion Regulations or are not presented in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included in the Registration Statement and the General Disclosure Package, including the Prospectus, (B) the unaudited amounts of net interest income and net income set forth under “Selected Consolidated Financial and Other Data” or under “Recent Developments” in the Registration Statement and Prospectus do not agree with the amounts set forth in unaudited financial statements as of and for the dates and periods presented under such caption or such amounts were not determined on a basis substantially consistent with that used in determining the corresponding amounts in the audited financial statements included in the Registration Statement, (C) at a specified date not more than five days prior to the date of this Agreement, there has been any increase in the long-term or short-term debt of the Bank or any decrease in total assets, the allowance for loan losses, total deposits or retained earnings of the Bank, in each case as compared with the amounts shown in the balance sheet included in the Registration Statement or, (D) during the period from September 30, 2010 to a specified date not more than five days prior to the date of this Agreement, there were any decreases, as compared with the corresponding period in the preceding fiscal year, in total interest income, net interest income, net interest income after provision for loan losses, income before income tax expense or net income of the Bank, except in all instances for increases or decreases which the Registration Statement and the General Disclosure Package, including the Prospectus, disclose have occurred or may occur; and (iv) in addition to the examination referred to in their opinions and the limited

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procedures referred to in clause (iii) above, they have carried out certain specified procedures, not constituting an audit, with respect to certain amounts, percentages and financial information which are included in the Registration Statement and the General Disclosure Package, including the Prospectus, and which are specified by the Agent, and have found such amounts, percentages and financial information to be in agreement with the relevant accounting, financial and other records of the Company and the Bank identified in such letter.

     (g) At Closing Time, the Agent shall have received from Stegman & Company a letter, dated as of Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (f) of this Section, except that the specified date referred to shall be a date not more than five days prior to Closing Time.

     (h) At Closing Time, the Securities shall have been approved for trading on the OTC Bulletin Board upon notice of issuance, provided that the Agent has timely filed the application for such trading.

     (i) At Closing Time, the Agent shall have received a letter from the Appraiser, dated as of the Closing Time, confirming its appraisal.

     (j) At Closing Time, counsel for the Agent shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated and related proceedings, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Agent and counsel for the Agent.

     (k) At any time prior to Closing Time, (i) there shall not have occurred any material adverse change in the financial markets in the United States or elsewhere or any outbreak of hostilities or escalation thereof or other calamity or crisis the effect of which, in the judgment of the Agent, are so material and adverse as to make it impracticable to market the Securities or to enforce contracts, including subscriptions or orders, for the sale of the Securities, and (ii) trading generally on either the New York Stock Exchange or the Nasdaq Stock Market shall not have been suspended, and minimum or maximum prices for trading shall not have been fixed, or maximum ranges for prices for securities have been required, by either of said Exchanges or by order of the Commission or any other governmental authority, and a banking moratorium shall not have been declared by Federal, New York or Maryland authorities.

Section 6. Indemnification.

     (a) The Company and the Bank, jointly and severally, agree to indemnify and hold harmless the Agent, each person, if any, who controls the Agent, within the meaning of Section

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15 of the Securities Act or Section 20 of the Exchange Act, and its respective partners, directors, officers, employees and agents as follows:

     (i) from and against any and all loss, liability, claim, damage and expense whatsoever, as incurred, related to or arising out of the Offerings or any action taken by the Agent where acting as agent of the Company or the Bank or otherwise as described in Section 2 hereof; provided, however, that this indemnity agreement shall not apply to any loss, liability claim, damage or expense found in a final judgment by a court of competent jurisdiction to have resulted primarily from bad faith, willful misconduct or gross negligence of the Agent;

     (ii) from and against any and all loss, liability, claim, damage and expense whatsoever, as incurred, based upon or arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement the General Disclosure Package, any Issuer — Represented Free or Limited Use Free Writing Prospectus, when considered together with the General Disclosure Package, or any amendment or supplement thereto, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in the Prospectus or the General Disclosure Package or any Issuer — Represented Free Writing or Limited Use Free Writing Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

     (iii) from and against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever described in clauses (i) or (ii) above, if such settlement is effected with the written consent of the Company or the Bank, which consent shall not be unreasonably withheld; and

     (iv) from and against any and all expense whatsoever, as incurred (including, subject to Section 6(c) hereof, the fees and disbursements of counsel chosen by the Agent), reasonably incurred in investigating, preparing for or defending against any litigation, or any investigation, proceeding or inquiry by any governmental agency or body, commenced or threatened, or any claim pending or threatened whatsoever described in clauses (i) or (ii) above, to the extent that any such expense is not paid under (i), (ii) or (iii) above;

provided, however, that the indemnification provided for in this paragraph (a) shall not apply to any loss, liability, claim, damage or expense to the extent (i) it arises out of any untrue statement

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or alleged untrue statement of a material fact contained in the Prospectus or the General Disclosure Package or any Issuer — Represented Free Writing Prospectus or Issuer — Represented Limited Use Free Writing Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading which was made in reliance upon and in conformity with the Agent Information.

     (b) The Agent agrees to indemnify and hold harmless the Company, the Bank, their directors, each of their officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, of a material fact made in the Prospectus or the General Disclosure Package or any Issuer — Represented Free Writing Prospectus or Issuer — Represented Limited Use Free Writing Prospectus (or any amendment or supplement thereto), in reliance upon and in conformity with the Agent Information.

     (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability which it may have otherwise than on account of this indemnity agreement. An indemnifying party may participate at its own expense in the defense of any such action. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to no more than one local counsel in each separate jurisdiction in which any action or proceeding is commenced) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances.

     (d) The Company and the Bank also agree that the Agent shall not have any liability (whether direct or indirect, in contract or tort or otherwise) to the Bank, the Company, its security holders or the Bank’s or the Company’s creditors relating to or arising out of the engagement of the Agent pursuant to, or the performance by the Agent of the services contemplated by, this Agreement, except to the extent that any loss, claim, damage or liability is found in a final judgment by a court of competent jurisdiction to have resulted primarily from the Agent’s bad faith, willful misconduct or gross negligence.

     (e) In addition to, and without limiting, the provisions of Section (6)(a)(iv) hereof, in the event that the Agent, any person, if any, who controls the Agent within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act or any of its partners, directors, officers, employees or agents is requested or required to appear as a witness or

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otherwise gives testimony in any action, proceeding, investigation or inquiry brought by or on behalf of or against the Company, the Bank, the Agent or any of its respective affiliates or any participant in the transactions contemplated hereby in which the Agent or such person or agent is not named as a defendant, the Company and the Bank jointly and severally agree to reimburse the Agent or such other person for all reasonable and necessary out-of-pocket expenses incurred by it or them in connection with preparing or appearing as a witness or otherwise giving testimony and to compensate the Agent and such other persons in an amount to be mutually agreed upon.

Section 7. Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in Section 6 hereof is for any reason held to be unenforceable by the indemnified parties although applicable in accordance with its terms, the Company, the Bank and the Agent shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by said indemnity agreement incurred by the Company or the Bank and the Agent, as incurred, in such proportions (i) that the Agent is responsible for that portion represented by the percentage that the maximum aggregate marketing fees in the Offerings bears to the maximum aggregate gross proceeds in the Offerings and the Company and the Bank are jointly and severally responsible for the balance or (ii) if, but only if, the allocation provided for in clause (i) is for any reason held unenforceable, in such proportion as is appropriate to reflect not only the relative benefits to the Company and the Bank on the one hand and the Agent on the other, as reflected in clause (i), but also the relative fault of the Company and the Bank on the one hand and the Agent on the other, as well as any other relevant equitable considerations; provided, however, that no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person, if any, who controls the Agent within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Agent, and each director of the Company, each director of the Bank, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company or the Bank within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company and the Bank. Notwithstanding anything to the contrary set forth herein, to the extent permitted by applicable law, in no event shall the Agent be required to contribute an aggregate amount in excess of the aggregate marketing fees to which the Agent is entitled and actually paid pursuant to this Agreement.

Section 8. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement, or contained in certificates of officers of the Company or the Bank submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any

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Agent or controlling person, or by or on behalf of the Company, and shall survive delivery of the Securities.

Section 9. Termination of Agreement.

     (a) The Agent may terminate this Agreement, by notice to the Company, at any time at or prior to Closing Time (i) if there has been, since the date of this Agreement or since the respective dates as of which information is given in the Registration Statement, any material adverse change in the financial condition, results of operations, business affairs or prospects of the Company or the Bank, or the Company and the Bank considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or elsewhere or any outbreak of hostilities or escalation thereof or other calamity or crisis the effect of which, in the judgment of the Agent, are so material and adverse as to make it impracticable to market the Securities or to enforce contracts, including subscriptions or orders, for the sale of the Securities, (iii) if trading generally on the Nasdaq Stock Market or the New York Stock Exchange has been suspended, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices for securities have been required, by either of said Exchanges or by order of the Commission or any other governmental authority, or if a banking moratorium has been declared by either Federal, New York or Maryland authorities, (iv) if any condition specified in Section 5 shall not have been fulfilled when and as required to be fulfilled; (v) if there shall have been such material adverse change in the condition or prospects of the Company or the Bank or the prospective market for the Company’s securities as in the Agent’s good faith opinion would make it inadvisable to proceed with the offering, sale or delivery of the Securities; (vi) if, in the Agent’s good faith opinion, the price for the Securities established by the Appraiser is not reasonable or equitable under then prevailing market conditions, or (vii) if the Conversion is not consummated on or prior to June 30, 2011.

     (b) If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Sections 2 and 4 hereof relating to the reimbursement of expenses and except that the provisions of Sections 6 and 7 hereof shall survive any termination of this Agreement.

Section 10. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Agent shall be directed to the Agent at 919 Third Avenue, 6th Floor, New York, New York 10022, Attention: General Counsel, with a copy to SNR Denton US LLP, 1301 K Street, N .W., Suite 600, East Tower, Washington, DC 20005, Attention: Matthew Dyckman; notices to the Company and the Bank shall be directed to either of them at 764 Washington Boulevard, Baltimore, Maryland 21230, attention of Thomas K. Sterner, Chairman

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and Chief Executive Officer with a copy to Kilpatrick Stockton, L.L.P., 607 14th Street, N.W., Suite 900, Washington, DC 20005, attention Gary R. Bronstein.

Section 11. Parties. This Agreement shall inure to the benefit of and be binding upon the Agent, the Company and the Bank and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Agent, the Company and the Bank and their respective successors and the controlling persons and partners, and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein or therein contained. This Agreement and all conditions and provisions hereof and thereof are intended to be for the sole and exclusive benefit of the Agent, the Company and the Bank and their respective successors, and said controlling persons and partners and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation.

Section 12. Entire Agreement; Amendment. This Agreement represents the entire understanding of the parties hereto with reference to the transactions contemplated hereby and supersedes any and all other oral or written agreements heretofore made, except for those sections of the Engagement Letter Agreement, relating to the Agent’s providing record management services to the Company and the Bank in connection with the Conversion and the section entitled “Confidentiality” in the engagement letter dated October 15, 2010, by and between the Agent, the Company and the Bank relating to offering services. No waiver, amendment or other modification of this Agreement shall be effective unless in writing and signed by the parties hereto.

Section 13. Governing Law and Time. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said State without regard to the conflicts of laws provisions thereof. Unless otherwise noted, specified times of day refer to Eastern time.

Section 14. Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.

Section 15. Headings. Sections headings are not to be considered part of this Agreement, are for convenience and reference only, and are not to be deemed to be full or accurate descriptions of the contents of any paragraph or subparagraph.

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     If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the Agent, the Company and the Bank in accordance with its terms.

Very truly yours, FRATERNITY COMMUNITY BANCORP, INC.
By:
	Name:	Thomas K. Sterner
	Title:	Chairman and Chief Executive Officer
FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
By:
	Name:	Thomas K. Sterner
	Title:	Chairman and Chief Executive Officer

CONFIRMED AND ACCEPTED, as of the date first above written: Sandler O’Neill & Partners, L.P.
By:	Sandler O’Neill & Partners Corp.,
	the sole general partner

By:
	Name:	Christopher J. DeCresce
	Title:	Authorized Signatory

APPENDIX A

     (i) The Company has been duly incorporated and is validly existing as a corporation under the laws of the State of Maryland.

     (ii) The Bank is validly existing as a federal savings bank chartered under the laws of the United States of America and, at the Closing Time, will be duly organized and validly existing in stock form.

     (iii) The Bank has the authority to transact business in the State of Maryland.

     (iv) Each of the Company and the Bank has the full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the General Disclosure Package, including the Prospectus, and to enter into and perform its obligations under this Agreement and the transactions contemplated hereby.

     (v) The authorized capital stock of the Company consists of 15,000,000 shares of Common Stock, par value $0.01 per share, and 1,000,000 shares of preferred stock, par value $0.01 per share, of which, to such counsel’s actual knowledge, no shares are issued and outstanding; immediately upon consummation of the Conversion and the Offerings the issued and outstanding capital stock of the Company will be within the range set forth in the Prospectus under “Capitalization”.

     (vi) Immediately upon consummation of the Conversion and the Offerings, the authorized capital stock of the Bank will consist of [           ] shares of common stock, par value $1.00 per share, and [           ] shares of serial preferred stock, par value $1.00 per share, and the issued and outstanding capital stock of the Bank will be [           ] shares of Bank Common Stock; when issued in accordance with the Plan, all of the issued and outstanding capital stock of the Bank will be duly authorized and validly issued, fully paid and non-assessable and owned beneficially and of record by the Company, to such counsel’s actual knowledge, free and clear of any security interest, mortgage, pledge, lien or encumbrance. The issuance of such Bank Common Stock to the Company was exempt from registration under the Securities Act pursuant to Section (3)(a)(5) thereof.

     (vii) The Securities have been duly authorized for issuance and sale, and when issued and delivered by the Company pursuant to the Plan against payment of the consideration calculated as set forth in the Plan, will be validly issued, fully paid and nonassessable.

     (viii) The issuance of the Securities is not subject to preemptive rights arising by operation of federal or state laws and regulations or the Company’s articles of incorporation, except for subscription rights granted pursuant to the Plan in accordance with OTS Regulations.

Appendix A-1

     (ix) To such counsel’s actual knowledge, the Company and the Bank have conducted the Offerings in accordance with applicable requirements of the Conversion Regulations (except to the extent that the requirements to comply therewith was specifically waived by the OTS) and the Plan, and have satisfied all conditions precedent to the issuance of the Securities imposed upon them by the OTS under the terms of the OTS’s written approval of the Conversion Application.

     (x) The Bank is a member in good standing of the Federal Home Loan Bank of Atlanta, and the deposit accounts of the Bank are insured by the FDIC up to the applicable limits.

     (xi) The Subsidiaries are validly existing as a corporation and a limited liability company in good standing under the laws of the jurisdictions of their incorporation or organization, as applicable, and the Subsidiaries have full power and authority to own, lease and operate their properties and to conduct their business as described in the Registration Statement; the activities of the Subsidiaries as described in the Prospectus are permitted to subsidiaries of a savings and loan holding company and of a federally chartered savings bank by the rules, regulations, resolutions and practices of the OTS; all of the issued and outstanding capital stock or membership interests of the Subsidiaries, if any, has been duly authorized and validly issued, is fully paid and non-assessable and, to such counsel’s actual knowledge, is owned by the Bank, directly, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity.

     (xii) The OTS has approved the Holding Company Application and the Conversion Application; to such counsel’s actual knowledge, such approvals remain in full force and effect and no action by the OTS to suspend the effectiveness of such approvals or to suspend the Offerings is pending or threatened; the Holding Company Application and the Conversion Application comply as to form in all material respects with the applicable requirements of the application Form H-(e)1-S and Form AC, as the case may be (it being understood, however, that (i) no opinion need be rendered with respect to the financial statements and schedules, notes to financial statements, stock valuation information or other financial and statistical data included in, or omitted from, the Holding Company Application or the Conversion Application, (ii) in passing upon the compliance as to form of the Holding Company Application and the Conversion Application, counsel need not assume any responsibility for the accuracy, completeness or fairness of the statements contained therein except as otherwise provided in such counsel’s opinion, and (iii) no opinion need be rendered with respect to the business plan or the appraisal report); such applications include all documents required to be filed as exhibits thereto; and, to such counsel’s actual knowledge, no person has sought to obtain review of the final action of the OTS in approving the Holding Company Application or the Conversion Application.

Appendix A-2

     (xiii) The execution and delivery of this Agreement, the incurrence of the obligations therein set forth, and the consummation of the transactions contemplated hereby, (A) have been duly authorized by all necessary corporate action on the part of each of the Company and the Bank, (B) will not violate the articles of incorporation, charter, articles of organization or bylaws or operating agreement of the Company, the Bank or the Subsidiaries, and (C) will not result in a breach of or default, or result in the creation of any lien, charge or encumbrance under any agreement filed as an exhibit to the Registration Statement.

     (xiv) This Agreement constitutes the legal, valid and binding agreement of each of the Company and the Bank, enforceable in accordance with its terms, except as rights to indemnity and contribution thereunder may be limited under applicable law, and subject to the qualification that (i) enforcement thereof may be limited by bankruptcy, insolvency, moratorium, reorganization or other laws (including the laws of fraudulent conveyance) or judicial decisions affecting the enforceability of creditors’ rights generally or the rights of creditors of savings banks or financial institutions, the accounts of which are insured by the FDIC, or holding companies thereof, and (ii) enforcement thereof is subject to general equity principles (regardless of whether such enforceability is considered in a proceeding in equity or at law) and to the effect of certain laws and judicial decisions upon the availability of injunctive relief and enforceability of equitable remedies, including the remedies of specific performance and self-help.

     (xv) The Registration Statement has been declared effective by the Commission under the Securities Act, and such counsel has been advised by the Commission’s staff that no stop order suspending the effectiveness of the Registration Statement has been issued under the Securities Act and that no proceedings for such purpose have been initiated or threatened by the Commission.

     (xvi) The Prospectus has been declared effective and the Proxy Statement has been cleared by the OTS, and such counsel has been advised by the OTS’ staff that no order suspending such effectiveness of the Prospectus or clearance of the Proxy Statement has been issued by the OTS and that no proceedings for such purpose have been initiated or threatened by the OTS.

     (xvii) No further approval, authorization, consent or other order of any public board or body is required in connection with the execution and delivery of this Agreement and the issuance of the Securities pursuant to the Plan, except as may be required under the securities or “Blue Sky” laws of various jurisdictions as to which no opinion need be rendered.

     (xviii) At the time the Registration Statement became effective, the Registration Statement complied as to form in all material respects with the applicable requirements under the Securities Act and the Securities Act Regulations; it being understood, however, that (i) no opinion need be rendered with respect to the financial statements and schedules, notes to financial statements, stock valuation information or other financial and statistical data included

Appendix A-3

in, or omitted from, the Registration Statement and (ii) in passing upon the compliance as to form of the Registration Statement, such counsel may assume that the statements made therein are correct and complete, except as otherwise set forth in paragraph (xxii).

     (xix) The form of certificate used to evidence the Common Stock complies with the requirements of Maryland law.

     (xx) There are no legal or governmental proceedings pending or to such counsel’s actual knowledge, threatened against or affecting the Company, the Bank or any Subsidiary which are required to be disclosed in the Registration Statement and Prospectus, other than those disclosed therein.

     (xxi) The statements in the Prospectus under the captions “Our Dividend Policy,” “Regulation and Supervision,” “Federal and State Taxation,” “The Conversion and Stock Offering — Effects of Conversion to Stock Form,” “— Material Income Tax Consequences,” “— Restrictions on Repurchase of Stock,” “-Restrictions on Transfer of Shares After the Conversion Applicable to Officers and Directors,” “Restrictions on the Acquisition of Fraternity Community Bancorp and Fraternity Federal Savings and Loan Association,” “Description of Fraternity Community Bancorp Capital Stock” and “Registration Requirements” insofar as they purport to summarize matters of law or to describe documents referred to therein, are accurate summaries and descriptions in all material respects.

     (xxii) To such counsel’s actual knowledge, there are no contracts or documents of a character required to be described in the Registration Statement or Prospectus or to be filed as exhibits thereto that are not described or filed, and the descriptions thereof or references thereto are correct in all material respects and, except as described in the Prospectus, no default exists, and no event has occurred which, with notice or lapse of time or both, would constitute a default, in the due performance or observance of any material obligation, agreement or covenant contained in any contract or document so described or filed.

     (xxiii) The Plan has been duly authorized by all necessary corporate action by the Company and the Bank.

     (xxiv) To such counsel’s actual knowledge, the Company, the Bank and the Subsidiaries are currently not in violation of their respective articles of incorporation, charter, articles of organization, bylaws and operating agreement.

     (xxv) The Company is not and, after giving effect to the offer and the sale of the Securities and the application of the net proceeds as described in the Prospectus under the caption “Use of Proceeds”, will not be, required to be registered as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.

Appendix A-4

EXHIBIT A

FORM OF SELECTED DEALERS AGREEMENT

Up to 1,380,000 Shares

(Maximum Offered to be Sold and Issued in Conversion, subject
to increase up to 1,587,000 shares
under certain circumstances)

Common Stock
(Par Value $0.01 Per Share)

SELECTED DEALER’S AGREEMENT

______________, 200__

Ladies and Gentlemen:

     We have agreed to assist Fraternity Community Bancorp, Inc., a Maryland corporation (the “Company”) in connection with the offer for sale and issuance of shares (the “Shares”) of common stock, par value $0.01 per share, of the Company, to be issued in connection with the conversion and reorganization of Fraternity Federal Savings and Loan Association, a federal savings bank (the “Bank”), from the mutual to stock holding company form of organization. The Company, in connection with its plan to effect such conversion, offered for sale up to 1,380,000 shares for subscription by the Company’s and the Bank’s employee stock ownership plan and certain of the Bank’s depositors and borrowers, in a subscription offering, and certain members of the general public in a concurrent direct community offering. The shares which were not subscribed for pursuant to such subscription and direct community offerings are being offered to the public in a syndicated community offering (the “Syndicated Community Offering”) in accordance with the rules of the Office of Thrift Supervision. The Shares, the bases on which the number of Shares to be issued may change, and certain of the terms on which they are being offered are more fully described in the enclosed Prospectus (the “Prospectus”).

     We are offering to Selected Dealers (of which you are one) the opportunity to participate in the solicitation of offers to buy the Shares in the Syndicated Community Offering, and we will pay you a fee in the amount of _____________ percent (______%) of the dollar amount of the Shares sold on behalf of the Company by you. The number of Shares sold by you shall be determined based on the authorized designation of your firm on the order form or forms for such Shares accompanying the funds transmitted for payment therefor (whether in the form of a check payable to the Bank or a withdrawal from an existing account at the Bank) to the special account

Exhibit A-1

established by the Company for the purpose of holding such funds. It is understood, of course, that payment of your fee will be made only out of compensation received by us for the Shares sold on behalf of the Company by you, as evidenced in accordance with the preceding sentence. The Bank has requested us to invite you to become a “Sponsoring Dealer,” that is, a Selected Dealer who solicits offers which result in the sale on behalf of the Bank of at least ____ shares. You may become a Sponsoring Dealer (subject to your fulfillment of the requirement in the preceding sentence) by checking the box on the confirmation at the end of this letter. If you become a Sponsoring Dealer, you shall be entitled to an additional fee in the amount of _____ percent (_____%) of the dollar amount of the Shares sold on behalf of the Company by you as evidenced in the manner set forth above.

     Each order form for the purchase of Shares must set forth the identity, address and tax identification number of each person ordering Shares regardless of whether the Shares will be registered in street name or in the purchaser’s name. Such order form should clearly identify your firm.

     As soon as practicable after all the Shares are sold, we will remit to you, out of our compensation as provided above, the fees to which you are entitled hereunder, including your Sponsoring Dealer fee.

     This offer is made subject to the terms and conditions herein set forth and is made only to Selected Dealers which are (i) members in good standing of the Financial Industry Regulatory Authority (“FINRA”) which agree to comply with all applicable interpretative materials, FINRA Rules and the National Association of Securities Dealers, Inc.’s (“NASD”) Conduct Rules, including, without limitation, NASD’s Interpretation with Respect to Free-Riding and Withholding and Rule 2740 of the NASD’s Conduct Rules, or (ii) foreign dealers not eligible for membership in FINRA which agree (A) not to sell any Shares within the United States, its territories or possessions or to persons who are citizens thereof or resident therein and (B) in making other sales to comply with the above-mentioned NASD Rules 2730, 2740 and 2750 of the above-mentioned Conduct Rules and FINRA Rule 2790 as if they were FINRA members and Rule 2420 of such NASD Conduct Rules as it applies to non-member brokers or dealers in a foreign country.

     Orders for Shares will be strictly subject to confirmation and we, acting on behalf of the Company, reserve the right in our absolute discretion to reject any order in whole or in part, to accept or reject orders in the order of their receipt or otherwise, and to allot. Neither you nor any other person is authorized by the Company, the Bank or by us to give any information or make any representations other than those contained in the Prospectus in connection with the offering and sale of any of the Shares. No Selected Dealer is authorized to act as agent for us when soliciting offers to buy the Shares from the public or otherwise. No Selected Dealer shall engage in any stabilizing (as defined in Regulation M promulgated under the Securities Exchange Act of

Exhibit A-2

1934, as amended (the “Exchange Act”)) with respect to the Company’s common stock during the offering.

     We and each Selected Dealer assisting in selling Shares pursuant hereto agree to comply with the applicable requirements of the Exchange Act, and applicable rules and regulations issued by the Securities and Exchange Commission (the “SEC”). In addition, we and each Selected Dealer confirm that the SEC interprets Rule 15c2-8 promulgated under the Exchange Act as requiring that a prospectus be supplied to each person who is expected to receive a confirmation of sale at least 48 hours prior to delivery of such person’s order form.

     We and each Selected Dealer further agree to the extent that our customers desire to pay for Shares with funds held by or to be deposited with us, in accordance with the interpretation of the SEC Rule 15c2-4 promulgated under the Exchange Act either (a) upon receipt of an executed order form or direction to execute an order form on behalf of a customer to forward the Syndicated Community Offering price for the Shares ordered on or before 12:00 p.m. on the business day following receipt or execution of an order form by us to the Bank for deposit in a segregated account or (b) to solicit indications of interest in which event (i) we will subsequently contact any customers indicating interest to confirm the interest and give instructions to execute and return an order form or to receive authorization to execute an order form on their behalf, (ii) we will mail acknowledgments of receipt of orders to each customer confirming interest on the business day following such confirmation, (iii) we will debit accounts of such customers on the fifth business day (the “debit date”) following receipt of the confirmation referred to in (i) and (iv) we will forward completed order forms together with such funds to the Bank on or before 12:00 p.m. on the next business day following the debit date for deposit in a segregated account. We acknowledge that if the procedure in (b) is adopted, our customer’s funds are not required to be in their accounts until the debit date. We and each Selected Dealer further acknowledge that, in order to use the foregoing “sweep arrangements,” we comply with the net capital requirements for broker/dealers under Rule 15c3-1(a)(1) of the Exchange Act.

     Unless earlier terminated by us, this Agreement shall terminate 45 full business days after the date hereof, but may be extended by us for an additional period or periods not exceeding 30 full business days in the aggregate. We may terminate this Agreement or any provisions hereof at any time by written or telegraphic notice to you. Of course, our obligations hereunder are subject to the successful completion of the offering, including the sale of all of the Shares.

     You agree that at any time or times prior to the termination of this Agreement you will, upon our request, report to us the number of Shares sold on behalf of the Company by you under this Agreement.

Exhibit A-3

     We shall have full authority to take such actions as we may deem advisable in respect to all matters pertaining to the offering. We shall be under no liability to you except for lack of good faith and for obligations expressly assumed by us in this Agreement.

     Upon application to us, we will inform you as to the states in which we believe the Shares have been qualified for sale under, or are exempt from the requirements of, the respective blue sky laws of such states, but we assume no responsibility or obligation as to your rights to sell Shares in any state.

     Additional copies of the Prospectus and any supplements thereto will be supplied in reasonable quantities upon request.

     Any notice from us to you shall be deemed to have been duly given if mailed, telephoned or telegraphed to you at the address to which this Agreement is mailed.

Exhibit A-4

     This Agreement shall be construed in accordance with the laws of New York.

     Please confirm your agreement hereto by signing and returning the confirmation accompanying this letter at once to us at Sandler O’Neill & Partners, L.P., 919 Third Avenue, 6^th Floor, New York, New York 10022. The enclosed duplicate copy will evidence the agreement between us.

Very truly yours, SANDLER O’NEILL & PARTNERS, L.P.
By:	Sandler O’Neill & Partners Corp.,
	the sole general partner

By:  

Exhibit A-5

Sandler O’Neill & Partners, L.P.
919 Third Avenue — 6th Floor
New York, New York 10022

Re:  _____________________

Ladies and Gentlemen:

     We hereby confirm our agreement to all the terms and conditions stated in the foregoing letter. We acknowledge receipt of the Prospectus relating to the Shares and we further state that in agreeing thereto we have relied upon the Prospectus and no other statement whatsoever, written or oral. We confirm that we are (i) a member on good standing of the Financial Industry Regulatory Authority (“FINRA”), and agree to comply with all applicable interpretative materials, FINRA Rules and the National Association of Securities Dealers, Inc.’s (“NASD”) Conduct Rules, including, without limitation, the NASD’s “Interpretation With Respect to Free-Riding and Withholding” and Rule 2740 of the NASD’s Conduct Rules, or (ii) a foreign dealer not eligible for membership in the FINRA and agree (A) not to sell any Shares of Fraternity Community Bancorp, Inc. within the United States, its territories or possessions or to persons who are citizens thereof or resident therein and (B) in making other sales to comply with the above-mentioned NASD Rules 2730, 2740 and 2750 of the above-mentioned Conduct Rules and FINRA Rule 2790 as if we were an FINRA member and Rule 2420 of such Conduct Rules as it applies to a non-member broker or dealer in a foreign country.

[__] We wish to become a “Sponsoring Dealer.”

Dated: ______________________

(Please print or type name of firm
 

By:  

Exhibit A-6

EX-2.0

Exhibit 2.0

FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION

PLAN OF CONVERSION

ADOPTED ON SEPTEMBER 14, 2010

AND AMENDED ON OCTOBER 18, 2010

TABLE OF CONTENTS

	PAGE
1. Introduction		1
2. Definitions		1
3. General Procedure for the Conversion		5
4. Total Number of Shares and Purchase Price of Common Stock		7
5. Subscription Rights of Eligible Account Holders (First Priority)		7
6. Subscription Rights of Tax-Qualified Employee Stock Benefit Plans (Second Priority)		8
7. Subscription Rights of Supplemental Eligible Account Holders (Third Priority)		9
8. Subscription Rights of Other Members (Fourth Priority)		9
9. Community Offering, Syndicated Community Offering, Public Offering and Other Offerings		10
10. Limitations on Subscriptions and Purchases of Common Stock		11
11. Timing of Subscription Offering; Manner of Exercising Subscription Rights and Order Forms		13
12. Payment for Common Stock		14
13. Account Holders in Nonqualified States or Foreign Countries		15
14. Requirements Following the Conversion for Registration, Market Making and Stock Exchange Listing		15
15. Liquidation Account		15
16. Completion of the Conversion		17
17. Requirements for Stock Purchases by Directors and Officers Following the Conversion		17
18. Restrictions on Transfer of Stock		17
19. Stock Compensation Plans		18
20. Dividend and Repurchase Restrictions on Stock		18
21. Amendment or Termination of the Plan		18
22. Interpretation of the Plan		19

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1. INTRODUCTION.

     For purposes of this section, all capitalized terms have the meanings ascribed to them in Section 2.

     This Plan of Conversion provides for the conversion of Fraternity Federal Savings and Loan Association (the “Association”) from a federally chartered mutual savings association into a federally chartered stock savings association. The Plan provides that the Association will operate as a wholly owned subsidiary of a stock holding company (the “Holding Company”).

     The Board of Directors of the Association has considered the alternatives available to the Association with respect to its corporate structure, and has determined that a mutual to stock conversion, as described in this Plan, will be in the best interests of the Association and its customers. The Conversion will raise capital which will enable the Association to: (1) support future lending and operational growth, including branching activities and acquisitions of other financial institutions or financial services companies; (2) increase its ability to render services to the communities it serves; (3) compete more effectively with commercial banks and other financial institutions for new business opportunities; and (4) increase its equity capital base and access the capital markets when needed. The Conversion will also enable the Holding Company and the Association to adopt stock benefit plans that will make the Association more competitive in providing incentive compensation to management and employees.

     The Plan provides that non-transferable subscription rights to purchase the Common Stock of the Holding Company shall be granted to certain Members of the Association pursuant to the Plan and in accordance with the rules and regulations of the OTS. The price of the Common Stock to be sold in the Conversion will be based upon an independent appraisal of the Association and will reflect its estimated pro forma market value, as converted. No change will be made in the board of directors or management of the Association as a result of the Conversion.

     The Plan was adopted by the Association’s Board of Directors on September 14, 2010. The Plan is subject to the approval of the OTS and must be approved by the affirmative vote of at least a majority of the total votes eligible to be cast by the Voting Members at the Special Meeting.

     After the Conversion, the Association will continue to be regulated by the OTS, as its chartering authority, and by the FDIC, which insures the Association’s deposits. In addition, the Association will continue to be a member of the Federal Home Loan Bank System and all insured savings deposits will continue to be insured by the FDIC up to the maximum limit provided by law.

2. DEFINITIONS.

     As used in this Plan, the terms set forth below have the following meaning:

     ACTING IN CONCERT means (i) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement; or (ii) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. A Person or company which acts in concert with another Person or company (“other party”) shall also be deemed to be acting in concert with any Person or company who is also acting in concert with that other party, except that any Tax-Qualified Employee Stock Benefit Plan will not be deemed to be acting in concert with its trustee or a person who serves in a similar capacity solely for the purpose of determining whether stock held by the trustee and stock held by the plan will be aggregated and participants or

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beneficiaries of any such Tax-Qualified Employee Stock Benefit Plan will not be deemed to be acting in concert solely as a result of their common interests as participants or beneficiaries. When Persons act together for such purpose, their group is deemed to have acquired their stock. The determination of whether a group is Acting in Concert shall be made solely by the Boards of Directors of the Holding Company and the Association or Officers delegated by such Boards and may be based on any evidence upon which the Board or such delegatee chooses to rely, including, without limitation, joint account relationships or the fact that such Persons share a common address (whether or not related by blood or marriage) or have filed joint Schedules 13D or Schedules 13G with the SEC with respect to other companies. Directors of the Holding Company and the Association shall not be deemed to be Acting in Concert solely as a result of their membership on such board or boards.

     ACTUAL PURCHASE PRICE means the price per share at which the Common Stock is ultimately sold by the Holding Company in the Offerings in accordance with the terms hereof.

     AFFILIATE means a Person who, directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with the Person specified.

     ASSOCIATE of a Person means (i) a corporation or organization (other than the Holding Company, the Association or a majority-owned subsidiary of the Holding Company or the Association), if the Person is a senior officer or partner or beneficially owns, directly or indirectly, 10% or more of any class of equity securities of the corporation or organization, (ii) a trust or other estate, if the Person has a substantial beneficial interest in the trust or estate or is a trustee or fiduciary of the trust or estate, provided, however, that such term shall not include any Tax-Qualified Employee Stock Benefit Plan of the Holding Company or the Association in which such Person has a substantial beneficial interest or serves as a trustee or in a similar fiduciary capacity, and (iii) any person who is related by blood or marriage to such Person and who lives in the same home as the Person or who is a director or senior officer of the Holding Company or the Association or any of their subsidiaries.

     ASSOCIATION means Fraternity Federal Savings and Loan Association.

     ASSOCIATION BENEFIT PLAN(S) includes, but is not limited to, Tax Qualified Employee Stock Benefit Plans and Non-Tax Qualified Employee Stock Benefit Plans.

     CODE means the Internal Revenue Code of 1986, as amended.

     COMMON STOCK means the shares of common stock to be issued and sold by the Holding Company in the Offerings, all pursuant to the Plan. The Common Stock will not be insured by the Federal Deposit Insurance Corporation.

     COMMUNITY OFFERING means the offering for sale by the Holding Company of any shares of Common Stock not subscribed for in the Subscription Offering to such Persons as may be selected by the Holding Company and the Association in their sole discretion and to whom a copy of the Prospectus is delivered by or on behalf of the Holding Company.

     CONTROL (including the terms “controlling,” “controlled by,” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

     CONVERSION means the conversion of the Association to stock form pursuant to this Plan, and all steps incident thereto.

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     DEPOSIT ACCOUNT means any withdrawable account as defined in Section 561.42 of the Rules and Regulations of the OTS, including a demand account as defined in Section 561.16 of the Rules and Regulations of the OTS.

     ELIGIBLE ACCOUNT HOLDER means any Person holding a Qualifying Deposit on the Eligibility Record Date for purposes of determining Subscription Rights.

     ELIGIBILITY RECORD DATE means the date for determining Qualifying Deposits of Eligible Account Holders and is the close of business on June 30, 2009.

     ESOP means a Tax Qualified Employee Stock Benefit Plan adopted by the Holding Company or the Association in connection with the Conversion, the purpose of which shall be to acquire shares of Common Stock.

     ESTIMATED PRICE RANGE means the range of the estimated aggregate pro forma market value of the total number of shares of Common Stock to be issued in the Offerings, as determined by the Independent Appraiser in accordance with Section 4 hereof.

     FDIC means the Federal Deposit Insurance Corporation, or any successor thereto.

     HOLDING COMPANY means the stock corporation that will hold all of the outstanding capital stock of the Association upon completion of the Conversion.

     INDEPENDENT APPRAISER means the independent financial consulting firm retained by the Holding Company and the Association to prepare an appraisal of the estimated pro forma market value of the Common Stock.

     INITIAL PURCHASE PRICE means the price per share to be paid initially by Participants for shares of Common Stock subscribed for in the Subscription Offering and by Persons for shares of Common Stock ordered in the Community Offering and/or Syndicated Community Offering.

     LOCAL COMMUNITY means Baltimore County, Howard County, Carroll County and Baltimore City in Maryland.

     MANAGEMENT PERSON means any Officer or director of the Association or the Holding Company or any Affiliate of the Association or the Holding Company and any person Acting in Concert with such Officer or director.

     MEMBER means any Person qualifying as a member of the Association in accordance with its mutual charter and bylaws and the laws of the United States.

     OFFERINGS mean the offering of Common Stock in the Subscription Offering, the Community Offering, the Syndicated Community Offering or the Public Offering.

     OFFICER means the chairman of the board, president, chief executive officer, vice-president, secretary, treasurer or principal financial officer, comptroller or principal accounting officer and any other person performing similar functions with respect to any organization whether incorporated or unincorporated.

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     ORDER FORM means the form or forms to be provided by the Holding Company, containing all such terms and provisions as set forth in Section 11 hereof, to a Participant or other Person by which Common Stock may be ordered in the Offerings.

     OTHER MEMBER means a Voting Member who is not an Eligible Account Holder or a Supplemental Eligible Account Holder.

     OTS means the Office of Thrift Supervision, or any successor thereto.

     PARTICIPANT means any Eligible Account Holder, Tax-Qualified Employee Stock Benefit Plan, Supplemental Eligible Account Holder or Other Member.

     PERSON means an individual, a corporation, a partnership, an association, a joint-stock company, a limited liability company, a trust, an unincorporated organization or a government or any political subdivision of a government.

     PLAN OF CONVERSION means this Plan of Conversion as adopted by the Board of Directors of the Association and any amendment hereto approved as provided herein.

     PREFERRED SUBSCRIBERS means natural persons and trusts of natural persons residing in the Local Community.

     PROSPECTUS means the one or more documents to be used in offering the Common Stock in the Offerings.

     PUBLIC OFFERING means an underwritten firm commitment offering to the public through one or more underwriters.

     QUALIFYING DEPOSIT means the aggregate balance of all Deposit Accounts in the Association of (i) an Eligible Account Holder at the close of business on the Eligibility Record Date, provided such aggregate balance is not less than $50.00, and (ii) a Supplemental Eligible Account Holder at the close of business on the Supplemental Eligibility Record Date, provided such aggregate balance is not less than $50.00.

     SEC means the Securities and Exchange Commission, or any successor thereto.

     SPECIAL MEETING means the special meeting of members of the Association called for the purpose of submitting this Plan to the Members for their approval, including any adjournments or postponements of such meeting.

     SUBSCRIPTION OFFERING means the offering of the Common Stock to Participants.

     SUBSCRIPTION RIGHTS mean nontransferable rights to subscribe for Common Stock granted to Participants pursuant to the terms of this Plan.

     SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER means any Person, except directors and Officers of the Association or the Holding Company and their Associates (unless the OTS grants a waiver to permit a director or Officer or Associate to be included), holding a Qualifying Deposit at the close of business on the Supplemental Eligibility Record Date.

4

     SUPPLEMENTAL ELIGIBILITY RECORD DATE, if applicable, means the date for determining Supplemental Eligible Account Holders and shall be required if the Eligibility Record Date is more than 15 months before the date of the approval of the Conversion by the OTS. If applicable, the Supplemental Eligibility Record Date shall be the last day of the calendar quarter preceding OTS approval of the Conversion.

     SYNDICATED COMMUNITY OFFERING means the offering for sale by a syndicate of broker-dealers to the general public of shares of Common Stock not purchased in the Subscription Offering and the Community Offering.

     TAX-QUALIFIED EMPLOYEE STOCK BENEFIT PLAN means any defined benefit plan or defined contribution plan, such as an employee stock ownership plan, stock bonus plan, profit-sharing plan or other plan, which is established for the benefit of the employees of the Holding Company and/or the Association and any Affiliate thereof and which, with its related trust, meets the requirements to be “qualified” under Section 401 of the Code as from time to time in effect. A “Non-Tax-Qualified Employee Stock Benefit Plan” is any defined benefit plan or defined contribution stock benefit plan that is not so qualified.

     VOTING MEMBER means a Person who, at the close of business on the Voting Record Date, is entitled to vote as a Member of the Association in accordance with its mutual charter and bylaws.

     VOTING RECORD DATE means the date or dates for determining the eligibility of Members to vote at the Special Meeting.

3. GENERAL PROCEDURE FOR THE CONVERSION.

     (a) Organization of the Holding Company and the Association

          The Association will apply to the OTS to have the Holding Company retain up to 50% of the net proceeds of the Offerings, or such other amount as may be determined by the Board of Directors. The Association may distribute additional capital to the Holding Company following the Conversion, subject to the OTS regulations governing capital distributions.

     (b) Effect on Deposit Accounts and Borrowings

          Each deposit account in the Association on the effective date of the Conversion, will remain a deposit account in the Association after the Conversion in the same amount and upon the same terms and conditions, and will continue to be federally insured up to the legal maximum by the FDIC in the same manner as each deposit account existed in the Association immediately before the Conversion. Holders of deposit accounts in the Association shall not, as such holders, have any voting rights. Upon consummation of the Conversion, all loans and other borrowings from the Association shall retain the same status with the Association after the Conversion, as they had with the Association immediately before the Conversion.

     (c) The Association

          Upon completion of the Conversion, the Association will be authorized to exercise any and all powers, rights and privileges of, and will be subject to all limitations applicable to, capital stock savings associations under federal law. The Conversion will not result in any reduction of the amount of retained earnings and general loss reserves will be accounted for by the Holding Company and the Association on a consolidated basis in accordance with generally accepted accounting principles. Copies of the proposed

5

federal stock charter and bylaws of the Association are attached hereto and made a part of this Plan. By their approval of this Plan, the Voting Members shall have approved and adopted the federal stock charter and bylaws of the Association.

          The initial members of the Board of Directors of the Association upon the completion of the Conversion will be the members of the Board of Directors of the Association at the time of the adoption of the Plan of Conversion who continue to be directors of the Association at the time of the closing of the Conversion. Following the Conversion, the Association will be wholly owned by the Holding Company. The Holding Company will be wholly owned by its stockholders who will initially consist of the persons who purchase Common Stock in the Offerings.

     (d) The Holding Company

          The Holding Company will be authorized to exercise any and all powers, rights and privileges, and will be subject to all limitations applicable to savings and loan holding companies under federal law and regulations. The initial members of the Board of Directors of the Holding Company will be appointed by the Association. Thereafter, the voting stockholders of the Holding Company will elect approximately one-third of the Holding Company’s directors annually. The total shares of Common Stock authorized under the Holding Company articles of incorporation will exceed the shares of Common Stock to be issued in the Conversion.

     (e) Applications and Regulatory and Member Approval

          The Association will take the necessary steps to prepare and file the Application for Conversion, including the Plan, together with all requisite material, with the OTS for approval. The Association also will cause notice of the adoption of the Plan by the Board of Directors of the Association to be given by publication in a newspaper having general circulation in each community in which an office of the Association is located, and will cause copies of the Plan to be made available at each office of the Association for inspection by Members. The Association will post the notice of the adoption of the Plan in each of its offices. Once the Application for Conversion is filed, the Association will again cause to be published, in accordance with the requirements of applicable regulations of the OTS, notice of the filing of the Application for Conversion with the OTS, and will post notice of the filing of the Application for Conversion in each office of the Association.

          As soon as practicable after the adoption of the Plan by the Board of Directors of the Association, the proposed Board of Directors of the Holding Company shall adopt the Plan by at least a two-thirds vote. The proposed Board of Directors of the Holding Company shall cause to be filed with the OTS such applications as may be required for approval of the Holding Company’s acquisition of the Association and filed with the SEC a Registration Statement to register the Common Stock under the Securities Act of 1933, as amended. The proposed Board of Directors of the Holding Company shall also register or qualify the Common Stock under any applicable state securities laws, subject to Section 13 hereof.

          Promptly following receipt of requisite approval of the OTS, the Plan will be submitted to the Voting Members for their consideration and approval at the Special Meeting. The Association may, at its option, mail to all Voting Members, at their last known address appearing on the records of the Association, a proxy statement in either long form, or to the extent permitted by applicable laws and regulations, summary form, describing the Plan, which will be submitted to a vote of the Voting Members at the Special Meeting. If the Plan is approved by the affirmative vote of a majority of the total number of votes eligible to be cast by Voting Members at the Special Meeting, the Association shall take all other necessary organizational steps

6

pursuant to applicable laws and regulations to amend its charter and bylaws to authorize the issuance of its capital stock to the Holding Company at the time the Conversion is consummated.

     (f) Expenses

          The Holding Company and the Association may retain and pay for the services of financial and other advisors and investment bankers to assist in connection with any or all aspects of the Conversion, including in connection with the Offerings, the payment of fees to brokers for assisting Persons in completing and/or submitting Order Forms. The Association shall use its best efforts to ensure that all fees, expenses, retainers and similar items shall be reasonable.

4. TOTAL NUMBER OF SHARES AND PURCHASE PRICE OF COMMON STOCK.

     (a) The aggregate price at which shares of Common Stock shall be sold in the Offerings shall be based on a pro forma valuation of the aggregate market value of the Common Stock prepared by the Independent Appraiser. The valuation shall be based on financial information relating to the Holding Company and the Association, market, financial and economic conditions, a comparison of the Holding Company and the Association with selected publicly held financial institutions and holding companies and with comparable financial institutions and holding companies and such other factors as the Independent Appraiser may deem to be important, including, but not limited to, the projected operating results and financial condition of the Holding Company and Association. The valuation shall be stated in terms of an Estimated Price Range, the maximum of which shall be no more than 15% above the average of the minimum and maximum of such price range and the minimum of which shall be no more than 15% below such average. The valuation shall be updated during the Conversion as market and financial conditions warrant and as may be required by the OTS.

     (b) Based upon the independent valuation, the Boards of Directors of the Holding Company and the Association shall fix the Initial Purchase Price and the number of shares of Common Stock to be offered in the Offerings. The purchase price per share for the Common Stock shall be a uniform price determined in accordance with applicable OTS rules and regulations. The Actual Purchase Price and the total number of shares of Common Stock to be issued in the Offerings shall be determined by the Boards of Directors of the Holding Company and the Association upon conclusion of the Offerings in consultation with the Independent Appraiser and any financial advisor or investment banker retained by the Holding Company in connection with such offering.

     (c) Subject to the approval of the OTS, the Estimated Price Range may be increased or decreased to reflect market, financial and economic conditions before completion of the Conversion or to fill the Order of the Tax-Qualified Employee Stock Benefit Plans, and under such circumstances the Holding Company and the Association may increase or decrease the total number of shares of Common Stock to be issued in the Conversion to reflect any such change. Notwithstanding anything to the contrary contained in this Plan, no resolicitation of subscribers shall be required and subscribers shall not be permitted to modify or cancel their subscriptions unless the gross proceeds from the sale of the Common Stock in the Offerings are less than the minimum or more than 15% above the maximum of the Estimated Price Range set forth in the Prospectus. In the event of an increase in the total number of shares offered in the Offerings due to an increase in the Estimated Price Range, the priority of share allocation shall be as set forth in this Plan.

5. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS (FIRST PRIORITY).

     (a) Each Eligible Account Holder shall receive, as first priority and without payment, Subscription Rights to purchase up to the greater of (i) $250,000 of Common Stock (or such maximum

7

purchase limitation as may be established for the Community Offering and/or Syndicated Community Offering), (ii) one-tenth of 1% of the total offering of shares in the Subscription Offering, or (iii) 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares of Common Stock offered in the Subscription Offering by a fraction, of which the numerator is the amount of the Qualifying Deposits of the Eligible Account Holder and the denominator is the total amount of all Qualifying Deposits of all Eligible Account Holders, in each case subject to Sections 10 and 13 hereof.

     (b) In the event of an oversubscription for shares of Common Stock pursuant to Section 5(a), available shares shall be allocated among subscribing Eligible Account Holders so as to permit each such Eligible Account Holder, to the extent possible, to purchase a number of shares which will make his or her total allocation equal to the lesser of the number of shares subscribed for or 100 shares. Any available shares remaining after each subscribing Eligible Account Holder has been allocated the lesser of the number of shares subscribed for or 100 shares shall be allocated among the subscribing Eligible Account Holders whose subscriptions remain unsatisfied in the proportion that the Qualifying Deposit of each such subscribing Eligible Account Holder bears to the total Qualifying Deposits of all such subscribing Eligible Account Holders whose orders are unfilled, provided that no fractional shares shall be issued.

     Subscription Rights of Eligible Account Holders who are also directors or Officers of the Holding Company or the Association and their Associates shall be subordinated to those of other Eligible Account Holders to the extent that they are attributable to increased deposits during the one-year period preceding the Eligibility Record Date.

6. SUBSCRIPTION RIGHTS OF TAX-QUALIFIED EMPLOYEE STOCK BENEFIT PLANS (SECOND PRIORITY).

     Tax-Qualified Employee Stock Benefit Plans (excluding the Association’s 401(k) plan) shall receive, without payment, Subscription Rights to purchase in the aggregate up to 10% of the Common Stock sold in the Offerings, including any shares of Common Stock to be issued as a result of an increase in the Estimated Price Range after commencement of the Subscription Offering and before completion of the Offerings. The subscription rights granted to Tax-Qualified Employee Stock Benefit Plans shall be subject to the availability of shares of Common Stock after taking into account the shares of Common Stock purchased by Eligible Account Holders; provided, however, that if the total number of shares of Common Stock is increased to any amount greater than the number of shares representing the maximum of the Estimated Price Range as set forth in the Prospectus (“Maximum Shares”), the ESOP shall have a priority right to purchase any such shares exceeding the Maximum Shares up to an aggregate of 10% of Common Stock sold in the Offerings. Shares of Common Stock purchased by any individual participant (“Plan Participant”) in a Tax-Qualified Employee Stock Benefit Plan using funds therein pursuant to the exercise of subscription rights granted to such Participant in his individual capacity as an Eligible Account Holder and/or Supplemental Eligible Account Holder and/or purchases by such Plan Participant in the Community Offering shall not be deemed to be purchases by a Tax-Qualified Employee Stock Benefit Plan for purposes of calculating the maximum amount of Common Stock that Tax-Qualified Employee Stock Benefit Plans may purchase pursuant to the first sentence of this Section 6 if the individual Plan Participant controls or directs the investment authority with respect to such account or subaccount. Consistent with applicable laws and regulations and policies and practices of the OTS, the Tax-Qualified Employee Stock Benefit Plans may use funds contributed by the Holding Company or the Association and/or borrowed from the Holding Company or an independent financial institution to exercise such Subscription Rights, and the Holding Company and the Association may make scheduled discretionary contributions thereto, provided that such contributions do not cause the Association to fail to meet any applicable regulatory capital requirement. The Tax-Qualified Employee Stock Benefit Plans may fill their orders to purchase Common Stock, in whole or in part, through open market purchases after the closing of the Offerings, subject to approval of the OTS.

8

     The Tax-Qualified Employee Stock Benefit Plans shall not be deemed to be an Associate or Affiliate of or Person Acting in Concert with any Management Person.

7. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS (THIRD PRIORITY).

     (a) In the event that the Eligibility Record Date is more than 15 months before the date of OTS approval of the Plan, then, and only in that event, a Supplemental Eligibility Record Date shall be set and each Supplemental Eligible Account Holder shall receive, without payment, Subscription Rights to purchase up to the greater of (i) $250,000 of Common Stock (or such maximum purchase limitation as may be established for the Community Offering and/or Syndicated Community Offering), (ii) one-tenth of 1% of the total offering of shares in the Subscription Offering or (iii) 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares of Common Stock offered in the Subscription Offering by a fraction, of which the numerator is the amount of the Qualifying Deposits of the Supplemental Eligible Account Holder and the denominator is the total amount of all Qualifying Deposits of all Supplemental Eligible Account Holders, in each case subject to Sections 10 and 13 hereof and the availability of shares of Common Stock for purchase after taking into account the shares of Common Stock purchased by Eligible Account Holders and Tax-Qualified Employee Stock Benefit Plans through the exercise of Subscription Rights under Sections 5 and 6 hereof.

     (b) In the event of an oversubscription for shares of Common Stock pursuant to Section 7(a), available shares shall be allocated among subscribing Supplemental Eligible Account Holders so as to permit each such Supplemental Eligible Account Holder, to the extent possible, to purchase a number of shares sufficient to make his or her total allocation (including the number of shares, if any, allocated in accordance with Section 5(a)) equal to the lesser of the number of shares subscribed for or 100 shares. Any remaining available shares shall be allocated among subscribing Supplemental Eligible Account Holders whose subscriptions remain unsatisfied in the proportion that the amount of their respective Qualifying Deposits bears to the total amount of the Qualifying Deposits of all such subscribing Supplemental Eligible Account Holders whose orders are unfilled, provided that no fractional shares shall be issued.

8. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY).

     (a) Each Other Member shall receive, without payment, Subscription Rights to purchase up to the greater of (i) $250,000 of Common Stock (or such maximum purchase limitation as may be established for the Community Offering and/or Syndicated Community Offering) and (ii) one-tenth of 1% of the total offering of shares in the Subscription Offering, subject to Sections 10 and 13 hereof and the availability of shares of Common Stock for purchase after taking into account the shares of Common Stock purchased by Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans and Supplemental Eligible Account Holders, if any, through the exercise of Subscription Rights under Sections 5, 6 and 7 hereof.

     (b) If, pursuant to this Section 8, Other Members subscribe for a number of shares of Common Stock in excess of the total number of shares of Common Stock remaining, available shares shall be allocated among subscribing Other Members so as to permit each such Other Member, to the extent possible, to purchase a number of shares which will make his or her total allocation equal to the lesser of the number of shares subscribed for or 100 shares. Any remaining available shares shall be allocated among subscribing Other Members whose subscriptions remain unsatisfied on a pro rata basis in the same proportion as each such Other Member’s subscription bears to the total subscriptions of all such subscribing Other Members, provided that no fractional shares shall be issued.

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9. COMMUNITY OFFERING, SYNDICATED COMMUNITY OFFERING, PUBLIC OFFERING AND OTHER OFFERINGS.

     (a) If less than the total number of shares of Common Stock offered by the Holding Company are sold in the Subscription Offering, it is anticipated that all remaining shares of Common Stock shall, if practicable, be sold in a Community Offering. Subject to the requirements set forth herein, the manner in which the Common Stock is sold in the Community Offering shall have as the objective the achievement of the widest possible distribution of such stock.

     (b) In the event of a Community Offering, all shares of Common Stock that are not subscribed for in the Subscription Offering shall be offered for sale by means of a direct community marketing program, which may provide for the use of brokers, dealers or investment banking firms experienced in the sale of financial institution securities. Any available shares in excess of those not subscribed for in the Subscription Offering will be available for purchase by members of the general public to whom a Prospectus is delivered by the Holding Company or on its behalf, with preference given first to Preferred Subscribers.

     (c) A Prospectus and Order Form shall be furnished to such Persons as the Holding Company and the Association may select in connection with the Community Offering, and each order for Common Stock in the Community Offering shall be subject to the absolute right of the Holding Company and the Association to accept or reject any such order in whole or in part either at the time of receipt of an order or as soon as practicable following completion of the Community Offering. Available shares will be allocated first to each Preferred Subscriber whose order is accepted in an amount equal to the lesser of 100 shares or the number of shares subscribed for by each such Preferred Subscriber, if possible. Thereafter, unallocated shares shall be allocated among the Preferred Subscribers whose accepted orders remain unsatisfied in the same proportion that the unfilled order bears to the total unfilled orders of all Preferred Subscribers whose accepted orders remain unsatisfied, provided that no fractional shares shall be issued. If there are any shares remaining after all accepted orders by Preferred Subscribers have been satisfied, such remaining shares shall be allocated to other members of the general public who purchase in the Community Offering, applying the same allocation described above for Preferred Subscribers.

     (d) The amount of Common Stock that any Person may purchase in the Community Offering shall not exceed $250,000 of Common Stock, provided, however, that this amount may be increased to up to 5% of the total offering of shares of Common Stock or decreased to less than $250,000, subject to any required regulatory approval but without the further approval of the Members or the resolicitation of subscribers; and provided further that to the extent applicable, and subject to the preferences set forth in Section 9(b) and (c) of this Plan and the limitations on purchases of Common Stock set forth in this Section 9(d) and Section 10 of this Plan, orders for Common Stock in the Community Offering shall first be filled to a maximum of 2% of the total number of shares of Common Stock sold in the Offerings and thereafter any remaining shares shall be allocated on an equal number of shares basis per order until all orders have been filled, provided no fractional shares shall be issued. The Holding Company and the Association may commence the Community Offering concurrently with, at any time during, or as soon as practicable after the end of, the Subscription Offering, and the Community Offering must be completed within 45 days after the completion of the Subscription Offering, unless extended by the Holding Company and the Association with any required regulatory approval.

     (e) Subject to such terms, conditions and procedures as may be determined by the Holding Company and the Association, all shares of Common Stock not subscribed for in the Subscription Offering or ordered in the Community Offering may be sold by a syndicate of broker-dealers to the general public in a Syndicated Community Offering. Each order for Common Stock in the Syndicated Community Offering

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shall be subject to the absolute right of the Holding Company and the Association to accept or reject any such order in whole or in part either at the time of receipt of an order or as soon as practicable after completion of the Syndicated Community Offering. The amount of Common Stock that any Person may purchase in the Syndicated Community Offering shall not exceed $250,000 of Common Stock, provided, however, that this amount may be increased to up to 5% of the total offering of shares of Common Stock or decreased to less than $250,000, subject to any required regulatory approval but without the further approval of the Members or the resolicitation of subscribers; and provided further that, to the extent applicable, and subject to the limitations on purchases of Common Stock set forth in this Section 9(e) and Section 10 of this Plan, orders for Common Stock in the Syndicated Community Offering shall first be filled to a maximum of 2% of the total number of shares of Common Stock sold in the Offerings and thereafter any remaining shares shall be allocated on an equal number of shares basis per order until all orders have been filled, provided no fractional shares shall be issued. The Holding Company and the Association may commence the Syndicated Community Offering concurrently with, at any time during, or as soon as practicable after the end of, the Subscription Offering and/or Community Offering, and the Syndicated Community Offering must be completed within 45 days after the completion of the Subscription Offering, unless extended by the Holding Company and the Association with any required regulatory approval.

     (f) The Holding Company and the Association may sell any shares of Common Stock remaining following the Subscription Offering, Community Offering and/or the Syndicated Community Offering in a Public Offering. The provisions of Section 10 hereof shall not be applicable to the sales to underwriters for purposes of the Public Offering but shall be applicable to sales by the underwriters to the public. The price to be paid by the underwriters in such an offering shall be equal to the Actual Purchase Price less an underwriting discount to be negotiated among such underwriters and the Holding Company and the Association, subject to any required regulatory approval or consent.

     (g) If for any reason a Syndicated Community Offering or Public Offering of shares of Common Stock not sold in the Subscription Offering and the Community Offering cannot be effected, or if any insignificant residue of shares of Common Stock is not sold in the Subscription Offering, Community Offering or Syndicated Community Offering, the Holding Company and the Association shall use their best efforts to obtain other purchasers for such shares in such manner and upon such conditions as may be satisfactory to the OTS.

10. LIMITATIONS ON SUBSCRIPTIONS AND PURCHASES OF COMMON STOCK.

     The following limitations shall apply to all purchases of Common Stock in the Offerings:

     (a) The maximum amount of Common Stock that may be subscribed for or purchased in all categories of the Offerings by any Person, together with any Associate or group of Persons Acting in Concert, shall not exceed $400,000 except for Tax-Qualified Employee Stock Benefit Plans.

     (b) The maximum number of shares of Common Stock which may be purchased in the Conversion by the ESOP shall not exceed 8%, and all Tax-Qualified Employee Stock Benefit Plans shall not exceed 10% of the total number of shares of Holding Company Common Stock issued in the Conversion, in each instance, including any shares which may be issued in the event of an increase in the maximum Estimated Price Range to reflect changes in market, financial and economic conditions after commencement of the Subscription Offering and before completion of the Offerings; provided, however, that purchases of Common Stock which are made by Plan Participants pursuant to the exercise of Subscription Rights granted to such Plan Participant in his or her individual capacity as a Participant or purchases by a Plan Participant in the Community Offering using the funds thereof held in Tax-Qualified Employee Stock Benefit Plans shall

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not be deemed to be purchases by a Tax-Qualified Employee Stock Benefit Plan for purposes of this Section 10(b).

     (c) No Person may purchase fewer than 25 shares of Common Stock in the Offerings, to the extent such shares are available; provided, however, that if the Actual Purchase Price is greater than $20.00 per share, such minimum number of shares shall be adjusted so that the aggregate Actual Purchase Price for such minimum shares will not exceed $500.00.

     (d) The maximum amount of Common Stock that directors and officers of the Holding Company or the Association and their Associates may purchase in the aggregate in the Offerings shall not exceed 32% of the total number of shares of Common Stock sold in the Offerings, including any shares which may be issued in the event of an increase in the maximum of the Estimated Price Range to reflect changes in market, financial and economic conditions after commencement of the Subscription Offering and before completion of the Offerings.

     (e) For purposes of the foregoing limitations and the determination of Subscription Rights, (i) directors, Officers and employees of the Holding Company, the Association or their subsidiaries shall not be deemed to be Associates or a group Acting in Concert solely as a result of their capacities as such, (ii) shares purchased by Tax-Qualified Employee Stock Benefit Plans shall not be attributable to the individual trustees or beneficiaries of any such plan for purposes of determining compliance with the limitations set forth in Section 10(b) hereof, and (iii) shares purchased by a Tax-Qualified Employee Stock Benefit Plan pursuant to instructions of an individual in an account in such plan in which the individual has the right to direct the investment, including any plan of the Association qualified under Section 401(k) of the Code, shall be aggregated and included in that individual’s purchases and not attributed to the Tax-Qualified Employee Stock Benefit Plan.

     (f) Subject to any required regulatory approval and the requirements of applicable laws and regulations, but without further approval of the Members, the Holding Company and the Association may increase or decrease any of the individual or aggregate purchase limitations set forth herein to a percentage which does not exceed 5% of the total offering of shares of Common Stock in the Offerings whether before, during or after the Subscription Offering, Community Offering and/or Syndicated Community Offering. If an individual purchase limitation is increased after commencement of the Subscription Offering or any other offering, the Holding Company and the Association shall permit any Person who subscribed for the maximum number of shares of Common Stock to purchase an additional number of shares, so that such Person shall be permitted to subscribe for the then maximum number of shares permitted to be subscribed for by such Person, subject to the rights and preferences of any Person who has priority Subscription Rights. If any of the individual or aggregate purchase limitations are decreased after commencement of the Subscription Offering or any other offering, the orders of any Person who subscribed for more than the new purchase limitation shall be decreased by the minimum amount necessary so that such Person shall be in compliance with the then maximum number of shares permitted to be subscribed for by such Person. In the event that the maximum purchase limitation is increased to 5% of the shares sold in the Offerings, such limitation may be further increased to 9.99%, provided that orders for Common Stock exceeding 5% of the shares of Common Stock sold in the Offerings shall not exceed in the aggregate 10% of the total shares of Common Stock sold in the Offerings.

     (g) The Holding Company and the Association shall have the right to take all such action as they may, in their sole discretion, deem necessary, appropriate or advisable to monitor and enforce the terms, conditions, limitations and restrictions contained in this Section 10 and elsewhere in this Plan and the terms, conditions and representations contained in the Order Form, including, but not limited to, the absolute right (subject only to any necessary regulatory approvals or concurrences) to reject, limit or revoke acceptance of

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any subscription or order and to delay, terminate or refuse to consummate any sale of Common Stock that they believe might violate, or is designed to, or is any part of a plan to, evade or circumvent such terms, conditions, limitations, restrictions and representations. Any such action shall be final, conclusive and binding on all persons, and the Holding Company, the Association and their respective Boards shall be free from any liability to any Person on account of any such action.

11. TIMING OF SUBSCRIPTION OFFERING; MANNER OF EXERCISING SUBSCRIPTION RIGHTS AND ORDER FORMS.

     (a) The Offerings shall be conducted in compliance with Part 563g of the Rules and Regulations of the OTS, to the extent applicable, and Form OC.

     (b) The exact timing of the commencement of the Subscription Offering shall be determined by the Holding Company and the Association in consultation with the Independent Appraiser and any financial or advisory or investment banking firm retained by them in connection with the Conversion. The Holding Company and the Association may consider a number of factors, including, but not limited to, their current and projected future earnings, local and national economic conditions, and the prevailing market for stocks in general and stocks of financial institutions in particular. The Holding Company and the Association shall have the right to withdraw, terminate, suspend, delay, revoke or modify any such Subscription Offering, at any time and from time to time, as they in their sole discretion may determine, without liability to any Person, subject to compliance with applicable securities laws and any necessary regulatory approval or concurrence.

     (c) Promptly after the SEC has declared the Registration Statement, which includes the Prospectus, effective and all required regulatory approvals have been obtained, the Holding Company shall, distribute or make available the Prospectus, together with Order Forms for the purchase of Common Stock, to all Participants for the purpose of enabling them to exercise their respective Subscription Rights, subject to Section 13 hereof.

     (d) A single Order Form for all Deposit Accounts maintained with the Association by an Eligible Account Holder and any Supplemental Eligible Account Holder may be furnished, irrespective of the number of Deposit Accounts maintained with the Association on the Eligibility Record Date and Supplemental Eligibility Record Date, respectively. No person holding a Subscription Right may exceed any otherwise applicable purchase limitation by submitting multiple orders for Common Stock. Multiple orders are subject to adjustment, as appropriate, on a pro rata basis and deposit balances will be divided equally among such orders in allocating shares in the event of an oversubscription.

     (e) The recipient of an Order Form shall have no less than 20 days and no more than 45 days from the date of mailing of the Order Form (with the exact termination date to be set forth on the Order Form) to properly complete and execute the Order Form and deliver it to the Holding Company. The Holding Company may extend such period by such amount of time as it determines is appropriate. Failure of any Participant to deliver a properly executed Order Form to the Holding Company, along with full payment (or authorization for full payment by withdrawal) for the shares of Common Stock subscribed for, within the time limits prescribed, shall be deemed a waiver and release by such person of any rights to subscribe for shares of Common Stock. Each Participant shall be required to confirm to the Holding Company by executing an Order Form that such Person has fully complied with all of the terms, conditions, limitations and restrictions in the Plan.

     (f) The Holding Company and the Association shall have the absolute right, in their sole discretion and without liability to any Participant or other Person, to reject any Order Form, including, but not limited to, any Order Form that is (i) improperly completed or executed; (ii) not timely received; (iii) not accompanied by the proper and full payment (or authorization of withdrawal for full payment) or, in the case

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of institutional investors in the Community Offering, not accompanied by an irrevocable order together with a legally binding commitment to pay the full amount of the purchase price before 48 hours before the completion of the Offerings; or (iv) submitted by a Person whose representations the Holding Company and the Association believe to be false or who they otherwise believe, either alone, or Acting in Concert with others, is violating, evading or circumventing, or intends to violate, evade or circumvent, the terms and conditions of the Plan. Furthermore, in the event Order Forms (i) are not delivered and are returned to the Holding Company by the United States Postal Service or the Holding Company is unable to locate the addressee, or (ii) are not mailed pursuant to a “no mail” order placed in effect by the account holder, the Subscription Rights of the Person to which such rights have been granted will lapse as though such Person failed to return the contemplated Order Form within the time period specified thereon. The Holding Company and the Association may, but will not be required to, waive any irregularity on any Order Form or may require the submission of corrected Order Forms or the remittance of full payment for shares of Common Stock by such date as they may specify. The interpretation of the Holding Company and the Association of the terms and conditions of the Order Forms shall be final and conclusive.

12. PAYMENT FOR COMMON STOCK.

     (a) Payment for shares of Common Stock subscribed for by Participants in the Subscription Offering and payment for shares of Common Stock ordered by Persons in the Community Offering shall be equal to the Initial Purchase Price multiplied by the number of shares that are being subscribed for or ordered, respectively. Such payment may be made in cash, if delivered in person, or by check, bank draft or money order at the time the Order Form is delivered to the Holding Company, provided that checks will only be accepted subject to collection. The Holding Company and the Association, in their sole and absolute discretion, may also elect to receive payment for shares of Common Stock by wire transfer. In addition, the Holding Company may elect to provide Participants and/or other Persons who have a Deposit Account with the Association the opportunity to pay for shares of Common Stock by authorizing the Association to withdraw from such Deposit Account an amount equal to the aggregate Initial Purchase Price of such shares. Payment may also be made by a Participant using funds held for such Participant’s benefit by an Association Benefit Plan to the extent that such plan allows participants or any related trust established for the benefit of such participants to direct that some or all of their individual accounts or sub-accounts be invested in Common Stock. If the Actual Purchase Price is less than the Initial Purchase Price, the Holding Company shall refund the difference to all Participants and other Persons, unless the Holding Company chooses to provide Participants and other Persons the opportunity on the Order Form to elect to have such difference applied to the purchase of additional whole shares of Common Stock. If the Actual Purchase Price is more than the Initial Purchase Price, the Holding Company shall reduce the number of shares of Common Stock ordered by Participants and other Persons and refund any remaining amount that is attributable to a fractional share interest, unless the Holding Company chooses to provide Participants and other Persons the opportunity to increase the Actual Purchase Price submitted by them.

     (b) Notwithstanding the above, if the Tax-Qualified Employee Stock Benefit Plans subscribe for shares during the Subscription Offering, such plans will not be required to pay for the shares at the time they subscribe but rather may pay for such shares of Common Stock subscribed for by such plans at the Actual Purchase Price upon consummation of the Conversion, provided that, in the case of the Employee Stock Ownership Plan, there is in force from the time of its subscription until the consummation of the Offerings, a loan commitment to lend to the Employee Stock Ownership Plan, at such time, the aggregate price of the shares for which it subscribed.

     (c) If a Participant or other Person authorizes the Association to withdraw the amount of the Initial Purchase Price from his or her Deposit Account, the Association shall have the right to make such withdrawal or to freeze funds equal to the aggregate Initial Purchase Price upon receipt of the Order Form.

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Notwithstanding any regulatory provisions regarding penalties for early withdrawals from certificate accounts, the Association may allow payment by means of withdrawal from certificate accounts without the assessment of such penalties. In the case of an early withdrawal of only a portion of such account, the certificate evidencing such account shall be canceled if any applicable minimum balance requirement ceases to be met. In such case, the remaining balance will earn interest at the regular passbook rate. However, where any applicable minimum balance is maintained in such certificate account, the rate of return on the balance of the certificate account shall remain the same as before such early withdrawal. This waiver of the early withdrawal penalty applies only to withdrawals made in connection with the purchase of Common Stock and is entirely within the discretion of the Holding Company and the Association.

     (d) The subscription funds will be held by the Association. The Holding Company shall pay interest, at not less than the Association’s passbook rate, for all amounts paid in cash, by check, bank draft or money order to purchase shares of Common Stock in the Subscription Offering and the Community Offering from the date payment is received until the date the Offerings are completed or terminated.

     (e) The Holding Company will not offer or sell any of the Common Stock proposed to be issued to any Person whose purchase would be financed by funds loaned, directly or indirectly, to the Person by the Association.

     (f) Each share of Common Stock shall be non-assessable upon payment in full of the Actual Purchase Price.

13. ACCOUNT HOLDERS IN NONQUALIFIED STATES OR FOREIGN COUNTRIES.

     The Holding Company and the Association shall make reasonable efforts to comply with the securities laws of all jurisdictions in the United States in which Participants reside. However, no Participant will be offered or receive any Common Stock under the Plan if such Participant resides in a foreign country or resides in a jurisdiction of the United States with respect to which any of the following apply: (a) there are few Participants otherwise eligible to subscribe for shares under this Plan who reside in such jurisdiction; (b) the granting of Subscription Rights or the offer or sale of shares of Common Stock to such Participants would require any of the Holding Company or the Association or their respective directors and Officers, under the laws of such jurisdiction, to register as a broker-dealer, salesman or selling agent or to register or otherwise qualify the Common Stock for sale in such jurisdiction, or any of the Holding Company or the Association would be required to qualify as a foreign corporation or file a consent to service of process in such jurisdiction; or (c) such registration, qualification or filing in the judgment of the Holding Company and the Association would be impracticable or unduly burdensome for reasons of cost or otherwise.

14. REQUIREMENTS FOLLOWING THE CONVERSION FOR REGISTRATION, MARKET MAKING AND STOCK EXCHANGE LISTING.

     In connection with the Conversion, the Holding Company shall register the Common Stock pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, and shall undertake not to deregister such stock for a period of three years thereafter. The Holding Company also shall use its best efforts to (i) encourage and assist a market maker to establish and maintain a market for the Common Stock, and (ii) list the Common Stock on a national or regional securities exchange or to have quotations for such stock disseminated on the Nasdaq Stock Market.

15. LIQUIDATION ACCOUNT.

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     (a) At the time of the Conversion, the Association shall establish a liquidation account in an amount equal to the Association’s net worth as reflected in its statement of financial condition contained in the Prospectus used in the Conversion. The function of the liquidation account will be to preserve the rights of certain holders of Deposit Accounts in the Association who maintain such accounts in the Association following the Conversion to a priority to distributions in the unlikely event of a liquidation of the Association subsequent to the Conversion.

     (b) The liquidation account shall be maintained for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders, if any, who maintain their Deposit Accounts in the Association after the Conversion. Each such account holder will, with respect to each Deposit Account held, have a related inchoate interest in a portion of the liquidation account balance, which interest will be referred to in this Section 15 as the “subaccount balance.” All Deposit Accounts having the same social security number will be aggregated for purposes of determining the initial subaccount balance with respect to such Deposit Accounts, except as provided in Section 15(d) hereof.

     (c) In the event of a complete liquidation of the Association subsequent to the Conversion (and only in such event), each Eligible Account Holder and Supplemental Eligible Account Holder, if any, shall be entitled to receive a liquidation distribution from the liquidation account in the amount of the then current subaccount balances for Deposit Accounts then held (adjusted as described below) before any liquidation distribution may be made with respect to the capital stock of the Association. No merger, consolidation, sale of bulk assets or similar combination transaction with another FDIC-insured institution in which the Association is not the surviving entity shall be considered a complete liquidation for this purpose. In any such transaction, the liquidation account shall be assumed by the surviving entity.

     (d) The initial subaccount balance for a Deposit Account held by an Eligible Account Holder and Supplemental Eligible Account Holder, if any, shall be determined by multiplying the opening balance in the liquidation account by a fraction, of which the numerator is the amount of the Qualifying Deposits of such account holder and the denominator is the total amount of Qualifying Deposits of all Eligible Account Holders and Supplemental Eligible Account Holders, if any. For Deposit Accounts in existence at both the Eligibility Record Date and the Supplemental Eligibility Record Date, if any, separate initial subaccount balances shall be determined on the basis of the Qualifying Deposits in such Deposit Accounts on each such record date. Initial subaccount balances shall not be increased, and shall be subject to downward adjustment as provided below.

     (e) If the aggregate deposit balance in the Deposit Account(s) of any Eligible Account Holder or Supplemental Eligible Account Holder, if any, at the close of business on any annual closing date (which date is the Association’s fiscal year end), commencing on or after the effective date of the Conversion, is less than the lesser of (a) the aggregate deposit balance in such Deposit Account(s) at the close of business on any other annual closing date subsequent to such record dates or (b) the aggregate deposit balance in such Deposit Account(s) as of the Eligibility Record Date or the Supplemental Eligibility Record Date, if any, the subaccount balance for such Deposit Account(s) shall be adjusted by reducing such subaccount balance in an amount proportionate to the reduction in such deposit balance. In the event of such a downward adjustment, the subaccount balance shall not be subsequently increased, notwithstanding any subsequent increase in the deposit balance of the related Deposit Account(s). The subaccount balance of an Eligible Account Holder or Supplemental Eligible Account Holder, if any, will be reduced to zero if the Account Holder ceases to maintain a Deposit Account at the Association that has the same social security number as appeared on his Deposit Account(s) at the Eligibility Record Date or, if applicable, the Supplemental Eligibility Record Date.

     (f) After the Conversion, the Association may not pay cash dividends generally on deposit accounts and/or capital stock of the Association, or repurchase any of the capital stock of the Association, if

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such dividend or repurchase would reduce the Association’s regulatory capital below the aggregate amount of the then current subaccount balances for Deposit Accounts then held; otherwise, the existence of the liquidation account shall not operate to restrict the use or application of any of the net worth accounts of the Association.

     (g) For purposes of this Section 15, a Deposit Account includes a predecessor or successor account which is held by an Account Holder with the same social security number.

16. COMPLETION OF THE CONVERSION.

     The effective date of the Conversion shall be the date of the closing of the sale of all shares of Common Stock. The closing of the sale of all shares of Common Stock sold in the Offerings shall occur simultaneously and shall be conditioned upon the prior receipt of all requisite regulatory and other approvals.

17. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS FOLLOWING THE CONVERSION.

     For a period of three years following the Conversion, the directors and Officers of the Holding Company and the Association and their Associates may not purchase Common Stock without the prior written approval of the OTS except from a broker-dealer registered with the SEC. This prohibition shall not apply, however, to (i) a negotiated transaction involving more than 1% of the outstanding Common Stock, and (ii) purchases of stock made by and held by any Tax-Qualified Employee Stock Benefit Plan (and purchases of stock made by and held by any Non-Tax-Qualified Employee Stock Benefit Plan following the receipt of shareholder approval of such plan) even if such Common Stock may be attributable to individual Officers or directors and their Associates. The foregoing restriction on purchases of Common Stock shall be in addition to any restrictions that may be imposed by federal and state securities laws.

18. RESTRICTIONS ON TRANSFER OF STOCK.

     All shares of Common Stock that are purchased by Persons other than directors and Officers of the Holding Company or the Association shall be transferable without restriction. Shares of Common Stock purchased by directors and Officers of the Holding Company or the Association on original issue from the Holding Company (by subscription or otherwise) shall be subject to the restriction that such shares shall not be sold or otherwise disposed of for value for a period of one year following the date of purchase, except for any disposition of such shares following the death of the original purchaser. The shares of Common Stock issued by the Holding Company to such directors and Officers shall bear the following legend giving appropriate notice of such one-year restriction:

“The shares of stock evidenced by this Certificate are restricted as to transfer for a period of one year from the date of this Certificate pursuant to Part 563b of the Rules and Regulations of the Office of Thrift Supervision. These shares may not be transferred during such one-year period without a legal opinion of counsel for the Company that said transfer is permissible under the provisions of applicable law and regulation. This restrictive legend shall be deemed null and void after one year from the date of this Certificate.”

In addition, the Holding Company shall give appropriate instructions to the transfer agent for the Holding Company with respect to the applicable restrictions relating to the transfer of restricted stock. Any shares issued at a later date as a stock dividend, stock split or otherwise with respect to any such restricted stock shall

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be subject to the same holding period restrictions as may then be applicable to such restricted stock. The foregoing restriction on transfer shall be in addition to any restrictions on transfer that may be imposed by federal and state securities laws.

19. STOCK COMPENSATION PLANS.

     (a) The Holding Company and the Association are authorized to adopt Tax-Qualified Employee Stock Benefit Plans in connection with the Conversion, including without limitation an ESOP.

     (b) Subsequent to the Conversion, the Holding Company and the Association are authorized to adopt Non-Tax Qualified Employee Stock Benefit Plans, including without limitation, stock option plans and restricted stock plans. In addition, any such plan implemented during the one-year period subsequent to the date of consummation of the Conversion: (i) shall be disclosed in the Prospectus; (ii) in the case of stock option plans and employee recognition or grant plans, shall be submitted for approval by the holders of the Common Stock no earlier than six months following consummation of the Conversion; and (iii) shall comply with all other applicable requirements of the OTS.

     (c) Existing, as well as any newly created, Tax-Qualified Employee Stock Benefit Plans may purchase shares of Common Stock in the Offerings, to the extent permitted by the terms of such benefit plans and this Plan.

     (d) The Holding Company and the Association are authorized to enter into employment or severance agreements with their executive officers.

20. DIVIDEND AND REPURCHASE RESTRICTIONS ON STOCK.

     The Holding Company may not declare or pay a cash dividend on its Common Stock if the effect thereof would cause the regulatory capital of the Association to be reduced below the amount required under § 567.2 of the OTS rules and regulations. Otherwise, the Holding Company may declare dividends or make other capital distributions in accordance with § 563b.520 of the Rules and Regulations of the OTS. Following completion of the Conversion, the Holding Company may repurchase its Common Stock consistent with § 563b.510 and § 563b.515 of the Rules and Regulations of the OTS relating to stock repurchases, as long as such repurchases do not cause the regulatory capital of the Association to be reduced below the amount required under the Rules and Regulations of the OTS.

21. AMENDMENT OR TERMINATION OF THE PLAN.

     If deemed necessary or desirable by the Boards of Directors of the Holding Company and the Association, this Plan may be substantively amended, as a result of comments from regulatory authorities or otherwise, at any time before the solicitation of proxies from Voting Members to vote on the Plan and at any time thereafter with the concurrence of the OTS.

     Before the Special Meeting, this Plan may be terminated by the Boards of Directors of the Holding Company and the Association without approval of the OTS. After the Special Meeting, the Boards of Directors of the Holding Company and the Association may terminate this Plan only with the concurrence of the OTS.

     This Plan shall terminate if the Conversion is not completed within 24 months from the date that the Plan is approved by the Voting Members at the Special Meeting.

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22. INTERPRETATION OF THE PLAN.

     All interpretations of this Plan and application of its provisions to particular circumstances by a majority of each of the Board of Directors of the Holding Company and the Board of Directors of the Association shall be final, subject to the authority of the OTS.

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FEDERAL STOCK CHARTER
OF
FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION

     Section 1. Corporate Title. The full corporate title of the savings association is Fraternity Federal Savings and Loan Association (the “Association”).

     Section 2. Office. The Association’s home office shall be located in the City of Baltimore, Maryland.

     Section 3. Duration. The duration of the Association is perpetual.

     Section 4. Purpose and Powers. The purpose of the Association is to pursue any or all of the lawful objectives of a Federal savings association chartered under Section 5 of the Home Owners’ Loan Act and to exercise all of the express, implied, and incidental powers conferred thereby and by all acts amendatory thereof and supplemental thereto, subject to the Constitution and laws of the United States as they are now in effect, or as they may hereafter be amended, and subject to all lawful and applicable rules, regulations, and orders of the Office of Thrift Supervision (the “Office”).

     Section 5. Capital Stock. The total number of shares of all classes of the capital stock that the Association has the authority to issue is eleven thousand (11,000), of which ten thousand (10,000) shares shall be common stock, par value $1.00 per share, and of which one thousand (1,000) shares shall be serial preferred stock, par value $1.00 per share. The shares may be issued from time to time as authorized by the board of directors without further approval of shareholders, except as otherwise provided in this Section 5 or to the extent that such approval is required by governing law, rule, or regulation. The consideration for the issuance of the shares shall be paid in full before their issuance and shall not be less than the par value. Neither promissory notes nor future services shall constitute payment or part payment for the issuance of shares of the Association. The consideration for the shares shall be cash, tangible or intangible property (to the extent direct investment in such property would be permitted to the Association), labor, or services actually performed for the Association, or any combination of the foregoing. In the absence of actual fraud in the transaction, the value of such property, labor, or services, as determined by the board of directors of the Association, shall be conclusive. Upon payment of such consideration, such shares shall be deemed to be fully paid and nonassessable. In the case of a stock dividend, that part of the retained earnings of the Association that is transferred to common stock or paid-in capital accounts upon the issuance of shares as a stock dividend shall be deemed to be the consideration for their issuance.

     Except for shares issued in the initial organization of the Association or in connection with the conversion of the Association from the mutual to stock form of capitalization, no shares of capital stock (including shares issuable upon conversion, exchange or exercise of other securities) shall be issued, directly or indirectly, to officers, directors, or controlling persons of the Association other than as part of a general public offering or as qualifying shares to a director, unless their issuance or the plan under which they would be issued has been approved by a majority of the total votes eligible to be cast at a legal meeting.

     Nothing contained in this Section 5 (or in any supplementary sections hereto) shall entitle the holders of any class or series of capital stock to vote as a separate class or series or to more than one vote per share: Provided, That this restriction on voting separately by class or series shall not apply:

     (i) to any provision that would authorize the holders of preferred stock, voting as a class or series, to elect some members of the board of directors, less than a majority thereof, in the event of default in the payment of dividends on any class or series of preferred stock;

     (ii) to any provision that would require the holders of preferred stock, voting as a class or series, to approve the merger or consolidation of the Association with another corporation or the sale, lease, or conveyance (other than by mortgage or pledge) of properties or business in exchange for securities of a corporation other than the Association if the preferred stock is exchanged for securities of such other corporation: Provided, That no provision may require such approval for transactions undertaken with the assistance or pursuant to the direction of the Office, or the Federal Deposit Insurance Corporation;

     (iii) to any amendment that would adversely change the specific terms of any class or series of capital stock as set forth in this Section 5 (or in any supplementary sections hereto), including any amendment which would create or enlarge any class or series ranking prior thereto in rights and preferences. An amendment that increases the number of authorized shares of any class or series of capital stock, or substitutes the surviving association in a merger or consolidation for the Association, shall not be considered to be such an adverse change.

     A description of the different classes and series (if any) of the Association’s capital stock and a statement of the designations, and the relative rights, preferences, and limitations of the shares of each class of and series (if any) of capital stock are as follows:

     A. Common Stock. Except as provided in this Section 5 (or in any supplementary sections hereto) the holders of the common stock shall exclusively possess all voting power. Each holder of shares of common stock shall be entitled to one vote for each share held by each holder and there shall be no right to cumulate votes in an election of directors.

     Whenever there shall have been paid, or declared and set aside for payment, to the holders of the outstanding shares of any class of stock having preference over the common stock as to payment of dividends, the full amount of dividends and of sinking fund, retirement fund, or other retirement payments, if any, to which such holders are respectively entitled in preference to the common stock, then dividends may be paid on the common stock and on any class or series of stock entitled to participate therewith as to dividends out of any assets legally available for the payment of dividends.

     In the event of any liquidation, dissolution, or winding up of the Association, the holders of the common stock (and the holders of any class or series of stock entitled to participate with the common stock in the distribution of assets) shall be entitled to receive, in cash or in kind, the assets of the Association available for distribution remaining after: (i) payment or provision for payment of the Association’s debts and liabilities; (ii) distributions or provisions for distributions in settlement of its liquidation account; and (iii) distributions or provisions for distributions to holders of any class or series of stock having preference over the common stock in the liquidation, dissolution, or winding up of the Association. Each share of common stock shall have the same relative rights as and be identical in all respects with all the other shares of common stock.

     B. Preferred Stock. The Association may provide in supplementary sections to its charter for one or more classes of preferred stock, which shall be separately identified. The shares of any class may be divided into and issued in series, with each series separately designated so as to distinguish the shares thereof from the shares of all other series and classes. The terms of each series shall be set forth in a supplementary section to the charter. All shares of the same class shall be identical except as to the following relative rights and preferences, as to which there may be variations between different series:

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     (a) The distinctive serial designation and the number of shares constituting such series;

     (b) The dividend rate or the amount of dividends to be paid on the shares of such series, whether dividends shall be cumulative and, if so, from which date(s), the payment date(s) for dividends, and the participating or other special rights, if any, with respect to dividends;

     (c) The voting powers, full or limited, if any, of shares of such series;

     (d) Whether the shares of such series shall be redeemable and, if so, the price(s) at which, and the terms and conditions on which, such shares may be redeemed;

     (e) The amount(s) payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Association;

     (f) Whether the shares of such series shall be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such shares, and if so entitled, the amount of such fund and the manner of its application, including the price(s) at which such shares may be redeemed or purchased through the application of such fund;

     (g) Whether the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes of stock of the Association and, if so, the conversion price(s) or the rate(s) of exchange, and the adjustments thereof, if any, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange;

     (h) The price or other consideration for which the shares of such series shall be issued; and

     (i) Whether the shares of such series which are redeemed or converted shall have the status of authorized but unissued shares of serial preferred stock and whether such shares may be reissued as shares of the same or any other series of serial preferred stock.

     Each share of each series of serial preferred stock shall have the same relative rights as and be identical in all respects with all the other shares of the same series.

     The board of directors shall have authority to divide, by the adoption of supplementary charter sections, any authorized class of preferred stock into series and, within the limitations set forth in this section and the remainder of this charter, fix and determine the relative rights and preferences of the shares of any series so established.

     Prior to the issuance of any preferred shares of a series established by a supplementary charter section adopted by the board of directors, the Association shall file with the Secretary of the Office a dated copy of that supplementary section of this charter establishing and designating the series and fixing and determining the relative rights and preferences thereof.

     Section 6. Preemptive Rights. Holders of the capital stock of the Association shall not be entitled to preemptive rights with respect to any shares of the Association which may be issued.

     Section 7. Directors. The Association shall be under the direction of a board of directors. The authorized number of directors, as stated in the Association’s bylaws, shall not be fewer than five (5) nor more than fifteen (15), except when a greater or lesser number is approved by the Director of the Office, or his or her delegate.

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     Section 8. Certain Provisions Applicable for Five Years. Notwithstanding anything contained in the Association’s charter and or bylaws to the contrary, for a period of five (5) years from the date of completion of the conversion of the Association from mutual to stock form, the following provisions shall apply:

     A. Beneficial Ownership Limitation. No person shall directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10 percent of any class of an equity security of the Association. This limitation shall not apply to a transaction in which the Association forms a holding company without change in the respective beneficial ownership interests of its stockholders other than pursuant to the exercise of any dissenter and appraisal rights, the purchase of shares by underwriters in connection with a public offering, or the purchase of shares by a tax-qualified employee stock benefit plan which is exempt from the approval requirements under 574.3(c)(1)(vii) of the Office’s regulations.

     In the event shares are acquired in violation of this Section 8, all shares beneficially owned by any person in excess of 10 percent shall be considered “excess shares” and shall not be counted as shares entitled to vote and shall not be voted by any person or counted as voting shares in connection with any matters submitted to the stockholders for a vote.

     For the purposes of this Section 8, the following definitions apply:

     (1) The term “person” includes an individual, a group acting in concert, a corporation, a partnership, an association, a joint stock company, a trust, an unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of the equity securities of the Association.

     (2) The term “offer” includes every offer to buy or otherwise acquire, solicitation of an offer to sell, tender offer for, or request or invitation for tenders of, a security or interest in a security for value.

     (3) The term “acquire” includes every type of acquisition, whether effected by purchase, exchange, operation of law or otherwise.

     (4) The term “acting in concert” means (i) knowing participation in a joint activity or conscious parallel action towards a common goal whether or not pursuant to an express agreement, or (ii) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangements, whether written or otherwise.

     B. Call for Special Meetings. Special meetings of stockholders relating to changes in control of the Association or amendments to its charter shall be called only upon direction of the board of directors.

     Section 9. Liquidation Account. Under Office regulations, the Association must establish and maintain a liquidation account for the benefit of its savings account holders as of June 30, 2009 and [supplemental eligibility record date]. If the Association undergoes a complete liquidation, it must comply with Office regulations with respect to the amount and priorities on liquidation of each of the savings account holders’ interests in the liquidation account. A savings account holder’s interest in the liquidation account does not entitle the savings account holder to any voting rights.

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     Section 10. Amendment of Charter. Except as provided in Section 5, no amendment, addition, alteration, change, or repeal of this charter shall be made, unless such is proposed by the board of directors of the Association, approved by the stockholders by a majority of the votes eligible to be cast at a legal meeting, unless a higher vote is otherwise required, and approved or preapproved by the Office.

		FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Attest:		By:
	M. Celeste Tolson		Thomas K. Sterner
	Secretary		Chairman of the Board, Chief Executive
			Officer and Chief Financial Officer
		OFFICE OF THRIFT SUPERVISION
Attest:		By:
	Secretary		Director

Effective Date: __________________

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STOCK BYLAWS
OF
FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION

Article I — Home Office

The home office of Fraternity Federal Savings and Loan Association shall be at 764 Washington Boulevard, in the City of Baltimore, in the State of Maryland.

Article II — Shareholders

Section 1. Place of Meetings. All annual and special meetings of shareholders shall be held at the home office of the Association or at such other convenient place as the Board of Directors may determine.

Section 2. Annual Meeting. A meeting of the shareholders of the Association for the election of directors and for the transaction of any other business of the Association shall be held annually on a date and time within one-hundred fifty (150) days after the end of the Association’s fiscal year.

Section 3. Special Meetings. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by the regulations of the Office of Thrift Supervision (the “Office”), may be called at any time by the chairman of the board, the chief executive officer, or a majority of the Board of Directors, and shall be called by the chairman of the board, the chief executive officer, or the secretary upon the written request of the holders of not less than one-tenth of all the outstanding capital stock of the Association entitled to vote at the meeting. Such written request shall state the purpose or purposes of the meeting and shall be delivered at the home office of the Association addressed to the chairman of the board, the chief executive officer, or the secretary.

Section 4. Conduct of Meetings. Annual and special meetings shall be conducted in accordance with the most current edition of Robert’s Rules of Order unless otherwise prescribed by regulations of the Office or these bylaws or the Board of Directors adopts another written procedure for the conduct of meetings. The Board of Directors shall designate, when present, either the chairman of the board or chief executive officer to preside at such meetings.

Section 5. Notice of Meetings. Written notice stating the place, day, and hour of the meeting and the purpose(s) for which the meeting is called shall be delivered not fewer than twenty (20) nor more than fifty (50) days before the date of the meeting, either personally or by mail, by or at the direction of the chairman of the board, the chief executive officer, or the secretary, or the directors calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the mail, addressed to the shareholder at the address as it appears on the stock transfer books or records of the Association as of the record date prescribed in Section 6 of this Article II with postage prepaid. When any shareholders’ meeting, either annual or special, is adjourned for thirty (30) days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. It shall not be necessary to give any notice of the time and place of any meeting adjourned for less than thirty (30) days or of the business to be transacted at the meeting, other than an announcement at the meeting at which such adjournment is taken.

Section 6. Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors shall fix in advance a date as the record date for any such determination of

shareholders. Such date in any case shall be not more than sixty (60) days and, in case of a meeting of shareholders, not fewer than ten (10) days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment.

Section 7. Voting Lists. At least twenty (20) days before each meeting of the shareholders, the officer or agent having charge of the stock transfer books for shares of the Association shall make a complete list of the shareholders of record entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address and the number of shares held by each. This list of shareholders shall be kept on file at the home office of the Association and shall be subject to inspection by any shareholder of record or the shareholder’s agent at any time during usual business hours for a period of twenty (20) days prior to such meeting. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection by any shareholder of record or any shareholder’s agent during the entire time of the meeting. The original stock transfer book shall constitute prima facie evidence of the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders. In lieu of making the shareholder list available for inspection by shareholders as provided in the preceding paragraph, the Board of Directors may elect to follow the procedures prescribed in § 552.6(d) of the Office’s regulations as now or hereafter in effect.

Section 8. Quorum. A majority of the outstanding shares of the Association entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares is represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to constitute less than a quorum. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater number of shareholders voting together or voting by classes is required by law or the charter. Directors, however, are elected by a plurality of the votes cast at an election of directors.

Section 9. Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his or her duly authorized attorney in fact. Proxies may be given telephonically or electronically so long as the holder uses a procedure for verifying the identity of the shareholder. Proxies solicited on behalf of the management shall be voted as directed by the shareholder or, in the absence of such direction, as determined by a majority of the Board of Directors. No proxy shall be valid more than eleven months from the date of its execution except for a proxy coupled with an interest.

Section 10. Voting of Shares in the Name of Two or More Persons. When ownership stands in the name of two or more persons, in the absence of written directions to the Association to the contrary, at any meeting of the shareholders of the Association any one or more of such shareholders may cast, in person or by proxy, all votes to which such ownership is entitled. In the event an attempt is made to cast conflicting votes, in person or by proxy, by the several persons in whose names shares of stock stand, the vote or votes to which those persons are entitled shall be cast as directed by a majority of those holding such stock and present in person or by proxy at such meeting, but no votes shall be cast for such stock if a majority cannot agree.

Section 11. Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by any officer, agent, or proxy as the bylaws of such corporation may prescribe,

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or, in the absence of such provision, as the Board of Directors of such corporation may determine. Shares held by an administrator, executor, guardian, or conservator may be voted by him or her, either in person or by proxy, without a transfer of such shares into his or her name.

Shares standing in the name of a trustee may be voted by him or her, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name. Shares held in trust in an IRA or Keogh Account, however, may be voted by the Association if no other instructions are received. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer into his or her name if authority to do so is contained in an appropriate order of the court or other public authority by which such receiver was appointed.

A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

Neither treasury shares of its own stock held by the Association nor shares held by another corporation, if a majority of the shares entitled to vote for the election of directors of such other corporation are held by the Association, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time for purposes of any meeting.

Section 12. Inspectors of Election. In advance of any meeting of shareholders, the Board of Directors may appoint any person other than nominees for office as inspectors of election to act at such meeting or any adjournment. The number of inspectors shall be either one or three. Any such appointment shall not be altered at the meeting. If inspectors of election are not so appointed, the chairman of the board or the chief executive officer may, or on the request of not fewer than 10 percent of the votes represented at the meeting shall, make such appointment at the meeting. If appointed at the meeting, the majority of the votes present shall determine whether one or three inspectors are to be appointed. In case any person appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment by the Board of Directors in advance of the meeting or at the meeting by the chairman of the board or the chief executive officer.

Unless otherwise prescribed by regulations of the Office, the duties of such inspectors shall include: determining the number of shares and the voting power of each share, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; receiving votes, ballots, or consents; hearing and determining all challenges and questions in any way arising in connection with the rights to vote; counting and tabulating all votes or consents; determining the result; and such acts as may be proper to conduct the election or vote with fairness to all shareholders.

Section 13. Nominating Committee. The Board of Directors shall act as a nominating committee for selecting the management nominees for election as directors. Except in the case of a nominee substituted as a result of the death or other incapacity of a management nominee, the nominating committee shall deliver written nominations to the secretary at least twenty (20) days prior to the date of the annual meeting. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the Association. No nominations for directors except those made by the nominating committee shall be voted upon at the annual meeting unless other nominations by shareholders are made in writing and delivered to the secretary of the Association at least five (5) days prior to the date of the annual meeting. Upon delivery, such nominations shall be posted in a conspicuous place in each office of the Association. Ballots bearing the names of all persons nominated by the nominating committee and by shareholders shall be provided for use at the annual meeting. However, if the nominating committee shall fail or refuse

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to act at least twenty (20) days prior to the annual meeting, nominations for directors may be made at the annual meeting by any shareholder entitled to vote and shall be voted upon.

Section 14. New Business. Any new business to be taken up at the annual meeting shall be stated in writing and filed with the secretary of the Association at least five (5) days before the date of the annual meeting, and all other business so stated, proposed, and filed shall be considered at the annual meeting; but no other proposal shall be acted upon at the annual meeting. Any shareholder may make any other proposal at the annual meeting and the same may be discussed and considered, but unless stated in writing and filed with the secretary at least five (5) days before the meeting, such proposal shall be laid over for action at an adjourned, special, or annual meeting of the shareholders taking place thirty (30) days or more thereafter. This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, directors, and committees; but in connection with such reports, no new business shall be acted upon at such annual meeting unless stated and filed as herein provided.

Section 15. Informal Action by Shareholders. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of shareholders, may be taken without a meeting if consent in writing, setting forth the action so taken, shall be given by all of the shareholders entitled to vote with respect to the subject matter.

Article III — Board of Directors

Section 1. General Powers. The business and affairs of the Association shall be under the direction of its Board of Directors. The Board of Directors shall annually elect a chairman of the board, a chief executive officer and a president from among its members and shall designate, when present, either the chairman of the board or the chief executive officer to preside at its meetings.

Section 2. Number and Term. The Board of Directors shall consist of five (5) members, and shall be divided into three classes as nearly equal in number as possible. The members of each class shall be elected for a term of three years and until their successors are elected and qualified. One class shall be elected by ballot annually.

Section 3. Regular Meetings. A regular meeting of the Board of Directors shall be held without other notice than this bylaw following the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and place, for the holding of additional regular meetings without other notice than such resolution. Directors may participate in a meeting by means of conference telephone or similar communications device through which all persons participating can hear each other at the same time. Participation by such means shall constitute presence in person for all purposes.

Section 4. Qualification. Each director shall at all times be the beneficial owner of not less than 100 shares of capital stock of the Association unless the Association is a wholly owned subsidiary of a holding company.

Section 5. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the chairman of the board, the chief executive officer, or one-third of the directors. The persons authorized to call special meetings of the Board of Directors may fix any place, within the Association’s normal lending territory, as the place for holding any special meeting of the Board of Directors called by such persons. Members of the Board of Directors may participate in special meetings by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other. Such participation shall constitute presence in person for all purposes.

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Section 6. Notice. Written notice of any special meeting shall be given to each director at least 24 hours prior thereto when delivered personally or by telegram or at least five (5) days prior thereto when delivered by mail to the address at which the director is most likely to be reached. Such notice shall be deemed to be delivered when deposited in the mail so addressed, with postage prepaid if mailed, when delivered to the telegraph company if sent by telegram, or when the Association receives notice of delivery if electronically transmitted. Any director may waive notice of any meeting by a writing filed with the secretary. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the Board of Directors need be specified in the notice of waiver of notice of such meeting.

Section 7. Quorum. A majority of the number of directors fixed by Section 2 of this Article III shall constitute a quorum for the transaction of business at any meeting of the Board of Directors; but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time. Notice of any adjourned meeting shall be given in the same manner as prescribed by Section 6 of this Article III.

Section 8. Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless a greater number is prescribed by regulation of the Office or by these bylaws.

Section 9. Action Without a Meeting. Any action required or permitted to be taken by the Board of Directors at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors.

Section 10. Resignation. Any director may resign at any time by sending a written notice of such resignation to the home office of the Association addressed to the chairman of the board or the chief executive officer. Unless otherwise specified, such resignation shall take effect upon receipt by the chairman of the board or the chief executive officer. More than three consecutive absences from regular meetings of the Board of Directors, unless excused by resolution of the Board of Directors, shall automatically constitute a resignation, effective when such resignation is accepted by the Board of Directors.

Section 11. Vacancies. Any vacancy occurring on the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors although less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected to serve only until the next election of directors by the shareholders. Any directorship to be filled by reason of an increase in the number of directors may be filled by election by the Board of Directors for a term of office continuing only until the next election of directors by the shareholders.

Section 12. Compensation. Directors, as such, may receive a stated salary for their services. By resolution of the Board of Directors, a reasonable fixed sum, and reasonable expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board of Directors. Members of either standing or special committees may be allowed such compensation for attendance at committee meetings as the Board of Directors may determine.

Section 13. Presumption of Assent. A director of the Association who is present at a meeting of the Board of Directors at which action on any Association matter is taken shall be presumed to have assented to the action taken unless his or her dissent or abstention shall be entered in the minutes of the meeting or unless he or she shall file a written dissent to such action with the person acting as the secretary of the

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meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the Association within five (5) days after the date a copy of the minutes of the meeting is received. Such right to dissent shall not apply to a director who voted in favor of such action.

Section 14. Removal of Directors. At a meeting of shareholders called expressly for that purpose, any director may be removed only for cause by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. Whenever the holders of the shares of any class are entitled to elect one or more directors by the provisions of the charter or supplemental sections thereto, the provisions of this section shall apply, in respect to the removal of a director or directors so elected, to the vote of the holders of the outstanding shares of that class and not to the vote of the outstanding shares as a whole.

Section 15. Integrity of Directors. A person is not qualified to serve as director if he or she: (1) is under indictment for, or has ever been convicted of, a criminal offense involving dishonesty or breach of trust and the penalty for such offense could be imprisonment for more than one year, or (2) is a person against who a banking agency has, within the past ten years, issued a cease and desist order for conduct involving dishonesty or breach of trust and that order is final and not subject to appeal, or (3) has been found either by a regulatory agency whose decision is final and not subject to appeal or by a court to have (i) breached a fiduciary duty involving personal profit or (ii) committed a willful violation of any law, rule or regulation governing banking, securities, commodities or insurance, or any final cease and desist order issued by a banking, securities, commodities or insurance regulatory agency.

Article IV — Executive and Other Committees

Section 1. Appointment. The Board of Directors, by resolution adopted by a majority of the full board, may designate the chief executive officer and two or more of the other directors to constitute an executive committee. The designation of any committee pursuant to this Article IV and the delegation of authority shall not operate to relieve the Board of Directors, or any director, of any responsibility imposed by law or regulation.

Section 2. Authority. The executive committee, when the Board of Directors is not in session, shall have and may exercise all of the authority of the Board of Directors except to the extent, if any, that such authority shall be limited by the resolution appointing the executive committee; and except also that the executive committee shall not have the authority of the Board of Directors with reference to: the declaration of dividends; the amendment of the charter or bylaws of the Association, or recommending to the shareholders a plan of merger, consolidation, or conversion; the sale, lease, or other disposition of all or substantially all of the property and assets of the Association otherwise than in the usual and regular course of its business; a voluntary dissolution of the Association; a revocation of any of the foregoing; or the approval of a transaction in which any member of the executive committee, directly or indirectly, has any material beneficial interest.

Section 3. Tenure. Subject to the provisions of Section 8 of this Article IV, each member of the executive committee shall hold office until the next regular annual meeting of the Board of Directors following his or her designation and until a successor is designated as a member of the executive committee.

Section 4. Meetings. Regular meetings of the executive committee may be held without notice at such times and places as the executive committee may fix from time to time by resolution. Special meetings of the executive committee may be called by any member thereof upon not less than one day’s notice stating the place, date, and hour of the meeting, which notice may be written or oral. Any member of the executive committee may waive notice of any meeting and no notice of any meeting need be given

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to any member thereof who attends in person. The notice of a meeting of the executive committee need not state the business proposed to be transacted at the meeting.

Section 5. Quorum. A majority of the members of the executive committee shall constitute a quorum for the transaction of business at any meeting thereof, and action of the executive committee must be authorized by the affirmative vote of a majority of the members present at a meeting at which a quorum is present.

Section 6. Action Without a Meeting. Any action required or permitted to be taken by the executive committee at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the members of the executive committee.

Section 7. Vacancies. Any vacancy in the executive committee may be filled by a resolution adopted by a majority of the full Board of Directors.

Section 8. Resignations and Removal. Any member of the executive committee may be removed at any time with or without cause by resolution adopted by a majority of the full Board of Directors. Any member of the executive committee may resign from the executive committee at any time by giving written notice to the president or secretary of the Association. Unless otherwise specified, such resignation shall take effect upon its receipt; the acceptance of such resignation shall not be necessary to make it effective.

Section 9. Procedure. The executive committee shall elect a presiding officer from its members and may fix its own rules of procedure which shall not be inconsistent with these bylaws. It shall keep regular minutes of its proceedings and report the same to the Board of Directors for its information at the meeting held next after the proceedings shall have occurred.

Section 10. Other Committees. The Board of Directors may by resolution establish an audit, loan, or other committee composed of directors as they may determine to be necessary or appropriate for the conduct of the business of the Association and may prescribe the duties, constitution, and procedures thereof.

Article V — Officers

Section 1. Positions. The officers of the Association shall be a chief executive officer, a president, one or more vice presidents, a secretary, and a treasurer or comptroller, each of whom shall be elected by the Board of Directors. The Board of Directors may also designate the chairman of the board as an officer. The offices of the secretary and treasurer or comptroller may be held by the same person and a vice president may also be either the secretary or the treasurer or comptroller. The Board of Directors may designate one or more vice presidents as executive vice president or senior vice president. The Board of Directors may also elect or authorize the appointment of such other officers as the business of the Association may require. The officers shall have such authority and perform such duties as the Board of Directors may from time to time authorize or determine. In the absence of action by the Board of Directors, the officers shall have such powers and duties as generally pertain to their respective offices.

Section 2. Election and Term of Office. The officers of the Association shall be elected annually at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers is not held at such meeting, such election shall be held as soon thereafter as possible. Each officer shall hold office until a successor has been duly elected and qualified or until the officer’s death, resignation, or removal in the manner hereinafter provided. Election or appointment of an officer, employee, or agent shall not of itself create contractual rights. The Board of Directors may authorize the

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Association to enter into an employment contract with any officer in accordance with regulations of the Office; but no such contract shall impair the right of the Board of Directors to remove any officer at any time in accordance with Section 3 of this Article V.

Section 3. Removal. Any officer may be removed by the Board of Directors whenever in its judgment the best interests of the Association will be served thereby, but such removal, other than for cause, shall be without prejudice to the contractual rights, if any, of the person so removed.

Section 4. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or otherwise, may be filled by the Board of Directors for the unexpired portion of the term.

Section 5. Remuneration. The remuneration of the officers shall be fixed from time to time by the Board of Directors.

Article VI — Contracts, Loans, Checks, and Deposits

Section 1. Contracts. To the extent permitted by regulations of the Office, and except as otherwise prescribed by these bylaws with respect to certificates for shares, the Board of Directors may authorize any officer, employee, or agent of the Association to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Association. Such authority may be general or confined to specific instances.

Section 2. Loans. No loans shall be contracted on behalf of the Association and no evidence of indebtedness shall be issued in its name unless authorized by the Board of Directors. Such authority may be general or confined to specific instances.

Section 3. Checks; Drafts. etc. All checks, drafts, or other orders for the payment of money, notes, or other evidences of indebtedness issued in the name of the Association shall be signed by one or more officers, employees, or agents of the Association in such manner as shall from time to time be determined by the Board of Directors.

Section 4. Deposits. All funds of the Association not otherwise employed shall be deposited from time to time to the credit of the Association in any duly authorized depositories as the Board of Directors may select.

Article VII — Certificates for Shares and Their Transfer

Section 1. Certificates for Shares. Certificates representing shares of capital stock of the Association shall be in such form as shall be determined by the Board of Directors and approved by the Office. Such certificates shall be signed by the chief executive officer or by any other officer of the Association authorized by the Board of Directors, attested by the secretary or an assistant secretary, and sealed with the corporate seal or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar other than the Association itself or one of its employees. Each certificate for shares of capital stock shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Association. All certificates surrendered to the Association for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares has been surrendered and cancelled, except that in the case of a lost or destroyed certificate, a new certificate may be issued upon such terms and indemnity to the Association as the Board of Directors may prescribe.

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Section 2. Transfer of Shares. Transfer of shares of capital stock of the Association shall be made only on its stock transfer books. Authority for such transfer shall be given only by the holder of record or by his or her legal representative, who shall furnish proper evidence of such authority, or by his or her attorney authorized by a duly executed power of attorney and filed with the Association. Such transfer shall be made only on surrender for cancellation of the certificate for such shares. The person in whose name the shares of capital stock stand on the books of the Association shall be deemed by the Association to be the owner for all purposes.

Article VIII — Fiscal Year

The fiscal year of the Association shall end on the 31st of December of each year. The appointment of accountants shall be subject to annual ratification by the shareholders.

Article IX — Dividends

Subject to the terms of the Association’s charter and the regulations and orders of the Office, the Board of Directors may, from time to time, declare, and the Association may pay, dividends on its outstanding shares of capital stock.

Article X — Corporate Seal

The Board of Directors shall provide an Association seal, which shall be two concentric circles between which shall be the name of the Association. The year of incorporation or an emblem may appear in the center.

Article XI — Amendments

These bylaws may be amended in a manner consistent with regulations of the Office and shall be effective after: (i) approval of the amendment by a majority vote of the authorized Board of Directors, or by a majority vote of the votes cast by the shareholders of the Association at any legal meeting, and (ii) receipt of any applicable regulatory approval. When the Association fails to meet its quorum requirements, solely due to vacancies on the board, then the affirmative vote of a majority of the sitting board will be required to amend the bylaws.

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EX-3.1

Exhibit 3.1

ARTICLES OF INCORPORATION
OF
FRATERNITY COMMUNITY BANCORP, INC.

     FIRST: The undersigned, Joel E. Rappoport, whose address is 607 14^th Street, NW, Suite 900, Washington, DC 20005, being at least eighteen years of age, acting as incorporator, does hereby form a corporation under the General Laws of the State of Maryland.

     SECOND: The name of the Corporation (hereinafter the “Corporation”) is:

Fraternity Community Bancorp, Inc.

     THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Laws of the State of Maryland.

     FOURTH: The present address of the principal office of the Corporation in the State of Maryland is 764 Washington Boulevard, Baltimore, Maryland 21230.

     FIFTH: The name and address of the resident agent of the Corporation is Thomas K. Sterner, 764 Washington Boulevard, Baltimore, Maryland 21230. Said resident agent is a citizen of Maryland who resides in Maryland.

     SIXTH:

     A. The total number of shares of stock of all classes of stock which the Corporation has authority to issue is sixteen million (16,000,000) shares, having an aggregate par value of one hundred sixty thousand dollars ($160,000), of which fifteen million (15,000,000) are to be shares of common stock with a par value of one cent ($.01) per share, and one million (1,000,000) are to be shares of preferred stock with a par value of one cent ($.01) per share.

     B. A description of each class of stock of the Corporation, including any voting powers, designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations and restrictions thereof, is as follows:

          1. Common Stock. Subject to all of the rights of the preferred stock as expressly provided in these Articles of Incorporation, by law or by the Board of Directors in a resolution(s) pursuant to this Article SIXTH, the common stock of the Corporation shall possess all such rights and privileges as are afforded to capital stock by Maryland law in the absence of any express grant of rights or privileges in the Corporation’s Articles of Incorporation, including but not limited to, the following:

a. Holders of the common stock shall be entitled to one (1) vote per share on each matter submitted to a vote at a meeting of stockholders; provided, however, that there shall not be any cumulative voting of the common stock.

b.	Dividends may be declared and paid or set aside for payment upon the common stock out of any assets or funds of the Corporation legally available therefor.
c.	Upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, its net assets shall be distributed ratably to holders of the common stock.

          2. Preferred Stock. The Board of Directors is expressly authorized to classify and reclassify any unissued shares of preferred stock, and to divide and classify shares of any class into one or more series of such class, by determining, fixing or altering from time to time before issuance any one or more of the following:

a.	The distinctive designation of such class or series and the number of shares to constitute such class or series; provided that, unless otherwise prohibited by the terms of such or any other class or series, the number of shares of any class or series may be decreased by the Board of Directors in connection with any classification or reclassification of unissued shares and the number of shares of such class or series may be increased by the Board of Directors in connection with any such classification or reclassification, and any shares of any class or series which have been redeemed, purchased, otherwise acquired, or converted into shares of common stock or any other class or series shall remain part of the authorized preferred stock and be subject to classification and reclassification as provided in this Paragraph B.2.
b.	Whether or not and, if so, the rates, amounts and times at which, and the conditions under which, dividends shall be payable on shares of such class or series, whether any such dividends shall rank senior or junior to or on a parity with the dividends payable on any other class or series of stock, and the status of any such dividends as cumulative, cumulative to a limited extent or non-cumulative, and as participating or non-participating.
c.	Whether or not shares of such class or series shall have voting rights, in addition to any voting rights provided by law and, if so, the terms of such voting rights.
d.	Whether or not shares of such class or series shall have conversion or exchange privileges and, if so, the terms and conditions thereof, including provision for adjustment of the conversion or exchange rate in such events or at such times as the Board of Directors shall determine.
e.	Whether or not shares of such class or series shall be subject to redemption and, if so, the terms and conditions of such redemption, including the date(s) upon or after which they shall be redeemable and the

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	amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; and whether or not there shall be any sinking fund or purchase account in respect thereof, and if so, the terms thereof.
f.	The rights of the holders of shares of such class or series upon the liquidation, dissolution, or winding up of the affairs of, or upon any distribution of the assets of, the Corporation, which rights may vary depending upon whether such liquidation, dissolution, or winding up is voluntary or involuntary and, if voluntary, may vary at different dates, and whether such rights shall rank senior or junior to or on a parity with such rights of any other class or series of stock.
g.	Whether or not there shall be any limitations applicable, while shares of such class or series are outstanding, upon the payment of dividends or making of distributions on, or the acquisition of, or the use of monies for the purchase or redemption of, any capital stock of the Corporation, or upon any other action of the Corporation, including action under this Paragraph B.2, and, if so, the terms and conditions thereof.
h.	Any other preferences, rights, restrictions, including restrictions on transferability, and qualifications of shares of such class or series, not inconsistent with law and the Articles of Incorporation of the Corporation.

     C. 1. Notwithstanding any other provision of these Articles of Incorporation, in no event shall any record owner of any outstanding common stock which is beneficially owned, directly or indirectly, by a person who, as of any record date for the determination of stockholders entitled to vote on any matter, beneficially owns shares of common stock in excess of the Limit (as hereinafter defined), be entitled, or permitted to any vote in respect of the shares held in excess of the Limit. The number of votes which may be cast by any record owner by virtue of the provisions hereof in respect of common stock beneficially owned by such person beneficially owning shares in excess of the Limit shall be a number equal to the total number of votes which a single record owner of all common stock beneficially owned by such person would be entitled to cast (subject to the provisions of this Article SIXTH), multiplied by a fraction, the numerator of which is the number of shares of such class or series which are both beneficially owned by such person and owned of record by such record owner and the denominator of which is the total number of shares of common stock beneficially owned by such person owning shares in excess of the Limit. The provisions of this Section C of Article SIXTH shall not be applicable, and any record owner of any outstanding common stock which is beneficially owned, directly or indirectly, by a person who, as of any record date for the determination of stockholders entitled to vote on any matter, beneficially owns shares of common stock in excess of the Limit shall have full voting rights with respect to all shares owned of record, if, before the beneficial owner of such shares acquired beneficial ownership of shares in excess of the Limit, the beneficial owner’s ownership of shares in excess of the Limit shall have been approved by a majority of the Unaffiliated Directors (as defined below).

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     2. The following definitions shall apply to this Section C of Article SIXTH:

a.

“Affiliate” shall have the meaning ascribed to it in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, as in effect on the date of filing of these Articles of Incorporation.

b.

“Beneficial ownership” shall be determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (or any successor rule or statutory provision), or, if said Rule 13d-3 shall be rescinded and there shall be no successor rule or provision thereto, pursuant to said Rule 13d-3 as in effect on the date of filing of these Articles of Incorporation; provided, however, that a person shall, in any event, also be deemed the “beneficial owner” of any common stock:

(1)	which such person or any of its Affiliates beneficially owns, directly or indirectly; or
(2)	which such person or any of its Affiliates has: (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding (but shall not be deemed to be the beneficial owner of any voting shares solely by reason of an agreement, contract or other arrangement with the Corporation to effect any transaction which is described in any one or more of Paragraphs 1 through 5 of Section A of Article NINTH), or upon the exercise of conversion rights, exchange rights, warrants or options or otherwise, or (b) sole or shared voting or investment power with respect thereto pursuant to any agreement, arrangement, understanding, relationship or otherwise (but shall not be deemed to be the beneficial owner of any voting shares solely by reason of a revocable proxy granted for a particular meeting of stockholders, pursuant to a public solicitation of proxies for such meeting, with respect to shares of which neither such person nor any such Affiliate is otherwise deemed the beneficial owner); or
(3)	which are beneficially owned, directly or indirectly, by any other person with which such first mentioned person or any of its Affiliates acts as a partnership, limited partnership, syndicate or other group pursuant to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the Corporation; and provided further, however, that: (a) no Director or Officer of the Corporation (or any Affiliate of any such Director or Officer) shall, solely by reason of any or all of such Directors or Officers acting

4

in their capacities as such, be deemed, for any purposes hereof, to beneficially own any common stock beneficially owned by any other such Director or Officer (or any Affiliate thereof); and (b) neither any employee stock ownership or similar plan of the Corporation or any subsidiary of the Corporation, nor any trustee with respect thereto or any Affiliate of such trustee (solely by reason of such capacity of such trustee), shall be deemed, for any purposes hereof, to beneficially own any common stock held under any such plan. For purposes only of computing the percentage of beneficial ownership of common stock of a person, the outstanding common stock shall include shares deemed owned by such person through application of this Subparagraph C.2.b but shall not include any other shares of common stock which may be issuable by the Corporation pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise. For all other purposes, the outstanding common stock shall include only shares of common stock then outstanding and shall not include any shares of common stock which may be issuable by the Corporation pursuant to any agreement, or upon the exercise of conversion rights, warrants or options, or otherwise.

c.	The “Limit” shall mean 10% of the then-outstanding shares of common stock.
d.	A “person” shall include an individual, a firm, a group acting in concert, a corporation, a partnership, an association, a joint venture, a pool, a joint stock company, a trust, an unincorporated organization or similar company, a limited liability company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of securities or any other entity.
e.	“Unaffiliated Director” means any member of the Board of Directors who is unaffiliated with the person beneficially owning shares in excess of the Limit (the “10% Beneficial Owner”) and was a member of the Board of Directors prior to the time that the 10% Beneficial Owner” became a 10% Beneficial Owner, and any Director who is thereafter chosen to fill any vacancy of the Board of Directors or who is elected and who, in either event, is unaffiliated with the 10% Beneficial Owner and in connection with his or her initial assumption of office is recommended for appointment or election by a majority of the Unaffiliated Directors then on the Board of Directors.

          3. The Board of Directors shall have the power to construe and apply the provisions of this Section C and to make all determinations necessary or desirable to implement such provisions, including but not limited to matters with respect to: (a) the number of shares of common stock beneficially owned by any person; (b) whether a person is an Affiliate of another;

5

(c) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in the definition of beneficial ownership; (d) the application of any other definition or operative provision of this Section C to the given facts; or (e) any other matter relating to the applicability or effect of this Section C.

          4. The Board of Directors shall have the right to demand that any person who is reasonably believed to beneficially own shares of common stock in excess of the Limit (or holds of record common stock beneficially owned by any person in excess of the Limit) supply the Corporation with complete information as to: (a) the record owner(s) of all shares beneficially owned by such person who is reasonably believed to own shares in excess of the Limit; and (b) any other factual matter relating to the applicability or effect of this Section C as may reasonably be requested of such person.

          5. Except as otherwise provided by law or expressly provided in this Section C, the presence, in person or by proxy, of the holders of record of shares of capital stock of the Corporation entitling the holders thereof to cast a majority of the votes (after giving effect, if required, to the provisions of this Section C) entitled to be cast by the holders of shares of capital stock of the Corporation entitled to vote shall constitute a quorum at all meetings of the stockholders, and every reference in these Articles of Incorporation to a majority or other proportion of capital stock (or the holders thereof) for purposes of determining any quorum requirement or any requirement for stockholder consent or approval shall be deemed to refer to such majority or other proportion of the votes (or the holders thereof) then entitled to be cast in respect of such capital stock.

          6. Any constructions, applications or determinations made by the Board of Directors pursuant to this Section C in good faith and on the basis of such information and assistance as was then reasonably available for such purpose shall be conclusive and binding upon the Corporation and its stockholders.

          7. In the event any provision (or portion thereof) of this Section C shall be found to be invalid, prohibited or unenforceable for any reason, the remaining provisions (or portions thereof) of this Section C shall remain in full force and effect, and shall be construed as if such invalid, prohibited or unenforceable provision had been stricken herefrom or otherwise rendered inapplicable, it being the intent of the Corporation and its stockholders that each such remaining provision (or portion thereof) of this Section C remain, to the fullest extent permitted by law, applicable and enforceable as to all stockholders, including stockholders owning an amount of stock over the Limit, notwithstanding any such finding.

     SEVENTH:

     A. The business and affairs of the Corporation shall be managed by or under the direction of its Board of Directors, except as these Articles of Incorporation or Maryland law otherwise provides; provided that any limitations on the Board of Director’s management or direction of the affairs of the Corporation shall reserve the Directors’ full power to discharge their fiduciary duties.

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     B. The Directors shall be divided into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the first annual meeting of stockholders, the term of office of the second class to expire at the annual meeting of stockholders one year thereafter and the term of office of the third class to expire at the annual meeting of stockholders two years thereafter with each Director to hold office for the term of office of his or her respective class and until his or her successor shall have been elected and qualified. At each annual meeting of stockholders following such initial classification and election, Directors elected to succeed those Directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election with each Director to hold office for the term of office of his or her respective class and until his or her successor shall have been duly elected and qualified.

     C. The names of the initial directors who will serve until their successors are duly elected and qualified are as follows:

First Class — Term Expiring 2011

Michael P. O’Shea
Richard C. Schultze

Second Class — Term Expiring 2012

William D. Norton
Thomas K. Sterner

Third Class — Term Expiring 2013

William J. Baird, Jr

     D. Any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least a majority of the shares of stock entitled to vote in the election of directors.

     EIGHTH:

     The following provisions are hereby adopted for the purpose of defining, limiting and regulating the powers of the Corporation, the directors and the stockholders:

     A. The Board of Directors is hereby empowered to authorize the issuance from time to time of shares of its stock of any class and securities convertible into shares of its stock of any class for such consideration as determined by the Board of Directors in accordance with the Maryland General Corporation Law (the “MGCL”), and without any action by the stockholders.

     B. The Corporation, if authorized by the Board of Directors, may acquire shares of the Corporation’s capital stock.

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     C. No holder of any stock or any other securities of the Corporation, whether now or hereafter authorized, shall have any preemptive right to subscribe for or purchase any stock or any other securities of the Corporation other than such, if any, as the Board of Directors, in its sole discretion, may determine and at such price(s) and upon such other terms as the Board of Directors, in its sole discretion, may fix; and any stock or other securities which the Board of Directors may determine to offer for subscription may, as the Board of Directors in its sole discretion shall determine, be offered to the holders of any class, series or type of stock or other securities at the time outstanding to the exclusion of the holders of any or all other classes, series or types of stock or other securities at the time outstanding.

     D. The Board of Directors shall have the power to create and to issue, whether or not in connection with the issuance and sale of any shares of stock or other securities of the Corporation, rights or options entitling the holders thereof to purchase from the Corporation any shares of its capital stock of any class(es), on such terms and conditions and in such form as the Board of Directors shall set forth in a resolution.

     E. The Board of Directors shall have the power, subject to any limitations or restrictions imposed by law, to classify or reclassify any unissued shares of stock whether now or hereafter authorized, by fixing or altering in any one or more respects before issuance of such shares the voting powers, designations, preferences and relative, participating, optional or other special rights of such shares and the qualifications, limitations or restrictions of such preferences and/or rights.

     F. The Board of Directors of the Corporation is expressly authorized to adopt, repeal, alter, amend and rescind the Bylaws of the Corporation by the affirmative vote of a majority of the directors then in office without the further approval of the stockholders. Notwithstanding any other provision of these Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law), the Bylaws shall not be adopted, repealed, altered, amended or rescinded by the stockholders of the Corporation except by the affirmative vote of the holders of at least 75% of the Voting Stock (after giving effect to the provisions of Article SIXTH), voting together as a single class.

     G. The Board of Directors shall have the power to declare and authorize the payment of stock dividends payable in stock of one class of the Corporation’s capital stock to holders of stock of another class(es) of the Corporation’s capital stock.

     H. The Board of Directors shall have authority to exercise without a vote of stockholders all powers of the Corporation, whether conferred by law or by these Articles of Incorporation, to purchase, lease or otherwise acquire the business assets or franchises in whole or in part of other corporations or unincorporated business entities.

     I. The Board of Directors shall have the power to borrow or raise money, from time to time and without limit, and upon any terms, for any corporate purposes, and, subject to the MGCL, to authorize the creation, issuance, assumption or guaranty of bonds, notes or other evidences of indebtedness for monies so borrowed, to include therein such provisions as to redeemability, convertibility or otherwise as the Board of Directors, in its sole discretion, may

8

determine and to secure the payment of principal, interest or sinking fund in respect thereof by mortgage upon, or the pledge of, or the conveyance or assignment in trust of, the whole or any part of the properties, assets and goodwill of the Corporation then owed or thereafter acquired.

     J. An officer or director of the Corporation, as such, shall not be liable to the Corporation or its stockholders for money damages, except (A) to the extent that it is proved that the person actually received an improper benefit or profit in money, property or services, for the amount of the benefit or profit in money, property or services actually received; or (B) to the extent that a judgment or other final adjudication adverse to the person is entered in a proceeding based on a finding in the proceeding that the person’s action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding; or (C) to the extent otherwise provided by the MGCL. If the MGCL is amended to further eliminate or limit the personal liability of officers and directors, then the liability of officers and directors of the Corporation shall be eliminated or limited to the fullest extent permitted by the MGCL, as so amended.

     Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such repeal or modification.

     K. The Board of Directors may, in connection with the exercise of its business judgment involving any actual or proposed transaction which would or may involve a change in control of the Corporation (whether by purchases of shares of stock or any other securities of the Corporation in the open market or otherwise, tender offer, merger, consolidation, dissolution, liquidation, sale of all or substantially all of the assets of the Corporation or proxy solicitation (other than on behalf of the Board of Directors or otherwise)), in determining what is in the best interests of the Corporation and its stockholders and in making any recommendation to its stockholders, give due consideration to all relevant factors, including, but not limited to the following: (1) the economic effect, both immediate and long-term, upon the Corporation’s stockholders, including stockholders, if any, choosing not to participate in the transaction; (2) effects, including any social and economic effects, on the employees, suppliers, creditors, depositors and customers of, and others dealing with, the Corporation and its subsidiaries and on the communities in which the Corporation and its subsidiaries operate or are located; (3) whether the proposal is acceptable based on the historical and current operating results or financial condition of the Corporation; (4) whether a more favorable price could be obtained for the Corporation’s stock or other securities in the future; (5) the reputation and business practices of the offeror and its management and affiliates as they would affect the employees; (6) the future value of the stock or any other securities of the Corporation; and (7) any antitrust or other legal and regulatory issues that are raised by the proposal. If the Board of Directors determines that any actual or proposed transaction which would or may involve a change in control of the Corporation should be rejected, it may take any lawful action to accomplish its purpose, including, but not limited to, any and all of the following: advising stockholders not to accept the proposal; instituting litigation against the party making the proposal; filing complaints with governmental and regulatory authorities; acquiring the stock or any of the securities of the Corporation; selling or otherwise issuing authorized but unissued stock, other securities or treasury stock or granting options with respect thereto; selling any of the assets of the

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Corporation; acquiring a company to create an antitrust or other regulatory problem for the party making the proposal; and obtaining a more favorable offer from another individual or entity.

     L. Notwithstanding any provision of the MGCL requiring stockholder authorization of an action by a greater proportion than a majority of the total number of shares of all classes of capital stock or of the total number of shares of any class of capital stock, such action shall be valid and effective if authorized by the affirmative vote of the holders of a majority of the total number of shares of all classes outstanding and entitled to vote thereon, except as otherwise provided in these Articles.

     M. Holders of shares of stock shall not be entitled to exercise any rights of an objecting stockholder provided for under Title 3, Subtitle 2 of the MGCL or any successor statute unless the Board of Directors, pursuant to a resolution approved by a majority of the directors then in office, shall determine that such rights apply with respect to all or any classes or series of stock, to one or more transactions occurring after the date of such determination in connection with which holders of such shares would otherwise be entitled to exercise such rights.

     NINTH: The Corporation shall indemnify (A) its directors and officers, whether serving the Corporation or at its request any other entity, to the fullest extent required or permitted by the general laws of the State of Maryland now or hereafter in force, including the advance of expenses under the procedures required, and (B) other employees and agents to such extent as shall be authorized by the Board of Directors or the Corporation’s Bylaws and be permitted by law. The foregoing rights of indemnification shall not be exclusive of any rights to which those seeking indemnification may be entitled. The Board of Directors may take such action as is necessary to carry out these indemnification provisions and is expressly empowered to adopt, approve and amend from time to time such Bylaws, resolutions or contracts implementing such provisions or such further indemnification arrangements as may be permitted by law. No amendment of the Articles of Incorporation of the Corporation shall limit or eliminate the right to indemnification provided hereunder with respect to acts or omissions occurring prior to such amendment or repeal.

     TENTH: The Corporation reserves the right to amend or repeal any provision contained in these Articles in the manner prescribed by the MGCL, including any amendment altering the terms or contract rights, as expressly set forth in these Articles, of any of the Corporation’s outstanding stock by classification, reclassification or otherwise, and no stockholder approval shall be required if the approval of stockholders is not required for the proposed amendment or repeal by the MGCL, and all rights conferred upon stockholders are granted subject to this reservation. The Board of Directors, pursuant to a resolution approved by a majority of the directors then in office, and without action by the stockholders, may amend these Articles to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that the Corporation has authority to issue. Notwithstanding any other provision of these Articles or any provision of law that might otherwise permit a lesser vote or no vote, any amendment of Section C of Article SIXTH, Sections B and D of Article SEVENTH, Sections F and J of Article EIGHTH and this Article TENTH of the Corporation’s Articles of Incorporation shall require the affirmative vote of 75% of the issued and outstanding shares of capital stock entitled to vote.

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     ELEVENTH: Under regulations of the Office of Thrift Supervision, the Corporation must establish and maintain a liquidation account (the “Liquidation Account”) for the benefit of certain Eligible Account Holders and Supplemental Eligible Account Holders as defined in the Plan of Conversion (the “Plan of Conversion”). In the event of a complete liquidation involving (i) the Corporation or (ii) Fraternity Federal Savings and Loan Association, the Corporation must comply with the regulations of the Office of Thrift Supervision and the provisions of the Plan of Conversion with respect to the amount and priorities of each Eligible Account Holder’s and Supplemental Eligible Account Holder’s interests in the Liquidation Account. The interest of an Eligible Account Holder or Supplemental Eligible Account Holder in the Liquidation Account does not entitle such account holders to voting rights.

     IN WITNESS WHEREOF, I have signed these articles and acknowledge the same to be my act.

SIGNATURE OF INCORPORATOR:

/s/ Joel E. Rappoport  

Name: Joel E. Rappoport 

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CONSENT OF RESIDENT AGENT

     The undersigned hereby agrees to my designation as resident agent in the State of Maryland for this corporation.

/s/ Thomas K. Sterner  

Name: Thomas K. Sterner 

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EX-3.2

Exhibit 3.2

FRATERNITY COMMUNITY BANCORP, INC.

BYLAWS

(As adopted on October 18, 2010)

ARTICLE I — STOCKHOLDERS

Section 1. ANNUAL MEETING

     The annual meeting of the stockholders of Fraternity Community Bancorp, Inc. (the “Corporation”) shall be held each year at such date and time as the Board of Directors shall, in their discretion, fix. The business to be transacted at the annual meeting shall include the election of directors and any other business properly brought before the meeting in accordance with these Bylaws.

Section 2. SPECIAL MEETINGS

     A special meeting of the stockholders may be called at any time for any purpose(s) by the Chairman of the Board, the President, or by two-thirds of the total number of Directors which the Corporation would have if there were no vacancies on the Board of Directors. By virtue of the Corporation’s election made hereby to be governed by Section 3-805 of the Maryland General Corporation Law, a special meeting of the stockholders shall be called by the Secretary of the Corporation upon the written request of the holders of at least a majority of all shares outstanding and entitled to vote on the business to be transacted at such meeting. Notwithstanding the previous sentence, the Secretary of the Corporation shall not be obligated to call a special meeting of the stockholders requested by stockholders for the purpose of taking any action that is non-binding or advisory in nature. Business transacted at any special meeting shall be confined to the purpose(s) stated in the notice of such meeting.

Section 3. PLACE OF MEETING

     The Board of Directors may designate any place, either within or without the State of Maryland, as the place of meeting for any annual or special meeting of stockholders.

Section 4. NOTICE OF MEETING; WAIVER OF NOTICE

     Not less than ten (10) days nor more than ninety (90) days before the date of every stockholders meeting, the Secretary shall give to each stockholder entitled to vote at or to notice of such meeting, written notice stating the place, date and time of the meeting and, in the case of a special meeting, the purpose(s) for which the meeting is called, either by mail to his or her address as it appears on the records of the Corporation or by presenting it to him or her personally or by leaving it at his or her residence or usual place of business. Notwithstanding the

foregoing provisions, a written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be equivalent to notice. Attendance of a person entitled to notice at a meeting, in person or by proxy, shall constitute a waiver of notice of such meeting, except when such person attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

     When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided however, that if the date of the adjourned meeting is more than 120 days after the record date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date and time of the adjourned meeting shall be given in conformity herewith.

Section 5. QUORUM

     At any meeting of stockholders, the presence of a quorum for all purposes shall be determined as provided in the Articles of Incorporation unless or except to the extent that the presence of a larger number may be required by law.

     If a quorum fails to attend any meeting, the Chairman of the meeting or the holders of a majority of the shares of stock entitled to vote who are represented in person or by proxy may adjourn the meeting to any place, date and time without further notice to a date not more than 120 days after the original record date. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting originally called. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of stockholders to leave less than a quorum.

Section 6. CONDUCT OF BUSINESS

     (a) The chairman of any meeting of stockholders shall determine the order of business and the procedures at the meeting, including such regulation of the manner of voting and the conduct of discussion. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting.

     (b) At any annual meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation who is entitled to vote with respect thereto and who complies with the notice procedures set forth in this Section 6(b). For business to be properly brought before an annual meeting by a stockholder, the business must relate to a proper subject matter for stockholder action and the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice must be delivered or mailed to and received at the principal executive office of the Corporation not less than ninety (90) days prior to the date of the annual meeting; provided, however, that in the event that less than one hundred (100) days’ notice or prior public disclosure of the date of the meeting

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is given or made to stockholders, notice by the stockholder to be timely must be received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A stockholder’s notice to the Secretary shall set forth as to each matter such stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the Corporation’s books, of the stockholder proposing such business, (iii) the class and number of shares of the Corporation’s capital stock that are beneficially owned by such stockholder, (iv) a statement disclosing (A) whether such stockholder is acting with or on behalf of any other person and (B) if applicable, the identity of such person, and (v) any material interest of such stockholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be brought before or conducted at an annual meeting except in accordance with the provisions of this Section 6(b). The Chairman of the Board or other person presiding over the annual meeting shall, if the facts so warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 6(b) and, if he or she should so determine, he or she shall so declare to the meeting and any such business so determined to be not properly brought before the meeting shall not be transacted.

     At any special meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting in accordance with Article I, Section 2.

     (c) Only persons who are nominated in accordance with the procedures set forth in these Bylaws shall be eligible for election as Directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders at which directors are to be elected only (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Section 6(c). Such nominations, other than those made by or at the direction of the Board of Directors, shall be made by timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered or mailed to and received at the principal executive office of the Corporation not less than ninety (90) days prior to the date of the meeting; provided, however, that in the event that less than one hundred (100) days’ notice or prior disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder’s notice shall set forth (i) as to each person whom such stockholder proposes to nominate for election or re-election as a Director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); and (ii) as to the stockholder giving the notice (A) the name and address, as they appear on the Corporation’s books, of such stockholder, (B) the class and number of shares of the Corporation’s capital stock that are beneficially owned by such stockholder, and (C) a statement disclosing (1) whether such stockholder or any nominee thereof is acting with or on behalf of any other person and (2) if applicable, the identity of such person.

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Section 7. VOTING

     All elections shall be determined by a plurality of the votes cast, and, except as otherwise required by law or the Articles of Incorporation, all other matters shall be determined by a majority of the votes cast.

Section 8. PROXIES

     At all meetings of stockholders, a stockholder may vote the shares owned of record by him or her either in person or by proxy executed in writing by the stockholder or by his or her duly authorized attorney-in-fact. Any facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this paragraph may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

     Such proxy shall be filed with the Secretary of the Corporation before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy. A proxy is revocable by a stockholder at any time without condition or qualification unless the proxy states that it is irrevocable and the proxy is coupled with an interest. A proxy may be made irrevocable for as long as it is coupled with an interest. The interest with which a proxy may be coupled includes an interest in the stock to be voted under the proxy or another general interest in the Corporation or its assets or liabilities.

Section 9. CONTROL SHARE ACQUISITION ACT

     Notwithstanding any other provision of the Articles of Incorporation or these Bylaws, Title 3, Subtitle 7 of the Maryland General Corporation Law (or any successor statute) shall not apply to any acquisition by any person of shares of stock of the Corporation. This Section 9 may be repealed at any time, in whole or in part, by a majority vote of the Corporation’s Board of Directors, whether before or after an acquisition of Control Shares (as such term is defined in Section 3-701(d) of the Maryland General Corporation Law, or any successor provision) and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent Control Share Acquisition (as such term is defined in Section 3-701(e) of the Maryland General Corporation Law, or any successor provision).

ARTICLE II — DIRECTORS

Section 1. GENERAL POWERS

     The business and affairs of the Corporation shall be managed by its Board of Directors. The Board of Directors may exercise all the powers of the Corporation, except those conferred on or reserved to the stockholders by statute or by the Articles of Incorporation or the Bylaws. The Board may adopt such rules and regulations for the conduct of their meetings and the

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management of the Corporation as they may deem proper, and which are not inconsistent with these Bylaws and with the Maryland General Corporation Law.

     The Board of Directors shall annually elect a Chairman of the Board from among its members. The Chairman of the Board shall serve in a general oversight capacity and shall preside at all meetings of the Corporation’s Board of Directors. The Chairman of the Board shall perform all duties and have all powers which are commonly included in the office of the Chairman of the Board or which are delegated to him by the Board of Directors.

Section 2. NUMBER

     The number of directors of the Corporation shall, by virtue of the Corporation’s election made hereby to be governed by Section 3-804(b) of the Maryland General Corporation Law, be fixed from time to time exclusively by vote of the Board of Directors; provided, however, that such number of directors shall never be less than the minimum number of directors required by the Maryland General Corporation Law.

Section 3. VACANCIES AND NEWLY CREATED DIRECTORSHIPS

     By virtue of the Corporation’s election made hereby to be governed by Section 3-804(c) of the Maryland General Corporation Law, any vacancies in the Board of Directors resulting from an increase in the size of the Board of Directors or the death, resignation or removal of a director may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred and until a successor is elected and qualifies. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

Section 4. REGULAR MEETINGS

     Regular meetings of the Board of Directors shall be held at such dates, such times and such places, either within or without the State of Maryland, as shall have been designated by the Board of Directors and publicized among all Directors.

Section 5. SPECIAL MEETINGS

     Special meetings of the Board of Directors may be called by the Chairman of the Board, by the Chief Executive Officer, or by two-thirds of the members of the Board of Directors in writing. The person(s) authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Maryland, as the place for holding the special meeting of the Board of Directors called by them.

Section 6. NOTICE

     A notice of a regular meeting shall not be required. The Secretary shall give notice to each director of the date, time and place of each special meeting of the Board of Directors. Notice is given to a director when it is delivered personally to him or her, left at his or her

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residence or usual place of business, or sent by telephone, telegraph, or similar means of transmission at least 24 hours before the time of the meeting, or in the alternative, when it is mailed to his or her address as it appears on the records of the Corporation, at least 72 hours before the time of the meeting. Any director may waive notice of any meeting either before or after the holding thereof by written waiver filed with the records of the meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.

Section 7. TELEPHONIC MEETINGS

     Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board or committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 7 shall constitute presence in person at such meeting.

Section 8. QUORUM

     At any meeting of the Board of Directors, a majority of the total number of directors shall constitute a quorum for the transaction of business, but if less than such quorum is present at a meeting, a majority of the directors present may adjourn the meeting without further notice or waiver thereof.

Section 9. MANNER OF ACTING

     The vote of the majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors unless the concurrence of a greater proportion is required for such action by the Articles of Incorporation.

Section 10. RESIGNATION

     A director may resign at any time by giving written notice to the Board, the President or the Secretary of the Corporation. Unless otherwise specified in the notice, the resignation shall take effect upon receipt thereof by the Board or such officer, and the acceptance of the resignation shall not be necessary to make it effective.

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Section 11. COMPENSATION

     By resolution of the Board of Directors, a fixed sum and expenses, if any, for attendance at each regular or special meeting of the Board of Directors or of committees thereof, and other compensation for their services as such or on such committees, may be paid to directors, as compensation for such attendance at meetings and other services as a director may render to the Corporation.

Section 12. COMMITTEES

     The Board of Directors, by a vote of a majority of the Board of Directors, may from time to time designate committees of the Board, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board and shall, for these committees and any others provided for herein, elect a director(s) to serve as the member(s), designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, that any such committee shall have no power or authority with reference to (i) declaring dividends or distributions on stock, (ii) issuing stock other than as authorized by the Board of Directors, (iii) recommending to the stockholders any action which requires stockholder approval, (iv) amending the Bylaws and (v) approving a merger or share exchange which does not require stockholder approval. In the absence or disqualification of any member of any committee and any alternate member in his or her place, the member(s) of the committee present at the meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member.

     Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings. The quorum requirements for each such committee shall be a majority of the members of such committee. Action may be taken by any committee without a meeting if all members thereof consent thereto in writing, and the writing(s) are filed with the minutes of the proceedings of such committee.

Section 13. INTEGRITY OF DIRECTORS.

     A person is not qualified to serve as director if he or she: (1) is under indictment for, or has ever been convicted of, a criminal offense involving dishonesty or breach of trust and the penalty for such offense could be imprisonment for more than one year, or (2) is a person against who a banking agency has, within the past ten years, issued a cease and desist order for conduct involving dishonesty or breach of trust and that order is final and not subject to appeal, or (3) has been found either by a regulatory agency whose decision is final and not subject to appeal or by a court to have (i) breached a fiduciary duty involving personal profit or (ii) committed a willful violation of any law, rule or regulation governing banking, securities, commodities or insurance,

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or any final cease and desist order issued by a banking, securities, commodities or insurance regulatory agency.

ARTICLE III — OFFICERS

Section 1. EXECUTIVE AND OTHER OFFICERS

     The officers of the Corporation shall be a President, a Secretary and a Treasurer. The Board of Directors may designate who shall serve as Chief Executive Officer, having general supervision of the business and affairs of the Corporation, and as Chief Operating Officer, having supervision of the operations of the Corporation; in the absence of a designation the President shall serve as Chief Executive Officer and Chief Operating Officer. The Board of Directors may appoint such other officers as it may deem proper. A person may hold more than one office in the Corporation but may not serve concurrently as both President and Vice President of the Corporation.

Section 2. CHIEF EXECUTIVE OFFICER

     The Chief Executive Officer shall be the principal executive officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board of Directors, he or she shall have the responsibility for the general management and control of the business and affairs of the Corporation and shall perform all duties and have all powers which are commonly incident to the office of the Chief Executive Officer or which are delegated to him or her by the Board of Directors. He or she shall have the power to sign all contracts, agreements, and other instruments of the Corporation which are authorized and shall have general supervision and direction of all of the other officers (except the Chairman of the Board), employees and agents of the Corporation.

Section 3. VICE PRESIDENT(S)

     The Vice President(s) shall perform the duties of the President in his or her absence or during his or her inability to act. In addition, the Vice President(s) shall perform the duties and exercise the powers usually incident to their respective offices and/or such other duties and powers as may be properly assigned to them by the Board of Directors or the President. A Vice President(s) may be designated as Executive Vice President or Senior Vice President.

Section 4. SECRETARY

     The Secretary shall keep the minutes of the meetings of the stockholders, of the Board of Directors and of any committees, in books provided for the purpose; he or she shall see that all notices are duly given in accordance with the provisions of the Bylaws or as required by law; he or she shall be custodian of the records of the Corporation; he or she shall witness all documents on behalf of the Corporation, the execution of which is duly authorized, see that the corporate seal is affixed where such document is required to be under its seal, and, when so affixed, may attest the same; and, in general, he or she shall perform all duties incident to the office of a

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secretary of a corporation, and such other duties as may from time to time be assigned to him or her by the Board of Directors or the President.

Section 5. TREASURER

     The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation, and shall deposit, or cause to be deposited, in the name of the Corporation, all monies or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by the Board of Directors. In general, he or she shall perform all the duties incident to the office of a treasurer of a corporation, and such other duties as may from time to time be assigned to him or her by the Board of Directors or the President.

Section 6. SUBORDINATE OFFICERS

     The Corporation may have such subordinate officers as the Board of Directors may from time to time deem desirable. Each such officer shall hold office for such period and perform such duties as the Board of Directors, the Chief Executive Officer or the committee or officer designated pursuant to these Bylaws may prescribe.

Section 7. COMPENSATION

     The Board of Directors shall have power to fix the salaries and other compensation and remuneration, of whatever kind, of all officers of the Corporation. It may authorize any committee or officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the salaries, compensation and remuneration of such subordinate officers.

Section 8. ELECTION, TENURE AND REMOVAL OF OFFICERS

     The Board of Directors shall elect the officers. The Board of Directors may from time to time authorize any committee or officer to appoint subordinate officers. An officer serves for one year or until his or her successor is elected and qualified. If the Board of Directors in its judgment finds that the best interests of the Corporation will be served, it may remove any officer or agent of the Corporation. The removal of an officer or agent does not prejudice any of his or her contract rights. The Board of Directors (or any committee or officer authorized by the Board of Directors) may fill a vacancy which occurs in any office for the unexpired portion of the term of that office.

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ARTICLE IV — STOCK

Section 1. CERTIFICATES FOR STOCK

     Each stockholder shall be entitled to certificates which represent and certify the shares of stock he or she holds in the Corporation. Each stock certificate shall include on its face the name of the Corporation, the name of the stockholder and the class of stock and number of shares represented by the certificate and be in such form, not inconsistent with law or with the Articles of Incorporation, as shall be approved by the Board of Directors or any officer(s) designated for such purpose by resolution of the Board of Directors. Each stock certificate shall be signed by the President or the Chairman of the Board, and countersigned by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer. Each certificate shall be sealed with the actual corporate seal or a facsimile of it or in any other form and the signatures on each certificate may be either manual or facsimile signatures. A certificate is valid and may be issued whether or not an officer who signed it is still an officer of the Corporation when it is issued.

     Notwithstanding anything to the contrary herein, the Board of Directors may provide by resolution that some or all of the shares of any or all classes or series of the Corporation’s capital stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation.

Section 2. TRANSFERS

     The Board of Directors shall have power and authority to make such rules and regulations as it may deem expedient concerning the issuance, transfer and registration of certificates of stock or uncertificated shares of stock, and may appoint transfer agents and registrars thereof. The duties of transfer agent and registrar may be combined.

Section 3. RECORD DATE AND CLOSING OF TRANSFER BOOKS

     In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than ninety (90) nor less than ten (10) days before the date of such meeting, nor more than ninety (90) days prior to any other action. The transfer books may not be closed for a period longer than twenty (20) days. In the case of a meeting of stockholders, the closing of the transfer books shall be at least ten (10) days before the date of the meeting.

Section 4. STOCK LEDGER

     The Corporation shall maintain a stock ledger which contains the name and address of each stockholder and the number of shares of stock of each class registered in the name of each stockholder. The stock ledger may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. The original or a

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duplicate of the stock ledger shall be kept at the offices of a transfer agent for the particular class of stock, within or without the State of Maryland, or, if none, at the principal office or the principal executive offices of the Corporation in the State of Maryland.

Section 5. CERTIFICATION OF BENEFICIAL OWNERS

     The Board of Directors may adopt by resolution a procedure by which a stockholder of the Corporation may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder.

Section 6. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES

     The Board of Directors of the Corporation may determine the conditions for issuing a new stock certificate or uncertificated shares in place of a stock certificate that is purportedly alleged to have been lost, stolen or destroyed, or the Board of Directors may delegate such power to any officer(s) of the Corporation. In its discretion, the Board of Directors or such officer(s) may refuse to issue such new certificate or uncertificated shares except upon the order of a court having jurisdiction in the premises.

ARTICLE V — FINANCE

Section 1. CHECKS, DRAFTS, ETC.

     All checks, drafts and orders for the payment of money, notes and other evidences of indebtedness, issued in the name of the Corporation, shall, unless otherwise provided by resolution of the Board of Directors, be signed by the Chief Executive Officer, President or a Vice President and countersigned by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary.

Section 2. FISCAL YEAR

     The fiscal year of the Corporation shall commence on the first day of January and end on the last day of December in each year.

ARTICLE VI — MISCELLANEOUS PROVISIONS

Section 1. CORPORATE SEAL

     The Board of Directors shall provide a suitable seal, bearing the name of the Corporation, which shall be in the charge of the Secretary. The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof.

11

Section 2. VOTING UPON SHARES IN OTHER CORPORATIONS

     Stock of other corporations or associations, registered in the name of the Corporation, may be voted by the Chief Executive Officer, the President, a Vice President or a proxy appointed by any of them. The Board of Directors, however, may by resolution appoint some other person to vote such shares, in which case such person shall be entitled to vote such shares upon the production of a certified copy of such resolution.

Section 3. MAIL

     Any notice or other document which is required by these Bylaws to be mailed shall be deposited in the United States mail, postage prepaid.

12

EX-4.0

Exhibit 4.0

COMMON STOCK
CERTIFICATE NO. __ COMMON STOCK
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP _______

FRATERNITY COMMUNITY BANCORP, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND

THIS CERTIFIES THAT	[SPECIMEN]
is the owner of:

FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK,
$0.01 PAR VALUE PER SHARE, OF FRATERNITY COMMUNITY BANCORP, INC.

     The shares represented by this certificate are transferable only on the stock transfer books of Fraternity Community Bancorp, Inc. (the “Company”) by the holder of record hereof, or by his duly authorized attorney or legal representative, upon the surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all the provisions of the Articles of Incorporation of the Company and any amendments thereto (copies of which are on file with the Corporate Secretary of the Company), to all of which provisions the holder by acceptance hereof, assents. This certificate is not valid until countersigned and registered by the Company’s Transfer Agent and Registrar.

     The shares evidenced by this certificate are not of an insurable type and are not insured by the Federal Deposit Insurance Corporation.

     IN WITNESS WHEREOF, FRATERNITY COMMUNITY BANCORP, INC. has caused this certificate to be executed by the facsimile signatures of its duly authorized officers and has caused a facsimile of its corporate seal to be hereunto affixed.

Dated: __________________ [SEAL]

Chairman of the Board, Chief Executive Officer
and Chief Financial Officer Corporate Secretary

FRATERNITY COMMUNITY BANCORP, INC.

     The shares represented by this certificate are subject to a limitation contained in the Articles of Incorporation to the effect that in no event shall any record owner of any outstanding common stock which is beneficially owned, directly or indirectly, by a person who beneficially owns in excess of 10% of the outstanding shares of common stock (the “Limit”) be entitled or permitted to any vote in respect of shares held in excess of the Limit.

     The Board of Directors of the Company is authorized by resolution(s), from time to time adopted, to provide for the issuance of serial preferred stock in series and to fix and state the voting powers, designations, preferences and relative, participating, optional, or other special rights of the shares of each such series and the qualifications, limitations and restrictions thereof. The Company will furnish to any shareholder upon request and without charge a full description of each class of stock and any series thereof.

     The shares represented by this Certificate may not be cumulatively voted on any matter.

     The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM —	as tenants in common	UNIF GIFTS MIN ACT —		custodian
			(Cust)		(Minor)
TEN ENT —	as tenants by the entireties	under Uniform Gifts to Minors Act
				(State)
JT TEN —	as joint tenants with right of survivorship and not as tenants in common

Additional abbreviations may also be used though not in the above list.

For value received __________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFICATION NUMBER OF ASSIGNEE

Please print or typewrite name and address including postal zip code of assignee.

____________________ shares of the common stock represented by this certificate and do hereby irrevocably constitute and appoint __________________________________________________, attorney, to transfer the said stock on the books of the within-named corporation with full power of substitution in the premises.

DATED
	NOTICE: The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular without alteration or enlargement or any change whatever.

SIGNATURE GUARANTEED:
	THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION, (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15

EX-5.0

Exhibit 5.0

                    , 2010

Board of Directors
Fraternity Community Bancorp, Inc.
764 Washington Boulevard
Baltimore, Maryland 21230

     Re:    Registration Statement on Form S-1

Ladies and Gentlemen:

     We have acted as special counsel for Fraternity Community Bancorp, Inc., a Maryland corporation (the “Company”), in connection with the Registration Statement on Form S-1 (the “Registration Statement”) initially filed by the Company on October 20, 2010 with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Act”), and the regulations promulgated thereunder.

     Pursuant to a Plan of Conversion, as amended, adopted by the Board of Directors of Fraternity Federal Savings and Loan Association (the “Association”), the Registration Statement relates to the proposed issuance and sale by the Company of up to 1,587,000 shares (the “Offering Shares”) of common stock, $0.01 par value per share, of the Company (the “Common Stock”) in a subscription offering and a community offering and, if necessary, a syndicated community offering (the “Offerings”).

     In the preparation of this opinion, we have examined originals or copies identified to our satisfaction of: (i) the Company’s articles of incorporation; (ii) the Company’s bylaws; (iii) the Registration Statement, including the prospectus contained therein and the exhibits thereto; (iv) certain resolutions of the Board of Directors of the Company relating to the issuance of the Common Stock being registered under the Registration Statement; (v) the Plan of Conversion, as amended; (vi) the trust agreement for the Association’s employee stock ownership plan (the “ESOP”) and the form of loan agreement between the Company and the ESOP; and (vii) the form of stock certificate approved by the Board of Directors of the Company to represent shares of the Common Stock. We have also examined originals or copies of such documents, corporate records, certificates of public officials and other instruments, and have conducted such other investigations of law and fact, as we have deemed necessary or advisable for purposes of our opinion.

Board of Directors
Fraternity Community Bancorp, Inc.
____________, 2010
Page 2

     In our examination, we have relied on the genuineness of all signatures, the authenticity of all documents and instruments submitted to us as originals, and the conformity to the originals of all documents and instruments submitted to us as certified or conformed copies. In addition, we have relied on the accuracy and completeness of all records, documents, instruments and materials made available to us by the Company.

     This opinion is limited solely to the Maryland General Corporation Law, including applicable provisions of the Constitution of Maryland and the reported judicial decisions interpreting such law.

     For purposes of this opinion, we have assumed that, prior to the issuance of any shares of Common Stock, (i) the Registration Statement, as finally amended, will have become effective under the Act and (ii) the conversion of the Association will have become effective.

     Based upon and subject to the foregoing, it is our opinion that the Offering Shares, when issued and sold in the manner described in the Registration Statement, will be validly issued, fully paid and nonassessable.

     This opinion may not be referred to in any document without our prior express written consent. We hereby consent to the filing of this opinion as an exhibit to the Company’s Registration Statement and as an exhibit to the Association’s Application on Form AC filed with the Office of Thrift Supervision (the “OTS Application”), and to the reference to our firm under the heading “Legal and Tax Opinions” in the prospectus which is part of the Registration Statement as such may be amended or supplemented, or incorporated by reference in any Registration Statement covering additional shares of Common Stock to be issued or sold under the Plan of Conversion, as amended, that is filed pursuant to Rule 462(b) of the Act, and to the reference to our firm in the OTS Application. In giving such consent, we do not hereby admit that we are experts or are otherwise within the category of persons whose consent is required under Section 7 of the Act or the rules or regulations of the Securities and Exchange Commission thereunder.

Very truly yours, KILPATRICK STOCKTON LLP
By:
	Joel E. Rappoport, a Partner

EX-8.1

Exhibit 8.1

                    , 2010

Boards of Directors
Fraternity Community Bancorp, Inc.
Fraternity Federal Savings and Loan Association
764 Washington Boulevard
Baltimore, Maryland 21230

Re:  Federal Income Tax Opinion Relating to the Conversion of Fraternity Federal Savings and Loan Association from a Federally-Chartered Mutual Savings Bank to a Federally-Chartered Stock Savings Bank

Ladies and Gentlemen:

     You have asked for our opinion regarding the material federal income tax consequences of the proposed conversion of Fraternity Federal Savings and Loan Association from a federally chartered mutual savings association to a federally chartered stock savings association (the “Converted Association”) and the acquisition of the Converted Association’s capital stock by Fraternity Community Bancorp, Inc., a Maryland corporation, pursuant to a plan of conversion adopted by the Board of Directors of Fraternity Federal Savings and Loan Association on September 14, 2010, and amended on October 18, 2010 (the “Plan of Conversion”). All capitalized terms used but not defined herein shall have the meanings assigned to them in the Plan of Conversion.

     In connection with the opinions expressed below, we have examined and relied upon originals, or copies certified or otherwise identified to our satisfaction, of the Plan of Conversion and of such corporate records of the parties to the conversion as we have deemed appropriate. We have also relied upon, without independent verification, the representations of Fraternity Federal Savings and Loan Association and Fraternity Community Bancorp, Inc. contained in their letter to us dated                     , 2010. We have assumed that such representations are true and that the parties to the conversion will act in accordance with the Plan of Conversion. In addition, we have made such investigations of law as we have deemed appropriate to form a basis for the opinions expressed below.

     We have assumed that the conversion contemplated by the Plan of Conversion will be consummated in accordance therewith and as described in the prospectus included as part of the Registration Statement on Form S-1 filed by Fraternity Community Bancorp, Inc.

Boards of Directors
Fraternity Community Bancorp, Inc.
Fraternity Federal Savings and Loan Association
                    , 2010
Page 2

     In issuing the opinions set forth below, we have referred solely to existing provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations and similar guidance issued by the Internal Revenue Service (the “IRS”) under the Code. Changes in the tax laws could affect the continued validity of the opinions expressed below. Furthermore, there can be no assurance that the opinions expressed herein would be adopted by the IRS or a court of law. We assume no obligation to revise or supplement this opinion should the present federal income tax laws be changed by any legislation, judicial decisions or otherwise.

     Based on and subject to the foregoing, it is our opinion that, for federal income tax purposes, under current law:

1.	The conversion of Fraternity Federal Savings and Loan Association from the mutual to the stock form of organization will qualify as a reorganization within the meaning of Section 368(a)(1)(F) of the Code (see Rev. Rul. 80-105, 1980-1 C.B. 78), and no gain or loss will be recognized by account holders and by Fraternity Federal Savings and Loan Association by reason of such conversion.
2.	No gain or loss will be recognized by Fraternity Community Bancorp, Inc. upon the sale of shares of common stock in the Offering (Section 1032(a) of the Code).
3.	No gain or loss will be recognized by account holders of Fraternity Federal Savings and Loan Association upon the issuance to them of accounts in the Converted Association immediately after the conversion, in the same dollar amounts and on the same terms and conditions as their accounts at Fraternity Federal Savings and Loan Association plus interests in the liquidation account in the Converted Association (Section 354(a) of the Code).
4.	It is more likely than not that the fair market value of the non-transferable subscription rights to purchase shares of common stock of Fraternity Community Bancorp, Inc. (the “Subscription Rights”) to be issued to Eligible Account Holders, Supplemental Eligible Account Holders, and Other Members is zero, and, accordingly, that no income will be realized by Eligible Account Holders, Supplemental Eligible Account Holders, and Other Members upon the issuance to them of Subscription Rights (Section 356(a) of the Code) or upon the exercise of the Subscription Rights (Rev. Rul. 56-572, 1956-2 C.B. 182).
5.	It is more likely than not that the tax basis to the holders of shares of common stock purchased in the Offering pursuant to the exercise of Subscription Rights will be the amount paid therefor, and that the holding period for such shares of common stock will begin on the date of completion of the Offering (Section 1223(5) of the Code).

Boards of Directors
Fraternity Community Bancorp, Inc.
Fraternity Federal Savings and Loan Association
__________, 2010
Page 3

6. The holding period for shares of common stock purchased in the Community Offering or Syndicated Community Offering will begin on the day after the date of the purchase (Rev. Rul. 70-598, 1970-2 C.B. 168).

     The reasoning in support of our opinions set forth in 4 and 5 above is set forth herein. Whether the Subscription Rights have a market value for federal income tax purposes is a question of fact, depending upon all relevant facts and circumstances. The IRS will not issue rulings on whether the Subscription Rights have a market value. We are unaware of any instance in which the IRS has taken the position that nontransferable subscription rights issued by a converting financial institution have a market value. The Subscription Rights will be granted at no cost to the recipients, will be nontransferable and of short duration, and will afford the recipients the right only to purchase Fraternity Community Bancorp, Inc. common stock at a price equal to its estimated fair market value, which will be the same price as the purchase price for the unsubscribed shares of common stock. We believe that it is more likely than not (i.e., that there is a more than a 50% likelihood) that the Subscription Rights have no market value for federal income tax purposes.

     Except as set forth above, we express no opinion to any party as to the tax consequences, whether federal, state, local or foreign, of the conversion or of any transaction related thereto or contemplated by the Plan of Conversion. This opinion may not be referred to in any document without our prior express written consent. We consent to the filing of this opinion as an exhibit to the Application for Conversion on Form AC filed with the Office of Thrift Supervision and as an exhibit to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission, both filed in connection with the conversion, and to reference to our firm and to this opinion in the prospectus included in both the Registration Statement on Form S-1 and the Application for Conversion on Form AC under the headings “The Conversion and Stock Offering—Material Income Tax Consequences” and “Legal and Tax Opinions.” In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended.

Very truly yours, KILPATRICK STOCKTON LLP
By:
	Joel E. Rappoport, a Partner

EX-8.2

Exhibit 8.2

October 22, 2010

Board of Directors
Fraternity Federal Savings & Loan Association
764 Washington Blvd.
Baltimore, Maryland 21230

Re:  State Income Tax Opinion Relating to the Conversion of Fraternity Federal Savings & Loan Association from a Federally-chartered Mutual Savings Association to a Federally-chartered Stock Savings Association

Ladies and Gentlemen:

     You have requested our opinion regarding the Maryland state income tax consequences of the proposed conversion of Fraternity Federal Savings & Loan Association (Association) from a federally-chartered mutual savings association to a federally-chartered stock association (Converted Bank) and the acquisition of the Converted Bank’s capital stock by Fraternity Community Bancorp, Inc. a Maryland corporation (Holding Company), pursuant to a Plan of Conversion initially adopted by the Board of Directors of the Association on September 14, 2010, (Plan of Conversion). All capitalized terms used but not defined herein shall have the meanings assigned to them in the Plan of Conversion.

     In connection with the opinions expressed below, we have examined and relied upon originals, or copies certified or otherwise identified to our satisfaction, of the Plan of Conversion and of such corporate records of the parties to the conversion as we have deemed appropriate. We have also relied upon, without independent verification, the representations of Fraternity Federal Savings & Loan Association contained in their Certificate of Representations dated October 20, 2010. We have assumed that such representations are true and that the parties to the conversion will act in accordance with the Plan of Conversion.

     Our opinion is limited solely to Maryland state income tax consequences and will not apply to any other taxes, jurisdictions, transactions, or issues.

     In rendering the opinion set forth below, we have relied on the opinion of Kilpatrick Stockton, LLP related to the federal tax consequences of the proposed conversion (Federal Tax Opinion), without undertaking to verify the federal tax consequences by independent investigation.

     Our opinion is subject to the truth and accuracy of certain representations made by the Association to us and Kilpatrick Stockton, LLP and the consummation of the proposed conversion in accordance with the terms of the Plan of Conversion and applicable state law.

     Our opinion is based on currently existing provisions of the Annotated Code of Maryland, existing regulations and current administrative rulings and court decisions there under. There can be no assurance that future legislative, judicial or administrative changes or interpretations will not adversely affect the accuracy of our opinion or of the statements and conclusions set forth herein. Any such changes or interpretations could be applied retroactively and could affect the tax consequences of the proposed conversion. We are under no obligation to update our opinion for such changes or interpretations. Furthermore, our opinion will not bind the Comptroller of Maryland and; therefore, the Comptroller of Maryland is not precluded from asserting a contrary position.

Kilpatrick Stockton, LLP Federal Tax Opinion

     Kilpatrick Stockton, LLP has provided an opinion that addresses the material federal income tax consequences of the planned conversion and reorganization. The opinion, which relies upon standard factual representations given by the Association, concluded, as follows:

1.	The conversion of the Association from the mutual to the stock form of organization will qualify as a reorganization within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code (see Rev. Rule 80-105, 1980-1 C.B.78), an no gain or loss will be recognized by account holders and no gain or loss will be recognized by the Association by reason of such conversion.
2.	No gain or loss will be recognized by the Holding Company upon the sale of shares of common stock in the offering (Section 1032(a) of the Code).
3.	No gain or loss will be recognized by account holders of the Association upon the issuance to them of accounts in the Converted Bank immediately after the conversion, in the same dollar amounts and on the same terms and conditions as their accounts at the Association, plus interests in the liquidation account in the Converted Bank (Section 354(a) of the Code).
4.	It is more likely than not that the fair market value of the nontransferable subscription rights to purchase shares of common stock of the Holding Company to be issued to Eligible Account Holders, Supplemental Eligible Account Holders and Other Members is zero (Subscription Rights) and; accordingly, that no income will be realized by Eligible Account Holders, Supplemental Eligible Account Holders and Other Members upon the issuance to them of Subscription Rights (Section 356(a) of the Code) or upon the exercise of subscription rights (Rev. Rule 56-572, 1956-2 C.B. 182).
5.	It is more likely than not that the tax basis to the holders of shares of common stock purchased in the Offering pursuant to the exercise of the Subscription Rights will be the amount paid thereof, and that the holding period for such shares of common stock will begin on the date of the completion of the Offering (Section 1223(5) of the Code).
6.	The holding period for shares of common stock purchased in the Community Offering will begin on the day after the date of the purchase (Rev. Rul. 70-598, 1970-2 C.B. 168).

Discussion Related to Maryland State Income Tax Consequences

     Title 10 of the Annotated Code of Maryland outlines the provisions for income tax in the State of Maryland. Income tax for individuals and corporations is addressed in Subtitle 2 and Subtitle 3 of the Annotated Code of Maryland, respectively. The Maryland modified income of a corporation is the corporation’s federal taxable income for the taxable year as determined under the Internal Revenue Code and as adjusted under Title 10, Subtitle 3, Part II of the Annotated Code of Maryland. Accordingly, based upon the facts and representation stated herein and the existing law, it is the opinion of Stegman & Company regarding the Maryland state income tax consequences of the proposed conversion that:

1.	No gain or loss will be recognized by the Association by reason of the conversion of the Association from a mutual to a stock form of organization within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code.
2.	No income tax will be imposed on account holders by reason of the conversion of the Association from a mutual to a stock form of organization within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code.
3.	No gain or loss will be recognized by the Holding Company upon the sale of shares of common stock in the Offering.
4.	No income tax will be imposed on account holders of the Association upon the issuance to them of accounts in the Converted Bank immediately after the conversion, in the same dollar amounts and on the same terms and conditions as their accounts at the Association, plus interest in the liquidation account in the Converted Bank.
5.	No income tax will be imposed on eligible account holders, supplemental eligible account holders and other members upon the issuance to them of Subscription Rights.
6.	The holding period and tax basis of any stock involved in the proposed conversion will be the same as for federal tax purposes.

Legal Disclaimer

     The opinions contained herein are rendered only with respect to the specific matters discussed herein and we express no opinion with respect to any other legal federal, state or local tax aspect of these transactions. This opinion is not binding upon any tax authority, including the Comptroller of Maryland or any court, and no assurance can be given that a position contrary to that expressed herein will not be assessed by a tax authority.

     However, all of the foregoing authorities are subject to change or modification which can be retroactive in effect and; therefore, could also affect our opinions. We undertake no responsibility to update our opinions for any subsequent change or modification.

     This opinion is given solely for the benefit of the Association, the Holding Company, eligible account holders, supplemental eligible account holders and other members described in the Plan of Conversion who will receive Subscription Rights and may not be relied upon by any other party or entity or otherwise referred to in any document without our express written consent. We hereby consent to the filing of the opinion as an exhibit to the Application for Conversion filed with the Office of Thrift Supervision and to this opinion in the Prospectus included in the registration statement on Form S-1 under the headings “The Conversion and Stock Offering- Material Income Tax Consequences” and “Legal and Tax Opinions”. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended.

Baltimore, Maryland
October 22, 2010

EX-10.2

Exhibit 10.2

FORM OF
FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
EMPLOYEE STOCK OWNERSHIP PLAN

Effective January 1, 2011

Fraternity Federal Savings and Loan Association
Employee Stock Ownership Plan
Certification

     I, Thomas K. Sterner, President and Chief Executive Officer of Fraternity Federal Savings and Loan Association (the “Bank”), hereby certify that the attached Fraternity Federal Savings and Loan Association Employee Stock Ownership Plan, effective as of January 1, 2011, was adopted at a duly held meeting of the Board of Directors of the Bank.

ATTEST:	Fraternity Federal Savings and Loan Association
	By:
		Thomas K. Sterner

Date

Fraternity Federal Savings and Loan Association
Employee Stock Ownership Plan

Table of Contents

Section 1 — Introduction	1
Section 2 — Definitions	1
Section 3 — Eligibility and Participation	11
Section 4 — Contributions	13
Section 5 — Plan Accounting	15
Section 6 — Vesting	22
Section 7 — Distributions	25
Section 8 — Voting of Company Stock and Tender Offers	34
Section 9 — The Committee and Plan Administration	35
Section 10 — Rules Governing Benefit Claims	38
Section 11 — The Trust	39
Section 12 — Adoption, Amendment and Termination	40
Section 13 — General Provisions	42
Section 14 — Top-Heavy Provisions	44

Fraternity Federal Savings and Loan Association
Employee Stock Ownership Plan

Section 1
Introduction

Section 1.01 Nature of the Plan.

Effective as of January 1, 201 (the “Effective Date”), Fraternity Federal Savings and Loan Association (the “Bank”) hereby adopts the Fraternity Federal Savings and Loan Association Employee Stock Ownership Plan (the “Plan”). The Plan enables Eligible Employees (as defined in Section 2.01(a) of the Plan) to acquire stock ownership interests in Fraternity Community Bancorp, Inc. (the “Company”), the holding company of the Bank. The Bank intends this Plan to be a tax-qualified stock bonus plan under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and an employee stock ownership plan within the meaning of Section 407(d)(6) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and Sections 409 and 4975(e)(7) of the Code. The Plan is designed to invest primarily in the common stock of the Company, which stock constitutes “qualifying employer securities” within the meaning of Section 407(d)(5) of ERISA and Sections 409(l) and 4975(e)(8) of the Code. Accordingly, the Plan and Trust Agreement (as defined in Section 2.01(mm) of the Plan) shall be interpreted and applied in a manner consistent with the Bank’s intent for it to be a tax-qualified plan designed to invest primarily in qualifying employer securities.

Section 1.02 Employers and Affiliates.

The Bank and each of its Affiliates (as defined in Section 2.01(c) of the Plan) which, with the consent of the Bank, adopt the Plan pursuant to the provisions of Section 12.01 of the Plan are collectively referred to as the “Employers” and individually as an “Employer.” The Plan shall be treated as a single plan with respect to all participating Employers. No Employer is a Subchapter-S corporation as of the Effective Date.

Section 2
Definitions

Section 2.01 Definitions.

In this Plan, whenever the context so indicates, the singular or the plural number and the masculine or feminine gender shall be deemed to include the other, the terms “he,” “his,” and “him,” shall refer to a Participant or Beneficiary, as the case may be, and, except as otherwise provided, or unless the context otherwise requires, the capitalized terms shall have the following meanings:

(a) “Account” or “Accounts” mean a Participant’s or Beneficiary’s Company Stock Account and/or his Other Investments Account, as the context so requires.

1

(b) “Acquisition Loan” means a loan (or other extension of credit, including an installment obligation to a “party in interest” (as defined in Section 3(14) of ERISA)) incurred by the Trustee in connection with the purchase of Company Stock.

(c) “Affiliate” means any corporation, trade or business, which, at the time of reference, is together with the Bank, a member of a controlled group of corporations, a group of trades or businesses (whether or not incorporated) under common control, or an affiliated service group, as described in Sections 414(b), 414(c), and 414(m) of the Code, respectively, or any other organization treated as a single employer with the Bank under Section 414(o) of the Code; provided, however, that, where the context so requires, the term “Affiliate” shall be construed to give full effect to the provisions of Sections 409(l)(4) and 415(h) of the Code.

(d) “Bank” means Fraternity Federal Savings and Loan Association, Baltimore, Maryland, and any entity which succeeds to the business of Fraternity Federal Savings and Loan Association and which adopts this Plan in accordance with the provisions of Section 12.02 of the Plan or by written agreement assuming the obligations under the Plan.

(e) “Beneficiary” means the person(s) entitled to receive benefits under the Plan following a Participant’s death, pursuant to Section 7.03 of the Plan.

(f) “Break in Service” means any Plan Year, in which an Employee has 500 or fewer Hours of Service. Solely for this purpose, an Employee shall be considered employed for his normal hours of paid employment during a Recognized Absence (the Employee shall not be credited with more than 501 Hours of Service to avoid a Break in Service), unless he does not resume his Service at the end of the Recognized Absence. Further, if an Employee is absent for any period (i) by reason of the Employee’s pregnancy, (ii) by reason of the birth of the Employee’s child, (iii) by reason of the placement of a child with the Employee in connection with the Employee’s adoption of the child, or (iv) for purposes of caring for such child for a period beginning immediately after such birth or placement, the Employee shall be credited with the Hours of Service which would normally have been credited but for such absence, up to a maximum of 501 Hours of Service. Hours of Service shall be credited only in the year in which the absence from work begins, if a Participant would be prevented from incurring a one-year Break in Service in such year solely because the period of absence is treated as Hours of Service, or in any other case, in the immediately following year.

(g) “Change in Control” means any one of the following events occurs:

(i) Merger: The Company or the Bank merges into or consolidates with another corporation, or merges another corporation into the Company or the Bank, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Bank immediately before the merger or consolidation;

2

(ii)	Acquisition of Significant Share Ownership: The Company files, or is required to file, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Exchange Act, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of twenty-five percent (25%) or more of a class of the Company’s voting securities, but this clause (b) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns fifty (50%) or more of its outstanding voting securities;
(iii)	Change in Board Composition: During any period of two consecutive years, individuals who constitute the Company’s or the Bank’s board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Bank’s or the Company’s board of directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board of directors (or first nominated by the board of directors for election by the stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; or
(iv)	Sale of Assets: The Company or the Bank sells to a third party all or substantially all of its assets.

(h) “Code” means the Internal Revenue Code of 1986, as amended.

(i) “Committee” means the individual(s) responsible for the administration of the Plan in accordance with Section 9 of the Plan.

(j) “Company” means Fraternity Community Bancorp, Inc. and any entity which succeeds to the business of Fraternity Community Bancorp, Inc.

(k) “Company Stock” means shares of the voting common stock or preferred stock, meeting the requirements of Section 409 of the Code and Section 407(d)(5) of ERISA, issued by the Bank or its Affiliates.

(l) “Company Stock Account” means the account established and maintained in the name of each Participant or Beneficiary to reflect his share of the Trust Fund invested in Company Stock.

(m) “Compensation” means a Participant’s wages as defined in Section 3401(a) of the Code and all other payments of Compensation and all other payments of compensation by the Employer (in the course of the Employer’s trade or business) for a Plan Year for which Employer is required to furnish the Participant a written statement under Sections 6041(d), 6051(a)(3) and 6052 of the Code. Compensation must be determined without regard to any rules under Section 3401(a) of the Code that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the

3

exception for agricultural labor in Section 3401(a)(2) of the Code). Compensation shall also include amounts not currently includible in gross income by reason of the application of Sections 125 (cafeteria plan), 132(f)(4) (qualified transportation fringe), 402(e)(3) (401(k) plan), 402(h)(1)(B)(simplified employee pension plan), 414(h) (employer pickup contributions under a governmental plan), 403(b) (tax sheltered annuity) or 457(b) (eligible deferred compensation plan) of the Code.

A Participant’s Compensation shall not exceed the limit set forth in Section 401(a)(17) of the Code ($245,000 for the Plan Years beginning January 1, 2010). If the Plan Year for which a Participant’s Compensation is measured is less than twelve (12) calendar months, then the amount of Compensation taken into account for such Plan Year shall be the adjusted amount for such Plan Year, as prescribed by the Secretary of the Treasury under Section 401(a)(17) of the Code, multiplied by a fraction, the numerator of which is the number of months taken into account for such Plan Year and the denominator of which is twelve (12). In determining the dollar limitation hereunder, Compensation received from an Affiliate shall be recognized as Compensation.

(n) “Disability” means a physical or mental impairment, certified by one or more physician(s) designated by the Committee, which prevents him from doing any substantial gainful activity for which he is fitted by education, training or experience, and which is expected to last at least 12 months or to result in death.

(o) “Effective Date” means January 1, 2011.

(p) “Eligible Employee” means any Employee who is not precluded from participating in the Plan by reason of the provisions of Section 3.02 of the Plan.

(q) “Employee” means any individual who is or has been employed or self-employed by an Employer. “Employee” also means an individual employed by a leasing organization who, pursuant to an agreement between an Employer and the leasing organization, has performed services for the Employer and any related persons (within the meaning of Section 414(n)(6) of the Code) on a substantially full-time basis for more than one year, if such services are performed under the primary direction or control of the Employer. However, such a “leased employee” shall not be considered an Employee if (i) he participates in a money purchase pension plan sponsored by the leasing organization which provides for immediate participation, immediate full vesting, and an annual contribution of at least 10 percent of the Employee’s Compensation, and (ii) leased employees do not constitute more than 20 percent of the Employer’s total work force (including leased employees, but excluding Highly Compensated Employees and any other Employees who have not performed services for the Employer on a substantially full-time basis for at least one year).

(r) “Employer” or “Employers” means the Bank and its Affiliates, which adopt the Plan in accordance with the provisions of Section 12.01 of the Plan, and any entity which succeeds to the business of the Bank or its Affiliates and which adopts the Plan in accordance with

4

the provisions of Section 12.02 of the Plan or by written agreement assumes the obligations under the Plan.

(s) “Entry Date” means the first day of the month following the date the Employee satisfies the eligibility requirements under Section 3.01 of the Plan.

(t) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

(u) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(v) “Financed Shares” means shares of Company Stock acquired by the Trustee with the proceeds of an Acquisition Loan, which shall constitute “qualifying employer securities” under Section 409(l) of the Code and any shares of Company Stock received upon conversion or exchange of such shares.

(w) “Highly Compensated Employee” means an Employee who, for a particular Plan Year, satisfies one of the following conditions:

(i)	was a “5-percent owner” (as defined in Section 414(q)(2) of the Code) during the year or the preceding year, or
(ii)	for the preceding year, had “compensation” (as defined in Section 414(q)(4) of the Code) from the Bank and its Affiliates exceeding the limit in Section 414(q)(1) of the Code ($110,000 for Plan Years beginning January 1, 2010). The applicable year for which a determination is being made is called a “determination year” and the preceding 12-month period is called “look-back year.”

(x) “Hours of Service” means hours to be credited to an Employee under the following rules:

(i)

Each hour for which an Employee is paid or is entitled to be paid for services to an Employer is an Hour of Service.

(ii)

Each hour for which an Employee is directly or indirectly paid or is entitled to be paid for a period of vacation, holidays, illness, disability, lay-off, jury duty, temporary military duty, or leave of absence is an Hour of Service. However, except as otherwise specifically provided, no more than 501 Hours of Service shall be credited for any single continuous period which an Employee performs no duties. No more than 501 Hours of Service will be credited under this paragraph for any single continuous period (whether or not such period occurs in a single computation period). Further, no Hours of Service shall be credited on account of payments made solely under a plan maintained to comply with worker’s compensation, unemployment

5

compensation, or disability insurance laws, or to reimburse an Employee for medical expenses.

(iii)	Each hour for which back pay (ignoring any mitigation of damages) is either awarded or agreed to by an Employer is an Hour of Service. However, no more than 501 Hours of Service shall be credited for any single continuous period during which an Employee would not have performed any duties. The same Hours of Service will not be credited both under paragraph (i) or (ii) as the case may be, and under this paragraph. These hours will be credited to the employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award agreement or payment is made.
(iv)	Hours of Service shall be credited in any one period only under one of the foregoing paragraphs (i), (ii) and (iii); an Employee may not get double credit for the same period.
(v)	If an Employer finds it impractical to count the actual Hours of Service for any class or group of non-hourly Employees, each Employee in that class or group shall be credited with 90 Hours of Service for each bi-weekly pay period in which he has at least one Hour of Service. However, an Employee shall be credited only for his normal working hours during a paid absence.
(vi)	Hours of Service to be credited on account of a payment to an Employee (including back pay) shall be recorded in the period of Service for which the payment was made. If the period overlaps two or more Plan Years, the Hours of Service credit shall be allocated in proportion to the respective portions of the period included in the several Plan Years. However, in the case of periods of 31 days or less, the Committee may apply a uniform policy of crediting the Hours of Service to either the first Plan Year or the second.
(vii)	In all respects an Employee’s Hours of Service shall be counted as required by Section 2530.200b-2(b) and (c) of the Department of Labor’s regulations under Title I of ERISA.

(y) “Loan Suspense Account” means that portion Trust Fund consisting of Company Stock acquired with an Acquisition Loan which has not yet been allocated to the Participants’ Accounts.

(z) “Normal Retirement Age” means the date the Employee attains age sixty-five (65).

(aa) “Normal Retirement Date” means the first day of the month coincident with or next following the Participant’s attainment of Normal Retirement Age.

6

(bb) “Other Investments Account” means the account established and maintained in the name of each Participant or Beneficiary to reflect his share of the Trust Fund, other than Company Stock.

(cc) “Participant” means any active Employee who has become a participant in accordance with Section 3.01 of the Plan or any other person with an Account balance under the Plan.

(dd) “Plan” means this Fraternity Federal Savings and Loan Association Employee Stock Ownership Plan, as amended from time to time.

(ee) “Plan Year” means the calendar year.

(ff) “Postponed Retirement Date” means the first day of the month coincident with or next following a Participant’s date of actual retirement which occurs after his Normal Retirement Date.

(gg) “Recognized Absence” means a period for which:

(i)	an Employer grants an Employee a leave of absence for a limited period of time, but only if an Employer grants such leaves of absence on a nondiscriminatory basis to all Eligible Employees; or
(ii)	an Employee is temporarily laid off by an Employer because of a change in the business conditions of the Employer; or
(iii)	an Employee is on active military duty, but only to the extent that his employment rights are protected by the Military Selective Service Act of 1967 (38 U.S.C. sec. 2021).

(hh) “Reemployment After a Period of Uniformed Service” means:

(i) that an Employee returned to employment with a participating Employer, within the time frame set forth in subparagraph (ii) below, after a Period of Uniformed Service (that is, the period of time in which an Employee serves in the Uniformed Services) and the following rules corresponding to provisions of the Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”) apply: (1) he gives sufficient notice of leave to the Employer prior to commencing a Period of Uniformed Service, or is excused from providing such notice; (2) his employment with the Employer prior to a Period of Uniformed Service was not of a brief, non-recurrent nature that would preclude a reasonable expectation that the employment would continue indefinitely or for a significant period; (3) the Employer’s circumstances have not changed so that reemployment is unreasonable or an undue hardship to the Employer; and (4) the applicable cumulative

7

Periods of Uniformed Service under USERRA equals five years or less, unless service in the Uniformed Services:

(A)	in excess of five years is required to complete an initial Period of Uniformed Service;
(B)	prevents the Participant from obtaining orders releasing him or her from such Period of Uniformed Service prior to the expiration of a five-year period (through no fault of the Participant);
(C)	is required in the National Guard for drill and instruction, field exercises or active duty training, or to fulfill necessary additional training, or to fulfill necessary additional training requirements certified in writing by the Secretary of the branch of Uniformed Services concerned; or
(D)	for a Participant is:

1.	required other than for training under any provisions of law during a war or national agency declared by the President or Congress;
2.	required (other than for training) in support of an operational mission for which personnel have been ordered to active duty other than during war or national emergency;
3.	required in support of a critical mission or requirement of the Uniformed Services; or
4.	the result of being called into service as a member of the National Guard by the President in the case of rebellion or danger of rebellion against the authority of the United States Government or if the President is unable to execute the laws of the United States with the regular forces.

(ii) The applicable statutory time frames within which an Employee must report to a Employer after a Period of Uniformed Service are as follows:

(A) If the Period of Uniformed Service was less than 31 days,

1. not later than the beginning of the first full regularly scheduled work period on the first full calendar day following the completion of the Period of Uniformed Service and the expiration of eight hours after a period of time allowing for the safe transportation of the Employee from the place of service in the Uniformed Services to the Employee’s residence; or

8

2. as soon as possible after the expiration of the eight-hour period of time referred to in clause (ii)(A)1, if reporting within the period referred to in such clause is impossible or unreasonable through no fault of the Employee.

(B)	In the case of an Employee whose Period of Uniformed Service was for more than 30 days but less than 181 days, by submitting an application for reemployment with a participating Employer not later than 14 days after the completion of the Period of Uniformed Service or, if submitting such application within such period is impossible or unreasonable through no fault of the Employee, the next first full calendar day when submission of such application becomes reasonable.
(C)	In the case of an Employee whose Period of Uniformed Service was for more than 180 days, by submitting an application for reemployment with a participating Employer not later than 90 days after the completion of the Period of Uniformed Service.
(D)	In the case of an Employee who is hospitalized for, or convalescing from, an illness or injury related to the Period of Uniformed Service the Employee shall apply for reemployment with a Employer at the end of the period that is necessary for the Employee to recover. Such period of recovery shall not exceed two years, unless circumstances beyond the Employee’s control make reporting as above unreasonable or impossible.

(iii) Notwithstanding subparagraph (i), Reemployment After a Period of Uniformed Service terminates upon the occurrence of any of the following:

(A)	a dishonorable or bad conduct discharge from the Uniformed Services;
(B)	any other discharge from the Uniformed Services under circumstances other than an honorable condition;
(C)	a discharge of a commissioned officer from the Uniformed Services by court martial, by commutation of sentence by court martial, or, in time of war, by the President; or
(D)	a demotion of a commissioned officer in the Uniformed Services for absence without authorized leave of at least 3 months confinement under a sentence by court martial, or confinement in a federal or state penitentiary after being found guilty of a crime under a final sentence.

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(ii) “Retirement Date” means a Participant’s Normal Retirement Date or Postponed Retirement Date, whichever is applicable.

(jj) “Service” means an Employee’s period(s) of employment or self-employment with an Employer, excluding for initial eligibility purposes any period in which the individual was a nonresident alien and did not receive from an Employer any earned income which constituted income from sources within the United States. An Employee’s Service shall include any Service which constitutes Service with a predecessor Employer within the meaning of Section 414(a) of the Code, provided, however, that Service with an acquired entity shall not be considered Service under the Plan unless required by applicable law or agreed to by the parties to such transaction. An Employee’s Service shall also include any Service with an entity which is not an Employer, but only either (i) in which the other entity is a member of a controlled group of corporations or is under common control with other trades and businesses within the meaning of Sections 414(b) or 414(c) of the Code, and a member of the controlled group or one of the trades and businesses is an Employer, (ii) in which the other entity is a member of an affiliated service group within the meaning of Section 414(m) of the Code, and a member of the affiliated service group is an Employer, or (iii) all Employers aggregated with the Employer under Section 414(o) of the Code (but not until the Proposed Regulations under Section 414(o) become effective). Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code.

(kk) “Treasury Regulations” means the regulations promulgated by the Department of Treasury under the Code.

(ll) “Trust” means the Fraternity Federal Savings and Loan Association Employee Stock Ownership Plan Trust created in connection with the establishment of the Plan.

(mm) “Trust Agreement” means the trust agreement establishing the Trust.

(nn) “Trust Fund” means the assets held in the Trust for the benefit of Participants and their Beneficiaries.

(oo) “Trustee” means the trustee or trustees from time to time in office under the Trust Agreement.

(pp) “Uniformed Service” means the performance of duty on a voluntary or involuntary basis in the uniformed service of the United States, including the U.S. Public Health Services, under competent authority and includes active duty, active duty for training, initial activity duty for training, inactive duty training, full-time National Guard duty, and the period for which a person is absent from a position of employment for purposes of an examination to determine the fitness of the person to perform any such duty.

10

(qq) “Valuation Date” means the last day of the Plan Year and each other date as of which the Committee shall determine the investment experience of the Trust Fund and adjust the Participants’ Accounts accordingly.

(rr) “Valuation Period” means the period following a Valuation Date and ending with the next Valuation Date.

(ss) “Year of Service” means any 12-consecutive month period in which an Employee completes at least 1,000 Hours of Service.

Section 3
Eligibility and Participation

Section 3.01 Initial Participation.

(a) All Eligible Employees on the closing date of the Bank’s mutual to stock conversion shall enter the Plan and become Participants as of the later of (i) the Effective Date or (ii) the Eligible Employee’s date of hire.

(b) An Eligible Employee who is first employed by an Employer after the closing date of the Bank’s mutual to stock conversion shall be a Participant on the Entry Date following their attainment of age 21 and one Year of Service.

Section 3.02 Certain Employees Ineligible.

The following Employees are ineligible to participate in the Plan:

(a) Employees covered by a collective bargaining agreement between the Employer and the Employee’s collective bargaining representative if:

(i)	retirement benefits have been the subject of good faith bargaining between the Employer and the representative, and
(ii)	the collective bargaining agreement does not expressly provide that Employees of such unit be covered under the Plan;

(b) Leased Employees;

(c) Employees who are nonresident aliens and who receive no earned income from an Employer which constitutes income from sources within the United States; and

(d) Employees of an Affiliate that has not adopted the Plan pursuant to Sections 12.01 or 12.02 of the Plan.

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Section 3.03 Transfer to and from Eligible Employment.

(a) If an Employee ineligible to participate in the Plan by reason of Section 3.02 of the Plan transfers to employment as an Eligible Employee, he shall enter the Plan as of the later of:

(i)	the first Entry Date after the date of transfer, or
(ii)	the first Entry Date on which he could have become a Participant pursuant to Section 3.01 of the Plan if his prior employment with the Bank or Affiliate had been as an Eligible Employee.

(b) If a Participant transfers to a position of employment that is not eligible to participate in the Plan by reason of Section 3.02 of the Plan, he shall cease active participation in the Plan as of the date of such transfer and his transfer shall be treated for all purposes of the Plan as any other termination of Service.

Section 3.04 Participation After Reemployment.

(a) Any Employee re-entering Service with an Employer after a One Year Break in Service who has never satisfied the eligibility requirements of Section 3.01(a) of the Plan shall not receive credit for prior Service with an Employer and shall be required to meet the eligibility requirements of Section 3.01(a) of the Plan before becoming a Participant.

(b) An Employee who has satisfied the eligibility requirements of Section 3.01(a) of the Plan but who terminates Service prior to entering the Plan and becoming a Participant in accordance with Section 3.01(b) of the Plan will become a Participant on the later of:

(i)	the first Entry Date on which he would have entered the Plan had he not terminated Service, or
(ii)	the date he re-commences Service.

(c) A Participant whose Service terminates will re-enter the Plan as a Participant on the date he re-commences Service.

Section 3.05 Participation Not Guarantee of Employment.

Participation in the Plan does not constitute a guarantee or contract of employment and will not give any Employee the right to be retained in the employ of the Bank or any of its Affiliates nor any right or claim to any benefit under the terms of the Plan unless such right or claim has specifically accrued under the Plan.

Section 3.06 Omission of Eligible Employee.

If, in any Plan Year, any Eligible Employee who should be included as a Participant in the Plan is erroneously omitted and discovery of such omission is not made until after a

12

contribution by his Employer for the year has been made, the Employer shall make a subsequent contribution with respect to the omitted Eligible Employee in the amount which the said Employer would have contributed regardless of whether or not it is deductible in whole or in part in any taxable year under applicable provisions of the Code.

Section 3.07 Inclusion of Ineligible Employee.

If, in any Plan Year, any person who should not have been included as a Participant in the Plan is erroneously included and discovery of such incorrect inclusion is not made until after a contribution for the year has been made, the Employer shall not be entitled to recover the contribution made with respect to the ineligible person regardless of whether or not a deduction is allowable with respect to such contribution. In such event, the amount contributed with respect to the ineligible person shall constitute a forfeiture for the fiscal year in which the discovery is made. Any person who, after the close of a Plan Year, is retroactively treated by the Bank, an affiliated company or any other party as an Employee for such prior Plan Year shall not, for purposes of the Plan, be considered an Employee for such prior Plan Year unless expressly so treated as such by the Bank.

Section 4
Contributions

Section 4.01 Employer Contributions.

(a) Discretionary Contributions. Each Plan Year, each Employer, in its discretion, may make a contribution to the Trust. Each Employer making a contribution for any Plan Year under this Section 4.01(a) will contribute to the Trustee cash equal to, or Company Stock or other property having an aggregate fair market value equal to, such amount as the Board of Directors of the Employer shall determine by resolution. Notwithstanding the Employer’s discretion with respect to the medium of contribution, an Employer shall not make a contribution in any medium which would make such contribution a prohibited transaction (for which no exemption is provided) under Section 406 of ERISA or Section 4975 of the Code. Upon a Participant’s Reemployment After a Period of Uniformed Service, the Employer shall make an additional contribution on behalf of such Participant that would have been made on his or her behalf during the Plan Year or Years corresponding to the Participant’s Period of Uniformed Service.

(b) Employer Contributions for Acquisition Loans. Each Plan Year, the Employers shall, subject to the provisions of the Bank’s “Plan of Conversion” (as filed with the appropriate governmental agencies in connection with the Bank’s conversion from a mutual to stock form of organization) and any related regulatory prohibitions, contribute an amount of cash sufficient to enable to the Trustee to discharge any indebtedness incurred with respect to an Acquisition Loan pursuant to the terms of the Acquisition Loan. The Employers’ obligation to make contributions under this Section 4.01(b) shall be reduced to the extent of any investment earnings attributable to such contributions and any cash dividends paid with respect to Company Stock held by the Trustee in the Loan Suspense

13

Account. If there is more than one Acquisition Loan, the Employers shall designate the one to which any contribution pursuant to this Section 4.01(b) is to be applied.

Section 4.02 Limitations on Contributions.

In no event shall an Employer’s contribution(s) made under Section 4.01 of the Plan for any Plan Year exceed the lesser of:

(a) The maximum amount deductible under Section 404 of the Code by that Employer as an expense for Federal income tax purposes; and

(b) The maximum amount which can be credited for that Plan Year in accordance with the allocation limitation provisions of Section 5.05 of the Plan.

Section 4.03 Acquisition Loans.

The Trustee may incur Acquisition Loans from time to time to finance the acquisition of Company Stock for the Trust or to repay a prior Acquisition Loan. An Acquisition Loan shall be for a specific term, shall bear a reasonable rate of interest, and shall not be payable on demand except in the event of default, and shall be primarily for the benefit of Participants and Beneficiaries of the Plan. An Acquisition Loan may be secured by a collateral pledge of the Financed Shares so acquired and any other Plan assets which are permissible security within the provisions of Section 54.4975-7(b) of the Treasury Regulations. No other assets of the Plan or Trust may be pledged as collateral for an Acquisition Loan, and no lender shall have recourse against any other Trust assets. Any pledge of Financed Shares must provide for the release of shares so pledged on a basis equal to the principal and interest (or if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), paid by the Trustee on the Acquisition Loan. The released Financed Shares shall be allocated by Participants’ Accounts in accordance with the provisions of Sections 5.04 or 5.08 of the Plan, whichever is applicable. Payment of principal and interest on any Acquisition Loan shall be made by the Trustee only from the Employer contributions paid in cash to enable the Trustee to repay such loan in accordance with Section 4.01(b) of the Plan, from earnings attributable to such contributions, and any cash dividends received by the Trustee on Financed Shares acquired with the proceeds of the Acquisition Loan (including contributions, earnings and dividends received during or prior to the year of repayment less such payments in prior years), whether or not allocated. Financed Shares shall initially be credited to the Loan Suspense Account and shall be transferred for allocation to the Company Stock Account of Participants only as payments of principal and interest (or, if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), on the Acquisition Loan are made by the Trustee. The number of Financed Shares to be released from the Loan Suspense Account for allocation to Participants’ Company Stock Account for each Plan Year shall be based on the ratio that the payments of principal and interest (or, if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), on the Acquisition Loan for that Plan Year bears to the sum of the

14

payments of principal and interest on the Acquisition Loan for that Plan Year plus the total remaining payment of principal and interest projected (or, if the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so elects, principal payments only), on the Acquisition Loan over the duration of the Acquisition Loan repayment period, subject to the provisions of Section 5.05 of the Plan.

Section 4.04. Conditions as to Contributions.

In addition to the provisions of Section 12.03 of the Plan for the return of an Employer’s contributions in connection with a failure of the Plan to qualify initially under the Code, any amount contributed by an Employer due to a good faith mistake of fact, or based upon a good faith but erroneous determination of its deductibility under Section 404 of the Code, shall be returned to the Employer within one year after the date on which the Employer originally made such contribution, or within one year after its nondeductibility has been finally determined. However, the amount to be returned shall be reduced to take account for any adverse investment experience within the Trust in order that the balance credited to each Participant’s Accounts is not less that it would have been if the contribution had never been made by the Employer.

Section 4.05 Employee Contributions.

Employee contributions are neither required nor permitted under the Plan.

Section 4.06 Rollover Contributions.

Rollover contributions of assets from other tax-qualified retirement plans are not permitted under the Plan.

Section 4.07 Trustee-to-Trustee Transfers.

Trustee-to-trustee transfer of assets from other tax-qualified retirement plans are not permitted under the Plan.

Section 5
Plan Accounting

Section 5.01 Accounting for Allocations.

The Committee shall establish the Accounts (and sub-accounts, if deemed necessary) for each Participant, and the accounting procedures for the purpose of making the allocations to the Participants’ Accounts provided for in this Section 5. The Committee shall maintain adequate records of the cost basis of shares of Company Stock allocated to each Participant’s Company Stock Account. The Committee also shall keep separate records of Financed Shares attributable to each Acquisition Loan and of contributions made by the Employers (and any earnings thereon) made for the purpose of enabling the Trustee to repay any Acquisition Loan. From time to time, the Committee may modify its accounting

15

procedures for the purpose of achieving equitable and nondiscriminatory allocations among the Accounts of Participants, in accordance with the provisions of this Section 5 and the applicable requirements of the Code and ERISA. In accordance with Section 9 of the Plan, the Committee may delegate the responsibility for maintaining Accounts and records.

Section 5.02 Maintenance of Participants’ Company Stock Accounts.

As of each Valuation Date, the Committee shall adjust the Company Stock Account of each Participant to reflect activity during the Valuation Period as follows:

(a) First, charge to each Participant’s Company Stock Account all distributions and payments made to him that have not been previously charged;

(b) Next, credit to each Participant’s Company Stock Account the shares of Company Stock, if any, that have been purchased with amounts from his Other Investments Account, and adjust such Other Investments Account in accordance with the provisions of Section 5.03 of the Plan;

(c) Next, credit to each Participant’s Company Stock Account the shares of Company Stock representing contributions made by the Employers in the form of Company Stock and the number of Financed Shares released from the Loan Suspense Account under Section 4.03 of the Plan that are to be allocated and credited as of that date in accordance with the provisions of Section 5.04 of the Plan; and

(d) Finally, credit to each Participant’s Company Stock Account the shares of Company Stock released from the Loan Suspense Account that are to be allocated in accordance with the provisions of Section 5.08 of the Plan.

Section 5.03 Maintenance of Participants’ Other Investments Accounts.

Except as otherwise provided for under Section 5.09 of the Plan, as of each Valuation Date, the Committee shall adjust the Other Investments Account of each Participant to reflect activity during the Valuation Period as follows:

(a) First, charge to each Participant’s Other Investments Account all distributions and payments made to him that have not previously been charged;

(b) Next, if Company Stock is purchased with assets from a Participant’s Other Investments Account, the Participant’s Other Investments Account shall be charged accordingly;

(c) Next, subject to the dividend provisions of Section 5.08 of the Plan, credit to the Other Investments Account of each Participant any cash dividends paid to the Trustee on shares of Company Stock held in that Participant’s Company Stock Account (as of the record date for such cash dividends) and dividends paid on shares of Company Stock held in the Loan Suspense Account that have not been used to repay any Acquisition Loan. Cash dividends that have not been used to repay an Acquisition Loan and have been credited to a

16

Participant’s Other Investments Account shall be applied by the Trustee to purchase shares of Company Stock, which shares shall then be credited to the Company Stock Account of such Participant. The Participant’s Other Investments Account shall then be charged by the amount of cash used to purchase such Company Stock or used to repay any Acquisition Loan. In addition, any earnings on:

(i)

Other Investments Accounts, including cash proceeds from the sale or disposition of Company Stock pursuant to Section 5.09 of the Plan, will be allocated to Participants’ Other Investments Account, pro rata, based on such Other Investment Accounts balances as of the first day of the Valuation Period, and

(ii)

The Loan Suspense Account, other than dividends used to repay the Acquisition Loan, will be allocated to Participants’ Other Investments Accounts, pro rata, based on their Other Investment Account Balances as of the first day of the Valuation Period; provided, however, that shares of Company Stock allocated pursuant to Section 5.09 of the Plan shall be allocated to the Participants’ Company Stock Account in accordance with the provisions of the Section 5.09 of the Plan.

(d) Next, allocate and credit the Employer contributions made pursuant to Section 4.01(b) of the Plan for the purpose of repaying any Acquisition Loan in accordance with Section 5.04 of the Plan. Such amount shall then be used to repay any Acquisition Loan and such Participant’s Other Investments Account shall be charged accordingly; and

(e) Finally, allocate and credit the Employer contributions (other than amounts contributed to repay an Acquisition Loan) that are made in cash (or property other than Company Stock) for the Plan Year to the Other Investments Account of each Participant in accordance with Section 5.04 of the Plan.

Section 5.04 Allocation and Crediting of Employer Contributions.

(a) Except as otherwise provided for in Sections 5.08 and 5.09 of the Plan, as of the Valuation Date for each Plan Year:

(i) Company Stock released from the Loan Suspense Account for that year and shares of Company Stock contributed directly to the Plan by an Employer shall be allocated and credited to each Active Participant’s (as defined in paragraph (b) of this Section 5.04) Company Stock Account based on the ratio that each Active Participant’s Compensation bears to the aggregate Compensation of all Active Participants for the Plan Year, provided, however, that, for purposes of this Section, an Active Participant’s Compensation shall not be considered for any part of a Plan Year prior to the date the Participant commenced participation in the Plan, and then

17

(ii) The cash contributions not used to repay an Acquisition Loan and any other property (other than shares of Company Stock) contributed for that year shall be allocated and credited to each Active Participant’s Other Investments Account based on the ratio determined by comparing each Active Participant’s Compensation to the aggregate Compensation of all Active Participants for the Plan Year.

.
(b) For purposes of this Section 5.04, the term “Active Participant” means those Employees who:

(i) were employed by that Employer, including Employees on a Recognized Absence, on the last day of the Plan Year and completed 1,000 Hours of Service during the Plan Year, or

(ii) who terminated employment during the Plan Year by reason of death, Disability, or attainment of their Retirement Date.

Section 5.05 Limitations on Allocations.

(a) In General. Subject to the provisions of this Section 5.05, Section 415 of the Code shall be incorporated by reference into the terms of the Plan. No allocation shall be made under Section 5.04 of the Plan that would result in a violation of Section 415 of the Code.

(b) Code Section 415 Compensation. For purposes of this Section 5.05, Compensation shall be adjusted to reflect the general rule of Section 1.415-2(d) of the Treasury Regulations.

(c) Limitation Year. The “limitation year” (within the meaning of Section 415 of the Code) shall be the calendar year.

(d) Multiple Defined Contribution Plans. In any case where a Participant also participates in another defined contribution plan of the Bank or its Affiliates, the appropriate committee of such other plan shall first reduce the after-tax contributions under any such plan, shall then reduce any elective deferrals under any such plan subject to Section 401(k) of the Code, shall then reduce all other contributions under any other such plan and, if necessary, shall then reduce contributions under this Plan, subject to the provisions of paragraph (f) of this Section 5.05.

(e) Excess Allocations. If, after applying the allocation provisions under Section 5.04 of the Plan, allocations under Section 5.04 of the Plan would otherwise result in a Participant’s account being in violation of Section 415 of the Code, the Committee shall reduce the Employer contributions for the next limitation year (and succeeding limitation years, as necessary) for that Participant if that Participant is covered by the Plan as of the end of the limitation year. However, if that Participant is not covered by the Plan as of the end of the limitation year, then the excess amounts shall be held unallocated in a suspense account for the limitation year and allocated and reallocated in the next limitation year to all the

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remaining Participants in the Plan; furthermore, the excess amounts shall be used to reduce Employer contributions for the next limitation year (and succeeding limitation years, as necessary) for all the remaining Participants in the Plan.

(f) Allocations Pursuant to Section 5.09. For purposes of this Section 5.05, no amount credited to any Participant’s Account pursuant to Section 5.09 of the Plan shall be counted as an “annual addition” for purposes of Section 415 of the Code. In the event any amount cannot be allocated to Affected Participants (as defined in Section 5.09 of the Plan) under the Plan pursuant to the Section 5.09 of the Plan in the year of a Change in Control, the amount which may not be so allocated in the year of the Change in Control shall be treated in accordance with paragraph (f) of this Section 5.05.

Section 5.06 Other Limitations.

Aside from the limitations set forth in Sections 5.05 of the Plan, in no event shall more than one-third of the Employer contributions to the Plan be allocated to the Accounts of Highly Compensated Employees. In the event more than one-third of the Employer Contributions to the Plan are allocated to the Accounts of Highly Compensated Employees, the Committee shall determine the allocation of the reduced amount among the Highly Compensated Employees such that the relative share of the Employer Contributions allocable to a Highly Compensated Employee is equal to such Highly Compensated Employee’s share of the contributions allocable to all Highly Compensated Employees if this Section 5.06 were inapplicable.

Section 5.07 Limitations as to Certain Section 1042 Transactions.

To the extent that a shareholder of Company Stock sell qualifying Company Stock to the Plan and elects (with the consent of the Bank) nonrecognition of gain under Section 1042 of the Code, no portion of the Company Stock purchased in such nonrecognition transaction (or dividends or other income attributable thereto) may accrue or be allocated during the nonallocation period (the ten (10) year period beginning on the later of the date of the sale of the qualified Company Stock or the date of the Plan allocation attributable to the final payment of an Acquisition Loan incurred in connection with such sale) for the benefit of:

(a) The selling shareholder;

(b) the spouse, brothers or sisters (whether by the whole or half blood), ancestors or lineal descendants of the selling shareholder or descendant referred to in (a) above; or

(c) any other person who owns, after application of Section 318(a) of the Code, more than twenty-five percent (25%) of:

(i)	any class of outstanding stock of the Bank or any Affiliate, or
(ii)	the total value of any class of outstanding stock of the Bank or any Affiliate.

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For purposes of this Section 5.07, Section 318(a) of the Code shall be applied without regard to the employee trust exception of Section 318(a)(2)(B)(i) of the Code.

Section 5.08 Dividends.

(a) Stock Dividends. Dividends on Company Stock which are received by the Trustee in the form of additional Company Stock shall be retained in the portion of the Trust Fund consisting of Company Stock, and shall be allocated among the Participant’s Accounts and the Loan Suspense Account in accordance with their holdings of the Company Stock on which the dividends have been paid.

(b) Cash Dividends on Allocated Shares. Dividends on Company Stock credited to Participants’ Accounts which are received by the Trustee in the form of cash shall, at the direction of the Bank, either:

(i)	be credited to Participants’ Accounts in accordance with Section 5.03 of the Plan and invested as part of the Trust Fund;
(ii)	be distributed immediately to the Participants;
(iii)	be distributed to the Participants within ninety (90) days of the close of the Plan Year in which paid; or
(iv)	be used to repay first principal and then, if available, interest on the Acquisition Loan used to acquire Company Stock on which the dividends were paid.

In addition to the alternatives specified in the preceding paragraph regarding the treatment of cash dividends paid with respect to shares of Company Stock credited to Participants’ Accounts, if authorized by the Committee for the Plan Year, a Participant may elect that cash dividends paid on Company Stock credited to the Participant’s Account shall either be:

(i)	paid to the Plan, reinvested in Company Stock and credited to the Participant’s Account;
(ii)	distributed in cash to the Participant; or
(iii)	distributed to the Participant within ninety (90) days of the close of the Plan Year in which paid.

Dividends subject to an election under this paragraph (and any Company Stock acquired therewith pursuant to a Participant’s election) shall at all times be fully vested. To the extent the Committee authorizes dividend elections pursuant to this paragraph, the Committee shall establish policies and procedures relating to Participant elections and, if applicable, the reinvestment of cash dividends in Company Stock, which are consistent with guidance issued under Section 404(k) of the Code.

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(c) Cash Dividends on Unallocated Shares. Dividends on Company Stock held in the Loan Suspense Account which are received by the Trustee in the form of cash shall be applied as soon as practicable to payments of first principal and then, if available, interest under the Acquisition Loan incurred with the purchase of the Company Stock.

(d) Financed Shares. Financed Shares released from the Loan Suspense Account by reason of dividends paid with respect to such Company Stock shall be allocated under Sections 5.03 and 5.04 of the Plan as follows:

(i)	First, Financed Shares with a fair market value at least equal to the dividends paid with respect the Company Stock allocated to Participants’ Accounts shall be allocated among and credited to the Accounts of such Participants, pro rata, according to the number of shares of Company Stock held in such accounts on the date such dividend is declared by the Company;
(ii)	Then, any remaining Financed Shares released from the Loan Suspense Account by reason of dividends paid with respect to Company Stock held in the Loan Suspense Account shall be allocated among and credited to the Accounts of all Participants, pro rata, according to each Participant’s Compensation.

Section 5.09 Allocations Upon Termination Prior to Satisfaction of Acquisition Loan.

(a) Notwithstanding any other provision of the Plan, in the event of a Change in Control, the Plan shall terminate as of the effective date of the Change in Control and, as soon as practicable thereafter, the Trustee shall repay in full any outstanding Acquisition Loan. In connection with such repayment, the Trustee shall: (i) apply cash, if any, received by the Plan in connection with the transaction constituting a Change in Control, with respect to the unallocated shares of Company Stock acquired with the proceeds of the Acquisition Loan, and (ii) to the extent additionally required to effect the repayment of the Acquisition Loan, obtain cash through the sale of any stock or security received by the Plan in connection with such transaction, with respect to such unallocated shares of Company Stock. After repayment of the Acquisition Loan, all remaining shares of Company Stock held in the Loan Suspense Account, all other stock or securities, and any cash proceeds from the sale or other disposition of any shares of Company Stock held in the Loan Suspense Account, shall be allocated among the Accounts of all Participants who were employed by an Employer on the date immediately preceding the effective date of the Change in Control. Such allocations of shares or cash proceeds shall be credited as earnings for purposes of Section 5.05 of the Plan and Section 415 of the Code, as of the effective date of the Change in Control, to the Account of each Participant who is either in active Service with an Employer, or is on a Recognized Absence, on the date immediately preceding the effective date of the Change of Control (each an “Affected Participant”), in proportion to the opening balances in their Company Stock Accounts as of the first day of the current Valuation Period. As of the effective date of a Change in Control, all Participant Accounts shall be fully vested and nonforfeitable.

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(b) In the event of a termination of the Plan in connection with a Change in Control, this Section 5.09 shall have no force and effect unless the price paid for the Company Stock in connection with a Change in Control is greater than the average basis of the unallocated Company Stock held in the Loan Suspense Account as of the date of the Change in Control.

Section 5.10 Erroneous Allocations.

No Participant shall be entitled to any annual additions or other allocations to his Account in excess of those permitted under Section 5. If it is determined at any time that the administrator and/or Trustee have erred in accepting and allocating any contributions or forfeitures under this Plan, or in allocating investment adjustments, or in excluding or including any person as a Participant, then the administrator, in a uniform and nondiscriminatory manner, shall determine the manner in which such error shall be corrected, after taking into consideration Sections 3.6 and 3.7 and any revenue procedure or other notice published by the Internal Revenue Service regarding permissible correction methods, if applicable, and shall promptly advise the Trustee in writing of such error and of the method for correcting such error. The Accounts of any or all Participants may be revised, if necessary, in order to correct such error.

Section 6
Vesting

Section 6.01 Deferred Vesting in Accounts.

(a) A Participant shall become vested in his Accounts in accordance with the following schedule:

Years of Service
  Vested Percentage
 

(b) For purposes of determining a Participant’s Years of Service under this Section 6.01, employment with the Bank or an Affiliate shall be deemed employment with the Employer. With respect to Employees who enter the Plan pursuant to Section 3.01(a) of the Plan, for purposes of determining a Participant’s vested percentage, all Years of Service shall be included. With respect to Employees who enter the Plan pursuant to Section 3.01(b) of the Plan, for purposes of determining a Participant’s vested percentage, all Years of Service shall be included, subject to the provisions of Section 6.05 of the Plan. Notwithstanding any provision of the Plan to the contrary, calculation of Service for determining a Participant’s Vested Percentage with respect to qualified military service will be provided in accordance with Section 414(u) of the Code.

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Section 6.02 Immediate Vesting in Certain Situations.

(a) Notwithstanding Section 6.01(a) of the Plan, a Participant shall become fully vested in his Accounts upon the earlier of:

(i)	termination of the Plan or upon the permanent and complete discontinuance of contributions by his Employer to the Plan; provided, however, that in the event of a partial termination, the interest of each Participant shall fully vest only with respect to that part of the Plan which is terminated;
(ii)	The Participant’s Normal Retirement Age;
(iii)	A Change in Control; or
(iv)	Termination of employment by reason of death or Disability. For purposes of this Section 6.02, benefits payable in the event of a Participant’s death or Disability while performing qualified military service shall fully vest in accordance with Section 414(u)(9) of the Code.

Section 6.03 Treatment of Forfeitures.

(a) If a Participant who is not fully vested in his Accounts terminates employment, that portion of his Accounts in which he is not vested shall be forfeited upon the earlier of:

(i)	The date the Participant receives a distribution of his entire vested benefits under the Plan, or
(ii)	The date at which the Participant incurs five (5) consecutive Breaks in Service.

(b) If a Participant who has terminated employment and has received a distribution of his entire vested benefits under the Plan is subsequently reemployed by an Employer prior to incurring five (5) consecutive Breaks in Service, he shall have the portion of his Accounts which was previously forfeited restored to his Accounts, provided he repays to the Trustee within five (5) years of his subsequent employment date an amount equal to the distribution. The amount restored to the Participant’s Account shall be credited to his Account as of the last day of the Plan Year in which the Participant repays the distributed amount to the Trustee and the restored amount shall come from other Employees’ forfeitures and, if such forfeitures are insufficient, from a special contribution by his Employer for that year. If a Participant’s employment terminates prior to his Account having become vested, such Participant shall be deemed to have received a distribution of his entire vested interest as of the Valuation Date next following his termination of employment.

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(c) If a Participant who has terminated employment but has not received a distribution of his entire vested benefits under the Plan is subsequently reemployed by an Employer subsequent to incurring five (5) consecutive Breaks in Service, any undistributed balance of his Accounts from his prior participation which was not forfeited shall be maintained as a fully vested subaccount with his Account.

(d) If a portion of a Participant’s Account is forfeited, assets other than Company Stock must be forfeited before any Company Stock may be forfeited.

(e) Forfeitures shall be reallocated among the other Participants in the Plan.

Section 6.04 Accounting for Forfeitures.

A forfeiture shall be charged to the Participant’s Account as of the first day of the first Valuation Period in which the forfeiture becomes certain pursuant to Section 6.03 of the Plan. Except as otherwise provided in Section 6.03 of the Plan, a forfeiture shall be added to the contributions of the terminated Participant’s Employer which are to be credited to other Participants pursuant to Section 4 as of the last day of the Plan Year in which the forfeiture becomes certain.

Section 6.05 Vesting Upon Reemployment.

(a) If an Employee is not vested in his Accounts, incurs a Break in Service and again performs an Hour of Service, such Employee shall receive credit for his Years of Service prior to his Break in Service only if the number of consecutive Breaks in Service is less than the greater of: (i) five (5) years or (ii) the aggregate number of his Years of Service credited before his Break in Service.

(b) If a Participant is partially vested in his Accounts, incurs a Break in Service and again performs an Hour of Service, such Participant shall receive credit for his Years of Service prior to his Break in Service; provided, however, that after five (5) consecutive Breaks in Service, a former Participant’s vested interest in his Accounts attributable to Years of Service prior to his Break in Service shall not be increased as a result of his Years of Service following his reemployment date.

(c) If a Participant is fully vested in his Accounts, incurs a Break in Service and again performs an Hour of Service, such Participant shall receive credit for all his Years of Service prior to his Breaks in Service.

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Section 7
Distributions

Section 7.01 Distribution of Benefit Upon a Termination of Employment.

(a) A Participant whose employment terminates for any reason shall receive the entire vested portion of his Accounts in a single payment on a date selected by the Committee; provided, however, that such date shall be on or before the 60th day after the end of the Plan Year in which the Participant’s employment terminated. The benefits from that portion of the Participant’s Other Investments Account shall be calculated on the basis of the most recent Valuation Date before the date of payment. Subject to the provisions of Section 7.05 of the Plan, if the Committee so provides, a Participant may elect that his benefits be distributed to him in the form of Company Stock, cash, or some combination thereof. In addition, if a Participant did not receive a distribution of his vested Account balance but his non-vested Account balance was forfeited after a one-year Break in Service, such nonvested Account balance shall be restored if the Plan terminates before the Participant has a five-year Break in Service. If the Participant did not receive a distribution of his vested Account balance, any forfeiture restored shall include earnings that would have been credited to the Account but for the forfeiture.

(b) Notwithstanding paragraph (a) of this Section 7.01, if the balance credited to a Participant’s Accounts exceeds, at the time such benefit was distributable, $1,000, his benefits shall not be paid before the latest of his 65th birthday or the tenth anniversary of the year in which he commenced participation in the Plan, unless he elects an early payment date in a written election filed with the Committee. Such an election is not valid unless it is made after the Participant has received the required notice under Section 1.411(a)-11(c) of the Treasury Regulations that provides a general description of the material features of a lump sum distribution and the Participant’s right to defer receipt of his benefits under the Plan. The notice shall be provided no less than 30 days and no more than ninety (90) days before the first day on which all events have occurred which entitle the Participant to such benefit. Written consent of the Participant to the distribution generally may not be made within 30 days of the date the Participant receives the notice and shall not be made more than ninety (90) days from the date the Participant receives the notice. However, a distribution may be made less than 30 days after the notice provided under Section 1.411(a)-11(c) of the Treasury Regulations is given, if:

(i)	the Committee clearly informs the Participant that he has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and if applicable, a particular distribution option), and
(ii)	the Participant, after receiving the notice, affirmatively elects a distribution.

A Participant may modify such an election at any time, provided any new benefit payment date is at least 30 days after a modified election is delivered to the Committee.

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Section 7.02 Minimum Distribution Requirements.

(a) General Rules.

(i)	Precedence. The requirements of this Section 7.02 will take precedence over any inconsistent provisions of the Plan.
(ii)	Requirements of Treasury Regulations Incorporated. All distributions required under this Section will be determined and made in accordance with the Treasury Regulations under section 401(a)(9) of the Internal Revenue Code.
(iii)	TEFRA Section 242(b)(2) Elections. Notwithstanding the other provisions of this article, distributions may be made under a designation made before January 1, 1984, in accordance with section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the plan that relate to section 242(b)(2) of TEFRA.

(b) Time and Manner of Distribution.

(i)	Required Beginning Date. The participant’s entire interest will be distributed, or begin to be distributed, to the participant no later than the participant’s required beginning date.
(ii)	Death of Participant Before Distributions Begin. If the participant dies before distributions begin, the participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

(A)	If the participant’s surviving spouse is the participant’s sole designated beneficiary, then, except as provided in the adoption agreement, distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the participant died, or by December 31 of the calendar year in which the participant would have attained age 70 1/2, if later.
(B)	If the participant’s surviving spouse is not the participant’s sole designated beneficiary, then, except as provided in the adoption agreement, distributions to the designated beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the participant died.
(C)	If there is no designated beneficiary as of September 30 of the year following the year of the participant’s death, the participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the participant’s death.
(D)	If the participant’s surviving spouse is the participant’s sole designated

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beneficiary and the surviving spouse dies after the participant but before distributions to the surviving spouse begin, this section (b)(ii), other than section (b)(ii)(A), will apply as if the surviving spouse were the participant.

(iii) Forms of Distribution. All distributions under this Plan will be made in a single lump sum.

(c) Required Minimum Distributions During Participant’s Lifetime.

(i) Amount of Required Minimum Distribution For Each Distribution Calendar Year. During the participant’s lifetime, the minimum amount that will be distributed for each distribution calendar year is the lesser of:

(A)

the quotient obtained by dividing the participant’s account balance by the distribution period in the Uniform Lifetime Table set forth in section 1.401(a)(9)-9 of the Treasury Regulations, using the participant’s age as of the participant’s birthday in the distribution calendar year; or

(B)

if the participant’s sole designated beneficiary for the distribution calendar year is the participant’s spouse, the quotient obtained by dividing the participant’s account balance by the number in the Joint and Last Survivor Table set forth in section 1.401(a)(9)-9 of the Treasury Regulations, using the participant’s and spouse’s attained ages as of the participant’s and spouse’s birthdays in the distribution calendar year; or

(ii) Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death. Required minimum distributions will be determined under this section (c) beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the participant’s date of death.

(d) Required Minimum Distributions After Participant’s Death.

(i) Death On or After Date Distributions Begin.

(A) Participant Survived by Designated Beneficiary. If the participant dies on or after the date distributions begin and there is a designated beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the participant’s death is the quotient obtained by dividing the participant’s account balance by the longer of the remaining life expectancy of the participant or the remaining life expectancy of the participant’s designated beneficiary, determined as follows:

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1.	The participant’s remaining life expectancy is calculated using the age of the participant in the year of death, reduced by one for each subsequent year.
2.	If the participant’s surviving spouse is the participant’s sole designated beneficiary, the remaining life expectancy of the surviving spouse is calculated for each distribution calendar year after the year of the participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For distribution calendar years after the year of the surviving spouse’s death, the remaining life expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.
3.	If the participant’s surviving spouse is not the participant’s sole designated beneficiary, the designated beneficiary’s remaining life expectancy is calculated using the age of the beneficiary in the year following the year of the participant’ death, reduced by one for each subsequent year.

(B) No Designated Beneficiary. If the participant dies on or after the date distributions begin and there is no designated beneficiary as of September 30 of the year after the year of the participant’s death, the minimum amount that will be distributed for each distribution calendar year after the year of the participant’s death is the quotient obtained by dividing the participant’s account balance by the participant’s remaining life expectancy calculated using the age of the participant in the year of death, reduced by one for each subsequent year.

(ii) Death Before Date Distributions Begin.

(A)

Participant Survived by Designated Beneficiary. Except as provided in the adoption agreement, if the participant dies before the date distributions begin and there is a designated beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the participant’s death is the quotient obtained by dividing the participant’s account balance by the remaining life expectancy of the participant’s designated beneficiary, determined as provided in this Section.

(B)

No Designated Beneficiary. If the participant dies before the date distributions begin and there is no designated beneficiary as of September 30 of the year following the year of the participant’s death, distribution of the participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of

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the participant’s death.

(C) Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the participant dies before the date distributions begin, the participant’s surviving spouse is the participant’s sole designated beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse, this section will apply as if the surviving spouse were the participant.

(e) Definitions for Section 7.02.

(i)	Designated beneficiary. The individual who is designated as the beneficiary under the Plan and is the designated beneficiary under section 401(a)(9) of the Internal Revenue Code and section 1.401(a)(9)-1, Q&A-4, of the Treasury Regulations.
(ii)	Distribution calendar year. A calendar year for which a minimum distribution is required. For distributions beginning before the participant’s death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the participant’s required beginning date. For distributions beginning after the participant’s death, the first distribution calendar year is the calendar year in which distributions are required to begin under section (b)(ii). The required minimum distribution for the participant’s first distribution calendar year will be made on or before the participant’s required beginning date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the participant’s required beginning date occurs, will be made on or before December 31 of that distribution calendar year.
(iii)	Life expectancy. Life expectancy as computed by use of the Single Life Table in section 1.401(a)(9)-9 of the Treasury Regulations.
(iv)	Participant’s account balance. The account balance as of the last valuation date in the calendar year immediately preceding the distribution calendar year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. The account balance for the valuation calendar year includes any amounts rolled over transferred to the plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.

Section 7.03 Benefits on a Participant’s Death.

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(a) If a Participant dies before his benefits are paid pursuant to Section 7.01 of the Plan, the balance credited to his Accounts shall be paid to his Beneficiary in a single distribution on or before the 60th day after the end of the Plan Year in which the Participant died. If the Participant has not named a Beneficiary or if his named Beneficiary should not survive him, then the balance in his Account shall be paid to his estate. The benefits from that portion of the Participant’s Other Investments Account shall be calculated on the basis of the most recent Valuation Date before the date of payment.

(b) If a married Participant dies before his benefit payments begin, then, unless he has specifically elected otherwise, the Committee shall cause the balance in his Accounts to be paid to his spouse, as Beneficiary. A married Participant may name an individual other than his spouse as his Beneficiary, provided that such election is accompanied by the spouse’s written consent, which must:

(i)	acknowledge the effect of the election;
(ii)	explicitly provide either that the designated Beneficiary may not subsequently be changed by the Participant without the spouse’s further consent or that it may be changed without such consent; and
(iii)	must be witnessed by the Committee, its representative, or a notary public.

This requirement shall not apply if the Participant establishes to the Committee’s satisfaction that the spouse may not be located.

(c) The Committee shall from time to time take whatever steps it deems appropriate to keep informed of each Participant’s marital status. Each Employer shall provide the Committee with the most reliable information in the Employer’s possession regarding its Participants’ marital status, and the Committee may, in its discretion, require a notarized affidavit from any Participant as to his marital status. The Committee, the Plan, the Trustee, and the Employers shall be fully protected and discharged from any liability to the extent of any benefit payments made as a result of the Committee’s good faith and reasonable reliance upon information obtained from a Participant as to the Participant’s marital status.

Section 7.04 Delay in Benefit Determination.

If the Committee is unable to determine the benefits payable to a Participant or Beneficiary on or before the latest date prescribed for payment pursuant to this Section 7, the benefits shall in any event be paid within 60 days after they can first be determined, with whatever makeup payments may be appropriate in view of the delay.

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Section 7.05 Options to Receive and Sell Stock.

(a) Unless ownership of virtually all Company Stock is restricted to active Employees and qualified retirement plans for the benefit of Employees pursuant to the certificates of incorporation or by-laws of the Employers issuing Company Stock, a terminated Participant or the Beneficiary of a deceased Participant may instruct the Committee to distribute the Participant’s entire vested interest in his Accounts in the form of Company Stock. In that event, the Committee shall apply the Participant’s vested interest in his Other Investments Account to purchase sufficient Company Stock to make the required distribution.

(b) Any Participant who receives Company Stock pursuant to this Section, and any person who has received Company Stock from the Plan or from such a Participant by reason of the Participant’s death or incompetency, by reason of divorce or separation from the Participant, or by reason of a rollover distribution described in Section 402(c) of the Code, shall have the right to require the Employer which issued the Company Stock to purchase the Company Stock for its current fair market value (hereinafter referred to as the “put right”). The put right shall be exercisable by written notice to the Committee during the first 60 days after the Company Stock is distributed by the Plan, and, if not exercised in that period, during the first 60 days in the following Plan Year after the Committee has communicated to the Participant its determination as to the Company Stock’s current fair market value. If the put right is exercised, the Trustee may, if so directed by the Committee in its sole discretion, assume the Employer’s rights and obligations with respect to purchasing the Stock. However, the put right shall not apply to the extent that the Company Stock, at the time the put right would otherwise be exercisable, may be sold on an established market in accordance with federal and state securities laws and regulations.

(c) With respect to a put right, the Employer or the Trustee, as the case may be, may elect to pay for the Company Stock in equal periodic installments, not less frequently than annually, over a period not longer than five (5) years from the 30th day after the put right is exercised pursuant to paragraph (b) of this Section 7.05, with adequate security and interest at a reasonable rate on the unpaid balance, all such terms to be set forth in a promissory note delivered to the seller with normal terms as to acceleration upon any uncured default.

(d) Nothing contained in this Section 7.05 shall be deemed to obligate any Employer to register any Company Stock under any federal or state securities law or to create or maintain a public market to facilitate the transfer or disposition of any Company Stock. The put right described in this Section 7.05 may only be exercised by a person described in the paragraph (b) of this Section 7.05, and may not be transferred with any Company Stock to any other person. As to all Company Stock purchased by the Plan in exchange for any Acquisition Loan, the put right be nonterminable. The put right for Company Stock acquired through a Acquisition Loan shall continue with respect to such Company Stock after the Acquisition Loan is repaid or the Plan ceases to be an employee stock ownership plan. Except as provided above, in accordance with the provisions of Sections 54.4975-7(b)(4) of the Treasury Regulations, no Company Stock acquired with the proceeds of an Acquisition Loan may be subject to any put, call or other option or buy-sell or similar arrangement while

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held by, and when distributed from, the Plan, whether the Plan is then an employee stock ownership plan.

Section 7.06 Restrictions on Disposition of Stock.

Except in the case of Company Stock which is traded on an established market, a Participant who receives Company Stock pursuant to this Section 7, and any person who has received Company Stock from the Plan or from such a Participant by reason of the Participant’s death or incompetency, by reason of divorce or separation from the Participant, or by reason of a rollover distribution described in Section 402(c) of the Code, shall, prior to any sale or other transfer of the Company Stock to any other person, first offer the Company Stock to the issuing Employer and to the Plan at its current fair market value. This restriction shall apply to any transfer, whether voluntary, involuntary, or by operation of law, and whether for consideration or gratuitous. Either the Employer or the Trustee may accept the offer within 14 days after it is delivered. Any Company Stock distributed by the Plan shall bear a conspicuous legend describing the right of first refusal under this Section 7.06, as applicable, as well as any other restrictions upon the transfer of the Company Stock imposed by federal and state securities laws and regulations.

Section 7.07 Direct Transfer of Eligible Plan Distributions.

(a) Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee’s election under this Section, a distributee (as defined below) may elect to have any portion of an eligible rollover distribution (as defined below) paid directly to an eligible retirement plan (as defined below) specified by the distributee in a direct rollover (as defined below). A “distributee” includes a Participant or former Participant. In addition, the Participant’s or former Participant’s surviving spouse and the Participant’s or former Participant’s spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. For purposes of this Section 7.07 a “direct rollover” is a payment by the Plan to the eligible retirement plan specified by the distributee.

(b) To effect such a direct transfer, the distributee must notify the Committee that a direct rollover is desired and provide to the Committee sufficient information regarding the eligible retirement plan to which the payment is to be made. Such notice shall be made in such form and at such time as the Committee may prescribe. Upon receipt of such notice, the Committee shall direct the Trustee to make a trustee-to-trustee transfer of the eligible rollover distribution to the eligible retirement plan so specified.

(c) For purposes of this Section 7.07, an “eligible rollover distribution” shall have the meaning set forth in Section 402(c)(4) of the Code and any Treasury Regulations promulgated thereunder. To the extent such meaning is not inconsistent with the above references, an eligible rollover distribution shall mean any distribution of all or any portion of the Participant’s Account, except that such term shall not include any distribution which is one of a series of substantially equal periodic payments (not less frequently than annually)

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made (i) for the life (or life expectancy) of the Participant or the joint lives (or joint life expectancies) of the Participant and a designated Beneficiary, or (ii) for a period of ten (10) years or more. Further, the term “eligible rollover distribution” shall not include any distribution required to be made under Section 401(a)(9) of the Code or, the portion of any distribution that is not includible in gross income (determined without regard to the exclusions for net unrealized appreciation with respect to Company Stock). To the extent applicable under the Plan, “eligible rollover distributions” shall also not include any hardship distribution described in Section 401(k)(2)(B)(i)(IV) of the Code.

(d) For purposes of this Section 7.07, an “eligible retirement plan” shall have the meaning set forth in Section 402(c)(8) of the Code and any Treasury Regulations promulgated thereunder. To the extent such meaning is not consistent with the above references, an eligible retirement plan shall mean: (i) an individual retirement account described in Section 408(a) of the Code, (ii) an individual retirement annuity described in Section 408(b) of the Code, (iii) an annuity or annuity plan described in Section 403(a) or Section 403(b) of the Code, (iv) a qualified trust described in Section 401(a) of the Code, or (v) a governmental plan under Section 457 of the Code that accepts the distributee’s eligible rollover distribution. However, in the case of an eligible rollover distribution to a surviving spouse, an eligible retirement plan means an individual retirement account or individual retirement annuity.

(e) An eligible retirement plan shall also mean an annuity contract described in Section 403(b) of the Code and an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state which agrees to separately account for amounts transferred into such plan from this Plan. The definition of eligible retirement plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order as defined in Section 414(p) of the Code.

Section 7.08 Waiver of 30-Day Period After Notice of Distribution.

If a distribution is one to which Sections 401(a)(11) and 417 of the Code do not apply, such distribution may commence less than 30 days after the notice required under Treasury Regulations Section 1.411(a)-11(c) is given, provided that:

(i)	the Trustee or Committee, as applicable, clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular option), and
(ii)	the Participant, after receiving the notice, affirmatively elects a distribution.

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Section 8
Voting of Company Stock and Tender Offers

Section 8.01 Voting of Company Stock.

(a) In General. The Trustee shall generally vote all shares of Company Stock held in the Trust in accordance with the provisions of this Section 8.01.

(b) Allocated Shares. Shares of Company Stock which have been allocated to Participants’ Accounts shall be voted by the Trustee in accordance with the Participants’ written instructions.

(c) Uninstructed and Unallocated Shares. Shares of Company Stock which have been allocated to Participants’ Accounts but for which no written instructions have been received by the Trustee regarding voting shall be voted by the Trustee in a manner calculated to most accurately reflect the instructions the Trustee has received from Participants regarding voting shares of allocated Company Stock. Shares of unallocated Company Stock shall also be voted by the Trustee in a manner calculated to most accurately reflect the instructions the Trustee has received from Participants regarding voting shares of allocated Company Stock. Notwithstanding the preceding two sentences, all shares of Company Stock which have been allocated to Participants’ Accounts and for which the Trustee has not timely received written instructions regarding voting and all unallocated shares of Company Stock must be voted by the Trustee in a manner determined by the Trustee to be solely in the best interests of the Participants and Beneficiaries.

(d) Voting Prior to Allocation. In the event no shares of Company Stock have been allocated to Participants’ Accounts at the time Company Stock is to be voted, each Participant shall be deemed to have one share of Company Stock allocated to his Accounts for the sole purpose of providing the Trustee with voting instructions.

(e) Procedure and Confidentiality. Whenever such voting rights are to be exercised, the Employers, the Committee, and the Trustee shall see that all Participants and Beneficiaries are provided with the same notices and other materials as are provided to other holders of the Company Stock, and are provided with adequate opportunity to deliver their instructions to the Trustee regarding the voting of Company Stock allocated to their Accounts or deemed allocated to their Accounts for purposes of voting. The instructions of the Participants with respect to the voting of shares of Company Stock shall be confidential.

Section 8.02 Tender Offers.

In the event of a tender offer, Company Stock shall be tendered by the Trustee in the same manner set forth in Section 8.01 of the Plan regarding the voting of Company Stock.

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Section 9
The Committee and Plan Administration

Section 9.01 Identity of the Committee.

The Committee shall consist of three or more individuals selected by the Bank. Any individual, including a director, trustee, shareholder, officer, or Employee of an Employer, shall be eligible to serve as a member of the Committee. The Bank shall have the power to remove any individual serving on the Committee at any time without cause upon ten (10) days written notice to such individual and any individual may resign from the Committee at any time without reason upon ten (10) days written notice to the Bank. The Bank shall notify the Trustee of any change in membership of the Committee.

Section 9.02 Authority of Committee.

(a) The Committee shall be the “plan administrator” within the meaning of ERISA and shall have exclusive responsibility and authority to control and manage the operation and administration of the Plan, including the interpretation and application of its provisions, except to the extent such responsibility and authority are otherwise specifically:

(i)	allocated to the Bank, the Employers, or the Trustee under the Plan and Trust Agreement;
(ii)	delegated in writing to other persons by the Bank, the Employers, the Committee, or the Trustee; or
(iii)	allocated to other parties by operation of law.

(b) The Committee shall have exclusive responsibility regarding decisions concerning the payment of benefits under the Plan.

(c) The Committee shall have full investment responsibility with respect to the Investment Fund except to the extent, if any, specifically provided in the Trust Agreement.

(d) In the discharge of its duties, the Committee may employ accountants, actuaries, legal counsel, and other agents (who also may be employed by an Employer or the Trustee in the same or some other capacity) and may pay such individuals reasonable compensation and expenses for their services rendered with respect to the operation or administration of the Plan to the extent such payments are not otherwise prohibited by law.

Section 9.03 Duties of Committee.

(a) The Committee shall keep whatever records may be necessary in connection with the maintenance of the Plan and shall furnish to the Employers whatever reports may be required from time to time by the Employers. The Committee shall furnish to the Trustee whatever information may be necessary to properly administer the Trust. The Committee

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shall see to the filing with the appropriate government agencies of all reports and returns required with respect to the Plan under ERISA and the Code and other applicable laws.

(b) The Committee shall have exclusive responsibility and authority with respect to the Plan’s holdings of Company Stock and shall direct the Trustee in all respects regarding the purchase, retention, sale, exchange, and pledge of Company Stock and the creation and satisfaction of any Acquisition Loan to the extent such responsibilities are not set forth in the Trust Agreement.

(c) The Committee shall at all times act consistently with the Bank’s long-term intention that the Plan, as an employee stock ownership plan, be invested primarily in Company Stock. Subject to the direction of the Committee with respect to any Acquisition Loan pursuant to the provisions of Section 4.03 of the Plan, and subject to the provisions of Sections 7.05 and 11.04 of the Plan as to Participants’ rights under certain circumstances to have their Accounts invested in Company Stock or in assets other than Company Stock, the Committee shall determine, in its sole discretion, the extent to which assets of the Trust shall be used to repay any Acquisition Loan, to purchase Company Stock, or to invest in other assets selected by the Committee or an investment manager. No provision of the Plan relating to the allocation or vesting of any interests in the Company Stock or investments other than Company Stock shall restrict the Committee from changing any holdings of the Trust Fund, whether the changes involve an increase or a decrease in the Company Stock or other assets credited to Participants’ Accounts. In determining the proper extent of the Trust Fund’s investment in Company Stock, the Committee shall be authorized to employ investment counsel, legal counsel, appraisers, and other agents and to pay their reasonable compensation and expenses to the extent such payments are not prohibited by law.

(d) If the valuation of any Company Stock is not established by reported trading on a generally recognized public market, then the Committee shall have the exclusive authority and responsibility to determine value of the Company Stock for all purposes under the Plan. Such value shall be determined as of each Valuation Date and on any other date as of which the Trustee purchases or sells Company Stock in a manner consistent with Section 4975 of the Code and the Treasury Regulations thereunder. The Committee shall use generally accepted methods of valuing stock of similar corporations for purposes of arm’s length business and investment transactions, and in this connection the Committee shall obtain, and shall be protected in relying upon, the valuation of Company Stock as determined by an independent appraiser experienced in preparing valuations of similar businesses.

Section 9.04 Compliance with ERISA and the Code.

The Committee shall perform all acts necessary to ensure the Plan’s compliance with ERISA and the Code. Each individual member of the Committee shall discharge his duties in good faith and in accordance with the applicable requirements of ERISA and the Code.

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Section 9.05 Action by Committee.

All actions of the Committee shall be governed by the affirmative vote of a number of the members of the Committee which is a majority of the total number of the members of the Committee. The members of the Committee may meet informally and may take any action without meeting as a group.

Section 9.06 Execution of Documents.

Any instrument executed by the Committee may be signed by any member of the Committee.

Section 9.07 Adoption of Rules.

The Committee shall adopt such rules and regulations of uniform applicability as it deems necessary or appropriate for the proper operation, administration and interpretation of the Plan.

Section 9.08 Responsibilities to Participants.

The Committee shall determine which Employees qualify to participate in the Plan. The Committee shall furnish to each Eligible Employee whatever summary plan descriptions, summary annual reports, and other notices and information may be required under ERISA. The Committee also shall determine when a Participant or his Beneficiary qualifies for the payment of benefits under the Plan. The Committee shall furnish to each such Participant or Beneficiary whatever information is required under ERISA or the Code (or is otherwise appropriate) to enable the Participant or Beneficiary to make whatever elections may be available pursuant to Section 7, and the Committee shall provide for the payment of benefits in the proper form and amount from the Trust. The Committee may decide in its sole discretion to permit modifications of elections and to defer or accelerate benefits to the extent consistent with the terms of the Plan, applicable law, and the best interests of the individuals concerned.

Section 9.09 Alternative Payees in Event of Incapacity.

If the Committee finds at any time that an individual qualifying for benefits under this Plan is a minor or is incompetent, the Committee may direct the benefits to be paid, in the case of a minor, to his parents, his legal guardian, a custodian for him under the Uniform Transfers to Minors Act, or the person having actual custody of him, or, in the case of an incompetent, to his spouse, his legal guardian, or the person having actual custody of him. The Committee and the Trustee shall not be obligated to inquire as to the actual use of the funds by the person receiving them under this Section 9.09, and any such payment shall completely discharge the obligations of the Plan, the Trustee, the Committee, and the Employers to the extent of the payment.

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Section 9.10 Indemnification by Employers.

Except as separately agreed in writing, the Committee, and any member or employee of the Committee, shall be indemnified and held harmless by the Employers, jointly and severally, to the fullest extent permitted by law against any and all costs, damages, expenses, and liabilities reasonably incurred by or imposed upon the Committee or such individual in connection with any claim made against the Committee or such individual or in which the Committee or such individual may be involved by reason of being, or having been, the Committee, or a member or employee of the Committee, to the extent such amounts are not paid by insurance.

Section 9.11 Abstention by Interested Member.

Any member of the Committee who also is a Participant in the Plan shall take no part in any determination specifically relating to his own participation or benefits under the Plan, unless his abstention would render the Committee incapable of acting on the matter.

Section 10
Rules Governing Benefit Claims

Section 10.01 Claim for Benefits.

Any Participant or Beneficiary who qualifies for the payment of benefits shall file a claim for his benefits with the Committee on a form provided by the Committee. The claim, including any election of an alternative benefit form, shall be filed at least 30 days before the date on which the benefits are to begin. If a Participant or Beneficiary fails to file a claim by the 30th day before the date on which benefits become payable, he shall be presumed to have filed a claim for payment for the Participant’s benefits in the standard form prescribed by Section 7 of the Plan.

Section 10.02 Notification by Committee.

Within 90 days after receiving a claim for benefits (or within 180 days, if special circumstances require an extension of time and written notice of the extension is given to the Participant or Beneficiary within 90 days after receiving the claim for benefits), the Committee shall notify the Participant or Beneficiary whether the claim has been approved or denied. If the Committee denies a claim in any respect, the Committee shall set forth in a written notice to the Participant or Beneficiary:

(a) each specific reason for the denial;

(b) specific references to the pertinent Plan provisions on which the denial is based;

(c) a description of any additional material or information which could be submitted by the Participant or Beneficiary to support his claim, with an explanation of the relevance of such information; and

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(d) an explanation of the claims review procedures set forth in Section 10.03 of the Plan.

Section 10.03 Claims Review Procedure.

Within 60 days after a Participant or Beneficiary receives notice from the Committee that his claim for benefits has been denied in any respect, he may file with the Committee a written notice of appeal setting forth his reasons for disputing the Committee’s determination. In connection with his appeal the Participant or Beneficiary or his representative may inspect or purchase copies of pertinent documents and records to the extent not inconsistent with other Participants’ and Beneficiaries’ rights of privacy. Within 60 days after receiving a notice of appeal from a prior determination (or within 120 days, if special circumstances require an extension of time and written notice of the extension is given to the Participant or Beneficiary and his representative within 60 days after receiving the notice of appeal), the Committee shall furnish to the Participant or Beneficiary and his representative, if any, a written statement of the Committee’s final decision with respect to his claim, including the reasons for such decision and the particular Plan provisions upon which it is based.

Section 11
The Trust

Section 11.01 Creation of Trust Fund.

All amounts received under the Plan from an Employer and investments shall be held in a Trust Fund pursuant to the terms of this Plan and the Trust Agreement. The benefits described in this Plan shall be payable only from the assets of the Trust Fund. Neither the Bank, any other Employer, its board of directors or trustees, its stockholders, its officers, its employees, the Committee, nor the Trustee shall be liable for payment of any benefit under this Plan except from the Trust Fund.

Section 11.02 Company Stock and Other Investments.

Trust Fund held by the Trustee shall be divided into Company Stock and investments other than Company Stock. The Trustee shall have no investment responsibility for the portion of the Trust Fund consisting of Company Stock, but shall accept any Employer contributions made in the form of Company Stock, and shall acquire, sell, exchange, distribute, and otherwise deal with and dispose of Company Stock in accordance with the instructions of the Committee.

Section 11.03 Acquisition of Company Stock.

From time to time the Committee may, in its sole discretion, direct the Trustee to acquire Company Stock from the issuing Employer or from shareholders, including shareholders who are or have been Employees, Participants, or fiduciaries with respect to the Plan. The Trustee shall pay for such Company Stock no more than its fair market value, which shall be determined conclusively by the Committee pursuant to Section 9.03(d) of the Plan. The

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Committee may direct the Trustee to finance the acquisition of Company Stock through an Acquisition Loan subject to the provisions of Section 4.03 of the Plan.

Section 11.04 Participants’ Option to Diversify.

The Committee shall provide for a procedure under which each Participant may, during the first five years of a certain six-year period, elect to have up to 25 percent of the value of his Accounts committed to alternative investment options within an “Investment Fund.” For the sixth year in this period, the Participant may elect to have up to 50 percent of the value of his Accounts committed to other investments. The six-year period shall begin with the Plan Year following the first Plan Year in which the Participant has both reached aged 55 and completed 10 years of participation in the Plan; a Participant’s election to diversify his Accounts must be made within the 90-day period immediately following the last day of each of the six Plan Years. The Committee shall see that the Investment Fund includes a sufficient number of investment options to comply with Section 401(a)(28)(B) of the Code. The Committee may, in its discretion, permit a transfer of a portion of the Participant’s Accounts to the Savings Plan in order to satisfy this Section 11.04, provided such investments comply with Section 401(a)(28)(B) and such transfer is not otherwise prohibited under the Code or ERISA. The Trustee shall comply with any investment directions received from Participants in accordance with the procedures adopted from time to time by the Committee under this Section 11.04.

Section 12
Adoption, Amendment and Termination

Section 12.01 Adoption of Plan by Other Employers.

With the consent of the Bank, any entity may become a participating Employer under the Plan by:

(a) taking such action as shall be necessary to adopt the Plan;

(b) becoming a party to the Trust Agreement establishing the Trust Fund; and

(c) executing and delivering such instruments and taking such other action as may be necessary or desirable to put the Plan into effect with respect to the entity’s Employees.

Section 12.02 Adoption of Plan by Successor.

In the event that any Employer shall be reorganized by way of merger, consolidation, transfer of assets or otherwise, so that an entity other than an Employer shall succeed to all or substantially all of the Employer’s business, the successor entity may be substituted for the Employer under the Plan by adopting the Plan and becoming a party to the Trust Agreement. Contributions by the Employer shall be automatically suspended from the effective date of any such reorganization until the date upon which the substitution of the successor entity for the Employer under the Plan becomes effective. If, within 90 days

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following the effective date of any such reorganization, the successor entity shall not have elected to become a party to the Plan, or if the Employer shall adopt a plan of complete liquidation other than in connection with a reorganization, the Plan shall be automatically terminated with respect to Employees of the Employer as of the close of business on the 90th day following the effective date of the reorganization, or as of the close of business on the date of adoption of a plan of complete liquidation, as the case may be.

Section 12.03 Plan Adoption Subject to Qualification.

Notwithstanding any other provision of the Plan, the adoption of the Plan and the execution of the Trust Agreement are conditioned upon their being determined initially by the Internal Revenue Service to meet the qualification requirements of Section 401(a) of the Code, so that the Employers may deduct currently for federal income tax purposes their contributions to the Trust and so that the Participants may exclude the contributions from their gross income and recognize income only when they receive benefits. In the event that this Plan is held by the Internal Revenue Service not to qualify initially under Section 401(a) of the Code, the Plan may be amended retroactively to the earliest date permitted by the Code and the applicable Treasury Regulations in order to secure qualification under Section 401(a) of the Code. If this Plan is held by the Internal Revenue Service not to qualify initially under Section 401(a) of the Code either as originally adopted or as amended, each Employer’s contributions to the Trust under this Plan (including any earnings thereon) shall be returned to it and this Plan shall be terminated. In the event that this Plan is amended after its initial qualification and the Plan as amended is held by the Internal Revenue Service not to qualify under Section 401(a) of the Code, the amendment may be modified retroactively to the earliest date permitted by the Code and the applicable Treasury Regulations in order to secure approval of the amendment under Section 401(a) of the Code.

Section 12.04 Right to Amend or Terminate.

The Bank intends to continue this Plan as a permanent program. However, each participating Employer separately reserves the right to suspend, supersede, or terminate the Plan at any time and for any reason, as it applies to that Employer’s Employees, and the Bank reserves the right to amend, suspend, supersede, merge, consolidate, or terminate the Plan at any time and for any reason, as it applies to the Employees of all Employers. No amendment, suspension, supersession, merger, consolidation, or termination of the Plan shall reduce any Participant’s or Beneficiary’s proportionate interest in the Trust Fund, or shall divert any portion of the Trust Fund to purposes other than the exclusive benefit of the Participants and their Beneficiaries prior to the satisfaction of all liabilities under the Plan. Except as is required for purposes of compliance with the Code or ERISA, the provisions of Section 4.04 relating to the crediting of contributions, forfeitures and shares of Company Stock released from the Loan Suspense Account, nor any other provision of the Plan relating to the allocation of benefits to Participants, may be amended more frequently than once every six months. Moreover, there shall not be any transfer of assets to a successor plan or merger or consolidation with another plan unless, in the event of the termination of the successor plan or the surviving plan immediately following such

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transfer, merger, or consolidation, each participant or beneficiary would be entitled to a benefit equal to or greater than the benefit he would have been entitled to if the plan in which he was previously a participant or beneficiary had terminated immediately prior to such transfer, merger, or consolidation. Following a termination of this Plan by the Bank, the Trustee shall continue to administer the Trust and pay benefits in accordance with the Plan and the Committee’s instructions.

Section 13
General Provisions

Section 13.01 Nonassignability of Benefits.

The interests of Participants and other persons entitled to benefits under the Plan shall not be subject to the claims of their creditors and may not be voluntarily or involuntarily assigned, alienated, pledged, encumbered, sold, or transferred. The prohibitions set forth in this Section 13.01 shall also apply any judgement, decree, or order (including approval of a property or settlement agreement) which relates to the provision of child support, alimony, or property rights to a present or former spouse, child, or other dependent of a Participant pursuant to a domestic relations order, unless such judgement, decree or order is determined to be a “qualified domestic relations order” as defined in Section 414(p) of the Code.

Section 13.02 Limit of Employer Liability.

The liability of the Employers with respect to Participants and other persons entitled to benefits under the Plan shall be limited to making contributions to the Trust from time to time, in accordance with Section 4 of the Plan.

Section 13.03 Plan Expenses.

All expenses incurred by the Committee or the Trustee in connection with administering the Plan and Trust shall be paid by the Trustee from the Trust Fund to the extent the expenses have not been paid or assumed by the Employers or by the Trustee.

Section 13.04 Nondiversion of Assets.

Except as provided in Sections 5.05 and 12.03 of the Plan, under no circumstances shall any portion of the Trust Fund be diverted to or used for any purpose other than the exclusive benefit of the Participants and their Beneficiaries prior to the satisfaction of all liabilities under the Plan.

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Section 13.05 Separability of Provisions.

If any provision of the Plan is held to be invalid or unenforceable, the other provisions of the Plan shall not be affected but shall be applied as if the invalid or unenforceable provision had not been included in the Plan.

Section 13.06 Service of Process.

The agent for the service of process upon the Plan shall be the president of the Bank and the Trustee, or such other person as may be designated from time to time by the Bank.

Section 13.07 Governing Law.

The Plan is established under, and its validity, construction and effect shall be governed by the laws of the State of Maryland to the extent those laws are not preempted by federal law, including the provisions of ERISA.

Section 13.08 Special Rules for Persons Subject to Section 16(b) Requirements.

Notwithstanding anything herein to the contrary, any former Participant who is subject to the provisions of Section 16(b) of the Securities Exchange Act of 1934, who becomes eligible to again participate in the Plan, may not become a Participant prior to the date that is six months from the date such former Participant terminated participation in the Plan. In addition, any person subject to the provisions of Section 16(b) of the 1934 Act receiving a distribution of Company Stock from the Plan must hold such Company Stock for a period of six months commencing with the date of distribution. However, this restriction will not apply to Company Stock distributions made in connection with death, retirement, disability or termination of employment, or made pursuant to the terms of a qualified domestic relations order.

Section 13.09 Military Service.

Notwithstanding any other provision of this Plan to the contrary, contributions, benefits and Service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code.

Section 13.10 Use of Electronic Media to Provide Notices and Make Participant Elections.

Pursuant to Treasury Regulations Section 1.401(a)-21, the Plan may elect to use electronic media to provide notices required to be provided to Participants under the Plan and will accept elections from Participants communicated to the Plan using such electronic media.

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Section 14
Top-Heavy Provisions

Section 14.01 Top-Heavy Provisions.

(a) Key employee. Key employee means any employee or former employee (including any deceased employee) who at any time during the Plan Year that includes the Determination Date was an officer of the Employer having annual compensation greater than $160,000 (as adjusted under Section 416(i)(1) of the Code), a 5% owner of the Employer or a 1% owner of the Employer having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of Section 415(c)(3) of the Code. The determination of who is a key employee will be made in accordance with Section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.

(b) Determination of present values and amounts. This section (ii) shall apply for purposes of determining the present values of accrued benefits and the amounts of account balances of Participants as of the distribution date.

(i)

Distributions during year ending on the Determination Date. The present values of accrued benefits and the amounts of account balances of a Participant as of the Determination Date shall be increased by the distributions made with respect to the Participant under the Plan and any Plan aggregated with the Plan under Section 416(g)(2) of the Code during the 1-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death or disability, this provision shall be applied by substituting “5-year period” for “1-year period”.

(ii)

Participants not performing services during the year ending on the Determination Date. The accrued benefits and accounts of any individual who has not performed services for the Employer during the 1-year period ending on the Determination Date shall not be taken into account.

Section 14.02 Plan Modifications Upon Becoming Top-Heavy.

(a) Minimum Accruals. Section 5.04 of the Plan will be modified to provide that the aggregate amount of Employer contributions allocated in each Plan Year to the Accounts of each Participant who is a non-Key Employee (as defined under Section 416(i)(1) of the Code), and who is employed by an Employer as of the last day of the Plan Year, may not be less than the lesser of:

(i) three percent (3%) of his Compensation for the Plan Year; and

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(ii) a percentage of his Compensation equal to the largest percentage obtained by dividing the sum of the amount credited to the Accounts of any Key Employee by that Key Employee’s Compensation.

(b) The preceding provision will remain in effect for the period in which the Plan is top-heavy. If, for any particular year thereafter, the Plan is no longer top-heavy, the provisions contained in this Section 14.02 shall cease to apply, except that any previously vested portion of any Account balance shall remain nonforfeitable.

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FORM OF

TRUST AGREEMENT

BETWEEN

FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION

AND

THE TRUSTEES

FOR THE

FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
EMPLOYEE STOCK OWNERSHIP PLAN TRUST

Effective as of January 1, 2011

TABLE OF CONTENTS

		Page No.
Section 1	Creation of Trust		1
Section 2	Investment of Trust Fund and Administrative Powers of the Trustee		2
Section 3	Compensation and Indemnification of Trustee and Payment of Expenses and Taxes		7
Section 4	Records and Valuation		8
Section 5	Instructions from Committee		9
Section 6	Change of Trustee		10
Section 7	Miscellaneous		10

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     This TRUST AGREEMENT dated as of [date], between FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION, with its administrative office at 764 Washington Boulevard, Baltimore, Maryland 21230 (hereinafter called the “Association”), and [TRUSTEE] (hereinafter called the “Trustee”).

WITNESSETH THAT:

     WHEREAS, the Association has approved and adopted an employee stock ownership plan for the benefit of its employees, the Fraternity Federal Savings and Loan Association Employee Stock Ownership Plan (hereinafter called the “Plan”); and

     WHEREAS, the Association has authorized the execution of this Trust Agreement and has appointed [Trustee] as Trustee of the Trust Fund created pursuant to the Plan; and

     WHEREAS, [Trustee] has agreed to act as Trustee and to hold and administer the assets of the Plan in accordance with the terms of this Trust Agreement.

     NOW, THEREFORE, the Association and the Trustee agree as follows:

     Section 1. Creation of Trust.

     1.1 Trustee. [Trustee] shall serve as Trustee of the Trust Fund created in accordance with and in furtherance of the Plan, and shall serve as Trustee until its removal or resignation in accordance with Section 6.

     1.2 Trust Fund. The Trustee hereby agrees to accept contributions from the Employer, as defined in the Plan, and amounts transferred from other qualified retirement plans from time to time in accordance with the terms of the Plan. All such property and contributions, together with income thereon and increments thereto, shall constitute the “Trust Fund” to be held in accordance with the terms of the Trust Agreement.

     1.3 Incorporation of Plan. An instrument entitled “Fraternity Federal Savings and Loan Association Employee Stock Ownership Plan” is incorporated herein by reference, and this Trust Agreement shall be interpreted consistently with that Plan. All words and phrases defined in that Plan shall have the same meanings when used in this Trust Agreement, unless otherwise defined in this Agreement.

     1.4 Name. The name of this trust shall be “Fraternity Federal Savings and Loan Association Employee Stock Ownership Plan Trust.”

     1.5 Nondiversion of Assets. In no event shall any part of the corpus or income of the Trust Fund be used for, or diverted to, purposes other than for the exclusive benefit of the Participants and their Beneficiaries prior to the satisfaction of all liabilities under the Plan, except to the extent that assets may be returned to the Employer in accordance with the Plan where the Plan fails to qualify initially under Section 401(a) of the Internal Revenue Code of 1986, as

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amended (the “Code”), or where they are attributable to contributions made by mistake of fact or in excess of the deductibility allowed under the Code.

     Section 2. Investment of Trust Fund and Administrative Powers of the Trustee.

     2.1 Stock and Other Investments. The basic investment policy of the Plan shall be to invest primarily in Stock of the Employer for the exclusive benefit of the Participants and their Beneficiaries. The Committee shall have full and complete investment authority and responsibility with respect to the purchase, retention, sale, exchange, and pledge of Stock and the payment of Stock Obligations, and the Trustee shall not deal in any way with Stock except in accordance with its obligations pursuant to this Trust Agreement and the written instructions of the Committee. The Trustee shall invest, or keep invested, all or a portion of the Trust Fund in Stock, and shall pay Stock Obligations out of assets of the Trust Fund, as instructed from time to time by the Committee. The Trustee shall invest any balance of the Trust Fund (the “Investment Fund”) in such other property as the Committee, in its sole discretion, shall deem advisable, subject to any delegation of such investment responsibility pursuant to Section 2.2 of this Agreement. Nothing contained herein shall provide investment discretion authority or any like responsibility in regard to the assets of the Trust Fund.

     In connection with instructions to acquire Stock, the Trustee may purchase newly issued or outstanding Stock from the Employer or any other holders of Stock, including Participants, Beneficiaries, and Plan fiduciaries. All purchases and sales of Stock shall be made by the Trustee at fair market value as determined by the Committee in good faith and in accordance with any applicable requirements under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Such purchases may be made with assets of the Trust Fund, with funds borrowed for this purpose (with or without guarantees of repayment to the lender by the Employer), or by any combination of the foregoing.

     Notwithstanding any other provision of this Trust Agreement or the Plan, neither the Committee nor the Trustee shall make any purchase, sale, exchange, investment, pledge, valuation, or loan, or take any other action involving those assets for which they are responsible which (i) is inconsistent with the policy of the Plan and Trust, (ii) is inconsistent with the prudence and diversification requirements set forth in Sections 404(a)(1)(B) and (C) of ERISA (to the extent such requirements apply to an employee stock ownership plan and trust), (iii) is prohibited by Section 406 or 407 of ERISA, or (iv) would impair the qualification of the Plan or the exemption of the Trust under Sections 401 and 501, respectively, of the Code.

     2.2 Delegation of Investment Responsibility. The Committee may, by written notice and in accordance with the Plan, direct the Trustee to segregate any portion or all of the Investment Fund into one or more separate accounts for each of which full investment responsibility will be delegated to an investment manager appointed in such notice pursuant to Section 402(c)(3) of ERISA (hereinafter a “Manager”). For any separate account where the Trustee is to maintain custody of the assets, the Trustee and the Manager shall agree upon procedures for the transmittal of investment instructions from the Manager to the Trustee, and the Trustee may provide the Manager with such documents as may be necessary to authorize the Manager to effect transactions directly on behalf of the segregated account.

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     Further, the Committee may, by written notice and in accordance with the Plan, direct the Trustee to segregate any portion or all of the Investment Fund into one or more separate accounts for each of which full investment responsibility will be delegated to an insurance company through one or more group annuity contracts, deposit administration contracts, or similar contracts, which may provide for investments in any commingled separate accounts established under such contracts. An insurance company shall be a Manager with respect to any amounts held under such a contract except to the extent the insurer’s assets are not deemed assets of the Plan and Trust Fund pursuant to Section 401(b)(2) of ERISA. The allocation of amounts held under such a contract among the insurer’s general account and one or more individual or commingled separate accounts shall be determined by the Committee except as otherwise agreed by the Committee and the insurer.

     Any Manager shall have all of the powers given to the Trustee pursuant to Section 2.3 of this Agreement with respect to the portion of the Trust Fund committed to its investment discretion and control. The Trustee shall be responsible for the safekeeping of any assets which remain in their custody, but in no event shall the Trustee be under any duty to question or make any inquiry or suggestion regarding the action or inaction of a Manager or an insurer or the advisability of acquiring, retaining, or disposing of any asset of a segregated account. The Employer shall indemnify and hold the Trustee harmless from any and all costs, damages, expenses, and liabilities which the Trustee may incur by reason of any action taken or omitted to be taken by the Trustee upon directions from the Committee, a Manager, or an insurer pursuant to this Section 2.2.

     2.3 Trustee Powers. In addition to and not by way of limitation upon the fiduciary powers granted to it by law, the Trustee shall have the following specific powers, subject to the limitations set forth in Section 2.1 of this Agreement:

     2.3-1 to receive, hold, manage, invest and reinvest the money or other property which constitutes the Trust Fund, without distinction between principal and income;

     2.3-2 to hold funds uninvested temporarily, provided it is a period of time that is not unreasonable, without liability for interest thereon, and to deposit funds in one or more savings or similar accounts with any banks and savings and loan associations which are insured by an instrumentality of the federal government, including the Trustee if it is such an institution;

     2.3-3 at the direction of the Committee, to invest or reinvest the whole or any portion of the money or other property which constitutes the Trust Fund in such common or preferred stocks, investment trust shares, mutual funds, commingled trust funds, partnership interests, bonds, notes, or other evidences of indebtedness, and real and personal property as the Trustee in their absolute judgment and discretion may deem to be for the best interests of the Trust Fund, regardless of nondiversification to the extent that such nondiversification is clearly prudent, and regardless of whether any such investment or property is authorized by law regarding the investment of trust funds, of a wasting asset nature, temporarily non-income producing, or within or without the United States;

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     2.3-4 to invest in common and preferred stocks, bonds, notes, or other obligations of any corporation or business enterprise in which an Employer or its owners may own an interest;

     2.3-5 at the direction of the Committee, to exchange any investment or property, real or personal, for other investments or properties at such time and upon such terms as the Trustee shall deem proper;

     2.3-6 at the direction of the Committee, to sell, transfer, convey or otherwise dispose of any investment or property, real or personal, for cash or on credit, in such manner and upon such terms and conditions as the Trustee shall deem advisable, and no person dealing with the Trustee shall be under any duty to inquire as to the validity, expediency, or propriety of any such sale or as to the application of the purchase money paid to the Trustee;

     2.3-7 to hold any investment or property in the name of the Trustee, with or without the designation of any fiduciary capacity, or in the name of a nominee, or unregistered, or in such other form that title may pass by delivery; provided, however, that the Trustee’s records always show that such investment or property belongs to the Trust Fund and the Trustee shall not be relieved hereby of its responsibility to maintain safe custody of such investment or property;

     2.3-8 to organize one or more corporations to hold, manage, or liquidate any property, including real estate, owned or acquired by the Trust Fund if in the sole discretion of the Trustee the organization of such corporation or corporations is for the best interests of the Trust and the Plan Participants and Beneficiaries;

     2.3-9 to extend the time for payment of, to modify, to renew, or to release security from any mortgage, note or other evidence of indebtedness, or to take advantage of or waive any default; to foreclose mortgages and bid on property under foreclosure or to take title to property by conveyance in lieu of foreclosure, either with or without the payment of additional consideration;

     2.3-10 to vote in person or by proxy all stocks and other securities having voting privileges; to exercise or refrain from exercising any option or privilege with respect to stocks and other securities, including any right or privilege to subscribe for or otherwise to acquire stocks and other securities; or to sell any such right or privilege; to assent to and join in any plan of refinance, merger, consolidation, reorganization or liquidation of any corporation or other enterprise in which this Trust may have an interest, to deposit stocks and other securities with any committee formed to effectuate the same, to pay any expense incidental thereto, to exchange stocks and other securities for those which may be issued pursuant to any such plan, and to retain as an investment the stocks and other securities received by the Trustee; and to deposit any investment in a voting trust; notwithstanding the preceding, Participants and Beneficiaries shall be entitled to direct the manner in which stock allocated to their respective accounts are to be voted on all matters. All stock which has been allocated to Participants’ Accounts for which the Trustee has received no written direction and all unallocated Employer securities will be voted by the Trustee in direct proportion to any Participant’s directions received and solely in the interest of the Participants and Beneficiaries. Whenever such voting rights are to be exercised, the Employer, the Committee and the Trustee shall see that all Participants and Beneficiaries are

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provided with adequate opportunity to deliver their instructions to the Trustee regarding voting of stock allocated to their accounts. The instructions of the Participants with respect to the voting of allocated shares hereunder shall be confidential;

     2.3-11 to abandon any property, real or personal, which the Trustee shall consider to be worthless or not of sufficient value to warrant its keeping or protecting; to abstain from the payment of taxes, water rents, assessments, repairs, maintenance, and upkeep of any such property; to permit any such property to be lost by tax sale or other proceedings, and to convey any such property for a nominal consideration or without consideration;

     2.3-12 to borrow money from the Employer or from others (including the Trustee), and to enter into installment contracts, for the purchase of Stock upon such terms and conditions and at such reasonable rates of interest as the Committee may deem to be advisable, to issue its promissory notes as Trustee to evidence such debt, to secure the payment of such notes by pledging any property of the Trust Fund, and to authorize the holders of any such notes to pledge them to secure obligations of the holders and in connection therewith to repledge any assets of the Trust as security therefor; provided that, with respect to any extension of credit to the Trust involving, as a lender or guarantor, the Employer or other “disqualified person” within the meaning of Section 4975(e)(2) of the Code —

(a)	each loan or installment contract is primarily for the benefit of Participants and Beneficiaries of the Plan;
(b)	any interest on a loan or installment contract does not exceed a reasonable rate;
(c)	the proceeds of any loan shall be used only to acquire Stock, to repay the loan, or to repay a previous loan meeting these conditions, and the subject of any installment contract shall be only the Trust’s purchase of Stock;
(d)	any collateral pledged to a creditor by the Trustee shall consist only of qualifying employer securities as that term is defined under Section 4975(e)(8) of the Code and the creditor shall have no recourse against the Trust Fund except with respect to the collateral (although the creditor may have recourse against an Employer as guarantor);
(e)	payments with respect to a loan or installment contract shall be made only from those amounts contributed by the Employer to the Trust Fund, from amounts earned on such contributions, and from cash dividends received on unallocated Stock held by the Trust as collateral for such an obligation; and
(f)	upon the payment of any portion of balance due on a loan or upon any installment payment, a proportionate part of any qualified employer securities originally pledged as collateral for such indebtedness shall be released from encumbrance in accordance with Section 4.2 of the Plan and the Committee shall at least annually advise the Trustee of the number of shares of Stock so released and the proper allocation of such shares under the terms of the Plan;

     2.3-13 to manage and operate any real property which shall at any time constitute an asset of the Trust Fund; to make repairs, alterations, and improvements thereto; to insure such property against loss by fire or other casualty; to lease or grant options for the sale of such property, which lease or option may be for a period of time which may extend beyond the life of

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this Trust; and to take any other action or enter into any other contract respecting such property which is consistent with the best interests of the Trust;

     2.3-14 to pay any and all reasonable and normal expenses incurred in connection with the exercise of any power, right, authority or discretion granted herein, and, upon prior notice to the Association, to employ and compensate agents, investment counsel, custodians, actuaries, attorneys, and accountants in such connection;

     2.3-15 to employ and consult with any legal counsel, who also may be counsel to an Employer or the Administrator, with respect to the meaning or construction of this Trust Agreement, the extent of the Trustee’s obligations and duties hereunder, and whether the Trustee should take or decline to take a particular action hereunder, and the Trustee shall be fully protected with respect to any action taken or omitted by such Trustee in good faith pursuant to such advice;

     2.3-16 to defend any action or proceeding instituted against the Trust Fund, to institute any action on behalf of the Trust Fund, and to compromise or submit to arbitration any dispute concerning the Trust Fund;

     2.3-17 to make, execute, acknowledge and deliver any and all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted;

     2.3-18 to commingle the Trust Fund created pursuant hereto, in whole or in part, in a single trust with all or any portion of any other trust fund, assigning an undivided interest to each such commingled trust fund, provided that such commingled trust is itself exempt from taxation pursuant to Section 501(a) of the Code, or its successor Section; and provided further that the trust agreement governing such commingled trust shall be deemed incorporated by reference in the Plan;

     2.3-19 where two or more trusts governed by this Trust Agreement have an undivided interest in any property, to credit the income from such property to such trusts in proportion to their undivided interests, and when non pro rata distributions of property or money are made from such trusts, to make appropriate adjustments to the undivided fractional interests of such trusts;

     2.3-20 to invest all or any portion of the Trust Fund in one or more group annuity contracts, deposit administration contracts, and other such contracts with insurance companies, including any commingled separate accounts established under such contracts;

     2.3-21 generally, with respect to all cash, stocks and other securities, and property, both real and personal, received or held in the Trust Fund by the Trustee, to exercise all the same rights and powers as are or may be lawfully exercised by persons owning cash, or stocks and other securities, or such property in their own right; and to do all other acts, whether or not expressly authorized, which it may deem necessary or proper for the protection of the Trust Fund; and

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     2.3-22 whenever more than two persons shall qualify to act as co-Trustee, to exercise and perform every power (including discretionary powers), authority or duty by the concurrence of a majority of them the same effect as if all had joined therein, except that the unanimous vote of such persons shall be necessary to determine the number (one or more) and identity of persons who may sign checks, make withdrawals from financial institutions, have access to safe deposit boxes, or direct the sale of trust assets and the disposition of the proceeds.

     2.4 Brokerage. If permitted in writing by the Committee the Trustee shall have the power and authority, to be exercised in their sole discretion at any time and from time to time, to issue and place orders for the purchase or sale of securities with qualified brokers and dealers. Such orders may be placed with such qualified brokers and/or dealers who also provide investment information or other research or statistical services to the Trustee in its capacity as a fiduciary or investment manager for other clients.

     Section 3. Compensation and Indemnification of Trustee and Payment of Expenses and Taxes.

     3.1 Fees and Expenses from Fund. In consideration for rendering services pursuant to this Trust Agreement, the Trustee shall be paid fees in accordance with the Trustee’s fee schedule as in effect from time to time. Fee changes resulting in fee increases shall be effective upon not less than 30 days’ notice to the Association. In addition, the Trustee shall be reimbursed for any reasonable expenses, including reasonable attorneys’ fees, incurred in the administration of the Trust created hereby. Fees and expenses shall be allocated to Participants’ Accounts, if any, unless paid directly by the Employer. All compensation and expenses of the Trustee shall be paid out of the Trust Fund or by the Employer as specified in the Plan. If and to the extent the Trust Fund shall not be sufficient, such compensation and expenses shall be paid by the Employer upon demand. If payment is due but not paid by the Employer, such amount shall be paid from the assets of the Trust Fund. The Trustee is hereby empowered to withdraw all such compensation and expenses which are 60 days past due from the Trust Fund, and, in furtherance thereof, liquidate any assets of the Trust Fund, without further authorization or direction from or by any person. Notwithstanding the foregoing, in the event any officer or director of Fraternity Federal Savings and Loan Association serves as trustee of the Plan, no compensation shall be paid to the officer or director in exchange for his or her services as trustee.

     3.2 Indemnification. Notwithstanding any other provision of this Trust Agreement, any individual designated as a trustee hereunder shall be indemnified and held harmless by the Employer to the fullest extent permitted by law against any and all costs, damages, expenses and liabilities including, but not limited to attorneys’ fees and disbursements reasonably incurred by or imposed upon such individual in connection with any claim made against him or in which he may be involved by reason of his being, or having been, a trustee hereunder, to the extent such amounts are not satisfied by insurance maintained by the Employer, except liability which is adjudicated to have resulted from the gross negligence or willful misconduct of the Trustee by reason of any action so taken. Further, any corporate trustee and its officers, directors and agents may be indemnified and held harmless by the Employer to the fullest extent permitted by law against any and all costs, damages, expenses and liabilities including, but not limited to,

7

attorneys’ fees and disbursements reasonably incurred by or imposed upon such persons and/or corporation in connection with any claim made against it or them or in which such persons and/or corporation may be involved by reason of its being, or having been, a trustee hereunder as may be agreed between the Employer and such trustee, except liability which is adjudicated to have resulted from the gross negligence or willful misconduct of the Trustee by reason of any action so taken.

     3.3 Expenses. All expenses of administering the Trust and the Plan, whether incurred by the Trustee or the Committee, shall be paid by the Trustee from the Trust Fund to the extent such expenses shall not have been assumed by the Employer.

     3.4 Taxes. All taxes that may be levied or assessed upon or in respect of the Trust Fund shall be paid from the Trust Fund. The Trustee shall notify the Committee of any proposed or final assessments of taxes and may assume that any such taxes are lawfully levied or assessed unless the Committee advises it in writing to the contrary within fifteen days after receiving the above notice from the Trustee. In such case, the Trustee, if requested by the Committee in writing, shall contest the validity of such taxes in any manner deemed appropriate by the Committee; the Employer may itself contest the validity of any such taxes, in which case the Committee shall so notify the Trustee and the Trustee shall have no responsibility or liability respecting such contest. If either party to this Agreement contests any such proposed levy or assessments, the other party shall provide such information and cooperation as the party conducting the contest shall reasonably request.

     Section 4. Records and Valuation.

     4.1 Records. The Trustee, and any investment manager appointed pursuant to Section 2.2 of this Agreement, shall maintain accurate and detailed records and accounts of all investments, receipts, disbursements and other transactions made by it with respect to the Trust Fund, and all accounts, books and records relating thereto shall be open at all reasonable time to inspection and audit by the Committee and the Employer.

     4.2 Valuation. From time to time upon the request of the Committee, but at least annually as of the last day of each Plan Year, the Trustee shall prepare a balance sheet of the Investment Fund in accordance with the Plan and shall deliver copies of the balance sheet to the Committee and the Employer.

     4.3 Discharge of Trustee. Ninety (90) days after the filing of any balance sheet under Section 4.2 of this Agreement or any accounting under Section 6 of this Agreement, the Trustee shall be forever released and discharged from any liability or accountability other than for gross negligence or wilful misconduct on the part of the Trustee to anyone with respect to the transactions shown or reflected in such balance sheet or accounting, except with respect to any acts or transactions as to which the Committee, within such 90-day period, files written objections with the Trustee. The written approval of the Committee of any balance sheet or accounting so filed by the Trustee, or the Committee’s failure to file written objections within 90 days, shall be a settlement of such balance sheet or accounting as against all persons, and shall forever release and discharge the Trustee from any liability of accountability to anyone with

8

respect to the transactions shown or reflected in such balance sheet or accounting other than liability arising out of the Trustee’s gross negligence or wilful misconduct. If a statement of objections is filed by the Committee and the Committee is satisfied that its objections should be withdrawn or if the balance sheet or accounting is adjusted to its satisfaction, the Committee shall indicate its approval of the balance sheet or accounting in a written statement filed with the Trustee and the Trustee shall be forever released and discharged from any liability of accountability to anyone in accordance with the immediately preceding sentence. If an objection is not settled by the Committee and the Trustee, the Trustee may start a proceeding for a judicial settlement of the balance sheet or accounting in any court of competent jurisdictions; the only parties that need be joined in such a proceeding are the Trustee, the Committee, the Employer and any other parties whose participation is required by law.

     4.4 Right to Judicial Settlement. Nothing in this Agreement shall prevent the Trustee from having its account settled by a court of competent jurisdiction at any time. The only parties that need be joined in any such proceeding are the Employer, the Committee, the Trustee and any other parties whose participation is required by law.

     Section 5. Instructions from Committee.

     5.1 Certification of Members of the Committee. From time to time the Association shall certify to the Trustee in writing the names of the individuals comprising the Committee and shall furnish to the Trustee specimens of their signatures and the signatures of their agents, if any. The Trustee shall be entitled to presume that the identities of such individuals and their agents are unchanged until it receives a certification from the Association notifying it of any changes.

     5.2 Instructions to Trustee.

     (a) The Trustee shall pay benefits and administrative expenses under the Plan only when it receives (and in accordance with) written instructions of the Committee indicating the amount of the payment and the name and address of the recipient in accordance with the terms of the Plan. The Trustee need not inquire into whether any payment the Committee instructs the Trustee to make is consistent with the terms of the Plan or applicable law or otherwise proper. Any payment made by the Trustee in accordance with such instructions shall be a complete discharge and acquaintance to the Trustee. If the Committee advises the Trustee that benefits have become payable with respect to a Participant’s interest in the Trust Fund but does not instruct the Trustee as to the manner of payment, the Trustee shall hold the Participant’s interest in the Trust until the Trustee receives written instructions from the Committee as to the manner of payment. The Trustee shall not pay benefits from the Trust Fund without such instructions, even though it may be informed from other sources, including, without limitation, a Participant or Beneficiary, that benefits are payable under the Plan. The Trustee shall have no responsibility to determine when, to whom or in what amount benefits and expenses are payable under the Plan. Further, the Trustee shall have no power, authority or duty to interpret the Plan or inquire into the decisions or determinations of the Committee, or to question the instructions given to it by the Committee. If the Committee so directs, the Trustee shall segregate amounts payable with

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respect to the interest in the Plan of any Participant and administer them separately from the rest of the Trust Fund in accordance with the Committee’s instructions.

     (b) The Trustee may require the Committee to certify in writing that any payment of benefits or expenses it instructs the Trustee to make pursuant to Section 5.2(a) above is: (i) in accordance with the terms of the Plan and/or (ii) one which the Committee is authorized by the Plan and any other applicable instruments to direct and/or (iii) made for the exclusive purpose of providing benefits to Participants and Beneficiaries, or defraying reasonable expenses of Plan administration and/or (iv) not made to a party in interest (within the meaning of ERISA Section 3(14)), and/or (v) not a prohibited transaction (within the meaning of Code Section 4975 and ERISA Section 406). If the Trustee requests, instructions to pay benefits shall be made by the Committee on forms prepared by the Trustee to include any or all of the above representations. The Trustee shall be fully protected in relying on the truth of any such representation by the Committee and shall have no duty to investigate whether such representations are correct or to see to the application of any amounts paid to and received by the recipient.

     5.3 Plan Change. In the event of an amendment, merger, division, or termination of the Plan, the Trustee shall continue to disburse funds and to take other proper actions in accordance with the instructions of the Committee.

     Section 6. Change of Trustee.

     The Association may at any time remove any person or entity serving as a Trustee hereunder by giving to such person or entity written notice of removal and, if applicable, the name and address of the successor trustee. Any person or entity serving as a Trustee hereunder may resign at any time by giving written notice to the Association. Any such removal or resignation shall take effect within 30 days after notice has been given by the Trustee or by the Association, as the case may be. Within those 30 days, the removed or resigned Trustee shall transfer, pay over and deliver any portion of the Trust Fund in its possession or control (less an appropriate reserve for any unpaid fees, expenses, and liabilities) and all pertinent records to the successor or remaining trustee; provided, however, that any assets which are invested in a collective fund or in some other manner which prevents their immediate transfer shall be transferred and delivered to the successor trustee as soon as may be practicable. Thereafter, the removed or resigned Trustee shall have no liability for the Trust Fund or for its administration by the successor or remaining trustee, but shall render an accounting to the Committee of its administration of the Trust Fund through the date on which its Trusteeship shall have been terminated. The Association may also, upon 30 days’ notice to each person currently serving as a trustee, appoint one or more persons to serve as co-Trustee hereunder.

     Section 7. Miscellaneous.

     7.1 Right to Amend. This Trust Agreement may be amended from time to time by an instrument executed by the Association; provided, however, that any amendment affecting the powers, duties or liabilities of the Trustee must be approved by the Trustee, and provided, further, that no amendment may divert any portion of the Trust Fund to purposes other than the exclusive benefit of the Participants and their Beneficiaries prior to the satisfaction of all

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liabilities for benefits. Any amendment shall apply to the Trust Fund as constituted at the time of the amendment as well as to that portion of the Trust Fund which is subsequently acquired.

     7.2 Compliance with ERISA. In the exercise of its powers and the performance of its duties, the Trustee shall act in good faith and in accordance with the applicable requirements under ERISA. Except as may be otherwise required by ERISA, the Trustee shall not be required to furnish any bond in any jurisdiction for the performance of their duties and, if a bond is required despite this provision, no surety shall be required on it.

     7.3 Nonresponsibility for Funding. The Trustee shall be under no duty to enforce the payment of any contributions and shall not be responsible for the adequacy of the Trust Fund to satisfy any obligations for benefits, expenses, and liabilities under the Plan.

     7.4 Reports. The Trustee shall file any report which they are required by law to file with any governmental authority with respect to this Trust, and the Committee shall furnish to the Trustee whatever information is necessary to prepare the report.

     7.5 Dealings with the Trustee. Persons dealing with the Trustee, including, but not limited to, banks, brokers, dealers, and insurers, shall be under no obligation to inquire concerning the validity of anything which the Trustee purports to do, nor need any person see to the proper application of any money paid or any property transferred upon the order of the Trustee or to inquire into the Trustee’s authority as to any transaction.

     7.6 Limitation Upon Responsibilities. The Trustee shall have no responsibilities with respect to the Plan or Trust other than those specifically enumerated or explicitly allocated to it under this Trust Agreement or the provisions of ERISA. All other responsibilities are retained and shall be performed by one or more of the Employer, the Committee, and such advisors or agents as they choose to engage.

     The Trustee may execute any of the trusts or powers hereof and perform any of its duties by or through attorneys, agents, receivers or employees and shall not be answerable for the conduct of the same if chosen with reasonable care and shall be entitled to advice of counsel concerning all matters of trust hereof and the duties hereunder, and may in all cases pay such reasonable compensation to all such attorneys, agents, receivers and employees as may reasonably be employed in connection with the trusts hereof. The Trustee may act upon the opinion or advice of any attorney (who may be the attorney for the Trustee or attorney for the Committee), approved by the Trustee in the exercise of reasonable care. The Trustee shall not be responsible for any loss or damage resulting from any action or non-action in good faith in reliance upon such opinion or advice.

     The Trustee shall be protected in acting upon any notice, request, consent, certificate, order, affidavit, letter, telegram or other paper or document believed to be genuine and correct and to have been signed or sent by the proper person or persons, and the Trustee shall be under no duty to make any investigation or inquiry as to any statement contained in any such writing but may accept the same as conclusive evidence of the truth and accuracy of the statements therein contained.

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     The Trustee shall not be liable for other than their gross negligence or willful misconduct. Except in the case of gross negligence or wilful misconduct on the part of the Trustee, the Trustee in its corporate capacity shall not be liable for claims of any persons in any manner regarding the Plan; such claims shall be limited to the Trust Fund. Unless the Trustee participates knowingly in, or knowingly undertakes to conceal, an act or omission of the Committee or any other fiduciary, knowing such act or omission to be a breach of fiduciary responsibility, the Trustee shall be under no liability for any loss of any kind which may result by reason of such act or omission.

     Before taking any action hereunder at the request or direction of the Committee, the Trustee may require that indemnity in form and amount satisfactory to the Trustee be furnished for the reimbursement of any and all costs and expenses to which they may be put including, without limitation, reasonable attorneys’ fees and to protect them against all liability, except liability which is adjudicated to have resulted from the gross negligence or willful misconduct of the Trustee by reason of any action so taken.

     No provision of this Trust Agreement shall require the Trustee to expend or risk their own funds or otherwise incur any financial liability in the performance of any of their duties hereunder, or in the exercise of any of their rights or powers, if they shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to them.

     7.7 Qualification of the Plan and Trust. The Trustee shall be fully protected in assuming that the Plan and Trust meet the requirements of Code Sections 401 and 501, respectively, and all the applicable provisions of ERISA, unless they are advised to the contrary in writing by the Committee or a governmental agency.

     7.8 Party in Interest Information. The Employer shall provide the Trustee with such information concerning the relationship between any person or organization and the Plan as the Trustee reasonably requests in order to determine whether such person or organization is a party in interest with respect to the Plan within the meaning of ERISA Section 3(14).

     7.9 Disputes. If a dispute arises as to the payment of any funds or delivery of any assets by the Trustee, the Trustee may withhold such payment or delivery until the dispute is determined by a court of competent jurisdiction or finally settled in writing by the parties concerned.

     7.10 Successor Trustee. This Trust Agreement shall apply to any person who shall be appointed to succeed the person currently appointed as the Trustee; and any reference herein to the Trustee shall be deemed to include any one or more individuals or corporations or any combination thereof who or which have at any time acted as a co-trustee or as the sole trustee.

     7.11 Governing State Law. This Trust Agreement shall be interpreted in accordance with the laws of the State of Maryland to the extent those laws may be applicable under the provisions of ERISA.

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     IN WITNESS WHEREOF, the parties hereto have executed this Trust Agreement as of the day and year first above written.

ATTEST:	FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
	By:
		For the Entire Board of Directors

ATTEST: [TRUSTEE]
as Trustee

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EX-10.3

Exhibit 10.3

FORM OF
ESOP LOAN AGREEMENT

     THIS LOAN AGREEMENT (“Loan Agreement”) is made and entered into as of [date], by and between [TRUSTEE], AS THE TRUSTEE FOR THE FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION EMPLOYEE STOCK OWNERSHIP PLAN TRUST (“Borrower”), a trust forming part of the Fraternity Federal Savings and Loan Association Employee Stock Ownership Plan (“ESOP”), and FRATERNITY COMMUNITY BANCORP, INC. (“Lender”), a corporation organized and existing under the laws of Maryland.

WITNESSETH

     WHEREAS, the Borrower is authorized to purchase shares of common stock of Fraternity Community Bancorp, Inc. (“Common Stock”), either directly from Fraternity Community Bancorp, Inc. or in open market purchases in an amount not to exceed eight percent (8%) of the shares of Common Stock offered in the initial public offering; and

     WHEREAS, the Borrower is authorized to borrow funds from the Lender for the purpose of financing authorized purchases of Common Stock; and

     WHEREAS, the Lender is willing to make a loan to the Borrower for such purpose.

     NOW, THEREFORE, the parties agree hereto as follows:

ARTICLE I
Definitions

     The following definitions shall apply for purposes of this Loan Agreement, except to the extent that a different meaning is plainly indicated by the context:

     Business Day means any day other than a Saturday, Sunday or other day on which banks are authorized or required to close under federal or local law or regulation.

     Code means the Internal Revenue Code of 1986, as amended (including the corresponding provisions of any succeeding law).

     Default means an event or condition which would constitute an Event of Default. The determination as to whether an event or condition would constitute an Event of Default shall be determined without regard to any applicable requirements of notice or lapse of time.

     ERISA means the Employee Retirement Income Security Act of 1974, as amended (including the corresponding provisions of any succeeding law).

     Event of Default means an event or condition described in Article 5 of this Loan Agreement.

     Loan means the loan described in Section 2.1 of this Loan Agreement.

     Loan Documents means, collectively, the Loan Agreement, the Promissory Note and the Pledge Agreement and all other documents now or hereafter executed and delivered in connection with such documents, including all amendments, modifications and supplements of or to all such documents.

     Pledge Agreement means the agreement described in Section 2.8(a) of this Loan Agreement.

     Principal Amount means the face amount of the Promissory Note, determined as set forth in Section 2.1(c) of this Loan Agreement.

     Promissory Note means the promissory note described in Section 2.3 of this Loan Agreement.

     Register means the register described in Section 2.9 of this Loan Agreement.

ARTICLE II
The Loan; Principal Amount;
Interest; Security; Indemnification

     Section 2.1 The Loan; Principal Amount.

     (a) The Lender hereby agrees to lend to the Borrower such amount, and at such time, as shall be determined under this Section 2.1; provided, however, that in no event shall the aggregate amount lent under this Loan Agreement from time to time exceed the greater of (i) $[amount] or (ii) the aggregate amount paid by the Borrower to purchase up to eight percent (8%) of the shares of Common Stock offered in the initial public offering.

     (b) Subject to the limitations of Section 2.1(a), the Borrower shall determine the amounts borrowed under this Loan Agreement, and the time at which such borrowings are effected. Each such determination shall be evidenced in a writing which shall set forth the amount to be borrowed and the date on which the Lender shall disburse such amount, and such writing shall be furnished to the Lender by notice from the Borrower. The Lender shall disburse to the Borrower the amount specified in each such notice on the date specified therein or, if later, as promptly as practicable following the Lender’s receipt of such notice; provided, however, that the Lender shall have no obligation to disburse funds pursuant to this Agreement following the occurrence of a Default or an Event of Default until such time as such Default or Event of Default shall have been cured.

     (c) For all purposes of this Loan Agreement, the Principal Amount on any date shall be equal to the excess, if any, of:

(i)	the aggregate amount disbursed by the Lender pursuant to Section 2.1(b) on or before such date; over
(ii)	the aggregate amount of any repayments of such amounts made before such date.

The Lender shall maintain on the Register a record of, and shall record in the Promissory Note, the Principal Amount, any changes in the Principal Amount and the effective date of any changes in the Principal Amount.

     Section 2.2 Interest.

     (a) The Borrower shall pay to the Lender interest on the Principal Amount, for the period commencing with the first disbursement of funds under this Loan Agreement and continuing until the Principal Amount shall be paid in full, at the rate of [rate] per annum. Interest payable under this Agreement shall be computed on the basis of a year of 365 days and

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actual days elapsed (including the first day but excluding the last) occurring during the period to which the computation relates.

     (b) Accrued interest on the Principal Amount shall be payable by the Borrower on the dates set forth in Schedule I to the Promissory Note. All interest on the Principal Amount shall be paid by the Borrower in immediately available funds.

     (c) Anything in this Loan Agreement or the Promissory Note to the contrary notwithstanding, the obligation of the Borrower to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the Lender to the extent that the Lender’s receipt thereof would not be permissible under the law or laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Any such payment referred to in the preceding sentence shall be made by the Borrower to the Lender on the earliest interest payment date or dates on which the receipt thereof would be permissible under the laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Such deferred interest shall not bear interest.

     Section 2.3 Promissory Note.

     The Loan shall be evidenced by the Promissory Note of the Borrower attached hereto as an exhibit payable to the order of the lender in the Principal Amount and otherwise duly completed.

     Section 2.4 Payment of Trust Loan.

     The Principal Amount of the Loan shall be repaid in accordance with Schedule I to the Promissory Note on the dates specified therein until fully paid.

     Section 2.5 Prepayment.

     The Borrower shall be entitled to prepay the Loan in whole or in part, at any time and from time to time; provided, however, that the Borrower shall give notice to the Lender of any such prepayment; and provided, further, that any partial prepayment of the Loan shall be in an amount not less than $1,000. Any such prepayment shall be: (a) permanent and irrevocable; (b) accompanied by all accrued interest through the date of such prepayment; (c) made without premium or penalty; and (d) applied on the inverse order of the maturity of the installment thereof unless the Lender and the Borrower agree to apply such prepayments in some other order.

     Section 2.6 Method of Payments.

     (a) All payments of principal, interest, other charges (including indemnities) and other amounts payable by the Borrower hereunder shall be made in lawful money of the United States, in immediately available funds, to the Lender at the address specified in or pursuant to this Loan Agreement for notices to the Lender, on the date on which such payment shall become due. Any such payment made on such date but after such time shall, if the amount paid bears interest, and except as expressly provided to the contrary herein, be deemed to have been made on, and interest shall continue to accrue and be payable thereon until, the next succeeding Business Day. If any payment of principal or interest becomes due on a day other than a Business Day, such payment may be made on the next succeeding Business Day, and when paid, such payment shall include interest to the day on which payment is in fact made.

     (b) Notwithstanding anything to the contrary contained in this Loan Agreement or the Promissory Note, the Borrower shall not be obligated to make any payment, repayment or pre-

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payment on the Promissory Note if doing so would cause the ESOP to cease to be an employee stock ownership plan within the meaning of Section 4975(e)(7) of the Code or qualified under Section 401(a) of the Code or cause the Borrower to cease to be a tax exempt trust under Section 501(a) of the Code or if such act or failure to act would cause the Borrower to engage in any “prohibited transaction” as such term is defined in the Section 4975(c) of the Code and the regulations promulgated thereunder which is not exempted by Section 4975(c)(2) or (d) of the Code and the regulations promulgated thereunder or in Section 406 of ERISA and the regulations promulgated thereunder which is not exempted by Section 408(b) of ERISA and the regulations promulgated thereunder; provided, however, that in each case, the Borrower, may act or refrain from acting pursuant to this Section 2.6(b) on the basis of an opinion of counsel, and any opinion of such counsel. The Borrower may consult with counsel, and any opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such opinion of counsel. Nothing contained in this Section 2.6(b) shall be construed as imposing a duty on the Borrower to consult with counsel. Any obligation of the Borrower to make any payment, repayment or prepayment on the Promissory Note or refrain from taking any other act hereunder or under the Promissory Note which is excused pursuant to this Section 2.6(b) shall be considered a binding obligation of the Borrower, or both, as the case may be, for the purposes of determining whether a Default or Event of Default has occurred hereunder or under the Promissory Note and nothing in this Section 2.6(b) shall be construed as providing a defense to any remedies otherwise available upon a Default or an Event of Default hereunder (other than the remedy of specific performance).

     Section 2.7 Use of Proceeds of Loan.

     The entire proceeds of the Loan shall be used solely for acquiring shares of Common Stock, and for no other purpose whatsoever.

     Section 2.8 Security.

     (a) In order to secure the due payment and performance by the Borrower of all of its obligations under this Loan Agreement, simultaneously with the execution and delivery of this Loan Agreement by the Borrower, the Borrower shall:

(i)	pledge to the Lender as Collateral (as defined in the Pledge Agreement), and grant to the Lender a first priority lien on and security interest in, the Common Stock purchased with the Principal Amount, by the execution and delivery to the lender of the Pledge Agreement attached hereto as an exhibit; and
(ii)	execute and deliver, or cause to be executed and delivered, such other agreement, instruments and documents as the Lender may reasonably require in order to effect the purposes of the Pledge Agreement and this Loan Agreement.

     (b) The Lender shall release from encumbrance under the Pledge Agreement and transfer to the Borrower, as of the date on which any payment or repayment of the Principal Amount is made, a number of shares of Common Stock held as Collateral determined pursuant to the applicable provisions of the ESOP.

     Section 2.9 Registration of the Promissory Note.

     (a) The Lender shall maintain a Register providing for the registration of the Principal Amount and any stated interest and of transfer and exchange of the Promissory Note.

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Transfer of the Promissory Note may be effected only by the surrender of the old instrument and either the reissuance by the Borrower of the old instrument to the new holder or the issuance by the Borrower of a new instrument to the new holder. The old Promissory Note so surrendered shall be canceled by the Lender and returned to the Borrower after such cancellation.

     (b) Any new Promissory Note issued pursuant to Section 2.9(a) shall carry the same rights to interest (unpaid and to accrue) carried by the Promissory Note so transferred or exchanged so that there will not be any loss or gain of interest on the note surrender. Such new Promissory Note shall be subject to all of the provisions and entitled to all of the benefits of this Agreement. Prior to due presentment for registration or transfer, the Borrower may deem and treat the registered holder of any Promissory Note as the holder thereof for purposes of payment and other purposes. A notation shall be made on each new Promissory Note of the amount of all payments of principal and interest theretofore paid.

ARTICLE III
Representations and Warranties of the Borrower

     The Borrower hereby represents and warrants to the Lender as follows:

     Section 3.1 Power, Authority, Consents.

     The Borrower has the power to execute, deliver and perform this Loan Agreement, the Promissory Note and Pledge Agreement, all of which have been duly authorized by all necessary and proper corporate or other action.

     Section 3.2 Due Execution, Validity, Enforceability.

     Each of the Loan Documents, including, without limitation, this Loan Agreement, the Promissory Note and the Pledge Agreement, has been duly executed and delivered by the Borrower; and each constitutes the valid and legally binding obligation of the Borrower, enforceable in accordance with its terms.

     Section 3.3 Properties, Priority of Liens.

     The liens which have been created and granted by the Pledge Agreement constitute valid, first liens on the properties and assets covered by the Pledge Agreement, subject to no prior or equal lien.

     Section 3.4 No Defaults, Compliance with Laws.

     The Borrower is not in default in any material respect under any agreement, ordinance, resolution, decree, bond, note, indenture, order or judgment to which it is a party or by which it is bound, or any other agreement or other instrument by which any of the properties or assets owned by it is materially affected.

     Section 3.5 Purchase of Common Stock.

     Upon consummation of any purchase of Common Stock by the Borrower with the proceeds of the Loan, the Borrower shall acquire valid, legal and marketable title to all of the Common Stock so purchased, free and clear of any liens, other than a pledge to the Lender of the Common Stock so purchased pursuant to the Pledge Agreement. Neither the execution and delivery of the Loan Documents nor the performance of any obligation thereunder violates any provisions of law or conflicts with or results in a breach of or creates (with or without the giving of notice of lapse of time, or both) a default under any agreement to which the Borrower is a

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party or by which it is bound or any of its properties is affected. No consent of any federal, state, or local governmental authority, agency, or other regulatory body, the absence of which could have a materially adverse effect on the Borrower or the Trustee, is or was required to be obtained in connection with the execution, delivery, or performance of the Loan Documents and the transaction contemplated therein or in connection therewith, including without limitation, with respect to the transfer of the shares of Common Stock purchased with the proceeds of the Loan pursuant thereto.

     Section 3.6 ESOP; Contributions.

     As of the effective date of the ESOP sponsor’s conversion, the ESOP and the Borrower will be duly created, organized and maintained by the ESOP sponsor in compliance with all applicable laws, regulations and rulings. The ESOP will qualify as an “employee stock ownership plan” as defined in Section 4975(e)(7) of the Code. The ESOP provides that the ESOP sponsor may make contributions to the ESOP in an amount necessary to enable the Trustee to amortize the Loan in accordance with the terms of the Promissory Note; provided, however, that no such contributions shall be required if they would adversely affect the qualification of the ESOP under Section 401(a) of the Code.

     Section 3.7 Trustee.

     The trustee of the ESOP has been duly appointed by the ESOP sponsor.

     Section 3.8 Compliance with Laws; Actions.

     Neither the execution and delivery by the Borrower of this Loan Agreement or any instruments required thereby, nor compliance with the terms and provisions of any such documents by the lender, constitutes a violation of any provision of any law or any regulation, order, writ, injunction or decree of any court or governmental instrumentality, or an event of default under any agreement, to which the Borrower is a party, to which the Borrower is bound or to which the Borrower is subject, which violation or event of default would have a material adverse effect on the Borrower. There is no action or proceeding pending or threatened against either the ESOP or the Borrower before any court or administrative agency.

ARTICLE IV
Representations and Warranties of the Lender

     The Lender hereby represents and warrants to the Borrower as follows:

     Section 4.1 Power, Authority, Consents.

     The Lender has the power to execute, deliver and perform this Loan Agreement, the Pledge Agreement and all documents executed by the Lender in connection with the Loan, all of which have been duly authorized by all necessary and proper corporate or other action. No consent, authorization or approval or other action by any governmental authority or regulatory body, and no notice by the Lender to, or filing by the Lender with, any governmental authority or regulatory body is required for the due execution, delivery and performance of this Loan Agreement.

     Section 4.2 Due Execution, Validity, Enforceability.

     This Loan Agreement and the Pledge Agreement have been duly executed and delivered by the Lender, and each constitutes a valid and legally binding obligation of the Lender, enforceable in accordance with its terms.

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ARTICLE V
Events of Default

     Section 5.1 Events of Default under Loan Agreement.

     Each of the following events shall constitute an “Event of Default” hereunder:

     (a) Failure to make any payment or mandatory prepayment of principal of the Promissory Note when due, or failure to make any payment of interest on the Promissory Note not later than five (5) Business Days after the date when due.

     (b) Failure by the Borrower to perform or observe any term, condition or covenant of this Loan Agreement or of any of the other Loan Documents, including, without limitation, the Promissory Note and the Pledge Agreement.

     (c) Any representation or warranty made in writing to the Lender in any of the Loan Documents, or any certificate, statement or report made or delivered in compliance with this Loan Agreement, shall have been false or misleading in any material respect when made or delivered.

     Section 5.2 Lender’s Rights upon Event of Default.

     If an Event of Default under this Loan Agreement shall occur and be continuing, the Lender shall have no rights to assets of the Borrower other than: (a) contributions (other than contributions of Common Stock) that are made by the ESOP sponsor to enable the Borrower to meet its obligations pursuant to this Loan Agreement and earnings attributable to the investment of such contributions and (b) “Eligible Collateral” (as defined in the Pledge Agreement); provided, however, that: (i) the value of the Borrower’s assets transferred to the Lender following an Event of Default in satisfaction of the due and unpaid amount of the Loan shall not exceed the amount in default (without regard to amounts owing solely as a result of any acceleration of the Loan); (ii) the Borrower’s assets shall be transferred to the Lender following an Event of Default only to the extent of the failure of the Borrower to meet the payment schedule of the Loan; and (iii) all rights of the Lender to the Common Stock purchased with the proceeds of the Loan covered by the Pledge Agreement following an Event of Default shall be governed by the terms of the Pledge Agreement.

ARTICLE VI
Miscellaneous Provisions

     Section 6.1 Payments Due to the Lender.

     If any amount is payable by the Borrower to the Lender pursuant to any indemnity obligation contained herein, then the Borrower shall pay, at the time or times provided therefor, any such amount and shall indemnify the Lender against and hold it harmless from any loss or damage resulting from or arising out of the nonpayment or delay in payment of any such amount. If any amounts as to which the Borrower has so indemnified the Lender hereunder shall be assessed or levied against the Lender, the Lender may notify the Borrower and make immediate payment thereof, together with interest or penalties in connection therewith, and shall thereupon be entitled to and shall receive immediate reimbursement therefor from the Borrower, together with interest on each such amount as provided for in Section 2.2(c) of this Loan Agreement. Notwithstanding any other provision contained in this Loan Agreement, the covenants and agreements of the Borrower contained in this Section 6.1 shall survive: (a) payment of the Promissory Note and (b) termination of this Loan Agreement.

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     Section 6.2 Payments.

     All payments hereunder and under the Promissory Note shall be made without set-off or counterclaim and in such amounts as may be necessary in order that all such payments shall not be less than the amounts otherwise specified to be paid under this Loan Agreement and the Promissory Note, subject to any applicable tax withholding requirements. Upon payment in full of the Promissory Note, the Lender shall mark such Promissory Note “Paid” and return it to the Borrower.

     Section 6.3 Survival.

     All agreements, representations and warranties made herein shall survive the delivery of this Loan Agreement and the Promissory Note.

     Section 6.4 Modifications, Consents and Waivers; Entire Agreement.

     No modification, amendment or waiver of or with respect to any provision of this Loan Agreement, the Promissory Note, the Pledge Agreement, or any of the other Loan Documents, nor consent to any departure from any of the terms or conditions thereof, shall in any event be effective unless it shall be in writing and signed by the party against whom enforcement thereof is sought. Any such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No consent to or demand on a party in any case shall, of itself, entitle it to any other or further notice or demand in similar or other circumstances. This Loan Agreement embodies the entire agreement and understanding between the Lender and the Borrower and supersedes all prior agreements and understandings relating to the subject matter hereof.

     Section 6.5 Remedies Cumulative.

     Each and every right granted to the Lender hereunder or under any other document delivered hereunder or in connection herewith, or allowed it by law or equity, shall be cumulative and may be exercised from time to time. No failure on the part of the Lender or the holder of the Promissory Note to exercise, and no delay in exercising, any right shall operate as a waiver thereof, nor shall any single or partial exercise of any right preclude any other or future exercise thereof or the exercise of any other right. The due payment and performance of the obligations under the Loan Documents shall be without regard to any counterclaim, right of offset or any other claim whatsoever which the Borrower may have against the Lender and without regard to any other obligation of any nature whatsoever which the Lender may have to the Borrower, and no such counterclaim or offset shall be asserted by the Borrower in any action, suit or proceeding instituted by the Lender for payment or performance of such obligations.

     Section 6.6 Further Assurances; Compliance with Covenants.

     At any time and from time to time, upon the request of the Lender, the Borrower shall execute, deliver and acknowledge or cause to be executed, delivered and acknowledged, such further documents and instruments and do such other acts and things as the Lender may reasonably request in order to fully effect the terms of this Loan Agreement, the Promissory Note, the Pledge Agreement, the other Loan Documents and any other agreements, instruments and documents delivered pursuant hereto or in connection with the Loan.

     Section 6.7 Notices.

     Except as otherwise specifically provided for herein, all notice, requests, reports and other communications pursuant to this Loan Agreement shall be in writing, either by letter

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(delivered by hand or commercial messenger service or sent by registered or certified mail, return receipt requested, except for routine reports delivered in compliance with Article VI hereof which may be sent by ordinary first-class mail) or telex or telecopier addressed as follows:

(a)	If to the Borrower:
	Fraternity Federal Savings and Loan Association Employee Stock Ownership Plan c/o [Trustee]
(b)	If to the Lender:
	Fraternity Community Bancorp, Inc. 764 Washington Boulevard Baltimore, Maryland 21230 Attn: Thomas K. Sterner

Any notice, request or communication hereunder shall be deemed to have been given on the day on which it is delivered by hand or by commercial messenger service, or sent by telex, or telecopier, to such party at its address specified above, or, if sent by mail, on the third Business Day after the day deposited in the mail, postage prepaid, addressed as aforesaid. Any party may change the person or address to whom or which notices are to be given hereunder, by notice duly given hereunder; provided, however, that any such notice shall be deemed to have been given only when actually received by the party to whom it is addressed.

     Section 6.8 Counterparts.

     This Loan Agreement may be signed in any number of counterparts which, when taken together, shall constitute one and the same document.

     Section 6.9 Construction; Governing Law.

     The headings used in the table of contents and in this Loan Agreement are for convenience only and shall not be deemed to constitute a part hereof. All uses herein of any gender or of singular or plural terms shall be deemed to include uses of the other genders or plural or singular terms, as the context may require. All references in this Loan Agreement of an Article or section shall be to an Article or section of this Loan Agreement, unless otherwise specified. This Loan Agreement, the Promissory Note, the Pledge Agreement and the other Loan Documents shall be governed by, and construed and interpreted in accordance with, the laws of the State of Maryland.

     Section 6.10 Severability.

     Wherever possible, each provision of this Loan Agreement shall be interpreted in such manner as to be effective and valid under applicable law; however, the provisions of this Loan Agreement are severable, and if any clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provisions in this Loan Agreement in any jurisdiction. Each of the covenants, agreements and conditions contained in this Loan Agreement are independent, and compliance by a party with any of them shall not excuse non-compliance by such party with any other. The Borrower shall not take any

9

action the effect of which shall constitute a breach or violation of any provision of this Loan Agreement.

     Section 6.11 Binding Effect: No Assignment or Delegation.

     This Loan Agreement shall be binding upon and inure to the benefit of the Borrower and its successors and the Lender and its successors and assigns. The rights and obligations of the Borrower under this Agreement shall not be assigned or delegated without the prior written consent of the Lender, and any purported assignment or delegation without such consent shall be void.

[Signature page follows]

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     IN WITNESS WHEREOF, the parties have caused this Loan Agreement to be executed as of the date first written above.

FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION EMPLOYEE STOCK OWNERSHIP PLAN TRUST
Trustee
FRATERNITY COMMUNITY BANCORP, INC.
By:
	Duly Authorized Officer

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FORM OF
PLEDGE AGREEMENT

     THIS PLEDGE AGREEMENT (“Pledge Agreement”) is made as of [date], by and between [TRUSTEE], AS TRUSTEE FOR THE FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION EMPLOYEE STOCK OWNERSHIP PLAN TRUST (“Pledgor”), and FRATERNITY COMMUNITY BANCORP, INC. (“Pledgee”).

WITNESSETH

     WHEREAS, this Pledge Agreement is being executed and delivered to the Pledgee pursuant to the terms of a Loan Agreement (“Loan Agreement”), by and between the Pledgor and the Pledgee;

     NOW, THEREFORE, in consideration of the mutual agreements contained herein and in the Loan Agreement, the parties hereto do hereby covenant and agree as follows:

     Section 1. Definitions. The following definitions shall apply for purposes of this Pledge Agreement, except to the extent that a different meaning is plainly indicated by the context; all capitalized terms used but not defined herein shall have the respective meanings assigned to them in the Loan Agreement:

     Collateral shall mean the Pledged Shares and, subject to Section 5 hereof, and to the extent permitted by applicable law, all rights with respect thereto, and all proceeds of such Pledged Shares and rights.

     ESOP shall mean the Fraternity Federal Savings and Loan Association Employee Stock Ownership Plan.

     Event of Default shall mean an event so defined in the Loan Agreement.

     Liabilities shall mean all the obligations of the Pledgor to the Pledgee, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, under the Loan Agreement and the Promissory Note.

     Pledged Shares shall mean all the Shares of Common Stock of Fraternity Community Bancorp, Inc. purchased by the Pledgor with the proceeds of the loan made by the Pledgee to the Pledgor pursuant to the Loan Agreement, but excluding any such shares previously released pursuant to Section 4 of this Pledge Agreement.

     Section 2. Pledge. To secure the payment of and performance of all the Liabilities, the Pledgor hereby pledges to the Pledgee, and grants to the Pledgee, a security interest in, and lien upon, the Collateral.

     Section 3. Representations and Warranties of the Pledgor. The Pledgor represents, warrants, and covenants to the Pledgee as follows:

     (a) the execution, delivery and performance of this Pledge Agreement and the pledging of the Collateral hereunder do not and will not conflict with, result in a violation of, or constitute a default under, any agreement binding upon the Pledgor;

     (b) the Pledged Shares are and will continue to be owned by the Pledgor free and clear of any liens or rights of any other person except the lien hereunder and under the Loan Agreement in favor of the Pledgee, and the security interest of the Pledgee in the Pledged Shares and the proceeds thereof is and will continue to be prior to and senior to the rights of all others;

     (c) this Pledge Agreement is the legal, valid, binding and enforceable obligation of the Pledgor in accordance with its terms;

     (d) the Pledgor shall, from time to time, upon request of the Pledgee, promptly deliver to the Pledgee such stock powers, proxies, and similar documents, satisfactory in form and substance to the Pledgee, with respect to the Collateral as the Pledgee may reasonably request; and

     (e) subject to the first sentence of Section 4(b) of this Pledge Agreement, the Pledgor shall not, so long as any Liabilities are outstanding, sell, assign, exchange, pledge or otherwise transfer or encumber any of its rights in and to any of the Collateral.

     Section 4. Eligible Collateral.

     (a) As used herein the term “Eligible Collateral” shall mean the amount of Collateral which has an aggregate fair market value equal to the amount by which the Pledgor is in default (without regard to any amounts owing solely as the result of an acceleration of the Loan Agreement) or such lesser amount of Collateral as may be required pursuant to Section 13 of this Pledge Agreement.

     (b) The Pledged Shares shall be released from this Pledge Agreement in a manner conforming to the requirements of Treasury Regulations Section 54.4975-7(b)(8), as the same may be from time to time amended or supplemented, and the applicable provisions of the ESOP. Subject to the Treasury Regulations, the Pledgee may from time to time, after any Default or Event of Default, and without prior notice to the Pledgor, transfer all or any part of the Eligible Collateral in the name of the Pledgee or its nominee, without disclosing that such Eligible Collateral is subject to any rights of the Pledgor and may from time to time, whether before or after any of the Liabilities shall become due and payable, without notice to the Pledgor, take all or any of the following actions: (i) notify the parties obligated on any of the Eligible Collateral to make payment to the Pledgee of any amounts due or due to become due thereunder, (ii) release or exchange all or any part of the Eligible Collateral, or compromise or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any party with respect thereto, and (iii) take control of any proceeds of the Eligible Collateral.

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     Section 5. Delivery.

     (a) The Pledgor shall deliver to the Pledgee upon execution of this Pledge Agreement (i) either (A) certificates for the Pledged Shares, each certificate duly signed in blank by the Pledgor or accompanied by a stock transfer power duly signed in blank by the Pledgor and each such certificate accompanied by all required documentary or stock transfer tax stamps, or (B) if the Trustee does not yet have possession of the Pledged Shares, an assignment by the Pledgor of all the Pledgor’s rights to and interest in the Pledged Shares and (ii) an irrevocable proxy, in form and substance satisfactory to the Pledgee, signed by the Pledgor with respect to the Pledged Shares.

     (b) Subject to the provisions of Section 6 of this Pledge Agreement, the Pledgor shall (i) be entitled to exercise any and all voting and other rights pertaining to the Collateral or any part thereof for any purpose not inconsistent with the terms of this Pledge Agreement, and (ii) be entitled to receive any and all cash dividends or other distributions paid in respect of the Collateral.

     Section 6. Events of Default.

     (a) If a Default or Event Default shall be existing, in addition to the rights it may have under the Loan Agreement, the Promissory Note, and this Pledge Agreement, or by virtue of any other instrument, (i) the Pledgee may exercise, with respect to the Eligible Collateral, from time to time, any rights and remedies available to it under the Uniform Commercial Code as in effect from time to time in the State of Maryland or otherwise available to it and (ii) the Pledgee shall have the right, for and in the name, place and stead of the Pledgor, to execute endorsement, assignments, stock powers and other instruments of conveyance or transfer with respect to all or any of the Eligible Collateral. Written notification of intended disposition of any of the Eligible Collateral shall be given by the Pledgee to the Pledgor at least three (3) business days before such disposition. No action of the Pledgee permitted hereunder shall impair or affect its rights in and to the Eligible Collateral. All rights and remedies of the Pledgee expressed hereunder are in addition to all other rights and remedies possessed by it, including, without limitation, those contained in the documents referred to in the definition of Liabilities in Section 1 hereof.

     (b) In any sale of any of the Eligible Collateral after a Default or an Event of Default shall have occurred, the Pledgee is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel if necessary in order to avoid violation of applicable law (including, without limitation, compliance with such procedures as may restrict the number of prospective bidders and purchasers or further restrict such prospective bidders or purchasers to persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Eligible Collateral), or in order to obtain such required approval of the sale or of the purchase by any governmental regulatory authority or official, and the Pledgor further agrees that such compliance shall not result in such sale’s being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Pledgee be liable or accountable to the Pledgor

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for any discount allowed by reason of the fact that such Eligible Collateral is sold in compliance with any such limitation or restriction.

     Section 7. Payment in Full. Upon the payment in full of all outstanding Liabilities, this Pledge Agreement shall terminate and the Pledgee shall forthwith assign, transfer and deliver to the Pledgor, against receipt and without recourse to the Pledgee, all Collateral then held by the Pledgee pursuant to the Pledge Agreement.

     Section 8. No Waiver. No failure or delay on the part of the Pledgee in exercising any right or remedy hereunder or under any other document which confers or grants any rights to the Pledgee in respect of the Liabilities shall operate as a waiver thereof nor shall any single or partial exercise of any such rights or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy of the Pledgee.

     Section 9. Binding Effect; No Assignment or Delegation. This Pledge Agreement shall be binding upon and inure to the benefit of the Pledgor, the Pledgee and their respective successors and assigns, except that the Pledgor may not assign or transfer its rights hereunder without the prior written consent of the Pledgee (which consent shall not unreasonably be withheld). Each duty or obligation of the Pledgor to the Pledgee pursuant to the provisions of this Pledge Agreement shall be performed in favor of any person or entity designated by the Pledgee, and any duty or obligation of the Pledgee to the Pledgor may be performed by any other person or entity designated by the Pledgee.

     Section 10. Governing Law. This Pledge Agreement shall be governed by and construed in accordance with the laws of the State of Maryland applicable to agreements to be performed wholly within the State of Maryland.

     Section 11. Notices. All notices, requests, instructions or documents hereunder shall be in writing and delivered personally or sent by United States mail, registered or certified, return receipt requested, with proper postage prepaid as follows:

(a)	If to the Pledgee: Fraternity Community Bancorp, Inc. 764 Washington Boulevard Baltimore, Maryland 21230 Attn: Thomas K. Sterner
(b)	If to the Pledgor: Fraternity Federal Savings and Loan Association Employee Stock Ownership Plan Trust c/o [Trustee]

or at such other address as either of the parties may designate by written notice to the other party. If delivered personally, the date on which a notice, request, instruction or document is delivered shall be the date on which such delivery is made, and, if delivered by mail, the date on which such notice, request, instruction, or document is deposited in the mail shall be the date of

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delivery. Each notice, request, instruction or document shall bear the date on which it is delivered.

     Section 12. Interpretation. Wherever possible each provision of this Pledge Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision herein shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions hereof.

     Section 13. Construction. All provisions hereof shall be construed so as to maintain (a) the ESOP as a tax-qualified, leveraged employee stock ownership plan under Section 401(a) and 4975(e)(7) of the Internal Revenue Code of 1986, as amended (the “Code”), (b) the ESOP Trust as exempt from taxation under Section 501(a) of the Code, and (c) the loan as an exempt loan under Section 54.4975-7(b) of the Treasury Regulations and as described in Department of Labor Regulation Section 2550.408b-3.

[Signature page follows]

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     IN WITNESS WHEREOF, this Pledge Agreement has been duly executed by the parties hereto as of the day and year first above written.

FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION EMPLOYEE STOCK OWNERSHIP PLAN TRUST
Trustee
FRATERNITY COMMUNITY BANCORP, INC.
By:
	Duly Authorized Officer

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FORM OF
PROMISSORY NOTE

     FOR VALUE RECEIVED, the undersigned, AS TRUSTEES FOR THE FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION EMPLOYEE STOCK OWNERSHIP PLAN TRUST (the “Borrower”), hereby promises to pay to the order of FRATERNITY COMMUNITY BANCORP, INC. (the “Lender”) up to [amount] ($[amount]), payable in accordance with the Loan Agreement made and entered into between the Borrower and the Lender of even date herewith (“Loan Agreement”) pursuant to which this Promissory Note is issued.

     The Principal Amount of this Promissory Note shall be payable in accordance with the schedule attached hereto (“Schedule I”).

     This Promissory Note shall bear interest at the rate per annum set forth or established under the Loan Agreement, such interest to be payable in accordance with Schedule I.

     Anything herein to the contrary notwithstanding, the obligation of the Borrower to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the Lender to the extent that the Lender’s receipt thereof would not be permissible under the law or laws applicable to the Lender limiting rates on interest which may be charged or collected by the Lender. Any such payments on interest which are not made as a result of the limitation referred to in the preceding sentence shall be made by the Borrower to the Lender on the earliest interest payment date or dates on which the receipt thereof would be permissible under the laws applicable to the Lender limiting rates of interest which may be charged or collected by the Lender. Such deferred interest shall not bear interest.

     Payments of both principal and interest on this Promissory Note are to be made at the principal office of the Lender or such other place as the holder hereof shall designate to the Borrower in writing, in lawful money of the United States of America in immediately available funds.

     Failure to make any payments of principal on this Promissory Note when due, or failure to make any payment of interest on this Promissory Note not later than five (5) Business Days after the date when due, shall constitute a default hereunder, whereupon the principal amount of accrued interest on this Promissory Note shall immediately become due and payable in accordance with the terms of the Loan Agreement.

     This Promissory Note is secured by a Pledge Agreement between the Borrower and the Lender of even date herewith and is entitled to the benefits thereof.

FRATERNITY FEDERAL SAVINGS AND
LOAN ASSOCIATION EMPLOYEE STOCK OWNERSHIP PLAN TRUST
 

Trustee 

EX-10.4

Exhibit 10.4

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of September 15, 2009, by and among FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION, a federally-chartered savings and loan and (the “Association”), and THOMAS K. STERNER (the “Executive”).

     WHEREAS, the Executive serves in a position of substantial responsibility with the Association; and

     WHEREAS, the Association wishes to set forth the terms of the Executive’s continued employment in these positions; and

     WHEREAS, the Executive is willing and desires to serve in this position with the Association.

     NOW THEREFORE, in consideration of these premises, the mutual covenants contained herein, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.

ARTICLE 1
EMPLOYMENT

     1.1 Employment. The Association hereby employs the Executive to serve as Chief Executive Officer and Chairman of the Board of Directors of the Association according to the terms and conditions of this Agreement and for the period stated in Section 1.3 of this Agreement. The Executive hereby accepts employment according to the terms and conditions of this Agreement and for the period stated in Section 1.3 of this Agreement.

     1.2 Duties. As Chief Executive Officer, the Executive shall report directly to the board of directors of the Association. The Executive shall serve the Association faithfully, diligently, competently, and to the best of the Executive’s ability. It is contemplated by this Agreement that the Executive’s duties shall be comparable to those presently undertaken by the Executive. The duties of employment shall include such additional executive duties on behalf of the Association and its operations of a character in keeping with the Executive’s position as may, from time to time, be assigned to the Executive by the Board of Directors of the Association. The Executive shall exclusively devote full working time, energy, and attention to the business of the Association and to the promotion of the interests of the Association throughout the term of this Agreement. Without the prior written consent of the board of directors of the Association, during the term of this Agreement the Executive shall not render services to or for any person, firm, corporation, or other entity or organization in exchange for compensation, regardless of the form in which the compensation is paid and regardless of whether it is paid directly or indirectly to the Executive. Nothing in this Section 1.2 shall prevent the Executive from managing personal investments and affairs, provided that doing so does not interfere with the proper performance of the Executive’s duties and responsibilities under this Agreement.

     1.3 Term.

     (a) The term of this Agreement shall include: (i) the initial term, consisting of the period commencing on the date of this Agreement (the “Effective Date”) and ending on the third anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to this Section 1.3.

     (b) Commencing on the first anniversary of the Effective Date and continuing on each anniversary of the Effective Date thereafter, the disinterested members of the Board of Directors may extend the Agreement term for an additional year, so that the remaining term of the Agreement again becomes thirty-six (36) months, unless the Executive elects not to extend the term of this Agreement by giving proper written notice. The board of directors of the Association will review the Agreement and Executive’s performance annually for purposes of determining whether to extend the Agreement term and will include the rationale and results of its review in the minutes of the meetings. The board of directors will notify the Executive as soon as possible after each annual review whether it has determined to extend the Agreement.

ARTICLE 2
COMPENSATION AND BENEFITS

     2.1 Base Salary. In consideration of the Executive’s performance of the obligations under this Agreement, the Association shall pay or cause to be paid to the Executive a salary at the annual rate of $193,743.90, payable according to the regular payroll practices of the Association. The Executive’s salary shall be subject to annual review. The Executive’s salary, as the same may be modified from time to time, is referred to in this Agreement as the “Base Salary.” All compensation under this Agreement shall be subject to customary income tax withholding and such other employment taxes as are imposed by law.

     2.2 Benefit Plans and Perquisites. For as long as the Executive is employed by the Association, the Executive shall be eligible (x) to participate in any and all officer or employee compensation, incentive compensation and benefit plans in effect from time to time, including without limitation plans providing retirement, medical, dental, disability, and group life benefits and including incentive or bonus plans existing on the date of this Agreement or adopted after the date of this Agreement, provided that the Executive satisfies the eligibility requirements for any the plans or benefits, and (y) to receive any and all other fringe and other benefits provided from time to time, including the specific items described in (a)-(c) below.

     (a) Reimbursement of business expenses. The Executive shall be entitled to reimbursement for all reasonable business expenses incurred while performing his obligations under this Agreement, including but not limited to all reasonable business travel and entertainment expenses incurred while acting at the request of or in the service of the Association and reasonable expenses for attendance at annual and other periodic meetings of trade associations. Expenses will be reimbursed if they are submitted in accordance with the Association’s policies and procedures.

     (b) Facilities. The Association will furnish the Executive with the working facilities and staff customary for executive officers with the comparable titles and duties of the Executive

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as set forth in Sections 1.1 and 1.2 of this Agreement and as are necessary for the Executive to perform his duties. The location of such facilities and staff shall be at the principal administrative offices of the Association, or at such other site or sites customary for such offices and as agreed to by the parties.

     (c) Automobile and Associated Costs. The Executive shall, during the term hereof, be entitled to the use of an Association owned vehicle. The make and model of the vehicle to be determined, from time to time, by the Board of Directors of the Association. Further, the Association shall furnish to the Executive a credit card to be used by the Executive to purchase fuel and oil for the operation of the vehicle and repairs to the vehicle. It shall be the responsibility of the Executive to maintain all records appropriate to Internal Revenue rules and regulations pertaining to the use of employer-owned vehicles and, should the use of the employer-owned vehicle result in additional tax consequences to the Executive, the tax shall be the responsibility of the Executive to pay.

     2.3 Vacation; Leave. The Executive shall be entitled to sick leave and paid annual vacation in accordance with policies established from time to time by the Association. In addition to paid vacations and other leave, the board of directors may grant the Executive a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the board of directors may determine. Vacation time must be taken during the calendar year in which it is accrued and may be carried over into succeeding calendar years or paid out to the Executive in accordance with the policies of the Association. The Executive shall take his vacation at a reasonable time or times taking into consideration the needs of the Association.

     2.4 Insurance. The Association shall maintain or cause to be maintained liability insurance covering the Executive throughout the term of this Agreement.

     2.5 Supplemental Executive Retirement Plan. The Association has established for the benefit of the Executive and other employees under date of June 29, 2004, a “Trust Account” in the form customarily referred to as the “Rabbi Trust”. This Trust will be funded by the Association placing into the Trust Account for the benefit of the Executive, the sum of $812.50 each and every month during the term of this Agreement. Executive’s right to the principal and the earnings thereon shall be one-hundred percent (100%) vested in employee at all times. The Executive’s interest in this benefit shall include all contributions (and earnings) made by the Association prior to the effective date of this Agreement (that is, pursuant to the terms of any prior arrangement).

     Notwithstanding any other provisions of this Agreement to the contrary, following a separation from service (as such term is defined for purpose of Section 409A of the Code) for any reason, including death, the Association shall commence the payment of benefits set forth in this Section 2.5 on the 90^th day following the date the separation from service occurs. The payment of all principal and accumulated income allocated to the Executive shall be paid over a fifteen (15) year period on a weekly basis. The weekly amount to be paid shall be determined by dividing the outstanding account balance as of the immediately preceding weekly pay date by the number of weeks remaining in the 15-year period. Following the occurrence of a Change in

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Control described in Section 5.2, all amounts due to or for the benefit of the Executive shall be paid in a lump-sum cash payment on the 90^th day following the Change in Control.

     The substantive terms of this Section 2.5 are consistent with the comparable terms under the employment agreement between the Executive and the Association, dated July 20, 2004, as amended December 13, 2005, and as amended December 16, 2008, and no changes have been made under this Agreement with regard to the timing or form of the payment of the benefit.

     Notwithstanding any provision of this Agreement to the contrary, if Executive is a “specified employee” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), then benefit distributions under this Section 2.5 that are made upon separation from service may not commence earlier than six (6) months after the date of such separation from service. Therefore, in the event this paragraph is applicable to the Executive, any distribution under this Section 2.5 which would otherwise be paid to the Executive within the first six months following the separation from service shall be accumulated and paid to the Executive in a lump sum on the first business day of the seventh month following the separation from service. All subsequent distributions shall be paid in the manner specified.

ARTICLE 3
EMPLOYMENT TERMINATION

     3.1 Termination Because of Death or Disability.

     (a) Death. The Executive’s employment shall terminate automatically at the Executive’s death. If the Executive dies in active service to the Association, the Executive’s estate shall receive any sums due to the Executive as Base Salary and reimbursement of expenses through the end of the month in which death occurs.

     (b) Disability. By delivery of written notice thirty (30) days in advance to the Executive, the Association may terminate the Executive’s employment due to the Executive’s Disability (as defined below). In the event that the Executive’s employment hereunder terminates due to his Disability, no termination benefits shall be payable to or in respect of the Executive. For purposes of this Agreement, “Disability” shall mean a physical or mental condition due to which the Executive shall have been absent from his duties on a full-time basis for a twelve (12) consecutive month period. The Executive’s employment shall be deemed to have terminated as a result of Disability on the date provided in the notice of termination provided to the Executive by the Association. The Executive shall not be considered Disabled, however, if the Executive has returned to employment on a full-time basis within thirty (30) days of receiving such notice.

     3.2 Involuntary Termination with Cause. The Association may terminate the Executive’s employment for Cause. If the Executive’s employment terminates for Cause, the Executive shall receive the Base Salary through the date on which termination becomes effective and reimbursement of expenses to which the Executive is entitled when termination becomes effective. The Executive shall not be deemed to have been terminated for Cause under this Agreement unless and until there is delivered to the Executive a copy of a resolution adopted at a meeting of the board of directors called and held for the purpose, which resolution shall (x)

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contain findings that the Executive has committed an act constituting Cause, and (y) specify the particulars thereof. The resolution of the board of directors shall be deemed to have been duly adopted if and only if it is adopted by the affirmative vote of a majority of the directors of the Association then in office, excluding the Executive. Notice of the meeting and the proposed termination for Cause shall be given to the Executive a reasonable time before the meeting of the board of directors. The Executive and the Executive’s counsel (if the Executive chooses to have counsel present) shall have a reasonable opportunity to be heard by the board of directors at the meeting. For purposes of this Agreement “Cause” means any of the following:

(1)	Personal dishonesty;
(2)	Incompetence;
(3)	Willful misconduct;
(4)	Breach of fiduciary duty involving personal profit;
(5)	Intentional failure to perform stated duties;
(6)	Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order; or
(7)	Material breach of any provision of this Agreement.

     3.3 Voluntary Termination by the Executive Without Good Reason. If the Executive terminates employment without Good Reason, the Executive shall receive the Base Salary and expense reimbursement to which the Executive is entitled through the date on which termination becomes effective.

     3.4 Involuntary Termination Without Cause and Voluntary Termination with Good Reason. With written notice to the Executive thirty (30) days in advance, the Association may terminate the Executive’s employment without Cause. Termination shall take effect at the end of the thirty (30) day period. With advance written notice to the Association as provided in clause (y), the Executive may terminate employment for Good Reason. If the Executive’s employment terminates involuntarily without Cause or voluntarily but with Good Reason, the Executive shall be entitled to the benefits specified in Article 4 of this Agreement. For purposes of this Agreement a voluntary termination by the Executive shall be considered a voluntary termination with Good Reason if the conditions stated in both clauses (x) and (y) of this Section 3.4 are satisfied:

     (x) a voluntary termination by the Executive shall be considered a voluntary termination with Good Reason if any of the following occur without the Executive’s written consent, and the term Good Reason shall mean the occurrence of any of the following without the Executive’s written consent:

(1)	a material diminution of the Executive’s Base Salary (unless the reduction is part of a company-wide or executive-level restructuring of compensation),
(2)	a material diminution of the Executive’s authority, duties, or responsibilities, or

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(3) a change in the geographic location at which the Executive must perform services for the Association by more than 30 miles from such location at the effective date.

     (y) the Executive must give notice to the Association of the existence of one or more of the conditions described in clause (x) within sixty (60) days after the initial existence of the condition, and the Association shall have thirty (30) days thereafter to remedy the condition. In addition, the Executive’s voluntary termination because of the existence of one or more of the conditions described in clause (x) must occur within six (6) months after the initial existence of the condition.

ARTICLE 4
SEVERANCE COMPENSATION

     4.1 Cash Severance after Termination Without Cause or Termination for Good Reason.

     (a) Subject to the possibility that cash severance after employment termination might be delayed under Section 4.1(b), if the Executive’s employment terminates involuntarily but without Cause or if the Executive voluntarily terminates employment with Good Reason, the Executive shall for thirty-six (36) months and in accordance with the Association’s regular pay practices continue to receive the Base Salary in effect at termination of employment. However, the Association and the Executive acknowledge and agree that the compensation and benefits under this Section 4.1 shall not be payable if compensation and benefits are payable or shall have been paid to the Executive under Article 5 of this Agreement.

     (b) If when employment termination occurs the Executive is a “specified employee” within the meaning of Section 409A of the Code, if the cash severance payment under Section 4.1(a) would be considered deferred compensation under Section 409A of the Code, and finally if an exemption from the six-month delay requirement of Section 409A(a)(2)(B)(i) of the Code is not available, the Executive’s continued Base Salary under Section 4.1(a) for the first six months after employment termination shall be paid to the Executive in a single lump sum without interest on the first business day of the seventh (7^th) month after the month in which the Executive’s employment terminates.

     4.2 Post-Termination Insurance Coverage.

     (a) If the Executive’s employment terminates involuntarily but without Cause or voluntarily but with Good Reason, the Association shall continue or cause to be continued at the Association’s expense health and life insurance benefits for the Executive and any of his dependents covered at the time of his termination. The health and life insurance benefits shall continue until the first to occur of (w) the Executive’s return to employment with the Association or another employer, (x) the Executive’s attainment of age 65, (y) the Executive’s (or dependent’s) death, or (z) the end of the thirty-six (36) month period following his termination of employment.

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     (b) If (x) under the terms of the applicable policy or policies for the insurance benefits specified in section 4.2(a) it is not possible to continue coverage for the Executive and his dependents, or (y) when employment termination occurs the Executive is a “specified employee” within the meaning of Section 409A of the Code, if any of the continued insurance coverage benefits specified in Section 4.2(a) would be considered deferred compensation under Section 409A of the Code, and finally, if an exemption from the six-month delay requirement of Section 409A(a)(2)(B)(i) of the Code is not available for that particular insurance benefit, the Association shall pay to the Executive in a single lump sum an amount in cash equal to the present value of the Association’s projected cost to maintain that particular insurance benefit (and associated income tax gross-up benefit, if applicable) had the Executive’s employment not terminated, assuming continued coverage for 36 months. The lump-sum payment shall be made thirty (30) days after employment termination or, if Section 4.1(b) applies, on the first business day of the seventh (7^th) month after the month in which the Executive’s employment terminates.

     4.3 In addition, the Executive shall have the right to purchase from the Association the Association owned vehicle that had been used by him at the then “Kelly Blue Book Trade in Value” valuation, provided the Executive notifies Association within seven (7) days of the termination of his intent to purchase the vehicle. Should, at the time of termination, the “Kelly Blue Book Trade in Value” not be published, the parties hereto agree to use the valuation book then in use by institutions lending on used vehicles.

ARTICLE 5
CHANGE IN CONTROL BENEFITS

     5.1 Change in Control Benefits. If a Change in Control occurs during the term of this Agreement and, thereafter during the then remaining term of the Agreement, the Executive’s employment terminates involuntarily but without Cause or if the Executive voluntarily terminates employment with Good Reason, the Association shall make or cause to be made a lump-sum payment to the Executive in an amount in cash equal to 2.99 times the Executive’s average annual compensation. For this purpose, average annual compensation means the Executive’s taxable income reported by the Association for the five (5) calendar years immediately preceding the calendar year in which the Change in Control occurs. The payment required under this paragraph is payable no later than five (5) business days after the Executive’s termination of employment. If the Executive receives payment under Section 5.1, the Executive shall not be entitled to any additional severance benefits under Section 4.1 of this Agreement. In addition, the Association shall provide the Executive and his dependents with the same post-termination insurance coverage provided for in Section 4.2 of the Agreement.

     5.2 Change in Control Defined. For purposes of this Agreement “Change in Control” means a change in control as defined in Internal Revenue Section 409A of the Code and rules, regulations, and guidance of general application thereunder issued by the Department of the Treasury, including a “change in ownership,” “change in effective control” or “change in ownership of a substantial portion of assets.” Notwithstanding the foregoing, a Change in Control shall not occur as a result of a conversion of the Association from mutual to stock form or a reorganization of the Association to the mutual holding company form of ownership.

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     5.3 Potential Limitation of Benefits Under Certain Circumstances. Notwithstanding any other provisions of this Agreement, in the event that (x) the aggregate payments or benefits to be made or afforded to the Executive under this Agreement or otherwise, which are deemed to be parachute payments as defined in Section 280G of the Code, or any successor thereof (the “Termination Benefits”), would be deemed to include an “excess parachute payment” under Section 280G of the Code; and (y) if such Termination Benefits were reduced to an amount (the “Non-Triggering Amount”), the value of which is one dollar ($1.00) less than an amount equal to three (3) times the Executive’s “base amount,” as determined in accordance with Section 280G of the Code and the Non-Triggering Amount less the product of the marginal rate of any applicable state and federal income tax and the Non-Triggering Amount would be greater than the aggregate value of the Termination Benefits (without such reduction) minus (1) the amount of tax required to be paid by the Executive thereon by Section 4999 of the Code and further minus (2) the product of the Termination Benefits and the marginal rate of any applicable state and federal income tax, then the Termination Benefits shall be reduced to the Non-Triggering Amount. The allocation of the reduction required hereby among the Termination Benefits shall be determined by the Executive. Notwithstanding the foregoing, the Association shall not pay the Executive severance benefits under this Agreement in excess of three (3) times his average annual compensation (or such other amount that may be permitted by the Office of Thrift Supervision pursuant to regulation or regulatory guidance). The Association’s independent public accountants will determine the value of any reduction in the payments and benefits; the Association will pay for the accountants’ opinion. If the Association and/or the Executive do not agree with the accountants’ opinion, the Association will pay to the Executive the maximum amount of payments and benefits pursuant to this Agreement or otherwise, as selected by Executive, that the opinion indicates have a high probability of not causing any of the payments and benefits to be non-deductible and subject to the excise tax imposed under Section 4999 of the Code. The Association may also request, and the Executive has the right to demand that, a ruling from the IRS as to whether the disputed payments and benefits have such tax consequences. The Association will promptly prepare and file the request for a ruling from the IRS, but in no event will the Association make this filing later than thirty (30) days from the date of the accountant’s opinion referred to above. The request will be subject to the Executive’s approval prior to filing; the Executive shall not unreasonably withhold his approval. The Association and the Executive agree to be bound by any ruling received from the IRS and to make appropriate payments to each other to reflect any IRS rulings, together with interest at the applicable federal rate provided for in Section 7872(1)(2) of the Code. Nothing contained in this Agreement shall result in a reduction of any payments or benefits to which the Executive may be entitled upon termination of employment other than pursuant to this Section 5.3 hereof, or a reduction in the payments and benefits specified, below zero.

ARTICLE 6
CONFIDENTIALITY AND CREATIVE WORK

     6.1 Non-disclosure. The Executive covenants and agrees not to reveal to any person, firm, or corporation any confidential information of any nature concerning the Association or its business, or anything connected therewith. As used in this Article 6 the term “confidential information” means all of the Association’s and the Association’s affiliates’ confidential and proprietary information and trade secrets in existence on the date hereof or existing at any time during the term of this Agreement, including but not limited to:

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     (a) the whole or any portion or phase of any business plans, financial information, purchasing data, supplier data, accounting data, or other financial information,

     (b) the whole or any portion or phase of any research and development information, design procedures, algorithms or processes, or other technical information,

     (c) the whole or any portion or phase of any marketing or sales information, sales records, customer lists, prices, sales projections, or other sales information, and

     (d) trade secrets, as defined from time to time by the laws of Maryland. This Section 6.1 does not prohibit disclosure required by an order of a court having jurisdiction or a subpoena from an appropriate governmental agency or disclosure made by the Executive in the ordinary course of business and within the scope of the Executive’s authority.

     6.2 Return of Materials. The Executive agrees to immediately deliver or return to the Association upon termination, upon expiration of this Agreement, or as soon thereafter as possible, all written information and any other similar items furnished by the Association or prepared by the Executive in connection with the Executive’s services hereunder and to immediately delete all electronically stored data of the Association maintained on the Executive’s personal computers and to return all Association-provided computers or communication devices (i.e., laptop, Blackberry, PDA, etc.). The Executive will retain no copies thereof after termination of this Agreement or termination of the Executive’s employment.

     6.3 Creative Work. The Executive agrees that all creative work and work product, including but not limited to all technology, business management tools, processes, software, patents, trademarks, and copyrights developed by the Executive during the term of this Agreement, regardless of when or where such work or work product was produced, constitutes work made for hire, all rights of which are owned by the Association. The Executive hereby assigns to the Association all rights, title, and interest, whether by way of copyrights, trade secret, trademark, patent, or otherwise, in all such work or work product, regardless of whether the same is subject to protection by patent, trademark, or copyright laws.

     6.4 Affiliates’ Confidential Information is Covered; Confidentiality Obligation Survives Termination. For purposes of this Agreement, the term “affiliate” of the Association includes any entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the Association. The rights and obligations set forth in this Article 6 shall survive termination of this Agreement.

     6.5 Injunctive Relief. The Executive acknowledges that it is impossible to measure in money the damages that will accrue to the Association if the Executive fails to observe the obligations imposed by this Article 6. Accordingly, if the Association institutes an action to enforce the provisions hereof, the Executive hereby waives the claim or defense that an adequate remedy at law is available to the Association, and the Executive agrees not to urge in any such action the claim or defense that an adequate remedy at law exists. The confidentiality and remedies provisions of this Article 6 shall be in addition to and shall not be deemed to supersede or restrict, limit, or impair the Association’s rights under applicable state or federal statute or

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regulation dealing with or providing a remedy for the wrongful disclosure, misuse, or misappropriation of trade secrets or proprietary or confidential information.

ARTICLE 7
COMPETITION AFTER EMPLOYMENT TERMINATION

     7.1 Covenant Not to Solicit Employees. The Executive agrees not to, directly or indirectly, solicit or employ the services of any officer or employee of the Association (including an individual who was an officer or employee of the Association during the one year period following the Executive’s termination) for two years after the Executive’s employment termination.

     7.2 Covenant Not to Compete.

     (a) The Executive covenants and agrees not to compete directly or indirectly with the Association for one year after employment termination. For purposes of this Section 7.2:

(1) the term compete means:

(i)	providing financial products or services on behalf of any financial institution for any person residing in the territory,
(ii)	assisting (other than through the performance of ministerial or clerical duties) any financial institution in providing financial products or services to any person residing in the territory, or
(iii)	inducing or attempting to induce any person who was a customer of the Association at the date of the Executive’s employment termination to seek financial products or services from another financial institution.

(2) the words directly or indirectly mean:

(i)	acting as a consultant, officer, director, independent contractor, or employee of any financial institution in competition with the Association in the territory, or
(ii)	communicating to such financial institution the names or addresses or any financial information concerning any person who was a customer of the Association when the Executive’s employment terminated.

(3)	the term customer means any person to whom the Association is providing financial products or services on the date of the Executive’s employment termination or within one year thereafter.
(4)	the term financial institution means any bank, savings association, or bank or savings association holding company, or any other institution, the

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business of which is engaging in activities that are financial in nature or incidental to such financial activities as described in Section 4(k) of the Bank Holding Company Act of 1956, other than the Association or any of its affiliated corporations.

(5)	financial product or service means any product or service that a financial institution or a financial holding company could offer by engaging in any activity that is financial in nature or incidental to such a financial activity under Section 4(k) of the Bank Holding Company Act of 1956 and that is offered by the Association or an affiliate on the date of the Executive’s employment termination, including but not limited to banking activities and activities that are closely related and a proper incident to banking.
(6)	the term person means any individual or individuals, corporation, partnership, fiduciary or association.
(7)	the term territory means the area within a 25-mile radius of any office of the Association at the date of the Executive’s employment termination.

     (b) If any provision of this section or any word, phrase, clause, sentence or other portion thereof (including, without limitation, the geographical and temporal restrictions contained therein) is held to be unenforceable or invalid for any reason, the unenforceable or invalid provision or portion shall be modified or deleted so that the provisions hereof, as modified, are legal and enforceable to the fullest extent permitted under applicable law.

     (c) The Executive acknowledges that the Association’s willingness to enter into this Agreement and to make the payments contemplated by Articles 3 and 4 of this Agreement is conditioned on the Executive’s acceptance of the covenants set forth in Articles 6 and 7 of this Agreement and that the Association would not have entered into this Agreement without such covenants in force.

     7.3 Injunctive and Other Relief. Because of the unique character of the services to be rendered by the Executive hereunder, the Executive understands that the Association would not have an adequate remedy at law for the material breach or threatened breach by the Executive of any one or more of the Executive’s covenants in this Article 7. Accordingly, the Executive agrees that the Association’s remedies for a breach of this Article 7 include, but are not limited to, (x) forfeiture of any money representing accrued salary, contingent payments, or other fringe benefits (including any amount payable pursuant to Article 4) due and payable to the Executive during the period of any breach by Executive, and (y) a suit in equity by the Association to enjoin the Executive from the breach or threatened breach of such covenants. The Executive hereby waives the claim or defense that an adequate remedy at law is available to the Association and the Executive agrees not to urge in any such action the claim or defense that an adequate remedy at law exists. Nothing herein shall be construed to prohibit the Association from pursuing any other or additional remedies for the breach or threatened breach.

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     7.4 Article 7 Survives Termination But Is Void After a Change in Control. The rights and obligations set forth in this Article 7 shall survive termination of this Agreement. However, Article 7 shall become null and void effective immediately upon a Change in Control.

ARTICLE 8
MISCELLANEOUS

     8.1 Successors and Assigns.

     (a) This Agreement shall be binding upon the Association and any successor to the Association, including any persons acquiring directly or indirectly all or substantially all of the business or assets of the Association by purchase, merger, consolidation, reorganization, or otherwise. But this Agreement and the Association’s obligations under this Agreement are not otherwise assignable, transferable, or delegable by the Association. By agreement in form and substance satisfactory to the Executive, the Association shall require any successor to all or substantially all of the business or assets of the Association expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Association would be required to perform had no succession occurred.

     (b) This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, and legatees.

     (c) Without written consent of the other parties, no party shall assign, transfer, or delegate this Agreement or any rights or obligations under this Agreement, except as expressly provided herein. Without limiting the generality or effect of the foregoing, the Executive’s right to receive payments hereunder is not assignable or transferable, whether by pledge, creation of a security interest, or otherwise, except for a transfer by the Executive’s will or by the laws of descent and distribution. If the Executive attempts an assignment or transfer that is contrary to this Section 8.1, the Association shall have no liability to pay any amount to the assignee or transferee.

     8.2 Governing Law, Jurisdiction and Forum. This Agreement shall be construed under and governed by the internal laws of the State of Maryland, without giving effect to any conflict of laws provision or rule that would cause the application of the laws of any jurisdiction other than Maryland. By entering into this Agreement, the Executive acknowledges that the Executive is subject to the jurisdiction of both the federal and state courts in Maryland.

     8.3 Entire Agreement. This Agreement sets forth the entire agreement of the parties concerning the employment of the Executive by the Association. Any oral or written statements, representations, agreements, or understandings made or entered into prior to or contemporaneously with the execution of this Agreement are hereby rescinded, revoked, and rendered null and void by the parties.

     8.4 Notices. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid. Unless otherwise

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changed by notice, notice shall be properly addressed to the Executive if addressed to the address of the Executive on the books and records of the Association at the time of the delivery of such notice, and properly addressed to the Association if addressed to the board of directors of the Association.

     8.5 Severability. If there is a conflict between any provision of this Agreement and any statute, regulation, or judicial precedent, the latter shall prevail, but the affected provisions of this Agreement shall be curtailed and limited solely to the extent necessary to bring them within the requirements of law. If any provisions of this Agreement is held by a court of competent jurisdiction to be indefinite, invalid, void or voidable, or otherwise unenforceable, the remainder of this Agreement shall continue in full force and effect unless that would clearly be contrary to the intentions of the parties or would result in an injustice.

     8.6 Captions and Counterparts. The captions in this Agreement are solely for convenience. The captions do not define, limit, or describe the scope or intent of this Agreement. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

     8.7 No Duty to Mitigate. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment. Moreover, provided the Executive is not in breach of any obligation under Articles 6 and 7 of this Agreement, the amount of any payment provided for in this Agreement shall not be reduced by any compensation earned or benefits provided as the result of employment of the Executive or as a result of the Executive being self-employed after employment termination.

     8.8 Amendment and Waiver. This Agreement may not be amended, released, discharged, abandoned, changed, or modified in any manner, except by an instrument in writing signed by each of the parties hereto. The failure of any party hereto to enforce at any time any of the provisions of this Agreement shall not be construed to be a waiver of any such provision, nor affect the validity of this Agreement or any part thereof or the right of any party thereafter to enforce each and every such provision. No waiver or any breach of this Agreement shall be held to be a waiver of any other or subsequent breach.

     8.9 Compliance with Internal Revenue Code Section 409A.

     (a) The Executive will be deemed to have a termination of employment for purposes of determining the timing of any payments that are classified as deferred compensation only upon a “separation from service” within the meaning of Section 409A.

     (b) If at the time of the Executive’s separation from service, (i) the Executive is a “specified employee” (within the meaning of Section 409A and using the methodology selected by the Association) and (ii) the Association makes a good faith determination that an amount payable or the benefits to be provided hereunder constitutes deferred compensation (within the meaning of Section 409A), the payment of which is required to be delayed pursuant to the six-month delay rule of Section 409A in order to avoid taxes or penalties under Section 409A, then the Association will not pay the entire amount on the otherwise scheduled payment date but will instead pay on the scheduled payment date the maximum amount permissible in order to comply

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with Section 409A (i.e., any amount that satisfies an exception under the Section 409A rules from being categorized as deferred compensation) and will pay the remaining amount (if any) in a lump sum on the first business day after such six month period.

     (c) To the extent the Executive would be subject to an additional 20% tax imposed on certain deferred compensation arrangements pursuant to Section 409A as a result of any provision of this Agreement, such provision shall be deemed amended to the minimum extent necessary to avoid application of such tax and the parties shall promptly execute any amendment reasonably necessary to implement this Section 8.9. The Executive and the Association agree to cooperate to make such amendment to the terms of this Agreement as may be necessary to avoid the imposition of penalties and taxes under Section 409A; provided, however, that the Executive agrees that any such amendment shall provide the Executive with economically equivalent payments and benefits, and the Executive agrees that any such amendment will not materially increase the cost to, or liability of, the Association with respect to any payment.

     (d) For purposes of this Agreement, Section 409A shall refer to Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury regulations and any other authoritative guidance issued thereunder.

     8.10 Required Provisions. In the event any of the foregoing provisions of this Agreement conflict with the terms of this Section 8.10, this Section 8.10 shall prevail.

     (a) The Association’s Board of Directors may terminate the Executive’s employment at any time, but any termination by the Association, other than termination for Cause, shall not prejudice the Executive’s right to compensation or other benefits under this Agreement. The Executive shall not have the right to receive compensation or other benefits for any period after termination for Cause as defined in Section 3.2 of this Agreement.

     (b) If the Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Association’s affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1818(e)(3) or (g)(1), the Association’s obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Association may, in its discretion: (i) pay the Executive all or part of the compensation withheld while its contract obligations were suspended; and (ii) reinstate (in whole or in part) any of the obligations which were suspended.

     (c) If the Executive is removed and/or permanently prohibited from participating in the conduct of the Association’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1818(e)(4) or (g)(1), all obligations of the Association under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.

     (d) If the Association is in default as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1813(x)(1), all obligations under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.

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     (e) All obligations under this Agreement shall terminate, except to the extent determined that continuation of the Agreement is necessary for the continued operation of the institution: (i) by the Director of the Office of Thrift Supervision (OTS), or his designee, at the time the Federal Deposit Insurance Corporation (FDIC) enters into an agreement to provide assistance to or on behalf of the Association under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1823(c), or (ii) by the Director of the OTS (or his designee) at the time the Director (or his designee) approves a supervisory merger to resolve problems related to the operations of the Association or when the Association is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.

     (f) Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to, and conditioned upon, their compliance with 12 U.S.C. Section 1828(k) and FDIC Regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

     IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the date first written above.

FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
 

/s/ William D. Norton  

For the Board of Directors 

/s/ Thomas K. Sterner  

Executive 

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EX-10.5

Exhibit 10.5

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of September 15, 2009, by and among FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION, a federally-chartered savings and loan (the “Association”), and RICHARD C. SCHULTZE (the “Executive”).

     WHEREAS, the Executive serves in a position of substantial responsibility with the Association; and

     WHEREAS, the Association wishes to set forth the terms of the Executive’s continued employment in these positions; and

     WHEREAS, the Executive is willing and desires to serve in this position with the Association.

     NOW THEREFORE, in consideration of these premises, the mutual covenants contained herein, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.

ARTICLE 1
EMPLOYMENT

     1.1 Employment. The Association hereby employs the Executive to serve as President and Chief Operating Officer of the Association according to the terms and conditions of this Agreement and for the period stated in Section 1.3 of this Agreement. The Executive hereby accepts employment according to the terms and conditions of this Agreement and for the period stated in Section 1.3 of this Agreement.

     1.2 Duties. As President, the Executive shall report directly to the board of directors of the Association. The Executive shall serve the Association faithfully, diligently, competently, and to the best of the Executive’s ability. It is contemplated by this Agreement that the Executive’s duties shall be comparable to those presently undertaken by the Executive. The duties of employment shall include such additional executive duties on behalf of the Association and its operations of a character in keeping with the Executive’s position as may, from time to time, be assigned to the Executive by the Board of Directors of the Association. The Executive shall exclusively devote full working time, energy, and attention to the business of the Association and to the promotion of the interests of the Association throughout the term of this Agreement. Without the prior written consent of the board of directors of the Association, during the term of this Agreement the Executive shall not render services to or for any person, firm, corporation, or other entity or organization in exchange for compensation, regardless of the form in which the compensation is paid and regardless of whether it is paid directly or indirectly to the Executive. Nothing in this Section 1.2 shall prevent the Executive from managing personal investments and affairs, provided that doing so does not interfere with the proper performance of the Executive’s duties and responsibilities under this Agreement.

     1.3 Term.

     (a) The term of this Agreement shall include: (i) the initial term, consisting of the period commencing on the date of this Agreement (the “Effective Date”) and ending on the third anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to this Section 1.3.

     (b) Commencing on the first anniversary of the Effective Date and continuing on each anniversary of the Effective Date thereafter, the disinterested members of the board of directors may

extend the Agreement term for an additional year, so that the remaining term of the Agreement again becomes thirty-six (36) months, unless the Executive elects not to extend the term of this Agreement by giving proper written notice. The board of directors of the Association will review the Agreement and Executive’s performance annually for purposes of determining whether to extend the Agreement term and will include the rationale and results of its review in the minutes of the meetings. The board of directors will notify the Executive as soon as possible after each annual review whether it has determined to extend the Agreement.

ARTICLE 2
COMPENSATION AND BENEFITS

     2.1 Base Salary. In consideration of the Executive’s performance of the obligations under this Agreement, the Association shall pay or cause to be paid to the Executive a salary at the annual rate of $193,743.90, payable according to the regular payroll practices of the Association. The Executive’s salary shall be subject to annual review. The Executive’s salary, as the same may be modified from time to time, is referred to in this Agreement as the “Base Salary.” All compensation under this Agreement shall be subject to customary income tax withholding and such other employment taxes as are imposed by law.

     2.2 Benefit Plans and Perquisites. For as long as the Executive is employed by the Association, the Executive shall be eligible (x) to participate in any and all officer or employee compensation, incentive compensation and benefit plans in effect from time to time, including without limitation plans providing retirement, medical, dental, disability, and group life benefits and including incentive or bonus plans existing on the date of this Agreement or adopted after the date of this Agreement, provided that the Executive satisfies the eligibility requirements for any the plans or benefits, and (y) to receive any and all other fringe and other benefits provided from time to time, including the specific items described in (a)-(c) below.

     (a) Reimbursement of business expenses. The Executive shall be entitled to reimbursement for all reasonable business expenses incurred while performing his obligations under this Agreement, including but not limited to all reasonable business travel and entertainment expenses incurred while acting at the request of or in the service of the Association and reasonable expenses for attendance at annual and other periodic meetings of trade associations. Expenses will be reimbursed if they are submitted in accordance with the Association’s policies and procedures.

     (b) Facilities. The Association will furnish the Executive with the working facilities and staff customary for executive officers with the comparable titles and duties of the Executive as set forth in Sections 1.1 and 1.2 of this Agreement and as are necessary for the Executive to perform his duties. The location of such facilities and staff shall be at the principal administrative offices of the Association, or at such other site or sites customary for such offices and as agreed to by the parties.

     (c) Automobile and Associated Costs. The Executive shall, during the term hereof, be entitled to the use of an Association owned vehicle. The make and model of the vehicle to be determined, from time to time, by the board of directors of the Association. Further, the Association shall furnish to the Executive a credit card to be used by the Executive to purchase fuel and oil for the operation of the vehicle and repairs to the vehicle. It shall be the responsibility of the Executive to maintain all records appropriate to Internal Revenue rules and regulations pertaining to the use of employer-owned vehicles and, should the use of the employer-owned vehicle result in additional tax consequences to the Executive, the tax shall be the responsibility of the Executive to pay.

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     2.3 Vacation; Leave. The Executive shall be entitled to sick leave and paid annual vacation in accordance with policies established from time to time by the Association. In addition to paid vacations and other leave, the board of directors may grant the Executive a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the board of directors may determine. Vacation time must be taken during the calendar year in which it is accrued and may be carried over into succeeding calendar years or paid out to the Executive in accordance with the policies of the Association. The Executive shall take his vacation at a reasonable time or times taking into consideration the needs of the Association.

     2.4 Insurance. The Association shall maintain or cause to be maintained liability insurance covering the Executive throughout the term of this Agreement.

     2.5 Supplemental Executive Retirement Plan. The Association has established for the benefit of the Executive and other employees under date of June 29, 2004, a “Trust Account” in the form customarily referred to as the “Rabbi Trust”. This Trust will be funded by the Association placing into the Trust Account for the benefit of the Executive, the sum of $812.50 each and every month during the term of this Agreement. Executive’s right to the principal and the earnings thereon shall be one-hundred percent (100%) vested in employee at all times. The Executive’s interest in this benefit shall include all contributions (and earnings) made by the Association prior to the effective date of this Agreement (that is, pursuant to the terms of any prior arrangement).

     Notwithstanding any other provisions of this Agreement to the contrary, following a separation from service (as such term is defined for purpose of Section 409A of the Code) for any reason, including death, the Association shall commence the payment of benefits set forth in this Section 2.5 on the 90^th day following the date the separation from service occurs. The payment of all principal and accumulated income allocated to the Executive shall be paid over a fifteen (15) year period on a weekly basis. The weekly amount to be paid shall be determined by dividing the outstanding account balance as of the immediately preceding weekly pay date by the number of weeks remaining in the 15-year period. Following the occurrence of a Change in Control described in Section 5.2, all amounts due to or for the benefit of the Executive shall be paid in a lump-sum cash payment on the 90^th day following the Change in Control.

     The substantive terms of this Section 2.5 are consistent with the comparable terms under the employment agreement between the Executive and the Association, dated July 20, 2004, as amended December 13, 2005, and as amended December 16, 2008, and no changes have been made under this Agreement with regard to the timing or form of the payment of the benefit.

     Notwithstanding any provision of this Agreement to the contrary, if Executive is a “specified employee” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), then benefit distributions under this Section 2.5 that are made upon separation from service may not commence earlier than six (6) months after the date of such separation from service. Therefore, in the event this paragraph is applicable to the Executive, any distribution under this Section 2.5 which would otherwise be paid to the Executive within the first six months following the separation from service shall be accumulated and paid to the Executive in a lump sum on the first business day of the seventh month following the separation from service. All subsequent distributions shall be paid in the manner specified.

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ARTICLE 3
EMPLOYMENT TERMINATION

     3.1 Termination Because of Death or Disability.

     (a) Death. The Executive’s employment shall terminate automatically at the Executive’s death. If the Executive dies in active service to the Association, the Executive’s estate shall receive any sums due to the Executive as Base Salary and reimbursement of expenses through the end of the month in which death occurs.

     (b) Disability. By delivery of written notice thirty (30) days in advance to the Executive, the Association may terminate the Executive’s employment due to the Executive’s Disability (as defined below). In the event that the Executive’s employment hereunder terminates due to his Disability, no termination benefits shall be payable to or in respect of the Executive. For purposes of this Agreement, “Disability” shall mean a physical or mental condition due to which the Executive shall have been absent from his duties on a full-time basis for a twelve (12) consecutive month period. The Executive’s employment shall be deemed to have terminated as a result of Disability on the date provided in the notice of termination provided to the Executive by the Association. The Executive shall not be considered Disabled, however, if the Executive has returned to employment on a full-time basis within thirty (30) days of receiving such notice.

     3.2 Involuntary Termination with Cause. The Association may terminate the Executive’s employment for Cause. If the Executive’s employment terminates for Cause, the Executive shall receive the Base Salary through the date on which termination becomes effective and reimbursement of expenses to which the Executive is entitled when termination becomes effective. The Executive shall not be deemed to have been terminated for Cause under this Agreement unless and until there is delivered to the Executive a copy of a resolution adopted at a meeting of the board of directors called and held for the purpose, which resolution shall (x) contain findings that the Executive has committed an act constituting Cause, and (y) specify the particulars thereof. The resolution of the board of directors shall be deemed to have been duly adopted if and only if it is adopted by the affirmative vote of a majority of the directors of the Association then in office, excluding the Executive. Notice of the meeting and the proposed termination for Cause shall be given to the Executive a reasonable time before the meeting of the board of directors. The Executive and the Executive’s counsel (if the Executive chooses to have counsel present) shall have a reasonable opportunity to be heard by the board of directors at the meeting. For purposes of this Agreement “Cause” means any of the following:

(1)	Personal dishonesty;
(2)	Incompetence;
(3)	Willful misconduct;
(4)	Breach of fiduciary duty involving personal profit;
(5)	Intentional failure to perform stated duties;
(6)	Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order; or
(7)	Material breach of any provision of this Agreement.

     3.3 Voluntary Termination by the Executive Without Good Reason. If the Executive terminates employment without Good Reason, the Executive shall receive the Base Salary and expense reimbursement to which the Executive is entitled through the date on which termination becomes effective.

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     3.4 Involuntary Termination Without Cause and Voluntary Termination with Good Reason. With written notice to the Executive thirty (30) days in advance, the Association may terminate the Executive’s employment without Cause. Termination shall take effect at the end of the thirty (30) day period. With advance written notice to the Association as provided in clause (y), the Executive may terminate employment for Good Reason. If the Executive’s employment terminates involuntarily without Cause or voluntarily but with Good Reason, the Executive shall be entitled to the benefits specified in Article 4 of this Agreement. For purposes of this Agreement a voluntary termination by the Executive shall be considered a voluntary termination with Good Reason if the conditions stated in both clauses (x) and (y) of this Section 3.4 are satisfied:

     (x) a voluntary termination by the Executive shall be considered a voluntary termination with Good Reason if any of the following occur without the Executive’s written consent, and the term Good Reason shall mean the occurrence of any of the following without the Executive’s written consent:

(1)	a material diminution of the Executive’s Base Salary (unless the reduction is part of a company-wide or executive-level restructuring of compensation),
(2)	a material diminution of the Executive’s authority, duties, or responsibilities, or
(3)	a change in the geographic location at which the Executive must perform services for the Association by more than 30 miles from such location at the effective date.

     (y) the Executive must give notice to the Association of the existence of one or more of the conditions described in clause (x) within sixty (60) days after the initial existence of the condition, and the Association shall have thirty (30) days thereafter to remedy the condition. In addition, the Executive’s voluntary termination because of the existence of one or more of the conditions described in clause (x) must occur within six (6) months after the initial existence of the condition.

ARTICLE 4
SEVERANCE COMPENSATION

     4.1 Cash Severance after Termination Without Cause or Termination for Good Reason.

     (a) Subject to the possibility that cash severance after employment termination might be delayed under Section 4.1(b), if the Executive’s employment terminates involuntarily but without Cause or if the Executive voluntarily terminates employment with Good Reason, the Executive shall for thirty-six (36) months and in accordance with the Association’s regular pay practices continue to receive the Base Salary in effect at termination of employment. However, the Association and the Executive acknowledge and agree that the compensation and benefits under this Section 4.1 shall not be payable if compensation and benefits are payable or shall have been paid to the Executive under Article 5 of this Agreement.

     (b) If when employment termination occurs the Executive is a “specified employee” within the meaning of Section 409A of the Code, if the cash severance payment under Section 4.1(a) would be considered deferred compensation under Section 409A of the Code, and finally if an exemption from the six-month delay requirement of Section 409A(a)(2)(B)(i) of the Code is not available, the Executive’s continued Base Salary under Section 4.1(a) for the first six months after employment termination shall be paid to the Executive in a single lump sum without interest on the first business day of the seventh (7^th) month after the month in which the Executive’s employment terminates.

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     4.2 Post-Termination Insurance Coverage.

     (a) If the Executive’s employment terminates involuntarily but without Cause or voluntarily but with Good Reason, the Association shall continue or cause to be continued at the Association’s expense health and life insurance benefits for the Executive and any of his dependents covered at the time of his termination. The health and life insurance benefits shall continue until the first to occur of (w) the Executive’s return to employment with the Association or another employer, (x) the Executive’s attainment of age 65, (y) the Executive’s (or dependent’s) death, or (z) the end of the thirty-six (36) month period following his termination of employment.

     (b) If (x) under the terms of the applicable policy or policies for the insurance benefits specified in section 4.2(a) it is not possible to continue coverage for the Executive and his dependents, or (y) when employment termination occurs the Executive is a “specified employee” within the meaning of Section 409A of the Code, if any of the continued insurance coverage benefits specified in Section 4.2(a) would be considered deferred compensation under Section 409A of the Code, and finally, if an exemption from the six-month delay requirement of Section 409A(a)(2)(B)(i) of the Code is not available for that particular insurance benefit, the Association shall pay to the Executive in a single lump sum an amount in cash equal to the present value of the Association’s projected cost to maintain that particular insurance benefit (and associated income tax gross-up benefit, if applicable) had the Executive’s employment not terminated, assuming continued coverage for 36 months. The lump-sum payment shall be made thirty (30) days after employment termination or, if Section 4.1(b) applies, on the first business day of the seventh (7^th) month after the month in which the Executive’s employment terminates.

     4.3 In addition, the Executive shall have the right to purchase from the Association the Association owned vehicle that had been used by him at the then “Kelly Blue Book Trade in Value” valuation, provided the Executive notifies Association within seven (7) days of the termination of his intent to purchase the vehicle. Should, at the time of termination, the “Kelly Blue Book Trade in Value” not be published, the parties hereto agree to use the valuation book then in use by institutions lending on used vehicles.

ARTICLE 5
CHANGE IN CONTROL BENEFITS

     5.1 Change in Control Benefits. If a Change in Control occurs during the term of this Agreement and, thereafter during the then remaining term of the Agreement, the Executive’s employment terminates involuntarily but without Cause or if the Executive voluntarily terminates employment with Good Reason, the Association shall make or cause to be made a lump-sum payment to the Executive in an amount in cash equal to 2.99 times the Executive’s average annual compensation. For this purpose, average annual compensation means the Executive’s taxable income reported by the Association for the five (5) calendar years immediately preceding the calendar year in which the Change in Control occurs. The payment required under this paragraph is payable no later than five (5) business days after the Executive’s termination of employment. If the Executive receives payment under Section 5.1, the Executive shall not be entitled to any additional severance benefits under Section 4.1 of this Agreement. In addition, the Association shall provide the Executive and his dependents with the same post-termination insurance coverage provided for in Section 4.2 of the Agreement.

     5.2 Change in Control Defined. For purposes of this Agreement “Change in Control” means a change in control as defined in Internal Revenue Section 409A of the Code and rules, regulations, and guidance of general application thereunder issued by the Department of the Treasury, including a “change in ownership,” “change in effective control” or “change in ownership of a substantial portion of assets.” Notwithstanding the foregoing, a Change in Control shall not occur as a result of a

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conversion of the Association from mutual to stock form or a reorganization of the Association to the mutual holding company form of ownership.

     5.3 Potential Limitation of Benefits Under Certain Circumstances. Notwithstanding any other provisions of this Agreement, in the event that (x) the aggregate payments or benefits to be made or afforded to the Executive under this Agreement or otherwise, which are deemed to be parachute payments as defined in Section 280G of the Code, or any successor thereof (the “Termination Benefits”), would be deemed to include an “excess parachute payment” under Section 280G of the Code; and (y) if such Termination Benefits were reduced to an amount (the “Non-Triggering Amount”), the value of which is one dollar ($1.00) less than an amount equal to three (3) times the Executive’s “base amount,” as determined in accordance with Section 280G of the Code and the Non-Triggering Amount less the product of the marginal rate of any applicable state and federal income tax and the Non-Triggering Amount would be greater than the aggregate value of the Termination Benefits (without such reduction) minus (1) the amount of tax required to be paid by the Executive thereon by Section 4999 of the Code and further minus (2) the product of the Termination Benefits and the marginal rate of any applicable state and federal income tax, then the Termination Benefits shall be reduced to the Non-Triggering Amount. The allocation of the reduction required hereby among the Termination Benefits shall be determined by the Executive. Notwithstanding the foregoing, the Association shall not pay the Executive severance benefits under this Agreement in excess of three (3) times his average annual compensation (or such other amount that may be permitted by the Office of Thrift Supervision pursuant to regulation or regulatory guidance). The Association’s independent public accountants will determine the value of any reduction in the payments and benefits; the Association will pay for the accountants’ opinion. If the Association and/or the Executive do not agree with the accountants’ opinion, the Association will pay to the Executive the maximum amount of payments and benefits pursuant to this Agreement or otherwise, as selected by Executive, that the opinion indicates have a high probability of not causing any of the payments and benefits to be non-deductible and subject to the excise tax imposed under Section 4999 of the Code. The Association may also request, and the Executive has the right to demand that, a ruling from the IRS as to whether the disputed payments and benefits have such tax consequences. The Association will promptly prepare and file the request for a ruling from the IRS, but in no event will the Association make this filing later than thirty (30) days from the date of the accountant’s opinion referred to above. The request will be subject to the Executive’s approval prior to filing; the Executive shall not unreasonably withhold his approval. The Association and the Executive agree to be bound by any ruling received from the IRS and to make appropriate payments to each other to reflect any IRS rulings, together with interest at the applicable federal rate provided for in Section 7872(0(2) of the Code. Nothing contained in this Agreement shall result in a reduction of any payments or benefits to which the Executive may be entitled upon termination of employment other than pursuant to this Section 5.3 hereof, or a reduction in the payments and benefits specified, below zero.

ARTICLE 6
CONFIDENTIALITY AND CREATIVE WORK

     6.1 Non-disclosure. The Executive covenants and agrees not to reveal to any person, firm, or corporation any confidential information of any nature concerning the Association or its business, or anything connected therewith. As used in this Article 6 the term “confidential information” means all of the Association’s and the Association’s affiliates’ confidential and proprietary information and trade secrets in existence on the date hereof or existing at any time during the term of this Agreement, including but not limited to:

     (a) the whole or any portion or phase of any business plans, financial information, purchasing data, supplier data, accounting data, or other financial information,

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     (b) the whole or any portion or phase of any research and development information, design procedures, algorithms or processes, or other technical information,

     (c) the whole or any portion or phase of any marketing or sales information, sales records, customer lists, prices, sales projections, or other sales information, and

     (d) trade secrets, as defined from time to time by the laws of Maryland. This Section 6.1 does not prohibit disclosure required by an order of a court having jurisdiction or a subpoena from an appropriate governmental agency or disclosure made by the Executive in the ordinary course of business and within the scope of the Executive’s authority.

     6.2 Return of Materials. The Executive agrees to immediately deliver or return to the Association upon termination, upon expiration of this Agreement, or as soon thereafter as possible, all written information and any other similar items furnished by the Association or prepared by the Executive in connection with the Executive’s services hereunder and to immediately delete all electronically stored data of the Association maintained on the Executive’s personal computers and to return all Association-provided computers or communication devices (i.e., laptop, Blackberry, PDA, etc.). The Executive will retain no copies thereof after termination of this Agreement or termination of the Executive’s employment.

     6.3 Creative Work. The Executive agrees that all creative work and work product, including but not limited to all technology, business management tools, processes, software, patents, trademarks, and copyrights developed by the Executive during the term of this Agreement, regardless of when or where such work or work product was produced, constitutes work made for hire, all rights of which are owned by the Association. The Executive hereby assigns to the Association all rights, title, and interest, whether by way of copyrights, trade secret, trademark, patent, or otherwise, in all such work or work product, regardless of whether the same is subject to protection by patent, trademark, or copyright laws.

     6.4 Affiliates’ Confidential Information is Covered; Confidentiality Obligation Survives Termination. For purposes of this Agreement, the term “affiliate” of the Association includes any entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the Association. The rights and obligations set forth in this Article 6 shall survive termination of this Agreement.

     6.5 Injunctive Relief. The Executive acknowledges that it is impossible to measure in money the damages that will accrue to the Association if the Executive fails to observe the obligations imposed by this Article 6. Accordingly, if the Association institutes an action to enforce the provisions hereof, the Executive hereby waives the claim or defense that an adequate remedy at law is available to the Association, and the Executive agrees not to urge in any such action the claim or defense that an adequate remedy at law exists. The confidentiality and remedies provisions of this Article 6 shall be in addition to and shall not be deemed to supersede or restrict, limit, or impair the Association’s rights under applicable state or federal statute or regulation dealing with or providing a remedy for the wrongful disclosure, misuse, or misappropriation of trade secrets or proprietary or confidential information.

ARTICLE 7
COMPETITION AFTER EMPLOYMENT TERMINATION

     7.1 Covenant Not to Solicit Employees. The Executive agrees not to, directly or indirectly, solicit or employ the services of any officer or employee of the Association (including an

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individual who was an officer or employee of the Association during the one year period following the Executive’s termination) for two years after the Executive’s employment termination.

     7.2 Covenant Not to Compete.

     (a) The Executive covenants and agrees not to compete directly or indirectly with the Association for one year after employment termination. For purposes of this Section 7.2:

(1) the term compete means:

(i)	providing financial products or services on behalf of any financial institution for any person residing in the territory,
(ii)	assisting (other than through the performance of ministerial or clerical duties) any financial institution in providing financial products or services to any person residing in the territory, or
(iii)	inducing or attempting to induce any person who was a customer of the Association at the date of the Executive’s employment termination to seek financial products or services from another financial institution.

(2) the words directly or indirectly mean:

(i)	acting as a consultant, officer, director, independent contractor, or employee of any financial institution in competition with the Association in the territory, or
(ii)	communicating to such financial institution the names or addresses or any financial information concerning any person who was a customer of the Association when the Executive’s employment terminated.

(3)	the term customer means any person to whom the Association is providing financial products or services on the date of the Executive’s employment termination or within one year thereafter.
(4)	the term financial institution means any bank, savings association, or bank or savings association holding company, or any other institution, the business of which is engaging in activities that are financial in nature or incidental to such financial activities as described in Section 4(k) of the Bank Holding Company Act of 1956, other than the Association or any of its affiliated corporations.
(5)	financial product or service means any product or service that a financial institution or a financial holding company could offer by engaging in any activity that is financial in nature or incidental to such a financial activity under Section 4(k) of the Bank Holding Company Act of 1956 and that is offered by the Association or an affiliate on the date of the Executive’s employment termination, including but not limited to banking activities and activities that are closely related and a proper incident to banking.
(6)	the term person means any individual or individuals, corporation, partnership, fiduciary or association.

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(7) the term territory means the area within a 25-mile radius of any office of the Association at the date of the Executive’s employment termination.

     (b) If any provision of this section or any word, phrase, clause, sentence or other portion thereof (including, without limitation, the geographical and temporal restrictions contained therein) is held to be unenforceable or invalid for any reason, the unenforceable or invalid provision or portion shall be modified or deleted so that the provisions hereof, as modified, are legal and enforceable to the fullest extent permitted under applicable law.

     (c) The Executive acknowledges that the Association’s willingness to enter into this Agreement and to make the payments contemplated by Articles 3 and 4 of this Agreement is conditioned on the Executive’s acceptance of the covenants set forth in Articles 6 and 7 of this Agreement and that the Association would not have entered into this Agreement without such covenants in force.

     7.3 Injunctive and Other Relief. Because of the unique character of the services to be rendered by the Executive hereunder, the Executive understands that the Association would not have an adequate remedy at law for the material breach or threatened breach by the Executive of any one or more of the Executive’s covenants in this Article 7. Accordingly, the Executive agrees that the Association’s remedies for a breach of this Article 7 include, but are not limited to, (x) forfeiture of any money representing accrued salary, contingent payments, or other fringe benefits (including any amount payable pursuant to Article 4) due and payable to the Executive during the period of any breach by Executive, and (y) a suit in equity by the Association to enjoin the Executive from the breach or threatened breach of such covenants. The Executive hereby waives the claim or defense that an adequate remedy at law is available to the Association and the Executive agrees not to urge in any such action the claim or defense that an adequate remedy at law exists. Nothing herein shall be construed to prohibit the Association from pursuing any other or additional remedies for the breach or threatened breach.

     7.4 Article 7 Survives Termination But Is Void After a Change in Control. The rights and obligations set forth in this Article 7 shall survive termination of this Agreement. However, Article 7 shall become null and void effective immediately upon a Change in Control.

ARTICLE 8
MISCELLANEOUS

     8.1 Successors and Assigns.

     (a) This Agreement shall be binding upon the Association and any successor to the Association, including any persons acquiring directly or indirectly all or substantially all of the business or assets of the Association by purchase, merger, consolidation, reorganization, or otherwise. But this Agreement and the Association’s obligations under this Agreement are not otherwise assignable, transferable, or delegable by the Association. By agreement in form and substance satisfactory to the Executive, the Association shall require any successor to all or substantially all of the business or assets of the Association expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Association would be required to perform had no succession occurred.

     (b) This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, and legatees.

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     (c) Without written consent of the other parties, no party shall assign, transfer, or delegate this Agreement or any rights or obligations under this Agreement, except as expressly provided herein. Without limiting the generality or effect of the foregoing, the Executive’s right to receive payments hereunder is not assignable or transferable, whether by pledge, creation of a security interest, or otherwise, except for a transfer by the Executive’s will or by the laws of descent and distribution. If the Executive attempts an assignment or transfer that is contrary to this Section 8.1, the Association shall have no liability to pay any amount to the assignee or transferee.

     8.2 Governing Law, Jurisdiction and Forum. This Agreement shall be construed under and governed by the internal laws of the State of Maryland, without giving effect to any conflict of laws provision or rule that would cause the application of the laws of any jurisdiction other than Maryland. By entering into this Agreement, the Executive acknowledges that the Executive is subject to the jurisdiction of both the federal and state courts in Maryland.

     8.3 Entire Agreement. This Agreement sets forth the entire agreement of the parties concerning the employment of the Executive by the Association. Any oral or written statements, representations, agreements, or understandings made or entered into prior to or contemporaneously with the execution of this Agreement are hereby rescinded, revoked, and rendered null and void by the parties.

     8.4 Notices. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid. Unless otherwise changed by notice, notice shall be properly addressed to the Executive if addressed to the address of the Executive on the books and records of the Association at the time of the delivery of such notice, and properly addressed to the Association if addressed to the board of directors of the Association.

     8.5 Severability. If there is a conflict between any provision of this Agreement and any statute, regulation, or judicial precedent, the latter shall prevail, but the affected provisions of this Agreement shall be curtailed and limited solely to the extent necessary to bring them within the requirements of law. If any provisions of this Agreement is held by a court of competent jurisdiction to be indefinite, invalid, void or voidable, or otherwise unenforceable, the remainder of this Agreement shall continue in full force and effect unless that would clearly be contrary to the intentions of the parties or would result in an injustice.

     8.6 Captions and Counterparts. The captions in this Agreement are solely for convenience. The captions do not define, limit, or describe the scope or intent of this Agreement. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

     8.7 No Duty to Mitigate. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment. Moreover, provided the Executive is not in breach of any obligation under Articles 6 and 7 of this Agreement, the amount of any payment provided for in this Agreement shall not be reduced by any compensation earned or benefits provided as the result of employment of the Executive or as a result of the Executive being self-employed after employment termination.

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     8.8 Amendment and Waiver. This Agreement may not be amended, released, discharged, abandoned, changed, or modified in any manner, except by an instrument in writing signed by each of the parties hereto. The failure of any party hereto to enforce at any time any of the provisions of this Agreement shall not be construed to be a waiver of any such provision, nor affect the validity of this Agreement or any part thereof or the right of any party thereafter to enforce each and every such provision. No waiver or any breach of this Agreement shaft be held to be a waiver of any other or subsequent breach.

     8.9 Compliance with Internal Revenue Code Section 409A.

     (a) The Executive will be deemed to have a termination of employment for purposes of determining the timing of any payments that are classified as deferred compensation only upon a “separation from service” within the meaning of Section 409A.

     (b) If at the time of the Executive’s separation from service, (i) the Executive is a “specified employee” (within the meaning of Section 409A and using the methodology selected by the Association) and (ii) the Association makes a good faith determination that an amount payable or the benefits to be provided hereunder constitutes deferred compensation (within the meaning of Section 409A), the payment of which is required to be delayed pursuant to the six-month delay rule of Section 409A in order to avoid taxes or penalties under Section 409A, then the Association will not pay the entire amount on the otherwise scheduled payment date but will instead pay on the scheduled payment date the maximum amount permissible in order to comply with Section 409A (i.e., any amount that satisfies an exception under the Section 409A rules from being categorized as deferred compensation) and will pay the remaining amount (if any) in a lump sum on the first business day after such six month period.

     (c) To the extent the Executive would be subject to an additional 20% tax imposed on certain deferred compensation arrangements pursuant to Section 409A as a result of any provision of this Agreement, such provision shall be deemed amended to the minimum extent necessary to avoid application of such tax and the parties shall promptly execute any amendment reasonably necessary to implement this Section 8.9. The Executive and the Association agree to cooperate to make such amendment to the terms of this Agreement as may be necessary to avoid the imposition of penalties and taxes under Section 409A; provided, however, that the Executive agrees that any such amendment shall provide the Executive with economically equivalent payments and benefits, and the Executive agrees that any such amendment will not materially increase the cost to, or liability of, the Association with respect to any payment.

     (d) For purposes of this Agreement, Section 409A shall refer to Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury regulations and any other authoritative guidance issued thereunder.

     8.10 Required Provisions. In the event any of the foregoing provisions of this Agreement conflict with the terms of this Section 8.10, this Section 8.10 shall prevail.

     (a) The Association’s Board of Directors may terminate the Executive’s employment at any time, but any termination by the Association, other than termination for Cause, shall not prejudice the Executive’s right to compensation or other benefits under this Agreement. The Executive shall not have the right to receive compensation or other benefits for any period after termination for Cause as defined in Section 3.2 of this Agreement.

     (b) If the Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Association’s affairs by a notice served under Section 8(e)(3) or 8(g)(1)

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of the Federal Deposit Insurance Act, 12 U.S.C. Section 1818(e)(3) or (g)(1), the Association’s obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Association may, in its discretion: (i) pay the Executive all or part of the compensation withheld while its contract obligations were suspended; and (ii) reinstate (in whole or in part) any of the obligations which were suspended.

     (c) If the Executive is removed and/or permanently prohibited from participating in the conduct of the Association’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1818(e)(4) or (g)(1), all obligations of the Association under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.

     (d) If the Association is in default as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1813(x)(1), all obligations under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.

     (e) All obligations under this Agreement shall terminate, except to the extent determined that continuation of the Agreement is necessary for the continued operation of the institution: (i) by the Director of the Office of Thrift Supervision (OTS), or his designee, at the time the Federal Deposit Insurance Corporation (FDIC) enters into an agreement to provide assistance to or on behalf of the Association under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1823(c), or (ii) by the Director of the OTS (or his designee) at the time the Director (or his designee) approves a supervisory merger to resolve problems related to the operations of the Association or when the Association is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.

     (f) Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to, and conditioned upon, their compliance with 12 U.S.C. Section 1828(k) and FDIC Regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

     IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the date first written above.

FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
 

/s/ William D. Norton  

For the Board of Directors 

/s/ Richard C. Schultze  

Executive 

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EX-10.6

Exhibit 10.6

FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

     THIS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT (this “Agreement”) is entered into as of this September 15, 2009, by and between Fraternity Federal Savings and Loan Association (hereinafter referred to as the “Association”) and Thomas K. Sterner, an individual resident of the State of Maryland (hereinafter referred to as the “Executive”).

     WHEREAS, the Executive has contributed substantially to the success of the Association and the Association desires that the Executive continue in its employ; and

     WHEREAS, to encourage the Executive to remain an employee of the Association, the Association is willing to provide supplement executive retirement benefits to the Executive, payable out of the Association’s general assets; and

     WHEREAS, the parties hereto intend that this Agreement shall be considered an unfunded arrangement maintained primarily to provide supplemental retirement benefits for the Executive, and shall be considered a plan described in Section 301(a)(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); and

     WHEREAS this Plan is intended to comply with the requirements of Internal Revenue Code Section 409A. Accordingly, the intent of the parties hereto is that the Plan shall be operated and interpreted consistent with the requirements of Section 409A.

     NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.

ARTICLE 1
DEFINITIONS

Whenever used in this Agreement, the following terms have the meanings specified —

     1.1 “Accrual Balance” means the liability that should be accrued by the Association under accounting principles generally accepted in the United States (“GAAP”) for the Association’s obligation to the Executive under this Agreement, by applying Accounting Principles Board Opinion No. 12, as amended by Statement of Financial Accounting Standards No. 106, and the calculation method and discount rate specified hereinafter. The projected Accrual Balance is detailed on Schedule A including annual accruals. The Accrual Balance shall be calculated assuming a level principal amount and interest as the discount rate is accrued each period. The principal accrual is determined such that when it is credited with interest each month, the Accrual Balance at Normal Retirement Age equals the present value of the normal retirement benefits described in Section 2.1.1. At the end of each Plan Year, the Accrual Balance shall be adjusted to reflect the Association’s obligation under Sections 2.1.1. The discount rate means the rate used by the Plan Administrator for determining the Accrual Balance. The initial discount rate is 6.00%. In its sole discretion, the Plan Administrator may adjust the discount rate to maintain the rate within reasonable standards according to GAAP and consistent with the Interagency Advisory

on Accounting for Deferred Compensation Agreements which states that the “cost of those benefits shall be accrued over that period of the employee’s service in a systematic and rational manner.”

     1.2 “Association” means Fraternity Federal Savings and Loan Association.

     1.3 “Beneficiary” means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive, determined according to Article 4.

     1.4 “Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that the Executive completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries.

     1.5 “Board of Directors” means the Board of Directors of the Association.

     1.6 “Change in Control” For the purposes of this Agreement, the term Change in Control means a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, as such change is defined in Treasury Regulation §1.409A-3(i)(5) or any subsequently applicable Treasury Regulation. The term “Change in Control” shall not include any conversion of the Association from the mutual to stock form or any reorganization of the Association into a mutual holding company structure of ownership.

     1.7 “Disability” means the Executive suffers a sickness, accident or injury that is determined by the carrier of any individual or group disability insurance policy covering the Executive to be a disability rendering the Executive totally and permanently disabled, as certified by a physician chosen by the Association and reasonably acceptable to the Executive, or as later defined by the Internal Revenue Service in IRS Notice 2005 — 1.

     1.8 “Early Retirement Date” means the date of the Executive’s Separation from Service with the Association for reasons other than death, Disability or Termination for Cause, prior to Normal Retirement Age.

     1.9 “Effective Date” means January 1, 2009.

     1.10 “Normal Retirement Age” means age sixty-five (65).

     1.11 “Plan Administrator” means the Association as defined herein.

     1.12 “Plan Year” means a twelve-month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date of this Agreement and end on December 31 of the year in which occurs the Effective Date.

     1.13 “Separation from Service” with the Association means that the Executive shall have ceased to be employed by the Association for reasons other than death or excepting a leave of absence approved by the Association. Whether a Separation from Service has occurred is determined based on whether the facts and circumstances indicate that the Association and the

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Executive reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding thirty-six (36) month period (or the full period of services to the Association if the Executive has been providing services to the Association less than thirty-six (36) months).

     1.14 “Specified Employee” means an employee who at the time of Separation from Service is a key employee of the Association, if any stock of the Association is publicly traded on an established securities market or otherwise. For purposes of this Agreement, an employee is a key employee if the employee meets the requirements of Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the regulations thereunder and disregarding section 416(i)(5)) at any time during the 12-month period ending on December 31 (the “identification period”). If the employee is a key employee during an identification period, the employee is treated as a key employee for purposes of this Agreement during the twelve (12) month period that begins on the first day of April following the close of the identification period.

     1.15 “Termination for Cause” shall have the same definition specified in any effective severance or employment agreement existing on the date hereof or hereafter entered into between the Executive and the Association. If the Executive is not a party to a severance or employment agreement containing a definition of termination for cause, Termination for Cause means the Association terminates the Executive’s employment because of:

(1)	Personal dishonesty;
(2)	Incompetence;
(3)	Willful misconduct;
(4)	Breach of fiduciary duty involving personal profit;
(5)	International failure to perform stated duties; or
(6)	Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order.

ARTICLE 2
RETIREMENT BENEFITS

     2.1 Normal Retirement Benefit. Upon the Executive’s Separation from Service on or after attaining his Normal Retirement Age for any reason other than death or a Termination for Cause, the Executive shall be eligible to receive the benefit described in this Section 2.1 in lieu of any other benefit under Article 2 of this Agreement.

2.1.1. Amount of Benefit. The annual normal retirement benefit under this Section 2.1 is ninety thousand one hundred fifteen dollars ($90,115).

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2.1.2. Payment of Benefit. The Association shall pay the aggregate annual benefit described in Section 2.1.1 to the Executive in equal monthly installments for fifteen (15) years (a total of one hundred eighty (180) monthly installments) beginning on the first day of the month after the month following the Executive’s Separation from Service.

     2.2 Early Retirement Benefit. Upon the Executive’s Early Retirement Date, the Executive shall be eligible to receive the benefit described in this Section 2.2 in lieu of any other benefit under Article 2 of this Agreement.

2.2.1.	Amount of Benefit. The benefit under this Section 2.2 is an amount equal to the Accrual Balance earned as of the last day of the Plan Year immediately preceding the Executive’s Early Retirement Date.
2.2.2.	Payment of Benefit. The Association shall pay the early retirement benefit to the Executive in 180 equal monthly installments beginning on the first day of the month after the month in which the Executive attains Normal Retirement Age.

     2.3 Disability Benefit. Upon the Executive’s Separation from Service due to a Disability before reaching Normal Retirement Age, the Executive shall be eligible to receive the benefit described in this Section 2.3 in lieu of any other benefit under this Agreement.

2.3.1.	Amount of Benefit. The benefit under this Section 2.3 is an amount equal to the Accrual Balance earned as of the last day of the Plan Year immediately preceding the effective date of the Executive’s Separation from Service.
2.3.2.	Payment of Benefit. The Association shall pay the Disability benefit to the Executive in 180 equal monthly installments beginning on the first day of the month after the month in which the Executive attains Normal Retirement Age.

     2.4 Change in Control Benefit. Notwithstanding any contrary provision contained herein, upon a Separation from Service at any time following a Change of Control, the Executive shall be eligible to receive the benefit described in this Article 2.4 in lieu of any other benefit under this Agreement.

2.4.1 Amount of Benefit. The benefit under this Section 2.4 is an amount equal to the present value of the Normal Retirement benefit set forth in Section 2.1.1. The present value shall be calculated using the number of installments provided for in Section 2.1.1 and the discount rate under Section 1.1 and shall be made without regard to the Executive’s age at the time of the payment of the Change in Control benefit.

2.4.1.1 Payment of Benefit. The Association shall pay the Change in Control benefit under Section 2.4 of this Agreement to the Executive in one lump sum within thirty (30) days after the Executive’s Separation from Service.

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     2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the actual amount of a particular benefit amount due the Executive under Sections 2.2, 2.3 or 2.4 hereof, then the actual amount of the benefit set forth in the Agreement shall control.

     2.6 Restriction on Timing of Distributions. Notwithstanding any provision of this Agreement to the contrary, if Executive is a Specified Employee of the Association as that term is defined in Section 1.14, then benefit distributions that are made upon Separation from Service may not commence earlier than six (6) months after the date of such Separation from Service. Therefore, in the event this Section 2.6 is applicable to the Executive, any distribution which would otherwise be paid to the Executive within the first six months following the Separation from Service shall be accumulated and paid to the Executive in a lump sum on the first business day of the seventh month following the Separation from Service. All subsequent distributions shall be paid in the manner specified.

     2.7 Distributions Upon Income Inclusion Under Section 409A of the Code. Upon the inclusion of any amount into the Executive’s income as a result of the failure of this non-qualified deferred compensation plan to comply with the requirements of Section 409A of the Internal Revenue Code of 1986 (the “Code”), as amended, and applicable regulations and guidance thereunder, to the extent such tax liability can be covered by the amount the Association has accrued with respect to the Association’s obligations hereunder, a distribution shall be made as soon as is administratively practicable following the discovery of the plan failure.

     2.8 Change in Form or Timing of Distributions. Any changes in the form or timing of distributions hereunder must comply with the following requirements. The changes:

(a)	may not accelerate the time or schedule of any distribution, except as provided in Section 409A of the Code and the regulations there under;
(b)	must, for benefits distributable under Sections 2.1, 2.2, 2.3 and 2.4, be made at least twelve (12) months prior to the first scheduled distribution;
(c)	must, for benefits distributable under Sections 2.1, 2.2, 2.3 and 2.4, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and
(d)	must take effect not less than twelve (12) months after the election is made.

     2.9 One Benefit Only. Despite any contrary provision of this Agreement, the Executive and any Beneficiary are entitled to one benefit only under Article 2 of this Agreement, which shall be determined by the first event to occur that is dealt with by Article 2 of this Agreement. Subsequent occurrence of events dealt with by this Article 2 shall not entitle the Executive or the Executive’s Beneficiary to other or additional benefits under Article 2.

     2.10 Compliance with Section 409A. This Agreement shall be interpreted and administered consistent with Code Section 409A.

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ARTICLE 3
DEATH BENEFITS

     3.1 Death During Active Service. If the Executive dies while employed by the Association, no benefits of any type will be payable under Article 2 of this Plan.

3.1.1	Death Benefit upon Death While Employed. Upon the Executive’s death while employed by the Association, the Association shall pay to the Executive’s designated beneficiary(ies) in a single lump sum the benefit described in Sections 3.1.2 and 3.1.3. The Association will pay the benefits from its general assets, but only so long as one of the Association’s general assets is an enforceable life insurance policy on the Executive’s life.
3.1.2	Amount of Benefits. Subject to Sections 3.1, and 3.1.1, the Association shall pay an amount equal to the lesser of one hundred percent (100%) of the portion of the insurance proceeds received by the Association on the life of the Executive and designated as the “Net Amount at Risk” by the insurance carrier or one million dollars ($1,000,000). The “Net Amount at Risk” refers to the difference in the death benefit payable by the insurance carrier and the cash value of the policy(ies) owned by the Association on the Executive’s life.
3.1.3	Payment of Benefit. The Association shall pay the benefit due to the Executive’s Beneficiary(ies) in a single lump sum within 90 days after receipt by the Association of the insurance proceeds payable on the life insurance policy(ies) owned by the Association on the Executive’s life.

     3.2 Death During Benefit Period. If the Executive dies after benefit payments under Article 2 of this Agreement commences but before receiving all such payments, or if the Executive is entitled to benefit payments under Article 2 but dies before payments commence, the present value of the benefits or the remaining benefits that would have been paid to the Executive had he survived, as the case may be, shall be payable to the Executive’s Beneficiary in a single lump sum within 90 days.

ARTICLE 4
BENEFICIARIES

     4.1 Beneficiary Designations. The Executive shall have the right to designate at any time a Beneficiary to receive any benefits payable under this Agreement upon the death of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Association in which the Executive participates.

     4.2 Beneficiary Designation: Change. The Executive shall designate a Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent. The Executive’s Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a

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spouse as Beneficiary and the marriage is subsequently dissolved. The Executive shall have the right to change a Beneficiary by completing, signing, and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by the Plan Administrator before the Executive’s death.

     4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received in writing by the Plan Administrator or its designated agent.

     4.4 No Beneficiary Designation. If the Executive dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Executive, then the Executive’s spouse shall be the designated Beneficiary. If the Executive has no surviving spouse, the benefits shall be distributed to the personal representative of the Executive’s estate.

     4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Association may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Association may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of the benefit. Distribution shall completely discharge the Association from all liability for the benefit.

ARTICLE 5
GENERAL LIMITATIONS

     5.1 Termination for Cause. If the Executive experiences a Separation from Service which is a Termination for Cause, notwithstanding any provision of this Agreement to the contrary, this Agreement and the Association’s obligations under this Agreement shall terminate as of the effective date of the Termination for Cause.

     5.2 Suicide or Misstatement. No benefits shall be paid under this Agreement if the Executive commits suicide within two years after the Effective Date of this Agreement or if the Executive makes any material misstatement of fact on any application for life insurance purchased by the Association.

     5.3 Removal. Despite any contrary provision of this Agreement, if the Executive is removed from office or permanently prohibited from participating in the Association’s affairs by an order issued under section 8(e) (4) or (g) (1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e) (4) or (g) (1), all obligations of the Association under this Agreement shall terminate as of the effective date of the order.

     5.4 Regulatory Provisions. Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to, and conditional upon, their compliance with 12 U.S.C. Section 1828(k) and FDIC Regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

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ARTICLE 6
CLAIMS AND REVIEW PROCEDURES

     6.1 Claims Procedure. A person or beneficiary (a “claimant”) who has not received benefits under the Agreement that he or she believes should be paid shall make a claim for such benefits as follows —

6.1.1	Initiation — Written Claim. The claimant initiates a claim by submitting to the Association a written claim for the benefits. If the claim relates to the contents of a notice received by the claimant, the claim must be made within 60 days after the notice was received by the claimant. All other claims must be made within 180 days after the date of the event that caused the claim to arise. The claim must state with particularity the determination desired by the claimant.
6.1.2	Timing of Association Response. The Association shall respond to such claimant within ninety (90) days after receiving the claim. If the Association determines that special circumstances require additional time for processing the claim, the Association can extend the response period by an additional ninety (90) days by notifying the claimant in writing, prior to the end of the initial ninety (90)-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Association expects to render its decision.
6.1.3	Notice of Decision. If the Association denies part or all of the claim, the Association shall notify the claimant in writing of such denial. The Association shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

6.1.3.1	The specific reasons for the denial,
6.1.3.2	A reference to the specific provisions of the Agreement on which the denial is based,
6.1.3.3	A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed,
6.1.3.4	An explanation of the Agreement’s review procedures and the time limits applicable to such procedures, and
6.1.3.5	A statement of the claimant’s right to bring a civil action under ERISA section 502(a) following an adverse benefit determination on review.

     6.2 Review Procedure. If the Association denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Association of the denial, as follows

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6.2.1	Initiation — Written Request. To initiate the review, the claimant, within 60 days after receiving the Association’s notice of denial, must file with the Association a written request for review.
6.2.2	Additional Submissions — Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Association shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.
6.2.3	Considerations on Review. In considering the review, the Association shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
6.2.4	Timing of Association Response. The Association shall respond in writing to such claimant within sixty (60) days after receiving the request for review. If the Association determines that special circumstances require additional time for processing the claim, the Association can extend the response period by an additional sixty (60) days by notifying the claimant in writing, prior to the end of the initial sixty (60)-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Association expects to render its decision.
6.2.5	Notice of Decision. The Association shall notify the claimant in writing of its decision on review. The Association shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth —

6.2.5.1	The specific reasons for the denial,
6.2.5.2	A reference to the specific provisions of the Agreement on which the denial is based,
6.2.5.3	A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits, and
6.2.5.4	A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

ARTICLE 7
MISCELLANEOUS

     7.1 Amendments and Termination. Subject to Section 7.13 of this Agreement, (a) this Agreement may be amended solely by a written agreement signed by the Association and

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by the Executive, and (b) except for termination occurring under Article 5, this Agreement may be terminated solely by a written agreement signed by the Association and by the Executive.

     7.2 Binding Effect. This Agreement shall bind the Executive and the Association and their beneficiaries, survivors, executors, successors, administrators, and transferees.

     7.3 No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Association, nor does it interfere with the Association’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.

     7.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner.

     7.5 Tax Withholding. The Association shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

     7.6 Applicable Law. Except to the extent preempted by the laws of the United States of America, the validity, interpretation, construction, and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of Maryland, without giving effect to the principles of conflict of laws of such state.

     7.7 Unfunded Arrangement. The Executive and the Executive’s Beneficiary are general unsecured creditors of the Association for the payment of benefits under this Agreement. The benefits represent the mere promise by the Association to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life is a general asset of the Association to which the Executive and Beneficiary have no preferred or secured claim.

     7.8 Severability. If any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of the provision, and the remainder of such provision together with all other provisions of this Agreement shall continue in full force and effect to the full extent consistent with law.

     7.9 Headings. The headings of sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement.

     7.10 Notices. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid. Unless otherwise changed by notice, notice shall be properly addressed to the Executive if addressed to the address of the Executive on the books and records of the Association at the time of the delivery of such

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notice, and properly addressed to the Association if addressed to the Board of Directors, at 764 Washington Boulevard, Baltimore, Maryland 21230-2398.

     7.11 Entire Agreement. This Agreement constitutes the entire agreement between the Association and the Executive concerning the subject matter hereof. No rights are granted to the Executive under this Agreement other than those specifically set forth herein.

     7.12 Payment of Legal Fees. In the event litigation ensues between the parties concerning the enforcement of the obligations of the parties under this Agreement, the Association shall pay all costs and expenses in connection with such litigation until such time as a final determination (excluding any appeals) is made with respect to the litigation. If the Association prevails on the substantive merits of the each material claim in dispute in such litigation, the Association shall be entitled to receive from the Executive all reasonable costs and expenses, including without limitation attorneys’ fees, incurred by the Association on behalf of the Executive in connection with such litigation, and the Executive shall pay such costs and expenses to the Association promptly upon demand by the Association.

     7.13 Termination or Modification of Agreement Because of Changes in Law, Rules or Regulations. The Association is entering into this Agreement on the assumption that certain existing tax laws, rules, and regulations will continue in effect in their current form. If that assumption materially changes and the change has a material detrimental effect on this Agreement, then the Association reserves the right to terminate or modify this Agreement accordingly, subject to the written consent of the Executive, which shall not be unreasonably withheld. This Section 7.13 shall become null and void effective immediately if a Change in Control occurs.

ARTICLE 8
ADMINISTRATION OF AGREEMENT

     8.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator consisting of the Board of Directors of the Association or such committee or person(s) as the Board of Directors of the Association shall appoint. The Plan Administrator shall have the sole and absolute discretion and authority to interpret and enforce all appropriate rules and regulations for the administration of this Agreement and the rights of the Executive under this Agreement, to decide or resolve any and all questions or disputes arising under this Agreement, including benefits payable under this Agreement and all other interpretations of this Agreement, as may arise in connection with the Agreement.

     8.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel, who may be counsel to the Association.

     8.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Executive or Beneficiary shall be deemed to have any right, vested or

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nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the discount rate and calculation method described in Section 1.1.

     8.4 Indemnity of Plan Administrator. The Plan Administrator shall not be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Agreement, unless such action or omission is attributable to the willful misconduct of the Plan Administrator or any of its members. The Association shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses, or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.

     8.5 Association Information. To enable the Plan Administrator to perform its functions, the Association shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Separation from Service of the Executive and such other pertinent information as the Plan Administrator may reasonably require.

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     IN WITNESS WHEREOF, the Executive and a duly authorized Officer of the Association have signed this Agreement as of the date first written above.

THE EXECUTIVE:	THE ASSOCIATION:
	Fraternity Federal Savings and Loan Association
/s/ Thomas K. Sterner	By:	/s/ Nancy J. Rexrode
Thomas K. Sterner
	Its:	Secretary

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SCHEDULE A

Fraternity Federal

Defined Benefit Approach

Tom Sterner

							Annual						Deferred
							Earnings		Vested		Account		Tax Asset		After Tax
Year	Age		Contribution		Yield		Charge		Payment		Balance		Account		Cost
2009		50		23,702		656		24,357		0		24,357		9,256		15,101
2010		51		25,164		2,198		27,362		0		51,719		10,397		16,964
2011		52		26,716		3,929		30,644		0		82,363		11,645		19,000
2012		53		28,363		5,864		34,228		0		116,591		13,007		21,221
2013		54		30,113		8,024		38,137		0		154,728		14,492		23,645
2014		55		31,970		10,428		42,398		0		197,126		16,111		26,286
2015		56		33,942		13,097		47,039		0		244,164		17,875		29,164
2016		57		36,035		16,056		52,092		0		296,256		19,795		32,297
2017		58		38,258		19,331		57,588		0		353,844		21,884		35,705
2018		59		40,618		22,948		63,565		0		417,410		24,155		39,411
2019		60		43,123		26,938		70,060		0		487,470		26,623		43,437
2020		61		45,782		31,332		77,115		0		564,585		29,304		47,811
2021		62		48,606		36,167		84,773		0		649,358		32,214		52,559
2022		63		51,604		41,478		93,082		0		742,440		35,371		57,711
2023		64		54,787		47,307		102,094		0		844,535		38,796		63,299
2024		65		23,814		52,387		76,200		52,567		868,168		28,956		47,244
2025		66		0		51,027		51,027		90,115		829,080		19,390		31,637
2026		67		0		48,616		48,616		90,115		787,581		18,474		30,142
2027		68		0		46,056		46,056		90,115		743,522		17,501		28,555
2028		69		0		43,339		43,339		90,115		696,746		16,469		26,870
2029		70		0		40,454		40,454		90,115		647,084		15,372		25,081
2030		71		0		37,391		37,391		90,115		594,360		14,209		23,182
2031		72		0		34,139		34,139		90,115		538,384		12,973		21,166
2032		73		0		30,686		30,686		90,115		478,956		11,661		19,026
2033		74		0		27,021		27,021		90,115		415,862		10,268		16,753
2034		75		0		23,130		23,130		90,115		348,876		8,789		14,340
2035		76		0		18,998		18,998		90,115		277,759		7,219		11,779
2036		77		0		14,612		14,612		90,115		202,256		5,552		9,059
2037		78		0		9,955		9,955		90,115		122,096		3,783		6,172
2038		79		0		5,011		5,011		90,115		36,991		1,904		3,107
2039		80		0		557		557		37,548		0		212		345
2040		81		0		0		0		0		0		0		0
				582,595		769,130		1,351,725		1,351,725				513,656		838,070

BENEFICIARY DESIGNATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

     I, Thomas K. Sterner, designate the following as beneficiary of any death benefits under this Supplemental Executive Retirement Plan.

     Primary:

     Contingent:

     Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement.

     I understand that I may change these beneficiary designations by filing a new written designation with the Association. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or if I have named my spouse as beneficiary and our marriage is subsequently dissolved.

Signature:
	Thomas K. Sterner
Date:		, 2009

     Accepted by the Association this _______ day of ________________, 2009.

     By:

     Print Name:

     Title:

EX-10.7

Exhibit 10.7

FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

     THIS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT (this “Agreement”) is entered into as of this September 15, 2009, by and between Fraternity Federal Savings and Loan Association (hereinafter referred to as the “Association”) and Richard C. Schultze, an individual resident of the State of Maryland (hereinafter referred to as the “Executive”).

     WHEREAS, the Executive has contributed substantially to the success of the Association and the Association desires that the Executive continue in its employ; and

     WHEREAS, to encourage the Executive to remain an employee of the Association, the Association is willing to provide supplement executive retirement benefits to the Executive, payable out of the Association’s general assets; and

     WHEREAS, the parties hereto intend that this Agreement shall be considered an unfunded arrangement maintained primarily to provide supplemental retirement benefits for the Executive, and shall be considered a plan described in Section 301(a)(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); and

     WHEREAS this Plan is intended to comply with the requirements of Internal Revenue Code Section 409A. Accordingly, the intent of the parties hereto is that the Plan shall be operated and interpreted consistent with the requirements of Section 409A.

     NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.

ARTICLE 1
DEFINITIONS

     Whenever used in this Agreement, the following terms have the meanings specified —

     1.1 “Accrual Balance” means the liability that should be accrued by the Association under accounting principles generally accepted in the United States (“GAAP”) for the Association’s obligation to the Executive under this Agreement, by applying Accounting Principles Board Opinion No. 12, as amended by Statement of Financial Accounting Standards No. 106, and the calculation method and discount rate specified hereinafter. The projected Accrual Balance is detailed on Schedule A including annual accruals. The Accrual Balance shall be calculated assuming a level principal amount and interest as the discount rate is accrued each period. The principal accrual is determined such that when it is credited with interest each month, the Accrual Balance at Normal Retirement Age equals the present value of the normal retirement benefits described in Section 2.1.1. At the end of each Plan Year, the Accrual Balance shall be adjusted to reflect the Association’s obligation under Sections 2.1.1. The discount rate means the rate used by the Plan Administrator for determining the Accrual Balance. The initial discount rate is 6.00%. In its sole discretion, the Plan Administrator may adjust the discount rate to maintain the rate within reasonable standards according to GAAP and consistent with the Interagency Advisory

on Accounting for Deferred Compensation Agreements which states that the “cost of those benefits shall be accrued over that period of the employee’s service in a systematic and rational manner.”

     1.2 “Association” means Fraternity Federal Savings and Loan Association.

     1.3 “Beneficiary” means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive, determined according to Article 4.

     1.4 “Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that the Executive completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries.

     1.5 “Board of Directors” means the Board of Directors of the Association.

     1.6 “Change in Control” For the purposes of this Agreement, the term Change in Control means a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, as such change is defined in Treasury Regulation §1.409A-3(i)(5) or any subsequently applicable Treasury Regulation. The term “Change in Control” shall not include any conversion of the Association from the mutual to stock form or any reorganization of the Association into a mutual holding company structure of ownership.

     1.7 “Disability” means the Executive suffers a sickness, accident or injury that is determined by the carrier of any individual or group disability insurance policy covering the Executive to be a disability rendering the Executive totally and permanently disabled, as certified by a physician chosen by the Association and reasonably acceptable to the Executive, or as later defined by the Internal Revenue Service in IRS Notice 2005 — 1.

     1.8 “Early Retirement Date” means the date of the Executive’s Separation from Service with the Association for reasons other than death, Disability or Termination for Cause, prior to Normal Retirement Age.

     1.9 “Effective Date” means January 1, 2009.

     1.10 “Normal Retirement Age” means age sixty-five (65).

     1.11 “Plan Administrator” means the Association as defined herein.

     1.12 “Plan Year” means a twelve-month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date of this Agreement and end on December 31 of the year in which occurs the Effective Date.

     1.13 “Separation from Service” with the Association means that the Executive shall have ceased to be employed by the Association for reasons other than death or excepting a leave of absence approved by the Association. Whether a Separation from Service has occurred is determined based on whether the facts and circumstances indicate that the Association and the

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     Executive reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding thirty-six (36) month period (or the full period of services to the Association if the Executive has been providing services to the Association less than thirty-six (36) months).

     1.14 “Specified Employee” means an employee who at the time of Separation from Service is a key employee of the Association, if any stock of the Association is publicly traded on an established securities market or otherwise. For purposes of this Agreement, an employee is a key employee if the employee meets the requirements of Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the regulations thereunder and disregarding section 416(i)(5)) at any time during the 12-month period ending on December 31 (the “identification period”). If the employee is a key employee during an identification period, the employee is treated as a key employee for purposes of this Agreement during the twelve (12) month period that begins on the first day of April following the close of the identification period.

     1.15 “Termination for Cause” shall have the same definition specified in any effective severance or employment agreement existing on the date hereof or hereafter entered into between the Executive and the Association. If the Executive is not a party to a severance or employment agreement containing a definition of termination for cause, Termination for Cause means the Association terminates the Executive’s employment because of:

(1)	Personal dishonesty;
(2)	Incompetence;
(3)	Willful misconduct;
(4)	Breach of fiduciary duty involving personal profit;
(5)	International failure to perform stated duties; or
(6)	Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order.

ARTICLE 2
RETIREMENT BENEFITS

     2.1 Normal Retirement Benefit. Upon the Executive’s Separation from Service on or after attaining his Normal Retirement Age for any reason other than death or a Termination for Cause, the Executive shall be eligible to receive the benefit described in this Section 2.1 in lieu of any other benefit under Article 2 of this Agreement.

2.1.1. Amount of Benefit. The annual normal retirement benefit under this Section 2.1 is ninety thousand one hundred fifteen dollars ($65,196).

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2.1.2. Payment of Benefit. The Association shall pay the aggregate annual benefit described in Section 2.1.1 to the Executive in equal monthly installments for fifteen (15) years (a total of one hundred eighty (180) monthly installments) beginning on the first day of the month after the month following the Executive’s Separation from Service.

     2.2 Early Retirement Benefit. Upon the Executive’s Early Retirement Date, the Executive shall be eligible to receive the benefit described in this Section 2.2 in lieu of any other benefit under Article 2 of this Agreement.

2.2.1.	Amount of Benefit. The benefit under this Section 2.2 is an amount equal to the Accrual Balance earned as of the last day of the Plan Year immediately preceding the Executive’s Early Retirement Date.
2.2.2.	Payment of Benefit. The Association shall pay the early retirement benefit to the Executive in 180 equal monthly installments beginning on the first day of the month after the month in which the Executive attains Normal Retirement Age.

     2.3 Disability Benefit. Upon the Executive’s Separation from Service due to a Disability before reaching Normal Retirement Age, the Executive shall be eligible to receive the benefit described in this Section 2.3 in lieu of any other benefit under this Agreement.

2.3.1.	Amount of Benefit. The benefit under this Section 2.3 is an amount equal to the Accrual Balance earned as of the last day of the Plan Year immediately preceding the effective date of the Executive’s Separation from Service.
2.3.2.	Payment of Benefit. The Association shall pay the Disability benefit to the Executive in 180 equal monthly installments beginning on the first day of the month after the month in which the Executive attains Normal Retirement Age.

     2.4 Change in Control Benefit. Notwithstanding any contrary provision contained herein, upon a Separation from Service at any time following a Change of Control, the Executive shall be eligible to receive the benefit described in this Article 2.4 in lieu of any other benefit under this Agreement.

2.4.1 Amount of Benefit. The benefit under this Section 2.4 is an amount equal to the present value of the Normal Retirement benefit set forth in Section 2.1.1. The present value shall be calculated using the number of installments provided for in Section 2.1.1 and the discount rate under Section 1.1 and shall be made without regard to the Executive’s age at the time of the payment of the Change in Control benefit.

2.4.1.1 Payment of Benefit. The Association shall pay the Change in Control benefit under Section 2.4 of this Agreement to the Executive in one lump sum within thirty (30) days after the Executive’s Separation from Service.

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     2.5 Contradiction in Terms of Agreement and Schedule A. If there is a contradiction in the terms of this Agreement and Schedule A attached hereto concerning the actual amount of a particular benefit amount due the Executive under Sections 2.2, 2.3 or 2.4 hereof, then the actual amount of the benefit set forth in the Agreement shall control.

     2.6 Restriction on Timing of Distributions. Notwithstanding any provision of this Agreement to the contrary, if Executive is a Specified Employee of the Association as that term is defined in Section 1.14, then benefit distributions that are made upon Separation from Service may not commence earlier than six (6) months after the date of such Separation from Service. Therefore, in the event this Section 2.6 is applicable to the Executive, any distribution which would otherwise be paid to the Executive within the first six months following the Separation from Service shall be accumulated and paid to the Executive in a lump sum on the first business day of the seventh month following the Separation from Service. All subsequent distributions shall be paid in the manner specified.

     2.7 Distributions Upon Income Inclusion Under Section 409A of the Code. Upon the inclusion of any amount into the Executive’s income as a result of the failure of this non-qualified deferred compensation plan to comply with the requirements of Section 409A of the Internal Revenue Code of 1986 (the “Code”), as amended, and applicable regulations and guidance thereunder, to the extent such tax liability can be covered by the amount the Association has accrued with respect to the Association’s obligations hereunder, a distribution shall be made as soon as is administratively practicable following the discovery of the plan failure.

     2.8 Change in Form or Timing of Distributions. Any changes in the form or timing of distributions hereunder must comply with the following requirements. The changes:

(a)	may not accelerate the time or schedule of any distribution, except as provided in Section 409A of the Code and the regulations there under;
(b)	must, for benefits distributable under Sections 2.1, 2.2, 2.3 and 2.4, be made at least twelve (12) months prior to the first scheduled distribution;
(c)	must, for benefits distributable under Sections 2.1, 2.2, 2.3 and 2.4, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and
(d)	must take effect not less than twelve (12) months after the election is made.

     2.9 One Benefit Only. Despite any contrary provision of this Agreement, the Executive and any Beneficiary are entitled to one benefit only under Article 2 of this Agreement, which shall be determined by the first event to occur that is dealt with by Article 2 of this Agreement. Subsequent occurrence of events dealt with by this Article 2 shall not entitle the Executive or the Executive’s Beneficiary to other or additional benefits under Article 2.

     2.10 Compliance with Section 409A. This Agreement shall be interpreted and administered consistent with Code Section 409A.

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ARTICLE 3
DEATH BENEFITS

     3.1 Death During Active Service. If the Executive dies while employed by the Association, no benefits of any type will be payable under Article 2 of this Plan.

3.1.1	Death Benefit upon Death While Employed. Upon the Executive’s death while employed by the Association, the Association shall pay to the Executive’s designated beneficiary(ies) in a single lump sum the benefit described in Sections 3.1.2 and 3.1.3. The Association will pay the benefits from its general assets, but only so long as one of the Association’s general assets is an enforceable life insurance policy on the Executive’s life.
3.1.2	Amount of Benefits. Subject to Sections 3.1, and 3.1.1, the Association shall pay an amount equal to the lesser of one hundred percent (100%) of the portion of the insurance proceeds received by the Association on the life of the Executive and designated as the “Net Amount at Risk” by the insurance carrier or one million dollars ($1,000,000). The “Net Amount at Risk” refers to the difference in the death benefit payable by the insurance carrier and the cash value of the policy(ies) owned by the Association on the Executive’s life.
3.1.3	Payment of Benefit. The Association shall pay the benefit due to the Executive’s Beneficiary(ies) in a single lump sum within 90 days after receipt by the Association of the insurance proceeds payable on the life insurance policy(ies) owned by the Association on the Executive’s life.

     3.2 Death During Benefit Period. If the Executive dies after benefit payments under Article 2 of this Agreement commences but before receiving all such payments, or if the Executive is entitled to benefit payments under Article 2 but dies before payments commence, the present value of the benefits or the remaining benefits that would have been paid to the Executive had he survived, as the case may be, shall be payable to the Executive’s Beneficiary in a single lump sum within 90 days.

ARTICLE 4
BENEFICIARIES

     4.1 Beneficiary Designations. The Executive shall have the right to designate at any time a Beneficiary to receive any benefits payable under this Agreement upon the death of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Association in which the Executive participates.

     4.2 Beneficiary Designation: Change. The Executive shall designate a Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent. The Executive’s Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a

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spouse as Beneficiary and the marriage is subsequently dissolved. The Executive shall have the right to change a Beneficiary by completing, signing, and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by the Plan Administrator before the Executive’s death.

     4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received in writing by the Plan Administrator or its designated agent.

     4.4 No Beneficiary Designation. If the Executive dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Executive, then the Executive’s spouse shall be the designated Beneficiary. If the Executive has no surviving spouse, the benefits shall be distributed to the personal representative of the Executive’s estate.

     4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Association may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person. The Association may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of the benefit. Distribution shall completely discharge the Association from all liability for the benefit.

ARTICLE 5
GENERAL LIMITATIONS

     5.1 Termination for Cause. If the Executive experiences a Separation from Service which is a Termination for Cause, notwithstanding any provision of this Agreement to the contrary, this Agreement and the Association’s obligations under this Agreement shall terminate as of the effective date of the Termination for Cause.

     5.2 Suicide or Misstatement. No benefits shall be paid under this Agreement if the Executive commits suicide within two years after the Effective Date of this Agreement or if the Executive makes any material misstatement of fact on any application for life insurance purchased by the Association.

     5.3 Removal. Despite any contrary provision of this Agreement, if the Executive is removed from office or permanently prohibited from participating in the Association’s affairs by an order issued under section 8(e) (4) or (g) (1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e) (4) or (g) (1), all obligations of the Association under this Agreement shall terminate as of the effective date of the order.

     5.4 Regulatory Provisions. Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to, and conditional upon, their compliance with 12 U.S.C. Section 1828(k) and FDIC Regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

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ARTICLE 6
CLAIMS AND REVIEW PROCEDURES

     6.1 Claims Procedure. A person or beneficiary (a “claimant”) who has not received benefits under the Agreement that he or she believes should be paid shall make a claim for such benefits as follows —

6.1.1	Initiation — Written Claim. The claimant initiates a claim by submitting to the Association a written claim for the benefits. If the claim relates to the contents of a notice received by the claimant, the claim must be made within 60 days after the notice was received by the claimant. All other claims must be made within 180 days after the date of the event that caused the claim to arise. The claim must state with particularity the determination desired by the claimant.
6.1.2	Timing of Association Response. The Association shall respond to such claimant within ninety (90) days after receiving the claim. If the Association determines that special circumstances require additional time for processing the claim, the Association can extend the response period by an additional ninety (90) days by notifying the claimant in writing, prior to the end of the initial ninety (90)-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Association expects to render its decision.
6.1.3	Notice of Decision. If the Association denies part or all of the claim, the Association shall notify the claimant in writing of such denial. The Association shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

6.1.3.1	The specific reasons for the denial,
6.1.3.2	A reference to the specific provisions of the Agreement on which the denial is based,
6.1.3.3	A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed,
6.1.3.4	An explanation of the Agreement’s review procedures and the time limits applicable to such procedures, and
6.1.3.5	A statement of the claimant’s right to bring a civil action under ERISA section 502(a) following an adverse benefit determination on review.

     6.2 Review Procedure. If the Association denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Association of the denial, as follows

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6.2.1	Initiation — Written Request. To initiate the review, the claimant, within 60 days after receiving the Association’s notice of denial, must file with the Association a written request for review.
6.2.2	Additional Submissions — Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Association shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.
6.2.3	Considerations on Review. In considering the review, the Association shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
6.2.4	Timing of Association Response. The Association shall respond in writing to such claimant within sixty (60) days after receiving the request for review. If the Association determines that special circumstances require additional time for processing the claim, the Association can extend the response period by an additional sixty (60) days by notifying the claimant in writing, prior to the end of the initial sixty (60)-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Association expects to render its decision.
6.2.5	Notice of Decision. The Association shall notify the claimant in writing of its decision on review. The Association shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth —

6.2.5.1	The specific reasons for the denial,
6.2.5.2	A reference to the specific provisions of the Agreement on which the denial is based,
6.2.5.3	A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits, and
6.2.5.4	A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

ARTICLE 7
MISCELLANEOUS

     7.1 Amendments and Termination. Subject to Section 7.13 of this Agreement, (a) this Agreement may be amended solely by a written agreement signed by the Association and

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by the Executive, and (b) except for termination occurring under Article 5, this Agreement may be terminated solely by a written agreement signed by the Association and by the Executive.

     7.2 Binding Effect. This Agreement shall bind the Executive and the Association and their beneficiaries, survivors, executors, successors, administrators, and transferees.

     7.3 No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Association, nor does it interfere with the Association’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.

     7.4 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner.

     7.5 Tax Withholding. The Association shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

     7.6 Applicable Law. Except to the extent preempted by the laws of the United States of America, the validity, interpretation, construction, and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of Maryland, without giving effect to the principles of conflict of laws of such state.

     7.7 Unfunded Arrangement. The Executive and the Executive’s Beneficiary are general unsecured creditors of the Association for the payment of benefits under this Agreement. The benefits represent the mere promise by the Association to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life is a general asset of the Association to which the Executive and Beneficiary have no preferred or secured claim.

     7.8 Severability. If any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement, and each such other provision shall continue in full force and effect to the full extent consistent with law. If any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of the provision, and the remainder of such provision together with all other provisions of this Agreement shall continue in full force and effect to the full extent consistent with law.

     7.9 Headings. The headings of sections herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement.

     7.10 Notices. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid. Unless otherwise changed by notice, notice shall be properly addressed to the Executive if addressed to the address of the Executive on the books and records of the Association at the time of the delivery of such

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notice, and properly addressed to the Association if addressed to the Board of Directors, at 764 Washington Boulevard, Baltimore, Maryland 21230-2398.

     7.11 Entire Agreement. This Agreement constitutes the entire agreement between the Association and the Executive concerning the subject matter hereof. No rights are granted to the Executive under this Agreement other than those specifically set forth herein.

     7.12 Payment of Legal Fees. In the event litigation ensues between the parties concerning the enforcement of the obligations of the parties under this Agreement, the Association shall pay all costs and expenses in connection with such litigation until such time as a final determination (excluding any appeals) is made with respect to the litigation. If the Association prevails on the substantive merits of the each material claim in dispute in such litigation, the Association shall be entitled to receive from the Executive all reasonable costs and expenses, including without limitation attorneys’ fees, incurred by the Association on behalf of the Executive in connection with such litigation, and the Executive shall pay such costs and expenses to the Association promptly upon demand by the Association.

     7.13 Termination or Modification of Agreement Because of Changes in Law, Rules or Regulations. The Association is entering into this Agreement on the assumption that certain existing tax laws, rules, and regulations will continue in effect in their current form. If that assumption materially changes and the change has a material detrimental effect on this Agreement, then the Association reserves the right to terminate or modify this Agreement accordingly, subject to the written consent of the Executive, which shall not be unreasonably withheld. This Section 7.13 shall become null and void effective immediately if a Change in Control occurs.

ARTICLE 8
ADMINISTRATION OF AGREEMENT

     8.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator consisting of the Board of Directors of the Association or such committee or person(s) as the Board of Directors of the Association shall appoint. The Plan Administrator shall have the sole and absolute discretion and authority to interpret and enforce all appropriate rules and regulations for the administration of this Agreement and the rights of the Executive under this Agreement, to decide or resolve any and all questions or disputes arising under this Agreement, including benefits payable under this Agreement and all other interpretations of this Agreement, as may arise in connection with the Agreement.

     8.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel, who may be counsel to the Association.

     8.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation, and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Executive or Beneficiary shall be deemed to have any right, vested or

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nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the discount rate and calculation method described in Section 1.1.

     8.4 Indemnity of Plan Administrator. The Plan Administrator shall not be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Agreement, unless such action or omission is attributable to the willful misconduct of the Plan Administrator or any of its members. The Association shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses, or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.

     8.5 Association Information. To enable the Plan Administrator to perform its functions, the Association shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Separation from Service of the Executive and such other pertinent information as the Plan Administrator may reasonably require.

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     IN WITNESS WHEREOF, the Executive and a duly authorized Officer of the Association have signed this Agreement as of the date first written above.

THE EXECUTIVE:	THE ASSOCIATION:
	Fraternity Federal Savings and Loan Association
/s/ Richard C. Schultze	By:	/s/ Nancy J. Rexrode
Richard C. Schultze
	Its:	Secretary

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Exhibit 10.7

I. Recommendations

Pension Shortfall
Richard Schultze

				Annual			Deferred
				Earnings	Vested	Account	Tax Asset	After Tax
Year	Age	Contribution	Yield	Charge	Payment	Balance	Account	Cost
2009	53	29,513	795	30,307	0	30,307	11,517	18,790
2010	54	31,283	2,661	33,944	0	64,251	12,899	21,045
2011	55	33,160	4,748	37,908	0	102,160	14,405	23,503
2012	56	35,150	7,076	42,226	0	144,386	16,046	26,180
2013	57	37,259	9,666	46,925	0	191,311	17,832	29,094
2014	58	39,495	12,542	52,037	0	243,348	19,774	32,263
2015	59	41,864	15,728	57,592	0	300,940	21,885	35,707
2016	60	44,376	19,251	63,627	0	364,567	24,178	39,449
2017	61	47,039	23,140	70,179	0	434,746	26,668	43,511
2018	62	49,861	27,427	77,288	0	512,034	29,370	47,919
2019	63	52,853	32,145	84,998	0	597,032	32,299	52,699
2020	64	32,283	36,833	69,117	27,165	638,984	26,264	42,852
2021	65	0	36,565	36,565	65,196	610,353	13,895	22,670
2022	66	0	34,847	34,847	65,196	580,004	13,242	21,605
2023	67	0	33,026	33,026	65,196	547,834	12,550	20,476
2024	68	0	31,096	31,096	65,196	513,734	11,816	19,280
2025	69	0	29,050	29,050	65,196	477,588	11,039	18,011
2026	70	0	26,881	26,881	65,196	439,273	10,215	16,666
2027	71	0	24,582	24,582	65,196	398,660	9,341	15,241
2028	72	0	22,146	22,146	65,196	355,609	8,415	13,730
2029	73	0	19,563	19,563	65,196	309,976	7,434	12,129
2030	74	0	16,825	16,825	65,196	261,604	6,393	10,431
2031	75	0	13,922	13,922	65,196	210,331	5,290	8,632
2032	76	0	10,846	10,846	65,196	155,980	4,121	6,724
2033	77	0	7,585	7,585	65,196	98,369	2,882	4,703
2034	78	0	4,128	4,128	65,196	37,301	1,569	2,559
2035	79	0	730	730	38,031	0	277	452
2036	80	0	0	0	0	0	0	0
		474,137	503,803	977,940	977,940			606,323

Fraternity Federal March 2009

BENEFICIARY DESIGNATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

     I, Richard C. Schultze, designate the following as beneficiary of any death benefits under this Supplemental Executive Retirement Plan.

     Primary:

     Contingent:

     Note: To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement.

     I understand that I may change these beneficiary designations by filing a new written designation with the Association. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or if I have named my spouse as beneficiary and our marriage is subsequently dissolved.

Signature:
	Richard C. Schultze
Date:		, 2009

     Accepted by the Association this _______ day of ________________, 2009.

     By:

     Print Name:

     Title:

EX-10.8

Exhibit 10.8

RABBI TRUST FOR THE BENEFIT OF EXECUTIVE
OFFICERS OF FRATERNITY FEDERAL SAVINGS AND
LOAN ASSOCIATION WHO HAVE ENTERED INTO
EMPLOYMENT AGREEMENT WITH THE ASSOCIATION

     This Agreement made this 20th of day of July, 2004, by and between Fraternity Federal Savings and Loan Association (“Association”), Grantor, and First Bankers Trust Company, an Illinois corporation, Trustee.

     WHEREAS, Association wishes to establish a trust (hereinafter called “Trust”) and to contribute to the Trust assets that shall be held therein, subject to the claims of Association’s creditors in the event of Association’s Insolvency, as herein defined, until paid to Beneficiary and his or her beneficiaries in such manner and at such times as specified in the employment agreement; and

     WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Employment Agreement plan as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974; and

     WHEREAS, it is the intention of Association to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities to participating employees.

     NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows:

SECTION 1. ESTABLISHMENT OF TRUST

     (a) Association hereby deposits with Trustee in trust $1,625.00, which shall become the principal of the Trust to be held, administered and disposed of by Trustee as provided in this Trust Agreement.

     (b) The Trust shall become irrevocable five days following the issuance of a favorable private letter ruling regarding the Trust from the Internal Revenue Service. Should the Association determine not to seek a private letter ruling, the Trust shall become irrevocable from the date of its full execution. Further, should a private letter ruling be sought and the Trust receives an unfavorable response, the Association reserves the right to, within five (5) business days after receipt of the unfavorable ruling, to decide to amend the agreement to cure the cited problems or to terminate the Trust.

     (c) The Trust is intended to be a grantor trust, of which Association is the grantor, within the meaning of subpart E, part 1, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended and shall be construed accordingly.

     (d) The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of Association and shall be used exclusively for the uses and purposes of

Trust participants and general creditors as herein set forth. Trust participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the employment agreement and this Trust Agreement shall be mere unsecured contractual rights of Trust participants and their beneficiaries against Association. Any assets held by the Trust will be subject to the claims of Association’s general creditors under federal and state law in the event of Insolvency, as defined in Section 3(a) herein.

     (e) Upon a termination of participant’s employment, Association shall, as soon as possible, but in no event longer than 30 days following the termination of employment as defined in the employment agreement, make an irrevocable contribution to the Trust in an amount that is sufficient to pay participant or beneficiary the benefits to which participant or his or her beneficiaries would be entitled pursuant to the terms of the particular employment contract as of the date on which the termination occurred.

SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES.

     (a) Association shall deliver to Trustee a schedule (the “Payment Schedule”) that indicates the amounts payable in respect to each participant (and his or her beneficiaries), that provides instructions acceptable to Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the employment contract), and the time of commencement for payment of such amounts. Except as otherwise provided herein, Trustee shall make payments to the participants and their beneficiaries in accordance with such Payment Schedule. The Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the employment contract and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by Association.

     (b) The entitlement of a participant or his or her beneficiaries to benefits under the employment contract shall be determined by Association or such party as it shall designate under the employment contract, and any claim for such benefits shall be considered and reviewed under the procedures set out in the employment contract.

     (c) Association may make payment of benefits directly to participants or their beneficiaries as they become due under the terms of the employment contract. Association shall notify Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to participants or their beneficiaries. In addition, if the principal of the Trust is not sufficient to make payments of benefits in accordance with the terms of the employment contract, Association shall make the balance of each such payment as it falls due. Trustee shall notify Association where principal is not sufficient.

     (d) Beneficiary shall have the right, from time to time, to name a person or persons as his/her beneficiary for the receipt of benefits not paid to Beneficiary and to change, from time to time, that person or persons so designated as the Beneficiary. Any such designation or change of designation shall be by written instruction to the then Trustee using such form as Trustee may require.

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SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN ASSOCIATION IS INSOLVENT.

     (a) Trustee shall cease payment of benefits to participants and their beneficiaries if the Association is Insolvent. Association shall be considered “Insolvent” for purposes of this Trust Agreement if (i) Association is unable to pay its debts as they become due, or (ii) Association is subject to a pending proceeding as a debtor under the United States Bankruptcy Code, or (iii) Association is determined to be insolvent by the Federal Deposit Insurance Company, the Office of Thrift Supervision, or other applicable federal regulatory agency.

     (b) At all times during the continuance of this Trust, as provided in Section 1(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of Association under federal and state law as set forth below.

          (1) The Board of Directors and the Chief Executive Officer of Association shall have the duty to inform Trustee in writing of Association’s Insolvency. If a person claiming to be a creditor of Association alleges in writing to Trustee that Association has become Insolvent, Trustee shall determine whether Association is Insolvent and, pending such determination, Trustee shall discontinue payment of benefits to participants or their beneficiaries.

          (2) Unless Trustee has actual knowledge of Association’s Insolvency, or has received notice from Association or a person claiming to be a creditor alleging that Association is Insolvent, Trustee shall have no duty to inquire whether Association is Insolvent. Trustee may in all events rely on such evidence concerning Association’s solvency as may be furnished to Trustee and that provides Trustee with a reasonable basis for making a determination concerning Association’s solvency.

          (3) If at any time Trustee has determined that Association is Insolvent, Trustee shall discontinue payments to participants or their beneficiaries and shall hold the assets of the Trust for the benefit of Association’s general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of participants or their beneficiaries to pursue their rights as general creditors of Association with respect to benefits due under the employment contract or otherwise.

          (4) Trustee shall resume the payment of benefits to participants or their beneficiaries in accordance with Section 2 of this Trust Agreement only after Trustee has determined that Association is not Insolvent (or is no longer Insolvent).

     (c) Provided that there are sufficient assets, if Trustee discontinues the payment of benefits from the Trust pursuant to Section 3(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to participants or their beneficiaries, under the terms of the employment contract for the period of such discontinuance, less the aggregate amount of any payments made to participants or their beneficiaries by Association in lieu of the payments provided for hereunder during any such period of discontinuance.

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SECTION 4. PAYMENTS TO ASSOCIATION.

     Except as provided in Section 3 hereof, after the Trust has become irrevocable, Association shall have no right or power to direct Trustee to return to Association or to divert to others any of the Trust assets before all payment of benefits have been made to participants and their beneficiaries pursuant to the terms of the employment contract.

SECTION 5. INVESTMENT AUTHORITY.

     Trustee shall have the authority to invest in bonds and/or notes issued by the United States Department of the Treasury, bonds issued by the various agencies of the government of the United States, municipal bonds carrying an investment grade of not less than A, certificates of deposits insured by the F.D.I.C., money market accounts and savings accounts provided same are insured by the F.D.I.C., stocks, common and/or preferred, which, at the time of purchase, were rated in Standard and Poor’s Stock Rating Book at not less than “B”, and Life Insurance products such as Annuities.

SECTION 6. DISPOSITION OF INCOME.

     During the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested.

SECTION 7. ACCOUNTING BY TRUSTEE.

     Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including such specific records as shall be agreed upon in writing between Association and Trustee. Within 120 days following the close of each calendar year and within 30 days after the removal or resignation of Trustee, Trustee shall deliver to Association a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements, and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchase or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities, and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be.

SECTION 8. RESPONSIBILITY OF TRUSTEE.

     (a) Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that Trustee shall incur no liability to any person for any action taken pursuant to a direction, request, or approval given by Association which is contemplated by, and in conformity with, the terms of the employment contract or this Trust and is given in writing by Association. In the event of a dispute between Association and a party, Trustee may apply to a court of competent jurisdiction to resolve the dispute or at Trustee’s discretion may require arbitration under the rules and procedures of the American Arbitration Association.

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     (b) Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants, or other professional to assist it in performing any of its duties or obligations hereunder.

     (c) Trustee shall have, without exclusion, all powers conferred on Trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or, pursuant to Section 2(d), at termination of the Trust, assign as directed by Beneficiary.

     (d) Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code.

SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE.

     Association shall pay all administrative and Trustee’s fees and expenses as are within the limits established by the Association’s Board of Directors.

SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE.

     (a) Trustee may resign at any time by written notice to Association, which shall be effective 15 days after receipt of such notice unless Association and Trustee agree otherwise.

     (b) Trustee may be removed by Association on 15 days notice or upon shorter notice accepted by Trustee.

     (c) Upon resignation or removal of Trustee and appointment of a successor Trustee, all assets shall be transferred to the successor Trustee.

SECTION 11. APPOINTMENT OF SUCCESSOR.

     (a) If Trustee resigns or is removed, Association may appoint a successor Trustee to replace Trustee. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by Association of the successor Trustee to evidence the transfer.

     (b) The successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets. The successor Trustee shall not be responsible for and Association shall indemnify and defend the successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor Trustee.

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SECTION 12. AMENDMENT OR TERMINATION.

     (a) This Trust Agreement may be amended by a written instrument executed by Trustee and Association. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the employment agreement or shall make the Trust revocable after it has become irrevocable in accordance with Section 1(b) hereof.

     (b) The Trust shall not terminate until the date on which employee participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the employment agreement. Upon termination of the Trust any assets remaining in the Trust shall be returned to the Association.

SECTION 13. MISCELLANEOUS.

     (a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof.

     (b) Benefits payable to participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process.

     (c) This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Maryland.

SECTION 14. EFFECTIVE DATE.

     The effective date of this Trust Agreement shall be the date hereinabove first written.

     As witness the hands and seals of the parties hereto.

ATTEST:	FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
/s/ Joyce H. Kuff	By:	/s/ Thomas K. Sterner	(SEAL)
Secretary		THOMAS K. STERNER Chief Executive Officer and Chairman of the Board
	FIRST BANKERS TRUST COMPANY Trustee
/s/ Kimberly Lubin	By:	/s/ Linda Schultz	(SEAL)
		Trust Officer

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STATE OF MARYLAND, BALTIMORE CITY, TO WIT :

     I HEREBY CERTIFY that, on this 20^th day of July, 2004, the subscriber, a Notary Public of the State of Maryland aforesaid, personally appeared THOMAS K. STERNER, who acknowledged himself to be the Chief Executive Officer and Chairman of the Board of FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION, a corporation, and that he, as such Chief Executive Officer and Chairman of the Board, being authorized so to do, executed the aforegoing instrument for the purposes therein contained, by signing, in my presence, the name of the corporation by himself as such Chief Executive Officer and Chairman of the Board.

     IN WITNESS WHEREOF, I hereunto set my hand and Notarial Seal.

/s/ Margie C. Rauh  

Notary Public
 

[SEAL]
MARGIE C. RAUH
Notary Public
Harford County, MD
My Commission Expires May 1, 2008 

My Commission Expires:                         

STATE OF ILLINOIS, ADAMS COUNTY, IL, TO WIT :

     I HEREBY CERTIFY that, on this 12^th day of August, 2004, the subscriber, a Notary Public of the State of Illinois aforesaid, personally appeared Linda Shultz, who acknowledged herself to be the Trust Officer of FIRST BANKERS TRUST COMPANY, a corporation, and that she, as such Trust Officer, being authorized so to do, executed the aforegoing instrument for the purposes therein contained, by signing, in my presence, the name of the corporation by herself as such Trust Officer.

     IN WITNESS WHEREOF, I hereunto set my hand and Notarial Seal.

/s/ Deborah J. Staff  

Notary Public
 

“OFFICIAL SEAL”
DEBORAH J. STAFF
Notary Public, State of Illinois
My Commission Expires 10/04/05 

My Commission Expires: 10/04/05

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EX-10.10

Exhibit 10.10

FORM OF
FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Effective January 1, 2011

FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Table of Contents

ARTICLE I	Introduction	1
ARTICLE II	Definitions	1
ARTICLE III	Eligibility and Participation	3
ARTICLE IV	Benefits	4
ARTICLE V	Accounts	5
ARTICLE VI	Supplemental Benefit Payments	6
ARTICLE VII	Claims Procedures	7
ARTICLE VIII	Amendment and Termination	8
ARTICLE IX	General Provisions	8

ARTICLE I
INTRODUCTION

Section 1.01 Purpose, Design and Intent.

(a)

The purpose of the Fraternity Federal Savings and Loan Association Supplemental Executive Retirement Plan (the “Plan”) is to assist Fraternity Federal Savings and Loan Association (the “Association”) in retaining the services of key employees until their retirement, to induce such employees to use their best efforts to enhance the business of the Association and its affiliates, and to provide certain supplemental retirement benefits to such employees, which cannot otherwise be provided under certain tax-qualified retirement plans.

(b)

The Plan, in relevant part, is intended to constitute an unfunded “excess benefit plan” as defined in Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended. In this respect, the Plan is specifically designed to provide certain key employees with retirement benefits that would have been provided under various tax-qualified retirement plans sponsored by the Association but for the applicable limitations placed on benefits and contributions under such plans by various provisions of the Internal Revenue Code of 1986, as amended.

ARTICLE II
DEFINITIONS

Section 2.01 Definitions. In this Plan, whenever the context so indicates, the singular or the plural number and the masculine or feminine gender shall be deemed to include the other, the terms “he,” “his,” and “him,” shall refer to a Participant or a beneficiary of a Participant, as the case may be, and, except as otherwise provided, or unless the context otherwise requires, the capitalized terms shall have the following meanings:

(a) “401(k) Plan” means [plan].

(b) “Applicable Limitations” means one or more of the following, as applicable:

(i)	the maximum limitations on annual additions to a tax-qualified defined contribution plan under Section 415(c) of the Code; and
(ii)	the maximum limitation on the annual amount of compensation that may, under Section 401(a)(17) of the Code, be taken into account in determining contributions to and benefits under tax-qualified plans; and
(iii)	the maximum limitations, under Section 401(k), 401(m), or 402(g) of the Code, on pre-tax contributions that may be made to a qualified defined contribution plan.

(c) “Association” means Fraternity Federal Savings and Loan Association and its successors.

(d) “Board of Directors” means the Board of Directors of the Association.

(e) “Change in Control” means a change in control as defined in Section 409A of the Code and rules, regulations, and guidance of general application thereunder issued by the Department of the Treasury, including:

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(i)	Change in ownership: a change in ownership of the Corporation occurs on the date any one person or group accumulates ownership of Corporation stock constituting more than 50% of the total fair market value or total voting power of Corporation stock; or
(ii)	Change in effective control: (x) any one person or more than one person acting as a group acquires within a 12-month period ownership of Corporation stock possessing 30% or more of the total voting power of Corporation stock, or (y) a majority of the Corporation’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed in advance by a majority of the Corporation’s board of directors; or
(iii)	Change in ownership of a substantial portion of assets: a change in ownership of a substantial portion of the Corporation’s assets occurs if in a 12-month period any one person or more than one person acting as a group acquires from the Corporation assets having a total gross fair market value equal to or exceeding 40% of the total gross fair market value of all of the Corporation’s assets immediately before the acquisition or acquisitions. For this purpose, gross fair market value means the value of the Corporation’s assets, or the value of the assets being disposed of, determined without regard to any liabilities associated with the assets.

(f) “Code” means the Internal Revenue Code of 1986, as amended.

(g) “Committee” means the person(s) designated by the Board of Directors, pursuant to Section 9.02 of the Plan, to administer the Plan.

(h) “Common Stock” means the common stock of the Corporation.

(i) “Corporation” means Fraternity Community Bancorp, Inc. and its successors.

(j) “Eligible Individual” means any Employee who participates in the ESOP or 401(k) Plan, as the case may be, and whom the Board of Directors determines is one of a “select group of management or highly compensated employees,” as such phrase is used for purposes of Sections 101, 201, and 301 of ERISA.

(k) “Employee” means any person employed by the Association or an Affiliate.

(l) “Employer” means the Association or Affiliate thereof that employs the Employee.

(m) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

(n) “ESOP” means the Fraternity Federal Savings and Loan Association Employee Stock Ownership Plan, as amended from time to time.

(o) “ESOP Acquisition Loan” means a loan or other extension of credit incurred by the trustee of the ESOP in connection with the purchase of Common Stock on behalf of the ESOP.

(p) “ESOP Valuation Date” means any day as of which the investment experience of the trust fund of the ESOP is determined and individuals’ accounts under the ESOP are adjusted accordingly.

(q) “Effective Date” means January 1, 2011.

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(r) “Participant” means an Eligible Employee who is entitled to benefits under the Plan.

(s) “Plan” means this Fraternity Federal Savings and Loan Association Supplemental Executive Retirement Plan, as amended from time to time.

(t) “Separation from Service” means a termination of a Participant’s services (whether as an employee or as an independent contractor) to the Association. Whether a Separation from Service has occurred shall be determined in accordance with the requirements of Section 409A of the Code based on whether the facts and circumstances indicate that the Association and the Participant reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Participant would performed after a certain date or (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding thirty-six (36) month period.

(u) “Supplemental ESOP Account” means an account established by an Employer, pursuant to Section 5.01 of the Plan, with respect to a Participant’s Supplemental ESOP Benefit.

(v) “Supplemental ESOP Benefit” means the benefit credited to a Participant pursuant to Section 4.01 of the Plan.

(w) “Supplemental Savings Account” means an account established by an Employer, pursuant to Section 5.03 of the Plan, with respect to a Participant’s Supplemental Savings Benefit.

(x) “Supplemental Savings Benefit” means the benefit credited to a Participant pursuant to Section 4.03 of the Plan.

(y) “Supplemental Stock Ownership Account” means an account established by an Employer, pursuant to Section 5.02 of the Plan, with respect to a Participant’s Supplemental Stock Ownership Benefit.

(z) “Supplemental Stock Ownership Benefit” means the benefit credited to a Participant pursuant to Section 4.02 of the Plan.

ARTICLE III
ELIGIBILITY AND PARTICIPATION

Section 3.01 Eligibility and Participation.

(a)

Each Eligible Employee may participate in the Plan. An Eligible Employee shall become a Participant in the Plan upon designation as such by the Board of Directors. An Eligible Employee whom the Board of Directors designates as a Participant in the Plan shall commence participation as of the date established by the Board of Directors. The Board of Directors shall establish an Eligible Employee’s date of participation at the same time it designates the Eligible Employee as a Participant in the Plan.

(b)

The Board of Directors may, at any time, designate an Eligible Employee as a Participant for any or all supplemental benefits provided for under Article IV of the Plan.

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ARTICLE IV
BENEFITS

Section 4.01 Supplemental ESOP Benefit.

As of the last day of each plan year of the ESOP, the Employer shall credit the Participant’s Supplemental ESOP Account with a Supplemental ESOP Benefit equal to the excess of (a) over (b), where:

(a)

Equals the annual contributions made by the Employer and/or the number of shares of Common Stock released for allocation in connection with the repayment of an ESOP Acquisition Loan that would otherwise be allocated to the accounts of the Participant under the ESOP for the applicable plan year, if the provisions of the ESOP were administered without regard to any of the Applicable Limitations; and

(b)

Equals the annual contributions made by the Employer and/or the number of shares of common stock released for allocation in connection with the repayment of an ESOP Acquisition Loan that are actually allocated to the accounts of the Participant under the provisions of the ESOP for that particular plan year, after giving effect to any reduction of such allocation required by any of the Applicable Limitations.

Section 4.02 Supplemental Stock Ownership Benefit.

(a) Upon a Change in Control, the Employer shall credit to the Participant’s Supplemental Stock Ownership Account a Supplemental Stock Ownership Benefit equal to (i) less (ii), the result of which is multiplied by (iii), where:

(i)	Equals the total number of shares of Common Stock acquired with the proceeds of all ESOP Acquisition Loans (together with any dividends, cash proceeds, or other medium related to such ESOP Acquisition Loans) that would have been allocated or credited for the benefit of the Participant under the ESOP and/or this Plan, as the case may be, had the Participant continued in the employ of the Employer through the first ESOP Valuation Date following the last scheduled payment of principal and interest on all ESOP Acquisition Loans outstanding at the time of the Change in Control; and
(ii)	Equals the total number of shares of Common Stock acquired with the proceeds of all ESOP Acquisition Loans (together with any dividends, cash proceeds, or other medium related to such ESOP Acquisition Loans) and allocated for the benefit of the Participant under the ESOP and/or this Plan, as the case may be, as of the first ESOP Valuation Date following the Change in Control; and
(iii)	Equals the fair market value of the Common Stock immediately preceding the Change in Control.

(b) For purposes of clause (i) of subsection (a) of this Section 4.02, the total number of shares of Common Stock shall be determined by multiplying the sum of (i) and (ii) by (iii), where:

(i) Equals the average of the total shares of Common Stock acquired with the proceeds of an ESOP Acquisition Loan and allocated for the benefit of the Participant under the ESOP as of the three most recent ESOP Valuation Dates preceding the Change in Control (or lesser number if the Participant has not participated in the ESOP for three full years);

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(ii)	Equals the average number of shares of Common Stock credited to the Participant’s Supplemental ESOP Account for the three most recent plan years of the ESOP (such that the three most recent plan years coincide with the three most recent ESOP Valuation Dates referred to in (i) above); and
(iii)	Equals the original number of scheduled annual payments on the ESOP Acquisition Loan.

Section 4.03 Supplemental Savings Benefit.

A Participant’s Supplemental Savings Benefit under the Plan shall be equal to the excess of (a) over (b), where:

(a)	is the sum of the matching contributions and other contributions of the Employer that would otherwise be allocated to an account of the Participant under the 401(k) Plan for a particular year, if the provisions of the 401(k) Plan were administered without regard to any of the Applicable Limitations; and
(b)	is the sum of the matching contributions and other contributions of the Employer that are actually allocated on account of the Participant under the provisions of the 401(k) Plan for that particular year, after giving effect to any reduction of such allocation required by any of the Applicable Limitations.

ARTICLE V
ACCOUNTS

Section 5.01 Supplemental ESOP Benefit Account.

For each Participant who is credited with a benefit pursuant to Section 4.01 of the Plan, the Employer shall establish, as a memorandum account on its books, a Supplemental ESOP Account. Each year, the Committee shall credit to the Participant’s Supplemental ESOP Account the amount of benefits determined under Section 4.01 of the Plan for that year. The Committee shall credit the account with an amount equal to the appropriate number of shares of Common Stock or other medium of contribution that would have otherwise been made to the Participant’s accounts under the ESOP but for the limitations imposed by the Code. Shares of Common Stock shall be valued under this Plan in the same manner as under the ESOP. Cash contributions credited to a Participant’s Supplemental ESOP Account shall be credited annually with interest at a rate equal to the combined weighted return provided to the Participant’s non-stock accounts under the ESOP.

Section 5.02 Supplemental Stock Ownership Account.

The Employer shall establish, as a memorandum account on its books, a Supplemental Stock Ownership Account. Upon a Change in Control, the Committee shall credit to the Participant’s Supplemental Stock Ownership Account the amount of benefits determined under Section 4.02 of the Plan. The Committee shall credit the account with an amount equal to the appropriate number of shares of Common Stock or other medium of contribution that would have otherwise been made to the Participant’s accounts under the ESOP. Shares of Common Stock shall be valued under this Plan in the same manner as under the ESOP. Cash contributions credited to a Participant’s Supplemental Stock Ownership Account shall be credited annually with interest at a rate equal to the combined weighted return provided to the Participant’s non-stock accounts under the ESOP.

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Section 5.03 Supplemental Savings Account.

The Employer shall establish a memorandum account on its books, a Supplemental Savings Account, for each Participant, and each year the Committee will credit the amount of contributions determined under Section 4.03 of the Plan. Contributions credited to a Participant’s Supplemental Savings Account shall be credited monthly with interest at a rate equal to the combined weighted return provided to the Participant’s account(s) under the 401(k) Plan.

ARTICLE VI
SUPPLEMENTAL BENEFIT PAYMENTS

Section 6.01 Payment of Supplemental ESOP Benefit.

(a)	A Participant’s Supplemental ESOP Benefit shall be paid to the Participant or, in the event of the Participant’s death, to his beneficiary (as designated on a form acceptable to the Employer), in a single lump sum cash payment as soon as administratively practicable, but in no event not later than sixty (60) days, following the Participant’s Separation from Service.
(b)	A Participant shall have a non-forfeitable right to the Supplemental ESOP Benefit credited to him under this Plan in the same percentage as he has with respect to benefits allocated to him under the ESOP at the time the benefits become distributable to him under the ESOP.

Section 6.02 Payment of Supplemental Stock Ownership Benefit.

(a)	A Participant’s Supplemental Stock Ownership Benefit shall be paid to the Participant or, in the event of the Participant’s death, to his beneficiary (as designated on a form acceptable to the Employer), in a single lump sum cash payment as soon as administratively practicable, but in no event not later than sixty (60) days, following the Participant’s Separation from Service.
(b)	A Participant shall always have a fully non-forfeitable right to the Supplemental Stock Ownership Benefit credited to him under this Plan.

Section 6.03 Payment of Supplemental Savings Benefit.

(a)	A Participant’s Supplemental Savings Benefit shall be paid to the Participant or, in the event of the Participant’s death, to his beneficiary (as designated on a form acceptable to the Employer) in a single sum cash payment, as soon as administratively practicable, but in no event not later than sixty (60) days, following the Participant’s Separation from Service.
(b)	A Participant shall have a non-forfeitable right to his Supplemental Savings Benefit under this Plan in the same percentage as he has to any matching contributions under the 401(k) Plan at the time of his Separation from Service.

Section 6.04 Payment to Specified Employees.

Notwithstanding anything in Article VI, if when a Separation from Service occurs the Participant is a “specified employee” within the meaning of Section 409A of the Code, the benefit shall be paid to the Participant in a single lump sum cash payment without interest on the first business day of the seventh (7^th) month after which the Participant incurs a Separation from Service.

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ARTICLE VII
CLAIMS PROCEDURES

Section 7.01 Claims Reviewer.

For purposes of handling claims with respect to this Plan, the “Claims Reviewer” shall be the Committee, unless the Committee designates another person or group of persons as Claims Reviewer.

Section 7.02 Claims Procedure.

(a)	An initial claim for benefits under the Plan must be made by the Participant or his beneficiary or beneficiaries in accordance with the terms of this Section 7.02.
(b)	Not later than ninety (90) days after receipt of such a claim, the Claims Reviewer will render a written decision on the claim to the claimant, unless special circumstances require the extension of such 90-day period. If such extension is necessary, the Claims Reviewer shall provide the Participant or the Participant’s beneficiary or beneficiaries with written notification of such extension before the expiration of the initial 90-day period. Such notice shall specify the reason or reasons for the extension and the date by which a final decision can be expected. In no event shall such extension exceed a period of ninety (90) days from the end of the initial 90-day period.
(c)	In the event the Claims Reviewer denies the claim of a Participant or any beneficiary in whole or in part, the Claims Reviewer’s written notification shall specify, in a manner calculated to be understood by the claimant, the reason for the denial; a reference to the Plan or other document or form that is the basis for the denial; a description of any additional material or information necessary for the claimant to perfect the claim; an explanation as to why such information or material is necessary; and an explanation of the applicable claims procedure.
(d)	Should the claim be denied in whole or in part and should the claimant be dissatisfied with the Claims Reviewer’s disposition of the claimant’s claim, the claimant may have a full and fair review of the claim by the Committee upon written request submitted by the claimant or the claimant’s duly authorized representative and received by the Committee within sixty (60) days after the claimant receives written notification that the claimant’s claim has been denied. In connection with such review, the claimant or the claimant’s duly authorized representative shall be entitled to review pertinent documents and submit the claimant’s views as to the issues, in writing. The Committee shall act to deny or accept the claim within sixty (60) days after receipt of the claimant’s written request for review unless special circumstances require the extension of such 60-day period. If such extension is necessary, the Committee shall provide the claimant with written notification of such extension before the expiration of such initial 60-day period. In all events, the Committee shall act to deny or accept the claim within one hundred and twenty (120) days of the receipt of the claimant’s written request for review. The action of the Committee shall be in the form of a written notice to the claimant and its contents shall include all of the requirements for action on the original claim.
(e)	In no event may a claimant commence legal action for benefits the claimant believes are due the claimant until the claimant has exhausted all of the remedies and procedures afforded the claimant by this Article VII.

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ARTICLE VIII
AMENDMENT AND TERMINATION

Section 8.01 Amendment of the Plan.

The Association may from time to time and at any time amend the Plan; provided, however, that such amendment may not adversely affect the rights of any Participant or beneficiary with respect to any benefit under the Plan to which the Participant or beneficiary may have previously become entitled prior to the effective date of such amendment without the consent of the Participant or beneficiary. The Committee shall be authorized to make minor or administrative changes to the Plan, as well as amendments required by applicable federal or state law (or authorized or made desirable by such statutes); provided, however, that such amendments must subsequently be ratified by the Board of Directors.

Section 8.02 Termination of the Plan.

The Association may terminate the Plan at any time; provided, however, that such termination may not adversely affect the rights of any Participant or beneficiary with respect to any benefit under the Plan to which the Participant or beneficiary may have previously become entitled prior to the effective date of such termination without the consent of the Participant or beneficiary. Any amounts credited to the supplemental accounts of any Participant shall remain subject to the provisions of the Plan and no distribution of benefits shall be accelerated because of termination of the Plan.

ARTICLE IX
GENERAL PROVISIONS

Section 9.01 Unfunded, Unsecured Promise to Make Payments in the Future.

The right of a Participant or any beneficiary to receive a distribution under this Plan shall be an unsecured claim against the general assets of the Association or its Affiliates, and neither a Participant, nor his designated beneficiary or beneficiaries, shall have any rights in or against any amount credited to any account under this Plan or any other assets of the Association or an Affiliate. The Plan at all times shall be considered entirely unfunded both for tax purposes and for purposes of Title I of ERISA. Any funds invested hereunder shall continue for all purposes to be part of the general assets of the Association or an Affiliate and available to its general creditors in the event of bankruptcy or insolvency. Accounts under this Plan and any benefits which may be payable pursuant to this Plan are not subject in any manner to anticipation, sale, alienation, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of a Participant or a Participant’s beneficiary. The Plan constitutes a mere promise by the Association or Affiliate to make benefit payments in the future. No interest or right to receive a benefit may be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such Participant or beneficiary, including claims for alimony, support, separate maintenance and claims in bankruptcy proceedings.

Section 9.02 Committee as Plan Administrator.

(a)	The Plan shall be administered by the Committee designated by the Board of Directors of the Association.
(b)	The Committee shall have the authority, duty and power to interpret and construe the provisions of the Plan as it deems appropriate. The Committee shall have the duty and responsibility of maintaining records, making the requisite calculations and disbursing the payments hereunder. In

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addition, the Committee shall have the authority and power to delegate any of its administrative duties to employees of the Association or an Affiliate, as they may deem appropriate. The Committee shall be entitled to rely on all tables, valuations, certificates, opinions, data and reports furnished by any actuary, accountant, controller, counsel or other person employed or retained by the Association with respect to the Plan. The interpretations, determinations, regulations and calculations of the Committee shall be final and binding on all persons and parties concerned.

Section 9.03 Expenses.

Expenses of administration of the Plan shall be paid by the Association or an Affiliate.

Section 9.04 Statements.

The Committee shall furnish individual annual statements of accrued benefits to each Participant, or current beneficiary, in such form as determined by the Committee or as required by law.

Section 9.05 Rights of Participants and Beneficiaries.

(a)	The sole rights of a Participant or beneficiary under this Plan shall be to have this Plan administered according to its provisions and to receive whatever benefits he may be entitled to hereunder.
(b)	Nothing in the Plan shall be interpreted as a guaranty that any funds in any trust which may be established in connection with the Plan or assets of the Association or an Affiliate will be sufficient to pay any benefit hereunder.
(c)	The adoption and maintenance of this Plan shall not be construed as creating any contract of employment or service between the Association or an Affiliate and any Participant or other individual. The Plan shall not affect the right of the Association or an Affiliate to deal with any Participants in employment or service respects, including their hiring, discharge, compensation, and other conditions of employment or service.

Section 9.06 Incompetent Individuals.

The Committee may, from time to time, establish rules and procedures which it determines to be necessary for the proper administration of the Plan and the benefits payable to a Participant or beneficiary in the event that such Participant or beneficiary is declared incompetent and a conservator or other person is appointed and legally charged with that Participant’s or beneficiary’s care. Except as otherwise provided for herein, when the Committee determines that such Participant or beneficiary is unable to manage his financial affairs, the Committee may pay such Participant’s or beneficiary’s benefits to such conservator, person legally charged with such Participant’s or beneficiary’s care, or institution then contributing toward or providing for the care and maintenance of such Participant or beneficiary. Any such payment shall constitute a complete discharge of any liability of the Association or an Affiliate and the Plan for such Participant or beneficiary.

Section 9.07 Sale, Merger or Consolidation of the Association.

The Plan may be continued after a sale of assets of the Association, or a merger or consolidation of the Association into or with another corporation or entity only if, and to the extent that, the transferee, purchaser or successor entity agrees to continue the Plan. Additionally, upon a merger, consolidation or other Change in Control, any amounts credited to Participant’s deferral accounts shall be placed in a

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grantor trust to the extent not already in such a trust. In the event that the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall be terminated subject to the provisions of Section 8.02 of the Plan. Any legal fees incurred by a Participant in determining benefits to which such Participant is entitled under the Plan following a sale, merger, or consolidation of the Association or an Affiliate of which the Participant is an Employee or, if applicable, a member of the Board of Directors, shall be paid by the resulting or succeeding entity.

Section 9.08 Location of Participants.

Each Participant shall keep the Association informed of his current address and the current address of his designated beneficiary or beneficiaries. The Association shall not be obligated to search for any person. If such person is not located within three (3) years after the date on which payment of the Participant’s benefits payable under this Plan may first be made, payment may be made as though the Participant or his beneficiary had died at the end of such three-year period.

Section 9.09 Liability of the Association and its Affiliates.

Notwithstanding any provision herein to the contrary, neither the Association nor any individual acting as an employee or agent of the Association shall be liable to any Participant, former Participant, beneficiary, or any other person for any claim, loss, liability or expense incurred in connection with the Plan, unless attributable to fraud or willful misconduct on the part of the Association or any such employee or agent of the Association.

Section 9.10 Governing Law.

All questions pertaining to the construction, validity and effect of the Plan shall be determined in accordance with the laws of the United States and, to the extent not preempted by such laws, by the laws of the State of Maryland.

[Signature page follows]

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This Plan has been approved and adopted by the Board of Directors of the Association and is effective as of January 1, 2011.

Attest:	FRATERNITY FEDERAL SAVINGS AND
	LOAN ASSOCIATION
	By:
		For the entire of Board of Directors

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EX-10.11

Exhibit 10.11

FORM OF
FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
EMPLOYEE SEVERANCE COMPENSATION PLAN

A. Purpose.

The primary purpose of the Fraternity Federal Savings and Loan Association Employee Severance Compensation Plan is to ensure the successful continuation of the business of Fraternity Federal Savings and Loan Association and the fair and equitable treatment of the employees of Fraternity Federal Savings and Loan Association following a Change in Control.

B. Definitions.

In this Plan, whenever the context so indicates, the singular or the plural number and the masculine or feminine gender shall be deemed to include the other, the terms “he,” “his,” and “him,” shall refer to an employee and, except as otherwise provided, or unless the context otherwise requires, the capitalized terms shall have the following meanings:

“Association” means Fraternity Federal Savings and Loan Association and its successors.

“Base Compensation” means

     (a) For salaried employees, the employee’s annual base salary at the rate in effect on his termination date or, if greater, the rate in effect on the date immediately preceding the Change in Control.

     (b) For employees whose compensation is determined in whole or in part on the basis of commission income, the employee’s base salary at his termination date (or, if greater, the employee’s base salary on the date immediately preceding the effective date of the Change in Control), if any, plus the commissions earned by the employee in the twelve (12) full calendar months preceding his termination of employment (or, if greater, the commissions earned in the twelve (12) full calendar months immediately preceding the effective date of the Change in Control).

     (c) For hourly employees, the employee’s total hourly wages for the twelve (12) full calendar months preceding his termination of employment or, if greater, the twelve (12) full calendar months preceding the effective date of the Change in Control.

“Board of Directors” means the Board of Directors of the Association.

“Cause” means grounds for termination of employment due to the employee’s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, or regulation (other than traffic violations or similar offenses) or final cease-and-desist order.

“Change in Control” means a change in control of the Association or the Corporation, as defined in Section 409A of the Code and rules, regulations, and guidance of general application thereunder issued by the Department of the Treasury, including:

     (a) Change in ownership: a change in ownership of the Corporation occurs on the date any one person or group accumulates ownership of Corporation stock constituting more than 50% of the total fair market value or total voting power of Corporation stock,

     (b) Change in effective control: (x) any one person or more than one person acting as a group acquires within a 12-month period ownership of Corporation stock possessing 30% or more of the total voting power of Corporation stock, or (y) a majority of the Corporation’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed in advance by a majority of the Corporation’s board of directors, or

     (c) Change in ownership of a substantial portion of assets: a change in ownership of a substantial portion of the Corporation’s assets occurs if in a 12-month period any one person or more than one person acting as a group acquires from the Corporation assets having a total gross fair market value equal to or exceeding 40% of the total gross fair market value of all of the Corporation’s assets immediately before the acquisition or acquisitions. For this purpose, gross fair market value means the value of the Corporation’s assets, or the value of the assets being disposed of, determined without regard to any liabilities associated with the assets.

“Change in Control Severance Benefit” means the benefit provided for in Paragraph D of the Plan.

“Code” means the Internal Revenue Code of 1986, as amended.

“Comparable Position” means a position that would (i) provide the employee with base compensation and benefits that are comparable in the aggregate to those provided to the employee prior to the Change in Control; (ii) provide the employee with an opportunity for variable bonus compensation that is comparable to the opportunity provided to the employee prior to the Change in Control; (iii) be in a location that would not require the employee to increase his daily one-way commuting distance by more than thirty-five (35) miles as compared to the employee’s commuting distance immediately prior to the Change in Control; and (iv) have job skill requirements and duties that are comparable to the requirements and duties of the position held by the employee immediately prior to the Change in Control.

“Corporation” means Fraternity Community Bancorp, Inc. and its successors.

“Plan” means this Fraternity Federal Savings and Loan Association Employee Severance Compensation Plan, as may be amended from time to time.

“Year of Service” means each 12-month period of service following an employee’s date of hire during which the employee completes at least one hour of service each month. The taking of a leave of absence shall not eliminate a period of time from being a Year of Service if the period of time otherwise qualifies as a year of service. A “leave of absence” means (i) the taking of an authorized or approved leave of absence under the provisions of the federal Family and Medical Leave Act (“FMLA”), (ii) any state law providing qualitatively similar benefits as the FMLA, or (iii) a leave of absence authorized under the policies of the Association.

C. Covered Employees.

     (a) Any employee of the Association with at least one Year of Service as of the date of his termination of employment shall receive a Change in Control Severance Benefit if, within the period beginning on the effective date of a Change in Control and ending on the first anniversary of the effective date of the Change in Control, (i) the Association terminates the employee’s employment without Cause, or (ii) the employee terminates employment with the Association voluntarily after being offered continued employment in a position that is not a Comparable Position.

     (b) Notwithstanding the foregoing, no employee shall be eligible for a Change in Control Severance Benefit if, at the time of his termination of employment, the employee is a party to an

2

individual employment agreement or change in control agreement with the Association and/or the Corporation pursuant to which he is entitled to severance benefits.

D. Determination and Payment of the Change in Control Severance Benefit.

     (a) The Change in Control Severance Benefit payable to an eligible employee under this Plan shall be determined under as follows:

     (1) An eligible employee shall receive a Change in Control Severance Benefit equal to the product of (i) the employee’s Years of Service from his hire date (including partial years and years prior to the adoption of this Plan) through the date of the termination of his employment and (ii) an amount equal to the employee’s Base Compensation for two (2) weeks. The maximum payment to an eligible employee shall be an amount equal to fifty-two (52) weeks of Base Compensation.

     (b) The Change in Control Severance Benefit shall be paid in a lump sum not later than five (5) business days after the date of the eligible employee’s termination of employment.

     (c) All payments under this Plan will be subject to required withholding for federal, state and local tax purposes.

E. Parachute Payment.

Notwithstanding anything in this Plan to the contrary, if a Change in Control Severance Benefit that is otherwise payable to an employee who is a “disqualified individual” would constitute an “excess parachute payment,” taking into account payments under this Plan and otherwise, then the benefit payable under this Plan shall be reduced to the maximum amount which does not include an excess parachute payment. The terms “disqualified individual” and “excess parachute payment” shall have the same meanings as under Section 280G of the Code.

F. Adoption by Affiliates.

Upon approval by the Board of Directors, this Plan may be adopted by any “subsidiary” or “parent” of the Association. Upon such adoption, the provisions of the Plan shall be fully applicable to the employees of that subsidiary or parent. The term “subsidiary” means any corporation in which the Association, directly or indirectly, holds a majority of the voting power of its outstanding shares of capital stock. The term “parent” means any corporation which holds a majority of the voting power of the outstanding shares of capital stock of the Association.

G. Administration.

The Plan shall be administered by the Board of Directors, which shall have the discretion to interpret the terms of the Plan and to make all determinations about eligibility and payment of benefits. All decisions of the Board of Directors, any action taken by the Board of Directors with respect to the Plan and within the powers granted to the Board of Directors under the Plan, and any interpretation by the Board of Directors of any term or condition of the Plan, shall be conclusive and binding on all persons, and will be given the maximum possible deference allowed by law. The Board of Directors may delegate and reallocate any authority and responsibility with respect to the Plan.

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H. Source of Payments.

Unless otherwise determined by the Board of Directors, all payments and benefits provided under this Agreement shall be paid solely by the Association or, if applicable, any affiliate that adopts the Plan.

I. Inalienability.

In no event may any employee sell, transfer, anticipate, assign or otherwise dispose of any right or interest under the Plan. At no time will any such right or interest be subject to the claims of creditors, nor liable to attachment, execution or other legal process.

J. Governing Law.

The provisions of the Plan will be construed, administered and enforced in accordance with the laws of the State of Maryland, except to the extent that federal law applies.

K. Severability.

If any provision of the Plan is held invalid or unenforceable, its invalidity or unenforceability will not affect any other provision of the Plan, and the Plan will be construed and enforced as if such provision had not been included.

L. No Employment Rights.

Neither the establishment nor the terms of this Plan shall be held or construed to confer upon any employee the right to a continuation of employment, nor constitute a contract of employment, express or implied. The Association and, if applicable, any affiliate that adopts the Plan, reserves the right to dismiss or otherwise deal with any employee to the same extent and on the same basis as though this Plan had not been adopted. Nothing in this Plan is intended to alter the at-will status of an employee’s employment status, it being understood that, except to the extent otherwise expressly set forth to the contrary in an individual employment-related agreement, the employment of any employee may be terminated at any time by the Association or, if applicable, any affiliate that adopts the Plan.

M. Amendment and Termination.

The Board of Directors may terminate or amend the Plan in any respect, unless a Change in Control has previously occurred. If a Change in Control occurs, the Plan no longer shall be subject to amendment, change, substitution, deletion, revocation or termination in any respect whatsoever. The form of any proper amendment or termination of the Plan shall be a written instrument signed by a duly authorized officer or officers of the Association, certifying that the amendment or termination has been approved by the Board of Directors. A proper amendment of the Plan automatically shall effect a corresponding amendment to each Participant’s rights hereunder. A proper termination of the Plan automatically shall effect a termination of all employees’ rights and benefits hereunder.

N. Required Provisions.

     (1) In the event any of the provisions of this Paragraph N are in conflict with the terms of this Plan, this Paragraph N shall prevail.

     (2) The Association may terminate an employee’s employment at any time, but any termination by the Association, other than termination for Cause, shall not prejudice an employee’s right

4

to compensation or other benefits under this Plan. An employee shall not have the right to receive compensation or other benefits for any period after termination for Cause.

     (3) If an employee is suspended from office and/or temporarily prohibited from participating in the conduct of the Association’s affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(3) or (g)(1); the Association’s obligations under this Plan shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Association may in its discretion: (i) pay the employee all or part of the compensation withheld while their contract obligations were suspended; and (ii) reinstate (in whole or in part) any of the obligations which were suspended.

     (4) If an employee is removed and/or permanently prohibited from participating in the conduct of the Association’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(4) or (g)(1), all obligations of the Association under this Plan shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.

     (5) If the Association is in default as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1813(x)(1) all obligations under this Plan shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.

     (6) All obligations under this Plan shall be terminated, except to the extent determined that continuation of the Plan is necessary for the continued operation of the Association: (i) by the Director of the Office of Thrift Supervision (“OTS”), or his designee, at the time the Federal Deposit Insurance Corporation (“FDIC”) enters into an agreement to provide assistance to or on behalf of the Association under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. §1823(c); or (ii) by the Director of the OTS (or his designee) at the time the Director of the OTS (or his designee) approves a supervisory merger to resolve problems related to the operations of the Association or when the Association is determined by the Director of the OTS to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.

     (7) Any payments made to employees pursuant to this Plan, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

[Signature Page to Follow]

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This plan has been approved and adopted by the Board of Directors of the Association and is effective as of [date].

	FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION
Attest:	By:
		For the Entire Board of Directors

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EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     We consent to the use in the Registration Statement on Form S-1 filed with the Securities and Exchange Commission and in the Application for Conversion on Form AC filed with the Office of Thrift Supervision of our report dated May 14, 2010 on the consolidated statements of financial condition of Fraternity Federal Savings and Loan Association, Inc. and Subsidiary as of December 31, 2009 and 2008, and the related consolidated statements of operations and comprehensive income and cash flows for each of the years then ended.

     We also consent to the reference to our firm under the heading “Experts” in the Prospectus that is part of the Registration Statement and the Application for Conversion.

/s/ Stegman & Company

Baltimore, Maryland
October 29, 2010

EX-23.3

Exhibit 23.3

Feldman Financial Advisors, Inc.

1001 Connecticut Avenue, NW • Suite 840
Washington, DC 20036
202-467-6862 • (Fax) 202-467-6963

October 27, 2010

Board of Directors
Fraternity Federal Savings and Loan Association
764 Washington Boulevard
Baltimore, Maryland 21230

Members of the Board:

We hereby consent to the use of our firm’s name in the Application for Conversion on Form AC, and amendments thereto, filed by Fraternity Federal Savings and Loan Association with the Office of Thrift Supervision. We also consent to the use of our firm’s name in the Registration Statement on Form S-1, and amendments thereto, filed by Fraternity Community Bancorp, Inc. with the Securities and Exchange Commission. Additionally, we consent to the inclusion of, summary of, and reference to our Conversion Valuation Appraisal Report in such filings and amendments, including the Prospectus of Fraternity Community Bancorp, Inc.

Sincerely,

Feldman Financial Advisors, Inc.

EX-99.1

Exhibit 99.1

Feldman Financial Advisors, Inc.

1001 Connecticut Avenue, NW • Suite 840
Washington, DC 20036
202-467-6862 • (Fax) 202-467-6963

Fraternity Federal
Savings and Loan Association
Baltimore, Maryland

Conversion Valuation Appraisal Report
Valued as of October 12, 2010

Prepared By

Feldman Financial Advisors, Inc.
Washington, DC

Feldman Financial Advisors, Inc.

1001 Connecticut Avenue, NW • Suite 840
Washington, DC 20036
202-467-6862 • (Fax) 202-467-6963

October 12, 2010

Board of Directors
Fraternity Federal Savings and Loan Association
764 Washington Boulevard
Baltimore, Maryland 21230

Members of the Board:

     At your request, we have completed and hereby provide an independent appraisal (“Appraisal”) of the estimated pro forma market value of Fraternity Federal Savings and Loan Association (“Fraternity Federal” or the “Association”) in connection with the simultaneous conversion of the Association from the mutual to stock form of ownership, the issuance of the Association’s capital stock to Fraternity Community Bancorp, Inc. (the “Company”), and the offering of shares of common stock of the Company for sale to certain depositors of the Association, employee benefit plans of the Association, and other members of the general public (collectively referred to herein as the “Conversion”). This Appraisal is furnished pursuant to the Association’s regulatory filing of the Application for Conversion (“Form AC”) with the Office of Thrift Supervision (“OTS”).

     Feldman Financial Advisors, Inc. (“Feldman Financial”) is a financial consulting and economic research firm that specializes in financial valuations and analyses of business enterprises and securities in the thrift, banking, and mortgage industries. The background of Feldman Financial is presented in Exhibit I. In preparing the Appraisal, we conducted an analysis of the Association that included discussions with the Association’s management, the Association’s legal counsel, Kilpatrick Stockton LLP, and the Association’s independent auditor, Stegman & Company. In addition, where appropriate, we considered information based on other available published sources that we believe are reliable; however, we cannot guarantee the accuracy and completeness of such information.

     We also reviewed, among other factors, the economy in the Association’s primary market area and compared the Association’s financial condition and operating performance with that of selected publicly traded thrift institutions. We reviewed conditions in the securities markets in general and in the market for thrift institution common stocks in particular.

     The Appraisal is based on the Association’s representation that the information contained in the Application and additional evidence furnished to us by the Association and its independent auditor are truthful, accurate, and complete. We did not independently verify the financial statements and other information provided by the Association and its independent auditor, nor did we independently value the assets or liabilities of the Association. The Appraisal considers the Association only as a going concern and should not be considered as an indication of the liquidation value of the Association.

FELDMAN FINANCIAL ADVISORS, INC.

Board of Directors
Fraternity Federal Savings and Loan Association
October 12, 2010
Page Two

     It is our opinion that, as of October 12, 2010, the estimated aggregate pro forma market value of the Association was within a range (the “Valuation Range”) of $10,200,000 to $13,800,000 with a midpoint of $12,000,000. The Valuation Range was based upon a 15% decrease from the midpoint to determine the minimum and a 15% increase from the midpoint to establish the maximum. Assuming an additional 15% increase above the maximum value would result in an adjusted maximum of $15,870,000. Thus, assuming an offering price of $10.00 per share of common stock, the Company will offer a minimum of 1,020,000 shares, a midpoint of 1,200,000 shares, a maximum of 1,380,000 shares, and an adjusted maximum of 1,587,000 shares.

     Our Appraisal is not intended, and must not be construed, to be a recommendation of any kind as to the advisability of purchasing shares of common stock in the Conversion. Moreover, because the Appraisal is necessarily based upon estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of stock in the Conversion will thereafter be able to sell such shares at prices related to the foregoing estimate of the Association’s pro forma market value. Feldman Financial is not a seller of securities within the meaning of any federal or state securities laws and any report prepared by Feldman Financial shall not be used as an offer or solicitation with respect to the purchase or sale of any securities.

     The Valuation Range reported herein will be updated as appropriate. These updates will consider, among other factors, any developments or changes in the Association’s operating performance, financial condition, or management policies, and current conditions in the securities markets for thrift institution common stocks. Should any such new developments or changes be material, in our opinion, to the valuation of the Association, appropriate adjustments to the estimated pro forma market value will be made. The reasons for any such adjustments will be explained in detail at that time.

Respectfully submitted,

Feldman Financial Advisors, Inc.

/s/ Trent R. Feldman

Trent R. Feldman

President

/s/ Peter W. L. Williams

Peter W. L. Williams

Principal

FELDMAN FINANCIAL ADVISORS, INC.

TABLE OF CONTENTS

TAB		PAGE
	INTRODUCTION		1
I.	Chapter One – BUSINESS OF FRATERNITY FEDERAL
	General Overview		4
	Financial Condition		9
	Income and Expense Trends		17
	Interest Rate Risk Management		23
	Asset Quality		27
	Subsidiary Activity		29
	Office Facilities		30
	Market Area		31
	Summary Outlook		39
II.	Chapter Two – COMPARISONS WITH PUBLICLY TRADED THRIFTS
	General Overview		40
	Selection Criteria		41
	Recent Financial Comparisons		45
III.	Chapter Three – MARKET VALUE ADJUSTMENTS
	General Overview		59
	Earnings Prospects		60
	Financial Condition		61
	Market Area		63
	Management		63
	Dividend Policy		64
	Liquidity of the Issue		65
	Subscription Interest		66
	Recent Acquisition Activity		67
	Effect of Government Regulations and Regulatory Reform		69
	Stock Market Conditions		69
	New Issue Discount		72
	Adjustments Conclusion		75
	Valuation Approach		75
	Valuation Conclusion		77
IV.	Appendix – EXHIBITS
	I Background of Feldman Financial Advisors, Inc.		I-1
	II-1 Consolidated Balance Sheets	II-1
	II-2 Consolidated Income Statements	II-2
	II-3 Loan Portfolio Composition	II-3
	II-4 Net Loan Activity	II-4
	II-5 Investment Portfolio Composition	II-5
	II-6 Deposit Account Distribution	II-6
	II-7 Borrowed Funds Distribution	II-7
	II-8 Office Facilities	II-8
	III Financial and Market Data for All Public Thrifts	III-1
	IV-1 Pro Forma Assumptions for Conversion Stock Offering	IV-1
	IV-2 Pro Forma Conversion Valuation Range	IV-2
	IV-3 Pro Forma Conversion Analysis at the Maximum Valuation	IV-3
	IV-4 Comparative Valuation Ratio Differential	IV-4

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LIST OF TABLES

TAB		PAGE
I.	Chapter One – BUSINESS OF FRATERNITY FEDERAL
	Table 1 Selected Financial Condition Data		9
	Table 2 Relative Balance Sheet Concentrations		10
	Table 3 Income Statement Summary		18
	Table 4 Income Statement Ratios		20
	Table 5 Yield and Cost Summary		22
	Table 6 Interest Rate Risk Analysis		26
	Table 7 Non-performing Assets and Loan Loss Allowance Summary		28
	Table 8 Selected Demographic Data		34
	Table 9 Deposit Market Share in the Baltimore MSA		37
	Table 10 Residential Mortgage Lending Market Share in the Baltimore MSA		38
II.	Chapter Two – COMPARISONS WITH PUBLICLY TRADED THRIFTS
	Table 11 Comparative Group Operating Summary 44 Table 12 Key Financial Comparisons		46
	Table 13 General Operating Characteristics		53
	Table 14 Summary Financial Performance Ratios		54
	Table 15 Income and Expense Analysis		55
	Table 16 Yield-Cost Structure and Growth Rates		56
	Table 17 Balance Sheet Composition		57
	Table 18 Regulatory Capital, Credit Risk, and Loan Composition		58
III.	Chapter Three – MARKET VALUE ADJUSTMENTS
	Table 19 Summary of Recent Maryland Acquisition Activity		68
	Table 20 Comparative Stock Index Performance		70
	Table 21 Summary of Recent Standard Conversion Stock Offerings		74
	Table 22 Comparative Pro Forma Market Valuation Analysis		79

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INTRODUCTION

     As requested, we have completed and hereby provide an independent appraisal (“Appraisal”) of the estimated pro forma market value of Fraternity Federal Savings and Loan Association (“Fraternity Federal” or the “Association”) in connection with the simultaneous conversion of the Association from the mutual to stock form of ownership, the issuance of the Association’s capital stock to Fraternity Community Bancorp, Inc. (the “Company”), and the offering of shares of common stock of the Company for sale to certain depositors of the Association, employee benefit plans of the Association, and other members of the general public (collectively referred to herein as the “Conversion”). This appraisal report is furnished pursuant to the Association’s filing of the Application for Conversion (“Form AC”) with the Office of Thrift Supervision (“OTS”). Our estimate of the pro forma market value of the Association is expressed in the form of a range (the “Valuation Range”) based on OTS guidelines.

     In the course of preparing the Appraisal, we reviewed and discussed with the Association’s management and the Association’s independent accountants, Stegman & Company, the audited financial statements of the Association’s operations for the years ended December 31, 2008 and 2009. We also reviewed and discussed with management other financial matters of the Association. Where appropriate, we considered information based upon other available public sources, which we believe to be reliable; however, we cannot guarantee the accuracy or completeness of such information. We visited the Association’s primary market area and examined the prevailing economic conditions. We also examined the competitive environment within which the Association operates and assessed the Association’s relative strengths and weaknesses.

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     We examined and compared the Association’s financial performance with selected segments of the thrift industry and selected publicly traded thrift institutions. We reviewed conditions in the securities markets in general and the market for thrift institution common stocks in particular. We included in our analysis an examination of the potential effects of the Conversion on the Association’s operating characteristics and financial performance as they relate to the estimated pro forma market value of the Association.

     In preparing the Appraisal, we have relied upon and assumed the accuracy and completeness of financial and statistical information provided by the Association and its independent accountants. We did not independently verify the financial statements and other information provided by the Association and its independent accountants, nor did we independently value the assets or liabilities of the Association. The Appraisal considers the Association only as a going concern and should not be considered as an indication of the liquidation value of the Association.

     Our Appraisal is not intended, and must not be construed, to be a recommendation of any kind as to the advisability of purchasing shares of common stock in the Conversion. Moreover, because such the Appraisal is necessarily based on estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of common stock in the Conversion will thereafter be able to sell such shares at prices related to the foregoing estimate of the Association’s pro forma market value. Feldman Financial is not a seller of securities within the meaning of any federal and state securities laws and any report prepared by Feldman Financial shall not be used as an offer or solicitation with respect to the purchase or sale of any securities.

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     The Valuation Range reported in this Appraisal will be updated as appropriate. These updates will consider, among other factors, any developments or changes in the Association’s financial performance or management policies, and current conditions in the securities market for thrift institution common stocks. Should any such developments or changes be material, in our opinion, to the valuation of the Association, appropriate adjustments to the estimated pro forma market value will be made. The reasons for any such adjustments will be explained in detail at that time.

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I. BUSINESS OF FRATERNITY FEDERAL

General Overview

     Fraternity Federal is a federally chartered mutual savings and loan association headquartered in Baltimore, Maryland. Over the course of its history, Fraternity Federal has operated as a community-oriented institution by offering a variety of loan and deposit products and serving other financial needs of the local community. The Association conducts its business from its main office in Baltimore City and three additional branch offices in Baltimore, Carroll, and Howard counties in Maryland. At June 30, 2010, Fraternity Federal had total assets of $167.9 million, net loans of $118.8 million, total deposits of $125.8 million, and equity capital of $16.6 million or 9.91% of total assets. The Association is regulated by the OTS and its deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation (“FDIC”). The Association is a member of the Federal Home Loan Association (“FHLB”) of Atlanta.

     Founded in 1913, Fraternity Federal currently offers a variety of deposit products and provides loans secured by real estate located in its market area. The Association’s real estate loans consist primarily of residential mortgage loans, as well as commercial real estate loans, land loans, home equity lines of credit, and residential construction loans. The Association also offers consumer loans and, to a limited extent, commercial business loans. Fraternity Federal operates out of its corporate headquarters and main office in Baltimore City and full-service branch offices located in Cockeysville (Baltimore County), Ellicott City (Howard County), and Hampstead (Carroll County), Maryland.

     The Association’s business consists primarily of accepting deposits from the general public and investing those deposits, together with borrowings and funds generated from

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operations, in one- to four-family residential mortgage loans and various investment securities. At June 30, 2010, one- to four-family residential mortgage loans totaled $89.6 million, or 75.5% of the Association’s loan portfolio. Most of the Association’s residential mortgage loans are owner occupied, but this category also includes loans secured by single-family investment properties. Home equity lines of credit, all of which are secured by one- to four-family residential properties, represented the Association’s second largest category of loans. Home equity lines of credit totaled $13.0 million or 11.0% of total loans at June 30, 2010. Residential construction, commercial real estate, consumer, and commercial business loans have historically composed smaller concentrations of Fraternity Federal’s loan portfolio.

     Fraternity Federal aims to operate as a well-capitalized and profitable community financial institution dedicated to providing quality customer service. The Association’s current business objectives emphasize residential mortgage lending and Fraternity Federal will continue to offer these types of loans. Another principal business objective of the Association is to build on Fraternity Federal’s historic strengths of customer loyalty and asset quality, and gradually grow the balance sheet with assets and liabilities that allow it to increase the net interest margin while reducing the overall exposure risk from interest rate fluctuations.

     The Association believes that its community orientation is attractive to customers and distinguishes it from the larger banks that operate in the local area. Fraternity Federal is presently focused on strengthening and expanding customer relationships to generate additional internal growth from its franchise. The Association’s operating strategies include the initiatives listed on the next page as follows:

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• Building on its strengths as a community-oriented financial institution. Fraternity Federal has operated continuously as a community-oriented financial institution since it was established in 1913. The Association provides a broad range of consumer and business financial services through its branch network and plans to continue seeking ways to improve convenience, safety and service through its product offerings. Over the years, the Association has developed a core of loyal customers, and its product mix concentrating on time, savings, and checking deposits and residential real estate mortgage loans has allowed it to maintain strong asset quality. Fraternity Federal intends to continue to retain these strengths while gradually growing its balance sheet with assets and liabilities that will contribute to net interest margin expansion.

• Improving the net interest margin and earnings and reducing interest rate risk by increasing commercial real estate lending. In recent years, Fraternity Federal has sought to increase the percentage of assets invested in commercial real estate loans, which tend to have higher yields than traditional single-family residential mortgages and which have shorter terms to maturity or adjustable interest rates. The Association intends to continue to emphasize residential lending, while also seeking to expand its commercial real estate lending activities with a focus on serving small businesses and emphasizing relationship banking in its primary market area. With the additional capital raised in the Conversion, the Association intends to pursue larger lending relationship opportunities. Though its current staff is sufficient to facilitate growth, the Association may seek to add further expertise in its commercial loan department. The Association also seeks to attract lower cost business checking deposits from these commercial customers.

• Emphasizing lower costing core deposits to reduce funding costs. Operating as a traditional thrift institution, a greater percentage of Fraternity Federal’s deposit base has comprised higher balance, higher costing certificates of deposits. The Association will continue to seek to reduce its dependence on traditional high cost deposits in favor of stable, low cost demand deposits. Fraternity Federal has utilized additional product offerings, technology, and a focus on customer service in working toward this goal. Over time, the Association will also seek to replace maturing, high cost, long-term FHLB advances with core deposits.

• Generating higher non-interest income by selling loans in the secondary market. The Association currently sells most of its fixed-rate, one- to four-family residential mortgage loan originations in the secondary market and has recognized gains on such sales in past periods. Fraternity Federal will seek to increase its originations of residential mortgage loans to generate further income from loan sales.

• Adding a new branch in its existing market area or a contiguous county. Fraternity Federal opened a new branch office in Hampstead, Maryland in September 2009. The Association intends to add another new branch to its office network within the next three years. The Association plans to explore possible locations in its existing market area or a contiguous county. At the present time, there are no plans or commitments regarding a specific additional branch office or location.

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• Expanding market share within its primary market area. Fraternity Federal intends to increase its market share by enhancing the efforts of its staff in marketing additional products and services to customers. The Association believes that it has a solid infrastructure in place that will allow it to grow assets and liabilities without adding materially to its operating expenses.

     While the Association’s present equity capital level is solid at 9.91% of total assets as of June 30, 2010, the Association believes it must raise additional capital in order to facilitate its growth objectives and loan diversification, and provide a greater cushion in response to the heightened risk profile associated with uncertain economic conditions and unproven expansion opportunities. The Association’s equity position recently declined from $17.0 million or 10.18% of total assets at December 31, 2009 to $16.6 million at June 30, 2010. The decrease in equity was caused by a net operating loss of $411,000 recorded by the Association for the six months ended June 30, 2010, primarily as a result of an increased provision for loan losses due to higher levels of problem loans and loan charge-offs.

     As a stock corporation upon completion of the Conversion, the Association will be organized in the form used by commercial banks, most major corporations, and a majority of savings institutions. The ability to raise new equity capital through the issuance and sale of capital stock will allow the Association the flexibility to increase its equity capital position more rapidly than by accumulating earnings.

     The Association also believes that the ability to attract new capital also will help address the needs of the communities it serves and enhance its ability to expand or to make acquisitions. After the Conversion, the Association will have increased ability to merge with or acquire other financial institutions or business enterprises. Finally, the Association expects to benefit from its employees and directors having stock ownership in its business, since that is viewed as an

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effective performance incentive and a means of attracting, retaining, and compensating employees and directors.

     In summary, Fraternity Federal’s primary reasons for implementing the Conversion and undertaking the offering are to:

• increase the capital of the Association to support future lending and operational growth and to allow it to make larger loans to borrowers within regulatory limits;

• enhance profitability and earnings through reinvesting and leveraging the offering proceeds, primarily through traditional funding and lending activities;

• support future branching activities and/or the acquisition of financial services companies; and

• implement equity compensation plans to retain and attract qualified directors, officers, and staff and to enhance the current incentive-based compensation programs.

     The remainder of Chapter I examines in more detail the trends addressed in this section, including the impact of changes in the Association’s economic and competitive environment, and recent management initiatives. The discussion is supplemented by the exhibits in the Appendix. Exhibit II-1 summarizes the Association’s consolidated balance sheets as of the years ended December 31, 2008 and 2009 and as of June 30, 2010. Exhibit II-2 presents the Association’s consolidated income statements for the years ended December 31, 2008 and 2009 and the six months ended June 30, 2009 and 2010.

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Financial Condition

     Table 1 presents selected data concerning the Association’s financial position as of December 31, 2008 and 2009 and June 30, 2010. Table 2 displays relative balance sheet concentrations for the Association as of similar fiscal year-end periods.

Table 1
Selected Financial Condition Data
As of December 31, 2008 and 2009 and June 30, 2010
(Dollars in Thousands)

	June 30,		December 31,
	2010		2009		2008
Total assets	$	167,928	$	166,976	$	170,688
Cash and cash equivalents		20,135		13,908		11,439
Investment securities available for sale		19,650		24,116		8,526
Investment securities held to maturity		—		—		7,447
Loans receivable, net		118,770		120,092		136,547
Total deposits		125,760		125,960		124,913
Federal Home Loan Bank advances		22,750		22,917		28,417
Total equity		16,647		16,992		16,475

Source: Fraternity Federal, financial statements.

Asset Composition

     The Association’s total assets amounted to $167.9 million at June 30, 2010, reflecting approximately a 1.6% or $2.8 million decrease from total assets of $170.7 million at December 31, 2008. The decline in total assets was primarily attributable to shrinkage of the loan portfolio by 13.0% or $17.8 million since December 31, 2008 as a result of increased volumes of loan sales. Cash and securities increased by $12.4 million between December 31, 2008 and June 30, 2010. The ratio of net loans to total assets decreased from 80.0% at December 31, 2008 to 70.7% at June 30, 2010.

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Table 2
Relative Balance Sheet Concentrations
As of December 31, 2008 and 2009 and June 30, 2010
(Percent of Total Assets)

	June 30,		December 31,
	2010		2009		2008
Cash and cash equivalents		11.99		8.33		6.70
Investment securities		11.70		14.44		9.36
Loans receivable, net		70.73		71.92		80.00
Other assets		5.58		5.31		3.94
Total Assets		100.00		100.00		100.00
Total deposits		74.89		75.44		73.18
FHLB advances		13.55		13.72		16.65
Other liabilities		1.65		0.66		0.52
Total Liabilities		90.09		89.82		90.35
Total equity		9.91		10.18		9.65
Total Liabilities and Equity		100.00		100.00		100.00

Source: Fraternity Federal, financial statement data.

     For many years, the Association operated as a traditional thrift institution emphasizing one loan product – long-term, fixed-rate, owner-occupied, single-family residential mortgage loans. While residential mortgages continue to be the predominant loan type within the Association’s portfolio, the Association has begun to diversify its loan mix at a gradual pace. As presented in Exhibit II-3, the Association’s current loan portfolio particularly includes an increased level of home equity lines of credit, residential construction loans, and commercial real estate loans. The Association intends to continue to emphasize residential lending, while also seeking to expand commercial real estate lending activities with a focus on serving small businesses and emphasizing relationship banking in its primary market area. The Association does not offer, and has not offered, subprime, no-documentation, or Alt-A mortgage loans.

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     Residential mortgage loans totaled $89.6 million or 75.5%, $89.3 million or 74.4%, and $108.7 million or 79.6%, of the total loan portfolio, at June 30, 2010 and December 31, 2009 and 2008, respectively. The $19.4 million, or 17.8%, decrease in one- to four-family mortgage loans during 2009 was primarily a result of the Association’s decision to sell most newly originated fixed-rate residential mortgage loans due to the low rates prevailing on such loans.

     Home equity lines of credit, all of which are secured by one- to four-family residential properties, totaled $13.0 million, and represented 11.0% of total loans at June 30, 2010, compared to $12.3 million or 10.3% of total loans at December 31, 2009 and $13.2 million or 9.6% of total loans at December 31, 2008. The Association offers home equity lines of credit with adjustable interest rates and terms up to 15 years, although in the past it has offered terms of up to 30 years. The Association does not currently originate home equity loans with loan-to-value ratios exceeding 80%, including any first mortgage loan balance.

     Residential construction loans totaled $8.9 million and represented 7.5% of total loans at June 30, 2010, compared to $10.4 million or 8.7% of total loans at December 31, 2009 and $7.7 million or 5.7% of total loans at December 31, 2008. Fraternity Federal increased its residential construction loans by $2.7 million or 35.1% during the 2009 as it made disbursements on several larger loans for the construction of custom built luxury homes, including speculative construction loans to builders. During the first half of 2010, the Association reduced residential construction loans by $1.5 million or 15.1% as it determined in light of weakened market conditions to discontinue originations of speculative construction loans. Approximately $1.8 million of residential construction loans at June 30, 2010 was categorized as non-performing, compared to $633,000 of residential construction loans at December 31, 2009 and zero at December 31, 2008

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     Commercial real estate loans totaled $4.0 million and represented 3.4% of total loans at June 30, 2010, compared to $4.2 million or 3.5% of total loans at December 31, 2009 and $3.6 million or 2.6% of total loans at December 31, 2008. Fraternity Federal offers a variety of commercial real estate loans to owner occupants and investors. The Association’s commercial real estate loans include loans secured by office buildings, dental offices, small retail buildings, and warehouses. The Association originates a variety of fixed-rate and adjustable-rate commercial real estate loans generally with rates fixed for 10 years and which amortize over terms of from 10 to 25 years. Commercial real estate loan amounts generally do not exceed 75% of the property’s appraised value.

     Land loans totaled $3.9 million or 3.2% of total loans at June 30, 2010, compared to $3.9 million or 3.3% of total loans at December 31, 2009 and $3.5 million or 2.6% of total loans at December 31, 2008. Most of the Association’s land loans represent loans to individuals and developers for the purchase of land that eventually will be used for the construction of owner-occupied residential property. Land loans are generally offered for terms of up to 15 years, with rates that adjust annually after an initial period of up to five years. The loan-to-value ratio on land loans is limited to a maximum of 75%, except where there are exceptional credit circumstances on the loan.

     The Association’s non-real estate loans consist of consumer loans and, to a very limited extent, commercial business loans. While Fraternity Federal offers a variety of consumer loans, it does not emphasize this type of lending and generally makes consumer loans as an accommodation to its existing customers. Consumer loans totaled $54,000 at June 30, 2010, representing less than 0.1% of the loan portfolio, and consisted of automobile loans, unsecured loans, and miscellaneous other loans. At June 30, 2010, commercial business loans consisted of

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two unsecured operating lines of credit. Fraternity Federal generally does not originate loans secured by equipment and receivables. Commercial business loans totaled $28,000, representing less than 0.1% of total loans at June 30, 2010.

     As shown in Exhibit II-4, total loan originations increased from $33.2 million in 2008 to $40.9 million in 2009. However, more recently, lending activity declined as total originations amounted to $12.9 million for the six months ended June 30, 2010 versus $26.8 million for the six months ended June 30, 2009. Loan sales increased from $8.4 million in 2008 to $21.2 million in 2009. In recent periods, the Association has elected to sell almost all newly originated fixed-rate residential mortgage loans and to retain in portfolio shorter-term fixed-rate loans and adjustable-rate loans. Generally, loans are sold to investors on a servicing released basis.

     Exhibit II-5 presents a summary of the Association’s investment portfolio as of December 31, 2008 and 2009 and June 30, 2010. As mentioned previously, the Association’s investment and liquidity holdings have increased in recent years as the volume of loan sales increased and total loans outstanding decreased. Fraternity Federal’s primary investment objectives are: (i) to provide and maintain liquidity within regulatory guidelines, (ii) to fully employ available funds; (iii) to earn an average rate of return on invested funds competitive with comparable institutions; (iv) to manage interest rate risk; and (v) to limit risk.

     At June 30, 2010, the Association’s investment securities amounted to $19.6 million and consisted primarily of U.S. government agency securities and mortgage-backed securities available-for-sale. Most of the U.S. government agency securities and mortgage-backed securities are issued by Freddie Mac or Fannie Mae or guaranteed by Ginnie Mae. The Association also had $1.1 million in private label mortgage-backed securities with unrealized losses totaling $59,000 at June 30, 2010. In addition to its investment portfolio, the Association

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held a $1.6 million investment, at cost, in the FHLB of Atlanta common stock at June 30, 2010. The investment securities portfolio declined from $24.2 million at December 31, 2009 to $19.6 million at June 30, 2010 as the Association invested cash flow from securities payments and maturities into liquid assets due to the historically low yields available on mortgage-backed securities.

Liability Composition

     Deposits are the Association’s major external source of funds for lending and other investment purposes. Exhibit II-6 presents a summary of the Association’s deposit composition as of December 31, 2008 and 2009 and June 30, 2010. Total deposits amounted to $125.8 million or 74.9% of total assets and 83.1% of total liabilities at June 30, 2010. Deposits have been held relatively steady over the past two and one-half years, totaling $126.0 million and $124.9 million at December 31, 2009 and 2008, respectively.

     Fraternity Federal generates deposits primarily from within its market area. The Association relies on competitive pricing and customer service to attract and retain deposits. The Association offers a variety of deposit accounts with a range of interest rates and terms. The Association’s current deposit account offerings consist of checking accounts, savings accounts, money market accounts, and certificates of deposit. The Association periodically reviews and establishes interest rates, maturity terms, service fees, and withdrawal penalties for its deposit accounts. Deposit rates and terms are based primarily on current operating strategies, market interest rates, liquidity requirements, interest rates paid by competitors, and deposit growth goals. The Association’s deposit pricing strategy has typically emphasized competitive rates on all types of deposits accounts with periodic offerings of special rates in order to attract deposits

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of a specific type or term. The Association has utilized brokered deposits to a limited extent. Brokered deposits totaled $2.3 million at June 30, 2010.

     Certificates of deposit have traditionally been the largest deposit category at Fraternity Federal and accounted for $107.0 million or 85.1% of total deposits at June 30, 2010. Approximately 54.0% or $57.8 million of certificate accounts had remaining maturities of one year or less. The Association has managed to maintain a relatively stable concentration of savings accounts, which equaled $12.7 million or 10.1% of total deposits at June 30, 2010. Non-interest bearing demand, NOW, and money market deposits amounted to $5.9 million or 4.7% of total deposits and have been targeted for growth by the Association. As of June 30, 2010, the weighted average costs of NOW/money market, savings, certificate, and brokered deposits were 0.24%, 0.54%, 2.71%, and 4.31%, respectively. The weighted average cost of all interest-bearing deposits was 2.42% at June 30, 2010. Balances of non-interest bearing deposits have increased marginally and amounted to $948,000 or 0.8% of total deposits at June 30, 2010.

     The Association utilizes borrowings as a supplemental, cost-effective source of funds when they can be invested at a positive interest rate spread or to meet asset/liability management objectives. The Association’s borrowings consist of FHLB advances. As of June 30, 2010, the Association had $22.8 million in FHLB advances outstanding and the ability to borrow an additional $27.5 million of advances. The weighted average interest rate of outstanding FHLB advances at June 30, 2010 was 3.91%. The average balance of advances outstanding amounted to $25.5 million in 2008, $23.5 million in 2009, and $24.5 million for the first half of 2010.

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Equity Capital

     Fraternity Federal has historically maintained solid capital levels. Over the past five years, the Association has moderated its balance sheet growth and maintained total assets within a range approximating $165 million to $175 million of assets with equity-to-assets ratios of 9.5% to 10.0%. Due to a net operating loss of $411,000 for the six months ended June 30, 2010, the Association’s equity capital declined from $17.0 million or 10.18% of total assets at December 31, 2009 to $16.6 million or 9.91% of total assets at June 30, 2010. Fraternity Federal’s capital level remains strong in comparison to minimum regulatory requirements. The Association’s regulatory capital ratios of Tier 1 Leverage Capital, Tier 1 Risk-based Capital, and Total Risk-based Capital were 9.89%, 17.91%, and 18.83%, respectively, as of June 30, 2010. In comparison, the minimum regulatory requirements under OTS guidelines were 3.00%, 4.00%, and 8.00%, and the threshold requirements for regulatory “well capitalized” levels were 5.00%, 6.00%, and 10.00%, respectively. Based on these regulatory capital ratios and measures, the Association was considered “well capitalized” as of June 30, 2010.

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Income and Expense Trends

     Table 3 displays the main components of Fraternity Federal’s earnings performance for the years ended December 31, 2008 and 2009 and the six months ended June 30, 2009 and 2010. Table 4 displays the Association’s principal income and expense ratios as a percent of average assets. Table 5 displays the Association’s weighted average yields on interest-earning assets and weighted average costs of interest-bearing liabilities for the corresponding periods.

General Overview

     Fraternity Federal has historically exhibited a steady record of low to moderate levels of profitability, reflecting a trend of relatively low net interest margins offset in part by low operating expenses. The Association’s earnings amounted to $8,000 in 2008 and $343,000 in 2009, reflecting a return on average assets (“ROA”) of 0.00% and 0.20%, respectively. The Association’s earnings declined to a loss of $411,000 for the six months ended June 30, 2010, compared to a profit of $214,000 for the six months ended June 30, 2009. The loss for the first half of 2010 was attributable chiefly to an increase in the provision for loan losses from $51,000 to $865,000 over the respective periods due to increases in problem loans and charge-offs.

Six Months Ended June 30, 2009 and 2010

     Net income decreased from $214,000 for the six months ended June 30, 2009 to a loss of $411,000 for the six months ended June 30, 2010. The decline in profitability was attributable to an increase of $814,000 in the provision for loan losses, an increase of $260,000 in total non-interest expense, and a decrease of $67,000 in total non-interest income. Net interest income increased modestly from $1.8 million for the first half of 2009 to $1.9 million for the first half of 2010, and the net interest margin increased from 2.14% to 2.27%.

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Table 3
Income Statement Summary
For the Years Ended December 31, 2008 and 2009
And the Six Months Ended June 30, 2009 and 2010
(Dollars in Thousands)

	Six Months Ended					Year Ended
	June 30					December 31
	2010			2009		2009		2008
Total interest income	$	3,848		$	4,287	$	8,272	$	8,993
Total interest expense		1,957			2,500		4,805		5,856
Net interest income		1,891			1,787		3,467		3,137
Provision for loan losses		865			51		51		5
Net interest income after provision		1,026			1,736		3,416		3,132
Total non-interest income		311			378		692		323
Total non-interest expense		2,065			1,805		3,646		3,600
Income (loss) before taxes		(728	)		309		462		(145	)
Income tax expense (benefit)		(317	)		95		119		(153	)
Net income (loss)	$	(411	)	$	214	$	343	$	8

Source: Fraternity Federal, financial statements.

     Increases in non-accrual loans and loan charge-offs led the Association to increase its provision for loan losses to $865,000 for the first half of 2010. Non-accrual loans increased to $3.3 million at June 30, 2010 from $1.0 million at year-end 2009. Net loan charge-offs increased to $337,000 for the first half of 2010, compared to $4,000 for the first half of 2009. As result, the allowance for loans losses was increased from $277,000 or 0.23% of total loans at year-end 2009 to $805,000 or 0.67% of total loans at June 30, 2010.

     Total non-interest income decreased by $67,000 or 17.7% from $378,000 for the six months ended June 30, 2009 to $311,000 for the six months ended June 30, 2010. The

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annualized ratio of non-interest income to average assets decreased from 0.45% in the 2009 period to 037% for the 2010 period. The decrease primarily reflected a decrease of $143,000 in gain on sale of loans. Gain on sale of investments increased by $52,000 as the Association elected to sell various securities to lock in gains, including mortgage-backed securities on which it anticipated prepayments in a declining interest rate environment. Also contributing to non-interest income was a $29,000 increase in income on bank-owned life insurance (“BOLI”). The Association’s BOLI investment amounted to $4.1 million or 2.4% of assets at June 30, 2010.

     Total non-interest expense increased by $260,000 or 14.4% from $1.8 million for the six months ended June 30, 2009 to $2.1 million for the six months ended June 30, 2010. The annualized ratio of non-interest expense to average assets increased from 2.15% in the 2009 period to 2.45% for the 2010 period. The increase primarily was attributable to increases of $134,000 or 13.6%, $27,000 or 8.9%, and $78,000 or 22.9%, in salaries and employee benefits, occupancy expenses, and other general and administrative expenses, respectively, as a result of the opening of a new branch office in Hampstead, Maryland in September 2009. The Association recorded an income tax benefit of $317,000 during the six months ended June 30, 2010, due to the incurrence of a pre-tax loss during that period.

Years Ended December 31, 2008 and 2009

     Net income increased from $8,000 in 2008 to $343,000 for 2009. The increase in earnings was mainly generated by increases of $330,000 in net interest income and $370,000 in total non-interest income, offset partially by increases of $47,000 in total non-interest expense and $46,000 in the provision for loan losses. The Association’s net interest spread improved from 1.48% in 2008 to 1.74% in 2009 as the cost of interest-bearing liabilities declined by 65 basis points while the yield on interest-earning assets declined by only 37 basis points.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 4
Income Statement Ratios
For the Years Ended December 31, 2008 and 2009
And the Six Months Ended June 30, 2009 and 2010
(Percent of Average Assets)

	Six Months Ended						Year Ended
	June 30,						December 31,
	2010(1)			2009(1)			2009			2008
Total interest income		4.55	%		5.19	%		4.92	%		5.29	%
Total interest expense		2.31			2.97			2.86			3.45
Net interest income		2.24			2.12			2.06			1.84
Provision for loan losses		1.02			0.06			0.03			0.00
Net interest income after provision		1.22			2.06			2.03			1.84
Total non-interest income		0.37			0.45			0.41			0.19
Total non-interest expense		2.44			2.15			2.17			2.12
Income (loss) before taxes		(0.86	)		0.36			0.27			(0.09	)
Income tax expense (benefit)		(0.37	)		0.11			0.07			(0.09	)
Net income (loss)		(0.49	)%		0.25	%		0.20	%		0.00	%

⁽¹⁾ Ratios for the six-month periods have been annualized.

Source: Fraternity Federal; Feldman Financial.

     Net interest income increased by 10.5% from $3.1 million in 2008 to $3.5 million in 2009. The improved net interest margin was driven largely by certificates of deposit rolling over at lower rates in the prevailing market environment. The cost of interest-bearing liabilities declined from 3.87% in 2008 to 3.22% for 2009. The provision for loan losses was increased from $5,000 in 2008 to $51,000 in 2009, as non-accrual loans amounted to $187,000 and $1.0 million at year-end 2008 and 2009, respectively. Also, net loan charge-offs increased from zero in 2008 to $46,000 during 2009.

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FELDMAN FINANCIAL ADVISORS, INC.

     Total non-interest income increased by $370,000 from $323,000 for the year ended December 31, 2008 to $693,000 for the year ended December 31, 2009. The increase primarily reflected increases of $196,000 in gain on sale of loans, $137,000 in gain on sale of investments, and an increase of $45,000 in BOLI income. The ratio of non-interest income to average assets increased from 0.19% in 2008 to 0.41% for 2009.

     Total non-interest expense increased modestly by $47,000 or 1.3% between 2008 and 2009. The ratio of non-interest income to average assets increased from 2.12% in 2008 to 2.17% for 2009. The increase in non-interest expense included increases of $125,000 or 6.6%, $31,000, or 5.4%, and $192,000 or 40.3%, in salaries and employee benefits, occupancy expenses and other general and administrative expenses, respectively, as a result of the opening of a new branch office in Hampstead, Maryland in September 2009. Partly offsetting these increases was the absence in 2009 of a $300,000 expense that the Association incurred in 2008 related to the termination of its pension plan. Excluding this non-recurring item, the Association’s total non-interest expense increased by 10.5% from $3.3 million in 2008 to $3.6 million for 2009.

     Fraternity Federal recorded an income tax benefit of $153,000 during the year ended December 31, 2008 as a result of incurring a pre-tax loss for 2008. The Association had an income tax expense of $119,000 for the year ended December 31, 2009, resulting in an effective tax rate of 25.7% for that year.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 5
Yield and Cost Summary
For the Years Ended December 31, 2008 and 2009
And the Six Months Ended June 30, 2009 and 2010
And as of June 30, 2010

	As of			Six Months Ended						Year Ended
	June 30,			June 30,						December 31,
	2010			2010			2009			2009			2008
Weighted Average Yields
Cash and cash equivalents		0.15	%		0.19	%		0.10	%		0.07	%		2.20	%
Loans receivable(1)		5.65			5.60			5.89			5.83			5.77
Investment securities available for sale		4.57			3.74			4.53			4.27			4.90
Other interest-earning assets		0.94			0.97			1.03			0.92			2.52
Total interest-earning assets		4.66			4.62			5.14			4.97			5.34
Weighted Average Costs
Time deposits		2.71			2.73			3.67			3.48			4.35
NOW and money market deposits		0.24			0.25			0.28			0.27			0.90
Passbook deposits		0.54			0.55			0.71			0.63			1.40
Brokered deposits		4.31			4.27			4.26			4.30			2.96
FHLB advances		3.94			3.66			3.81			3.89			3.63
Total interest-bearing liabilities		2.65			2.64			3.35			3.22			3.87
Net interest spread(2)		1.99			1.98			1.79			1.74			1.48
Net interest margin(3)	NA				2.27			2.14			2.08			1.86

(1)	Includes non-accrual loans for the respective periods.
(2)	Difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(3)	Net interest income as a percentage of average interest-earning assets.

Source: Fraternity Federal, preliminary prospectus.

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FELDMAN FINANCIAL ADVISORS, INC.

Interest Rate Risk Management

     The Association seeks to reduce its earnings vulnerability to changes in market interest rates by managing the mismatch between asset and liability maturities and interest rates. Management actively monitors and manages the Association’s interest rate risk exposure. The principal objective of the Association’s interest rate risk management function is to evaluate the interest rate risk embedded in certain balance sheet accounts, determine the level of risk appropriate given the Association’s business strategy, operating environment, capital and liquidity requirements and performance objectives, and manage the risk consistent with guidelines approved by the Board of Directors. The Association strives to maintain an acceptable balance between maximizing net interest spread potential and limiting its exposure to changes in interest rates. The Association relies on its Asset/Liability Management Committee to coordinate, monitor, and control its interest rate risk and asset/liability management objectives.

     Because the net present value of the majority of the Association’s assets and liabilities are sensitive to changes in interest rates, the most significant form of market risk is interest rate risk. The Association is vulnerable to an increase in interest rates to the extent that its interest-bearing liabilities mature or reprice more quickly than its interest-earning assets. To reduce the potential volatility of its earnings, the Association has sought to improve the match between asset and liability maturities and rates, while maintaining an acceptable interest rate spread. Fraternity Federal’s primary strategy for managing interest rate risk is directed toward diversifying its loan portfolio composition to include more loans with variable rates and adjusting its investment portfolio mix and duration.

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FELDMAN FINANCIAL ADVISORS, INC.

     The Association has implemented a number of balance sheet initiatives in recent years to manage its interest rate risk exposure. The Association has emphasized the origination of fixed-rate residential mortgages with ten-year terms. In addition, at June 30, 2010, the Association had $13.0 million of home equity lines of credit, all of which reprice monthly. In the current interest rate environment, the Association has also increased its holdings of shorter-term liquidity, which amounted to $20.1 million of cash and cash equivalents at June 30, 2010. In the past, the Association has also sold lower yielding loans at a loss in order to reduce its interest rate risk profile and to enhance future earnings through the reinvestment of the proceeds from such loan sales into higher yielding assets. On the liability side of the balance sheet, the Association has experienced some success in the present low interest rate environment of increasing its longer-term certificates of deposit while decreasing its shorter-term certificates of deposit as customers seek increased yields.

     The Association measures its interest rate sensitivity based on the net portfolio value (“NPV”) of market equity as facilitated by the regulatory analytical framework. NPV reflects the simulated equity of the Association as obtained by estimating the economic present value of its assets, liabilities, and off-balance sheet items under different interest rate scenarios. Table 6 summarizes the interest rate sensitivity of the Association’s NPV as of June 30, 2010, assuming instantaneous and sustained parallel shifts in the U.S. Treasury yield curve of 100 to 300 basis points either up or down in various increments. Because of the current level of interest rates, scenarios of down 200-plus basis points have not been considered.

     As shown in Table 6, the Association’s NPV would be negatively impacted by an increase or decrease in interest rates from current levels. An increase in rates would negatively impact the Association’s NPV more significantly as a result of deposit accounts and FHLB

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FELDMAN FINANCIAL ADVISORS, INC.

borrowings repricing more rapidly than loans and securities due to the fixed-rate nature of a large portion of the Association’s loan and investment portfolios. As rates rise, the market value of fixed-rate assets declines due to both the rate increases and slowing prepayments.

     Table 6 indicates that the Association’s NPV was $20.3 million or 11.57% of the present value of portfolio assets as of June 30, 2010. Based upon the assumptions utilized, an immediate 200 basis point increase in market interest rates would result in a $2.8 million decrease in the Association’s NPV and would result in a 124 basis point decrease in the NPV ratio to 10.33%. An immediate 100 basis point increase in market interest rates would result in a $763,000 decrease in the Association’s NPV and a 26 basis point decrease in the NPV ratio to 11.31%. Similarly, an immediate 100 basis point decrease in market interest rates would result in a $310,000 decrease in the Association’s NPV and a 25 basis point decrease in the NPV ratio to 11.32%.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 6
Interest Rate Risk Analysis
Net Portfolio Value
As of June 30, 2010
(Dollars in Thousands)

Change in			Change			Change						Basis Point
Interest Rates(1)	Estimated		from Base			from Base			NPV			Change in
(basis points)	NPV(2)		(000s)			(%)			Ratio(3)			NPV Ratio
+ 300 b.p.	$	14,861	$	(418	)		(26.7	)%		9.02	%		(255	)b.p.
+ 200 b.p.		17,457		(2,822	)		(13.9	)%		10.33	%		(124	)b.p.
+ 100 b.p.		19,516		(763	)		(3.8	)%		11.31	%		(26	)b.p.
0 b.p.		20,279		—			—			11.57	%		—
- 100 b.p.		10,498		(310	)		(1.5	)%		11.32	%		(25	)b.p.

(1)	Assumes instantaneous and sustained parallel shifts in interest rates.
(2)	NPV is the discounted present value of expected cash flows from assets, liabilities, and off-balance sheet items.
(3)	NPV divided by the portfolio value of assets.

Source: Fraternity Federal, preliminary prospectus.

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FELDMAN FINANCIAL ADVISORS, INC.

Asset Quality

     Table 7 summarizes the Association’s total non-performing assets (“NPAs”) as of December 31, 2008 and 2009 and June 30, 2010. Historically, Fraternity Federal has exhibited an excellent record of asset quality until experiencing an upturn in non-performing loans over the past 12 months. The Association’s ratio of non-performing assets to total assets increased from 0.11% at December 31, 2008 to 1.94% at June 30, 2010. The Association’s ratio of non-performing loans (“NPLs”) to total loans increased from 0.14% at December 31, 2008 to 2.72% at June 30, 2010. Previously, the Association maintained very low levels of non-performing assets due in part to conservative underwriting criteria, its high concentration of residential mortgages, and limited portfolio diversification. In recent years, the increased portfolio diversification – particularly in residential construction lending – contributed to increases in non-performing assets. As of June 30, 2010, the Association’s non-performing assets totaled $3.3 million and comprised $1.8 million in residential construction loans, $960,000 in residential mortgage loans, and $495,000 of land loans.

     In order to reflect the increased risk inherent in the loan portfolio, the Association increased its provision for loan losses from $5,000 in 2008 and $51,000 in 2009 to $865,000 for the six months ended June 30, 2010, reflecting the increased levels of non-accrual loans and loan charge-offs. Total charge-offs increased from zero in 2008 and $46,000 in 2009 to $338,000 for the six months ended June 30, 2010, including $207,000 of home equity lines of credit and $113,000 of residential construction loans in the year-to-date 2010 period. As a result, the allowance for loan losses increased by $532,000 from $272,000 or 0.20% of total loans at December 31, 2008 to approximately $805,000 or 0.67% of total loans at June 30, 2010.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 7
Non-performing Assets and Loan Loss Allowance Summary
As of or For the Years Ended December 31, 2008 and 2009 and
As of or For the Six Months Ended June 30, 2010
(Dollars in Thousands)

	As of or For the
	Six Mos.			Year Ended
	June 30,			December 31,
	2010			2009			2008
Non-performing Assets
Non-accruing loans:
One- to four-family	$	960		$	341		$	—
Lines of credit		—			59			—
Residential construction		1,804			633			—
Land		495			—			—
Consumer		—			—			187
Total non-accruing loans		3,259			1,033			187
Accruing loans 90 days past due:
One- to four-family		—			706			—
Total non-performing loans		3,259			1,739			187
Foreclosed assets		—			—			—
Total non-performing assets	$	3,259		$	1,739		$	187
Total non-performing loans to total loans		2.72	%		1.44	%		0.14	%
Total non-performing assets to total assets		1.94	%		1.04	%		0.11	%
Allowance for Loan Losses
Beginning balance	$	277		$	272		$	267
Charge-offs:
One- to four-family		207			42			—
Residential construction		113			—			—
Land		11			—			—
Consumer		7			4			—
Total charge-offs		338			46			—
Recoveries		1			—			—
Net (charge-offs) recoveries		(337	)		(46	)		—
Provision for loan losses		865			51			5
Ending balance	$	805		$	277		$	272
Net charge-offs to average loans		0.28	%		0.04	%		0.00	%
Allowance for loan losses to total loans		0.67	%		0.23	%		0.20	%

Source: Fraternity Federal, preliminary prospectus.

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Subsidiary Activity

     Fraternity Federal has one active subsidiary, 764 Washington Boulevard, LLC (the “LLC”). The LLC was established in order to hold and manage real estate owned. The LLC had no assets at June 30, 2010. In addition, the Association has an inactive subsidiary, Fraternity Insurance Agency Incorporated, which had been licensed to sell insurance products on an agency basis.

     As a federally chartered thrift institution, Fraternity Federal is permitted by OTS regulations to invest up to 2% of its assets in the stock of, or loans to, service corporation subsidiaries. The Association may invest an additional 1% of its assets in service corporations if the additional funds are used for inner-city or community development purposes, and up to 50% of its total capital in conforming loans to service corporations in which it owns more than 10% of the capital stock. In addition to investments in service corporations, Fraternity Federal may invest an unlimited amount in operating subsidiaries engaged solely in activities in which the Association may engage as a federally chartered thrift institution.

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Office Facilities

     Fraternity Federal currently conducts business from its main office in the city of Baltimore, Maryland. The Association owns its main office and headquarters building, which is located at 764 Washington Boulevard, Baltimore, Maryland 21230. The net book value of the Association’s premises and equipment at 764 Washington Boulevard was $279,000 at June 30, 2010. The Association’s three other branch offices are leased facilities and were opened in 1964 (Ellicott City), 1995 (Cockeysville), and 2009 (Hampstead). Exhibit II-8 provides certain information relating to the Association’s office network as of June 30, 2010.

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FELDMAN FINANCIAL ADVISORS, INC.

Market Area

Overview of Market Area

     Fraternity Federal is headquartered in Baltimore, Maryland and considers its lending market area to consist of the Baltimore metropolitan statistical area (“MSA”), which comprises Baltimore City and Baltimore, Carroll, Howard, Harford, Anne Arundel, and Queen Anne’s counties. The Association’s branch offices are located in Baltimore City, Cockeysville (Baltimore County), Ellicott City (Howard County), and Hampstead (Carroll County), Maryland.

     The economy of the Baltimore MSA constitutes a diverse cross section of employment sectors, with a mix of services, manufacturing, wholesale/retail trade, federal and local government, health care facilities and finance related employment. The largest employers in the Baltimore MSA include the University System of Maryland, John Hopkins University, John Hopkins Hospital and Health System, U.S. Social Security Administration, Fort Meade, and Aberdeen Proving Ground. The area’s diversification helped to mitigate the impact of the economic recession experienced over the last two years. The unemployment rates for Maryland and the Baltimore MSA were 7.6% and 8.2%, respectively, in August 2010, below the national unemployment rate of 9.6%.

     The estimated population of the Baltimore MSA in 2010 was 2.7 million, reflecting an increase of 5.8% over the past decade. The Baltimore City population has declined 2.7% since 2000, while the population in Baltimore and Howard counties increased 4.3% and 14.6%, respectively. Estimated median household income in 2010 was $63,553 for the Baltimore MSA, above the national median of $54,442. The median value of owner occupied housing units was approximately $469,600 in the Baltimore MSA versus the national median of $192,400.

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     The Baltimore MSA consists of the following counties: Baltimore City, Baltimore County, Anne Arundel County, Carroll County, Harford County, Howard County, and Queen Anne’s County. The Baltimore MSA is the 20th most populous metropolitan area in the United States, and together with Washington, DC and Northern Virginia, constitutes the fourth largest combined statistical area in the United States. Located adjacent to major transportation corridors and the Washington, DC MSA, the Baltimore MSA provides a diversified economic base, with employment sectors that include a mix of services, manufacturing, wholesale/retail trade, federal and local government, health care facilities, finance, and defense contractors. In addition, the Association’s market area demonstrates relatively strong population growth trends (except for Baltimore City) resulting from the shift to suburban markets for job opportunities and exhibits above average wealth in terms of income levels. The Baltimore MSA is home to six Fortune 1000 companies, Constellation Energy (utilities), W.R. Grace (chemicals), Black & Decker (industrial and farm equipment), Legg Mason (investments), T. Rowe Price (investments), and McCormick & Company (consumer foods).

     Table 8 presents comparative demographic data for the United States, the state of Maryland, the Baltimore MSA, Baltimore City, Baltimore County, and Howard County. The state of Maryland had an estimated population in 2010 of 5.7 million. Approximately 47% of the state’s residents, or 2.7 million, resided in the Baltimore MSA. Baltimore City and Baltimore County had estimated populations in 2010 of approximately 634,000 and 791,000, respectively. Baltimore City has experienced a net population decline in recent years, while population growth rates in the outlying counties (Carroll, Harford, Howard, and Queen Anne’s) are projected to surpass the national and state growth rates over the net five years.

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FELDMAN FINANCIAL ADVISORS, INC.

     Compared to national demographic trends, the Baltimore MSA reflects a slightly older and wealthier cross-section of residents. The median household net worth for 2010 is estimated at $121,744 in the Baltimore MSA, as compared to the United States median of $93,084. The average household income is estimated at $78,476 in the Baltimore MSA, as compared to the average United States household income of $70,173. The median age of residents in the Baltimore MSA was 38.6, as compared to the United States median age of 37.0. The number of owner occupied housing units is expected to increase by 1.6% in the Baltimore MSA over the next five years, as compared to 2.2% statewide and 4.2% nationally.

     In recent year, the unemployment rates for Maryland, the Baltimore MSA, and Baltimore County have compared favorably to the national unemployment rate. However, the unemployment rate in Baltimore City has exceeded national and state averages. For August 2010, Maryland and the Baltimore MSA exhibited unemployment rates of 7.6% and 8.2%, respectively, compared to the national unemployment rate of 9.6%. The unemployment rate for Baltimore City was positioned higher at 11.7% for August 2010, but lower in Howard County at 5.6%.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 8
Selected Demographic Data

	United			State of			Baltimore			Baltimore			Baltimore			Howard
	States			Maryland			MSA			City			County			County
Total Population
2010 - Current		311,212,863			5,730,892			2,699,667			633,635			791,426			283,917
2015 - Projected		323,209,391			5,841,374			2,735,043			629,820			795,029			296,964
% Change 2000-10		10.59	%		8.20	%		5.75	%		-2.69	%		4.29	%		14.56	%
% Change 2010-15		3.85	%		1.93	%		1.31	%		-0.60	%		0.46	%		4.60	%
Age Distribution, 2010
0 - 14 Age Group		20.08	%		19.67	%		19.40	%		18.93	%		17.58	%		21.95	%
15 - 34 Age Group		27.22	%		25.90	%		25.86	%		29.48	%		26.05	%		23.83	%
35 - 54 Age Group		28.03	%		29.65	%		29.41	%		26.53	%		28.35	%		32.87	%
55- 69 Age Group		15.54	%		16.00	%		16.10	%		15.35	%		16.67	%		15.16	%
70+ Age Group		9.12	%		8.77	%		9.22	%		9.71	%		11.34	%		6.19	%
Median Age (years)		37.0			38.3			38.6			36.3			40.2			37.9
Total Households
2010 - Current		116,761,140			2,138,493			1,025,317			242,595			314,631			102,991
2015 - Projected		121,359,607			2,181,390			1,039,154			240,274			316,159			107,752
% Change 2000-10		10.69	%		7.96	%		5.26	%		-5.97	%		4.92	%		14.38	%
% Change 2010-15		3.94	%		2.01	%		1.35	%		-0.96	%		0.49	%		4.62	%
Median Household Income
2010 - Current	$	54,442		$	66,983		$	63,553		$	36,650		$	63,355		$	100,769
2015 - Projected	$	61,189		$	76,186		$	71,630		$	42,003		$	70,238		$	118,087
% Change 2000-10		29.12	%		26.37	%		27.26	%		21.85	%		24.95	%		35.84	%
% Change 2010-15		12.39	%		13.74	%		12.71	%		14.61	%		10.86	%		17.19	%
Average Household Income
2010 - Current	$	70,173		$	83,182		$	78,476		$	48,101		$	76,039		$	120,182
2015 - Projected	$	79,340		$	94,879		$	89,891		$	55,023		$	86,487		$	138,650
% Change 2000-10		23.88	%		23.32	%		24.48	%		14.28	%		16.88	%		36.29	%
% Change 2010-15		13.06	%		14.06	%		14.55	%		14.39	%		13.74	%		15.37	%
Per Capita Income
2010 - Current	$	26,739		$	31,494		$	30,290		$	19,216		$	30,669		$	43,834
2015 - Projected	$	30,241		$	35,938		$	34,698		$	21,906		$	34,892		$	50,567
% Change 2000-10		23.87	%		22.96	%		24.15	%		13.18	%		17.20	%		35.28	%
% Change 2010-15		13.10	%		14.11	%		14.55	%		14.00	%		13.77	%		15.36	%

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FELDMAN FINANCIAL ADVISORS, INC.

Table 8 (continued)
Selected Demographic Data

	United			State of			Baltimore			Baltimore			Baltimore			Howard
	States			Maryland			MSA			City			County			County
Household Net Worth
Median	$	93,084		$	135,762		$	121,744		$	17,984		$	120,262		$	304,660
Average	$	418,865		$	508,396		$	469,568		$	189,144		$	434,778		$	879,920
Current Household Net Worth
$0 - $35,000		34.96	%		29.55	%		31.10	%		57.55	%		29.26	%		17.46	%
$35,000 - $100,000		16.38	%		14.86	%		15.31	%		15.54	%		16.85	%		10.66	%
$100,000 -$250,000		19.13	%		19.38	%		19.84	%		14.11	%		21.59	%		16.32	%
$250,000 -$500,000		12.97	%		14.88	%		14.63	%		6.47	%		14.96	%		17.15	%
$500,000 +		16.56	%		21.34	%		19.32	%		6.32	%		17.33	%		38.40	%
Total Number of Owner Occupied Housing Units
2010 - Current		76,868,769			1,439,313			683,862			119,357			209,202			75,112
2015 - Projected		80,072,859			1,471,361			694,453			118,064			209,985			78,671
% Change 2000-10		10.10	%		7.27	%		4.92	%		-8.09	%		3.27	%		12.99	%
% Change 2010-15		4.17	%		2.23	%		1.55	%		-1.08	%		0.37	%		4.74	%
Value of Owner Occupied Housing Units
2008 - Median	$	192,400		$	340,900		$	469,568		$	154,600		$	271,500		$	303,600
Current Value of Owner Occupied Housing Units
$0 - $100,000		27.39	%		5.35	%		8.01	%		32.48	%		2.64	%		3.03	%
$100,000 -$200,000		34.48	%		19.91	%		29.59	%		50.91	%		37.66	%		10.21	%
$200,000 -$300,000		17.08	%		27.35	%		25.60	%		7.71	%		28.77	%		21.66	%
$300,000 -$500,000		12.49	%		29.02	%		22.66	%		4.88	%		18.07	%		37.64	%
$500,000 +		8.56	%		18.37	%		14.14	%		4.02	%		12.86	%		27.45	%
Unemployment Rates
August 2010		9.6	%		7.6	%		8.2	%		11.7	%		8.2	%		5.6	%
August 2009		9.5	%		7.1	%		7.7	%		11.1	%		7.6	%		5.4	%

Source: SNL Financial, ESRI, and U.S. Census Bureau.

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FELDMAN FINANCIAL ADVISORS, INC.

Market Share Analysis

     Table 9 displays branch deposit data for the top 30 financial institutions in the Baltimore MSA as of June 30, 2010 (with deposit data adjusted for completed and pending mergers). Reflecting its small size, the Association ranked 45^th in the Baltimore MSA out of 77 financial institutions with total deposits of $127.6 million as of June 30, 2010 and a market share of 0.08%. Previously, the Association ranked 46^th in the Baltimore MSA with total deposits of $128.0 million as of June 30, 2009. The top five financial institutions (Bank of America, M&T Bank, PNC Bank, Wells Fargo Bank, and BB&T) held $39.9 billion or 68.7% of the deposit market in the Baltimore MSA. The deposit market in the area has been altered by the acquisition of its previously ranked fourth (Wachovia Bank) and fifth (Provident Bank) institutions. Wells Fargo acquired Wachovia in December 2008 and M&T Bank acquired Provident in May 2009. M&T Bank added to its local market share through the acquisition in August 2009 of the failed Bradford Bank.

     Table 10 provides residential mortgage market share data for the top 30 lenders in the Baltimore MSA as ranked by loans funded in calendar 2009. Out-of-market lenders such as Wells Fargo, Bank of America, MetLife Bank, SunTrust Bank, and BB&T ranked among the leading residential lenders in the local market area. Fraternity Federal ranked 95^th with a market share of 0.11% based on total residential mortgage loans funded of $27.7 million in 2009. Previously, the Association ranked 115^th with a market share of 0.10% based on total residential mortgage loans funded of $18.4 million in 2008. Total residential mortgage originations in the Baltimore MSA increased 37.8% from $18.6 billion in 2008 to $25.6 billion in 2009. The average residential mortgage loan funded in the Baltimore MSA was approximately $252,000 in 2009 versus $233,000 in 2008.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 9
Deposit Market Share in the Baltimore MSA
Data as of June 30, 2010
(Adjusted for Pending and Completed Mergers)

						Total		Total
				No. of		Market		Funded
				Funded		Share		Loans
Rank		Company	Type	Loans		(%)		($000)
	1	Wells Fargo & Co. (CA)	Bank		15,149		15.11		3,866,927
	2	Bank of America Corp. (NC)	Bank		9,376		9.06		2,319,413
	3	MetLife Bank NA (NJ)	Bank		5,460		5.65		1,446,500
	4	SunTrust Banks Inc. (GA)	Bank		4,255		4.83		1,235,661
	5	BB&T Corp. (NC)	Bank		3,156		2.98		762,499
	6	First Mariner Bancorp (MD)	Bank		2,890		2.78		712,195
	7	First Home Mortgage Corp. (MD)	Mortgage Bank		2,705		2.73		698,334
	8	PNC Financial Services Group (PA)	Bank		2,702		2.64		675,551
	9	JPMorgan Chase & Co. (NY)	Bank		2,380		2.27		580,429
	10	Tower Federal Credit Union (MD)	Credit Union		2,325		2.11		540,413
	11	New York Community Bancorp (NY)	Thrift		1,872		1.91		487,596
	12	Quicken Loans Inc. (MI)	Mortgage Bank		1,788		1.74		445,906
	13	Provident Funding Associates (CA)	Mortgage Bank		1,391		1.45		370,596
	14	PHH Corp. (NJ)	Specialty Lender		1,230		1.30		331,829
	15	Flagstar Bank FSB (MI)	Thrift		1,321		1.27		323,879
	16	M&T Bank Corporation (NY)	Bank		1,451		1.27		323,757
	17	Liberty Mortgage Corp. (NC)	Mortgage Bank		1,072		1.24		317,667
	18	Prosperity Mortgage Co. (VA)	Mortgage Bank		1,258		1.23		316,012
	19	Carrollton Bancorp (MD)	Bank		1,421		1.23		315,038
	20	Navy Federal Credit Union (VA)	Credit Union		1,073		1.12		287,027
	21	USAA Insurance Group (TX)	NA		1,094		1.07		274,105
	22	NVR Inc. (VA)	Homebuilder		870		1.03		264,152
	23	Taylor Bean & Whitaker Mortgage (FL)	Mortgage Bank		1,039		1.03		263,073
	24	Citigroup Inc. (NY)	Bank		1,166		1.01		258,116
	25	Sierra Pacific Mortgage Inc. (CA)	Mortgage Bank		993		0.98		250,136
	26	Cleveland Corp. (MD)	Thrift HC		866		0.95		242,833
	27	Primary Residential Mrtg Inc (UT)	Mortgage Bank		970		0.94		240,844
	28	Equitable Trust Mortgage Corp. (MD)	Mortgage Bank		898		0.83		211,979
	29	State Employees CU of MD Inc (MD)	Credit Union		1,166		0.78		199,100
	30	Capital One Financial Corp. (VA)	Bank		967		0.73		185,736
	95	Fraternity Federal S&LA (MD)	Thrift		94		0.11		27,739
		Total			101,668		100.00		25,592,465

Source: SNL Financial.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 10
Residential Mortgage Lending Market Share in the Baltimore MSA
Data for 2009
(Adjusted for Pending and Completed Mergers)

						Total		Total
				No. of		Market		Funded
				Funded		Share		Loans
Rank		Company	Type	Loans		(%)		($000)
	1	Wells Fargo & Co. (CA)	Bank		15,149		15.11		3,866,927
	2	Bank of America Corp. (NC)	Bank		9,376		9.06		2,319,413
	3	MetLife Bank NA (NJ)	Bank		5,460		5.65		1,446,500
	4	SunTrust Banks Inc. (GA)	Bank		4,255		4.83		1,235,661
	5	BB&T Corp. (NC)	Bank		3,156		2.98		762,499
	6	First Mariner Bancorp (MD)	Bank		2,890		2.78		712,195
	7	First Home Mortgage Corp. (MD)	Mortgage Bank		2,705		2.73		698,334
	8	PNC Financial Services Group (PA)	Bank		2,702		2.64		675,551
	9	JPMorgan Chase & Co. (NY)	Bank		2,380		2.27		580,429
	10	Tower Federal Credit Union (MD)	Credit Union		2,325		2.11		540,413
	11	New York Community Bancorp (NY)	Thrift		1,872		1.91		487,596
	12	Quicken Loans Inc. (MI)	Mortgage Bank		1,788		1.74		445,906
	13	Provident Funding Associates (CA)	Mortgage Bank		1,391		1.45		370,596
	14	PHH Corp. (NJ)	Specialty Lender		1,230		1.30		331,829
	15	Flagstar Bank FSB (MI)	Thrift		1,321		1.27		323,879
	16	M&T Bank Corporation (NY)	Bank		1,451		1.27		323,757
	17	Liberty Mortgage Corp. (NC)	Mortgage Bank		1,072		1.24		317,667
	18	Prosperity Mortgage Co. (VA)	Mortgage Bank		1,258		1.23		316,012
	19	Carrollton Bancorp (MD)	Bank		1,421		1.23		315,038
	20	Navy Federal Credit Union (VA)	Credit Union		1,073		1.12		287,027
	21	USAA Insurance Group (TX)	NA		1,094		1.07		274,105
	22	NVR Inc. (VA)	Homebuilder		870		1.03		264,152
	23	Taylor Bean & Whitaker Mortgage (FL)	Mortgage Bank		1,039		1.03		263,073
	24	Citigroup Inc. (NY)	Bank		1,166		1.01		258,116
	25	Sierra Pacific Mortgage Inc. (CA)	Mortgage Bank		993		0.98		250,136
	26	Cleveland Corp. (MD)	Thrift HC		866		0.95		242,833
	27	Primary Residential Mrtg Inc (UT)	Mortgage Bank		970		0.94		240,844
	28	Equitable Trust Mortgage Corp. (MD)	Mortgage Bank		898		0.83		211,979
	29	State Employees CU of MD Inc (MD)	Credit Union		1,166		0.78		199,100
	30	Capital One Financial Corp. (VA)	Bank		967		0.73		185,736
	95	Fraternity Federal S&LA (MD)	Thrift		94		0.11		27,739
		Total			101,668		100.00		25,592,465

Source: SNL Financial.

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FELDMAN FINANCIAL ADVISORS, INC.

Summary Outlook

     Fraternity Federal reported improved earnings in 2009 that resulted in net income of $343,000, as compared to $8,000 in 2008. The Association’s ROA advanced from 0.00% in 2008 to 0.20% in 2009. However, the earnings progress was halted in 2010 due to increases in non-performing loans that contributed to a net loss of $411,000 for the first half of 2010 as the provision for loan losses was increased substantially to $865,000.

     The Association’s earnings fundamentals reflect a relatively low net interest margin, coupled with a low level of operating expenses. Excluding gains on sale of loans and investments, the Association generates a modest level of non-interest operating income that is dependent primarily on BOLI income. The Association’s operating expenses have increased noticeably due to the addition of a branch office in September 2009, but remain below industry norms as a percent of average assets.

     The Association’s earnings trends will continue to be dependent on interest rate movements and asset quality. The Association’s net interest margin is very sensitive to interest rate risk exposure because of the sizeable concentration of fixed-rate and intermediate to longer term loans in portfolio. While asset quality has historically been satisfactory, non-performing loans have exhibited signs of increasing in residential construction, residential, and land loan categories. The diversification of the Association’s lending activity will have to be monitored diligently to assure that credit losses do not continue to impair earnings in future periods. Also, as the Association considers the addition of staff for lending expertise and the possible opening of another branch, operating expenses will become an important challenge to manage in sustaining steady profitability at the Association.

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FELDMAN FINANCIAL ADVISORS, INC.

II. COMPARISONS WITH PUBLICLY TRADED THRIFTS

General Overview

     The comparative market approach provides a sound basis for determining estimates of going-concern valuations where a regular and active market exists for the stocks of peer institutions. The comparative market approach was utilized in determining the estimated pro forma market value of the Association because: (i) reliable market and financial data are readily available for comparable institutions; (ii) the comparative market method is required by the applicable regulatory guidelines; and (iii) other alternative valuation methods (such as income capitalization, liquidation analysis, or discounted cash flow) are unlikely to produce a valuation relevant to the future trading patterns of the related equity interest. The generally employed valuation method in initial public offerings, where possible, is the comparative market approach, which also can be relied upon to determine pro forma market value in a thrift stock conversion.

     The comparative market approach derives valuation benchmarks from the trading patterns of selected peer institutions which, due to certain factors such as financial performance and operating strategies, enable the appraiser to estimate the potential value of the subject institution in a stock conversion offering. The pricing and trading history of recent initial public offerings of thrifts are also examined to provide evidence of the “new issue discount” that must be considered. In Chapter II, our valuation analysis focuses on the selection and comparison of the Association with a comparable group of publicly traded thrift institutions (the “Comparative Group”). Chapter III will detail any additional discounts or premiums that we believe are appropriate to the Association’s pro forma market value.

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FELDMAN FINANCIAL ADVISORS, INC.

Selection Criteria

     Selected market price and financial performance data for all public thrifts listed on major stock exchanges are shown in Exhibit III. The list excludes companies that are subject to being acquired under a pending transaction and companies that have a majority ownership interest controlled by a mutual holding company (“MHC”). Several criteria, discussed below, were used to select the individual members of the Comparative Group from the overall universe of publicly traded thrifts.

• Operating characteristics – An institution’s operating characteristics are the most important factors because they affect investors’ expected rates of return on a company’s stock under various business/economic scenarios, and they influence the market’s general perception of the quality and attractiveness of a given company. Operating characteristics, which may vary in importance during the business cycle, include financial variables such as profitability, balance sheet growth, capitalization, asset quality, and other factors such as lines of business and management strategies.

• Degree of marketability and liquidity – Marketability of a stock reflects the relative ease and promptness with which a security may be sold when desired, at a representative current price, without material concession in price merely because of the necessity of sale. Marketability also connotes the existence of buying interest as well as selling interest and is usually indicated by trading volumes and the spread between the bid and asked price for a security. Liquidity of the stock issue refers to the organized market exchange process whereby the security can be converted into cash. We attempted to limit our selection to companies that have access to a regular trading market or price quotations, and therefore only considered companies listed on major stock exchanges. We eliminated from the Comparative Group companies with market prices that were materially influenced by announced acquisitions or other unusual circumstances. However, the expectation of continued industry consolidation is currently embedded in thrift equity valuations.

• Geographic Location – The region of the country where a company operates is also of importance in selecting the comparative group. The operating environment for thrift institutions varies from region to region with respect to business and economic environments, real estate market conditions, speculative takeover activity, and investment climates. Economic and investor climates can also vary greatly within a region, particularly due to takeover activity.

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FELDMAN FINANCIAL ADVISORS, INC.

     The operations of the Association fit the general profile of a small traditional thrift institution, concentrating primarily on residential mortgage lending in its local market and relying significantly on retail certificates of deposit as a funding source. One- to four-family residential loans remain the core product in the Association’s loan portfolio, drawing upon Fraternity Federal’s roots as a home lender. However, the Association has attempted to diversify its loan mix through the origination of commercial real estate loans, land loans, residential construction loans, and home equity lines of credit.

     In determining the Comparative Group composition, we focused on Fraternity Federal’s asset size, earnings fundamentals, and lending concentration. Attempting to concentrate on the Association’s performance characteristics and to develop a meaningful number of comparables for valuation purposes, we expanded the geographic criterion for comparable thrifts beyond the Mid-Atlantic region. In addition, because of the scarcity of candidates meeting the criteria precisely, we expanded the asset size constraint to generate a meaningful number of comparables while maintaining non-size related characteristics. As with any composition of a group of comparable companies, the selection criteria were broadened sufficiently to assemble a meaningful number of members. Specifically, we applied the following selection criteria:

• Publicly traded thrift – stock-form thrift whose shares are traded on the New York, NYSE Amex, or NASDAQ stock markets.

• Non-acquisition target – company is not subject to a pending acquisition.

• Excludes mutual holding companies – company’s majority ownership interest is not held by an MHC.

• Seasoned trading issue – company has been publicly traded for at least one year.

• Profitability – company has reported an ROA of less than or equal to 0.20% for the last twelve months ended June 30, 2010.

• Capitalization –tangible equity to assets ratio greater than or equal to 6.0%.

• Asset size – total assets of less than $625 million.

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FELDMAN FINANCIAL ADVISORS, INC.

• Credit risk exposure – ratio of non-performing assets plus loans 90 days past due as a percent of tangible common equity plus reserves less than 75%.

• Real estate lending concentration – ratio of real estate loans to total loans is greater than or equal to 50%.

• Loans to assets level – ratio of total loans to total assets plus reserves is greater than or equal to 50%.

• Geographic presence – preference for companies based in the Mid-Atlantic region of the country, but criterion considered secondary to above criteria.

     As a result of applying the stated criteria, the screening process produced a reliable representation of public thrifts. A general operating summary of the ten companies included in the Comparative Group is presented in Table 11. All of the selected companies are traded on the NASDAQ market. The Comparative Group ranged in asset size from $227.0 million at First Federal of Northern Michigan Bancorp to $622.3 million at BCSB Bancorp. The median asset size of the Comparative Group was $381.4 million.

     Three of the comparables are located in Mid-Atlantic states (BCSB Bancorp and WSB Holdings in Maryland and CMS Bancorp in New York). Four are based in Midwestern states (Central Federal Corporation in Ohio, Citizens Community Bancorp in Wisconsin, First Clover Leaf Financial Corp. in Illinois, and First Federal of Northern Michigan Bancorp in Michigan). Two companies are based in Southern states (First Advantage Bancorp in Tennessee and GS Financial Corp. in Louisiana) and one from New England (Hampden Bancorp in Massachusetts).

     In comparison to recent performance trends of the aggregate public thrift industry, the Comparative Group generally exhibited lower profitability returns, comparable capital levels, and slightly less favorable asset quality ratios. While some differences inevitably may exist between Fraternity Federal and the individual companies, we believe that the chosen Comparative Group on the whole provides a meaningful basis of financial comparison for valuation purposes.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 11
Comparative Group Operating Summary
As of June 30, 2010

									Tang.
							Total		Equity/
			No. of		IPO		Assets		Assets
Company	City	State	Offices		Date		($mil.)		(%)
Fraternity Federal S&LA	Baltimore	MD		4	NA		$	167.9		9.91
Comparative Group
BCSB Bancorp, Inc.	Baltimore	MD		18		04/11/08		622.3		9.78
Central Federal Corporation	Fairlawn	OH		4		12/30/98		275.1		6.18
Citizens Community Bancorp	Eau Claire	WI		27		11/01/06		576.4		8.75
CMS Bancorp, Inc.	White Plains	NY		6		04/04/07		242.6		8.75
First Advantage Bancorp	Clarksville	TN		5		11/30/07		345.1		19.72
First Clover Leaf Financial Corp.	Edwardsville	IL		4		07/11/06		563.2		11.83
First Federal of Northern Michigan	Alpena	MI		8		04/04/05		227.0		10.05
GS Financial Corp.	Metairie	LA		6		04/01/97		274.0		10.36
Hampden Bancorp, Inc.	Springfield	MA		9		01/17/07		584.0		16.23
WSB Holdings, Inc.	Bowie	MD		5		08/03/88		417.7		12.49

Source: Fraternity Federal; SNL Financial.

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FELDMAN FINANCIAL ADVISORS, INC.

Recent Financial Comparisons

     Table 12 summarizes certain key financial comparisons between Fraternity Federal and the Comparative Group. Tables 13 through 18 contain the detailed financial comparisons of the Association with the individual Comparative Group companies based on measures of profitability, income and expense components, yield-cost structure, capital levels, balance sheet composition, asset quality, and growth rates. Financial data for the Association, the Comparative Group, and All Public Thrift aggregate were utilized for the latest available period as of for the twelve months ending June 30, 2010.

     Fraternity Federal’s LTM ROA was negative 0.17%, reflecting a profitability measure below the Comparative Group median of negative 0.09% and the All Public Thrift median of positive 0.20%. The Association’s lower ROA was attributable mainly to a lower net interest margin and lower level of non-interest income. The Association’s LTM ROE was negative 1.66% and positioned below the Comparative Group median of negative 0.78%. Six members of the Comparative Group reported losses for the LTM period, while the remaining four exhibited modest levels of positive earnings. Similar to Fraternity Federal, most of the Comparative Group companies reported elevated levels of loan loss provisions for the LTM period.

     Based on core earnings as adjusted to exclude intangibles amortization expense and non-recurring income and expense items, Fraternity Federal’s core profitability ratios also lagged behind those of the Comparative Group. The Association’s core earnings for the LTM period excluded $281,000 of pre-tax gains on sales of investments. The Association’s core ROA of negative 0.28% was below the Comparative Group median of negative 0.06% and the All Public Thrift median of positive 0.24%.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 12
Key Financial Comparisons
Fraternity Federal and the Comparative Group
As of or For the Last Twelve Months Ended June 30, 2010

				Comp.			All Public
	Fraternity			Group			Thrift
	Federal			Median			Median
Profitability
LTM Return on Average Assets (ROA)		(0.17)	%		(0.09)	%		0.20	%
LTM Return on Average Equity (ROE)		(1.66	)		(0.78	)		1.55
Core Return on Avg. Assets (Core ROA)		(0.28	)		(0.06	)		0.24
Core Return on Avg. Equity (Core ROE)		(2.74	)		(0.41	)		2.19
Income and Expense (% of avg. assets)
Total Interest Income		4.65			4.97			4.82
Total Interest Expense		2.53			1.76			1.73
Net Interest Income		2.12			3.17			3.12
Provision for Loan Losses		0.51			0.72			0.60
Other Operating Income		0.20			0.42			0.50
Net Secs. Gains and Non-rec. Income		0.17			0.05			0.09
General and Administrative Expense		2.32			2.98			2.85
Intangibles Amortization Expense		0.00			0.00			0.00
Non-recurring Expense		0.00			0.00			0.00
Pre-tax Core Earnings		(0.51	)		(0.10	)		0.30
Efficiency Ratio		99.80			79.56			68.05
Yield-Cost Data
Yield on Interest-earning Assets		4.71			5.34			5.14
Cost of Interest-bearing Liabilities		2.87			2.07			2.04
Net Interest Spread		1.84			3.13			3.15
Net Interest Margin		2.15			3.37			3.33
Asset Utilization (% of avg. total assets)
Avg. Interest-earning Assets		98.76			94.13			92.84
Avg. Interest-bearing Liabilities		88.22			87.50			80.34
Avg. Net Interest-earning Assets		10.54			6.77			11.08

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FELDMAN FINANCIAL ADVISORS, INC.

Table 12 (continued)
Key Financial Comparisons
Fraternity Federal and the Comparative Group
As of or For the Last Twelve Months Ended June 30, 2010

				Comp.			All Public
	Fraternity			Group			Thrift
	Federal			Median			Median
Balance Sheet Composition (% of total assets)
Cash and Securities		24.62	%		24.21	%		22.91	%
Loans Receivable, net		70.73			70.83			70.66
Real Estate		0.00			0.26			0.33
Intangible Assets		0.00			0.01			0.09
Other Assets		4.65			4.44			4.85
Total Deposits		74.89			75.03			73.39
Borrowed Funds		13.55			13.63			14.00
Other Liabilities		1.65			0.93			0.96
Total Equity		9.91			10.36			9.95
Loan Portfolio (% of total loans)
Residential First Mortgage Loans		75.04			48.98			49.59
Other Real Estate Mortgage Loans		24.89			44.03			32.28
Non-mortgage Loans		0.07			9.17			18.14
Growth Rates
Total Assets		(0.17	)		(0.44	)		0.84
Total Loans		(4.15	)		2.26			(1.69	)
Total Deposits		(0.32	)		5.05			5.50
Regulatory Capital Ratios
Tier 1 Leverage Ratio		9.72			10.14			8.99
Tier 1 Risk-based Capital		17.57			16.16			13.62
Total Risk-based Capital		18.49			17.20			14.46
Credit Risk Ratios
Non-performing Loans / Total Loans		2.72			3.63			2.93
Non-performing Assets / Total Assets		1.94			2.65			2.25
Reserves / Total Loans		0.67			1.53			1.51
Reserves / Non-performing Assets		24.68			40.23			40.04

Source: Fraternity Federal; SNL Financial; Feldman Financial.

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FELDMAN FINANCIAL ADVISORS, INC.

     As shown in Table 14, the Association’s net interest margin of 2.15% significantly trailed the Comparative Group median of 3.37% and the All Public Thrift median of 3.33%. The Association’s net interest margin has been hampered by its relatively undiversified loan portfolio, which is mainly concentrated in residential mortgages, and a deposit base dependent on higher costing certificate accounts versus lower costing transaction accounts. Only two members of the Comparative Group reported net interest margins below 3.00%, WSB Holdings at 2.88% and First Clover Leaf Financial at 2.85%. The Association’s 4.71% yield on interest-earning assets measured less than the Comparative Group median of 5.34% and the All Public Thrift median of 5.14%. Residential mortgage loans, which are the predominant loan type in the Association’s loan portfolio, typically provide less yield potential than other types of loans (due in part to the lower degree of perceived risk). The Association’s 2.87% cost of interest-bearing liabilities was higher than the Comparative Group median of 2.07% and the All Public Thrift median of 2.04%. Certificates of deposit composed 85.1% of the Association’s total deposit base at June 30, 2010, which contributed to a higher cost of deposit funds. In contrast, the Comparative Group exhibited a 53.5% median ratio of certificates of deposit to total deposits. Fraternity Federal’s net interest spread of 1.84% for the LTM period was very low as compared to the Comparative Group median of 3.13% and All Public Thrift median of 3.15%.

     The Association’s non-interest operating income totaled 0.20% of average assets, noticeably lagging behind the Comparative Group and All Public Thrift medians of 0.42% and 0.50%, respectively. While the Association’s non-interest income production trailed the Comparative Group level, Fraternity Federal’s non-interest revenue has actually increased substantially in recent years as a result of income contributions from its BOLI investment and gains on sale of loans. Similar to many other small financial institutions, the Association has not

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FELDMAN FINANCIAL ADVISORS, INC.

developed a broad range of other banking-related services and products that are potential contributors to a larger stream of non-interest revenue. The Association’s non-interest income ratio at 0.20% of average assets would have ranked last among the Comparative Group companies. The Association has generated gains on sale of investments, which amounted to 0.17% of average assets for the LTM period and exceeded the Comparative Group and All Public Thrift medians of 0.05% and 0.09%, respectively.

     The Association’s operating expense ratio at 2.32% of average assets was much lower than the Comparative Group median of 2.98% and All Public Thrift median of 2.85%. The Association’s operating expense was lower than each of the corresponding ratios reported by the Comparative Group companies. Fraternity Federal operates efficiently as reflected by its salary and compensation to 1.28% of average assets as compared to the Comparative Group median of 1.65%. Based on its 33 full-time equivalent employees at June 30, 2010, the Association maintained $5.1 million of assets per employee versus the Comparative Group median of $4.1 million. In addition, the Association operates a relatively small number of branches with substantial deposit size. Prior to opening the Hampstead branch in September 2009, the Association’s other three branches had an average deposit size of $42.7 million as of June 30, 2009.

     While the Association’s expenses are expected to increase in the near term as a result of the new branch and employee stock benefit plans, Fraternity Federal’s historical mode of operating efficiently should help the Association to contain the expense ratio in future periods. Although the Association’s non-interest expense ratio is comparatively low, its efficiency ratio did not measure as favorably. The Association’s efficiency ratio (non-interest expense less intangibles amortization expense as a percent of net interest income before provision plus non-

49

FELDMAN FINANCIAL ADVISORS, INC.

interest operating income) was relatively high at 99.8% versus the Comparative Group and All Public Thrift medians of 79.6% and 68.1%, respectively. The Association’s low operating expense level was not sufficiently covered by net interest income production for the recent LTM period.

     The Association historically had made minimal provisions for loan losses based upon its satisfactory asset quality and credit loss experience. However, in 2010, the Association increased its provision significantly to $865,000 to augment its loan loss reserves and reflect the recent increases in non-performing loans and net charge-offs. The provision measured 0.51% of average assets and approached the Comparative Group median of 0.72% and All Public Thrift median of 0.60% for the LTM period.

     As reflected in Table 17, the overall balance sheet composition of the Association was comparable to that of the Comparative Group. The Association’s net total loans amounted to 70.7% of total assets as of June 30, 2010, similar to the median of 70.8% for the Comparative Group. The Association’s ratio of cash and securities to total assets was 24.6% and closely approximated the median of 24.2% of the Comparative Group. The Association had no goodwill or other intangible assets on its balance sheet as of June 30, 2010. The Association’s ratio of other assets measured 4.1% and was similar to the Comparative Group median of 4.4%. The Association’s category of other assets largely consisted of its BOLI investment.

     The Association’s borrowings level at 13.6% of assets reflected its usage of FHLB advances as a supplemental funding source, and was similar to the Comparative Group’s median borrowings level of 13.6%. The Association’s deposit level at 74.9% of total assets was almost identical to the Comparative Group’s median deposit level of 75.0%. The Association’s equity

50

FELDMAN FINANCIAL ADVISORS, INC.

level before the Conversion was 9.91% relative to total assets, which was slightly lower than the Comparative Group and All Public Thrift medians of 10.36% and 9.95%, respectively.

     While the Association had begun to make strides toward diversifying its loan portfolio, its loan mix is not as varied as that of the Comparative Group. The Association’s level of residential first mortgage loans measured 75.0% of total loans based on regulatory financial data as of June 30, 2010, above the Comparative Group and All Public Thrift medians of 48.9% and 49.6%, respectively. Among the Comparative Group companies, CMS Bancorp at 77.5% and Citizens Community Bancorp at 56.2% also held high concentrations of residential first mortgages in their respective loan portfolios. Conversely, the Association’s concentration ratios of non-residential loans were lower. The Association’s ratio of other non-residential mortgage loans was 24.9% of total loans versus the Comparative Group median of 44.0%, and its ratio of non-mortgage loans was 0.1% versus the Comparative Group median of 9.2%.

     The Association’s recent emphasis on restrained balance sheet growth is reflected in the comparative growth rates. The Association’s asset growth rate measured negative 0.2% over the recent LTM period and paralleled the Comparative Group median of negative 0.4%. The Association also exhibited negative growth rates of loans and deposits, while the Comparative Group reported median growth rates of loans and deposits at low yet positive levels. The sluggish economy and mounting credit-related losses have forced many financial institutions to emphasize capital preservation and credit remediation over growth objectives.

     The Association’s 1.94% ratio of non-performing assets was positioned slightly below the Comparative Group median of 2.65% and the All Public Thrift median of 2.25%. While the Association’s asset quality ratios compared favorably to the peer groups, its level of reserves was lower. The Association’s ratio of reserves to total loans was 0.67% versus the Comparative

51

FELDMAN FINANCIAL ADVISORS, INC.

Group and All Public Thrift medians of 1.53% and 1.51%, respectively, and its 24.7% ratio of reserves to non-performing assets was below the Comparative Group median of 40.2%.

     In summary, the Association’s recent earnings performance trailed the results exhibited by the Comparative Group and All Public Thrift segments. The Association’s profitability is characterized by a relatively low net interest margin and, more recently, increased provisions for loan losses. The Association’s net interest margin has been restrained by the yield potential of its residential mortgage loan portfolio along with the higher costs associated with certificate of deposit funding versus transaction accounts. While the Association exhibited a lower level of non-interest expenses and slightly lower level of non-performing assets, these factors did not offset the Association’s comparative disadvantages in the recent earnings cycle. Fraternity Federal’s earnings growth outlook will depend largely on the Association’s ability to sustain satisfactory loan quality as its grows the portfolio, improve the net interest margin across movements in the interest rate environment, and control non-interest expense as it expands its sphere of operation.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 13
General Operating Characteristics
As of the Last Twelve Months Ended June 30, 2010

							Total		Total		Total		Total
					No. of	IPO	Assets		Loans		Deposits		Equity
	City	State	Ticker	Exchange	Offices	Date	($000s)		($000s)		($000s)		($000s)
Fraternity Federal S&LA	Baltimore	MD	NA	NA	4	NA		167,928		119,575		125,760		16,647
Comparative Group Average								412,731		293,717		307,917		50,037
Comparative Group Median								381,398		241,590		243,900		54,271
Comparative Group
BCSB Bancorp, Inc.	Baltimore	MD	BCSB	NASDAQ	18	04/11/08		622,316		402,905		537,798		60,924
Central Federal Corporation	Fairlawn	OH	CFBK	NASDAQ	4	12/30/98		275,101		228,381		226,255		17,152
Citizens Community Bancorp, Inc.	Eau Claire	WI	CZWI	NASDAQ	27	11/01/06		576,367		458,583		441,016		56,376
CMS Bancorp, Inc.	White Plains	NY	CMSB	NASDAQ	6	04/04/07		242,566		181,304		183,285		21,217
First Advantage Bancorp	Clarksville	TN	FABK	NASDAQ	5	11/30/07		345,089		232,011		218,238		68,054
First Clover Leaf Financial Corp.	Edwardsville	IL	FCLF	NASDAQ	4	07/11/06		563,228		405,145		429,054		77,810
First Federal of North. Michigan	Alpena	MI	FFNM	NASDAQ	8	04/04/05		226,950		167,514		157,827		23,500
GS Financial Corp.	Metairie	LA	GSLA	NASDAQ	6	04/01/97		273,951		190,297		204,093		28,393
Hampden Bancorp, Inc.	Springfield	MA	HBNK	NASDAQ	9	01/17/07		584,039		419,861		420,060		94,773
WSB Holdings, Inc.	Bowie	MD	WSB	NASDAQ	5	08/03/88		417,707		251,169		261,544		52,166

Source: Fraternity Federal S&LA; SNL Financial; Feldman Financial.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 14
Summary Financial Performance Ratios
As of or For the Last Twelve Months Ended June 30, 2010

			Total		Tang.				Net
	Total		Equity/		Equity/		NPA/s		Interest		Effcy.		LTM			LTM			Core			Core
	Assets		Assets		Assets		Assets		Margin		Ratio		ROA			ROE			ROA			ROE
	($000s)		(%)		(%)		(%)		(%)		(%)		(%)			(%)			(%)			(%)
Fraternity Federal S&LA		167,928		9.91		9.91		1.94		2.15		99.80		(0.17	)		(1.66	)		(0.28	)		(2.74	)
Comparative Group Average		412,731		11.75		11.41		3.48		3.32		82.04		(0.91	)		(9.59	)		(0.87	)		(9.39	)
Comparative Group Median		381,398		10.36		10.21		2.65		3.37		79.56		(0.09	)		(0.78	)		(0.06	)		(0.41	)
All Public Thrift Average		2,971,808		11.04		10.24		3.85		3.26		71.49		(0.28	)		(6.27	)		(0.22	)		(5.62	)
All Public Thrift Median		966,540		9.95		9.14		2.25		3.33		68.05		0.20			1.55			0 .24			2.19
Comparative Group
BCSB Bancorp, Inc.		622,316		9.79		9.78		2.23		3.45		77.68		(0.21	)		(2.07	)		0 .06			0.56
Central Federal Corporation		275,101		6.23		6.18		5.05		3.19		81.43		(5.10	)		(58.76	)		(5.19	)		(59.87	)
Citizens Community Bancorp, Inc.		576,367		9.78		8.75		1.79		3.77		70.30		0.13			1.35			0 .31			3.15
CMS Bancorp, Inc.		242,566		8.75		8.75		0.72		3.21		103.76		(0.11	)		(1.19	)		(0.16	)		(1.83	)
First Advantage Bancorp		345,089		19.72		19.72		1.08		3.62		77.12		0.20			1.01			0 .40			1.96
First Clover Leaf Financial Corp.		563,228		13.82		11.83		3.07		2.85		55.91		0.19			1.47			0 .24			1.82
First Federal of North. Michigan		226,950		10.35		10.05		5.71		3.48		94.51		(2.73	)		(25.84	)		(2.84	)		(26.91	)
GS Financial Corp.		273,951		10.36		10.36		4.32		3.42		76.30		0.03			0.32			(0.05	)		(0.44	)
Hampden Bancorp, Inc.		584,039		16.23		16.23		1.96		3.32		81.88		(0.06	)		(0.37	)		(0.06	)		(0.38	)
WSB Holdings, Inc.		417,707		12.49		12.49		8.86		2.88		101.54		(1.43	)		(11.82	)		(1.44	)		(11.92	)

Source: Fraternity Federal S&LA; SNL Financial; Feldman Financial.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 15
Income and Expense Analysis
For the Last Twelve Months Ended June 30, 2010

	As a Percent of Average Assets
					Net		Other					Loan		Gen. &		Amort.				Pretax
	Interest		Interest		Interest		Oper.		Non-rec.			Loss		Admin.		& Imp.		Non-rec.		Core
	Income		Expense		Income		Income		Income			Prov.		Expense		Intang,		Expense		Earnings
Fraternity Federal S&LA		4.65		2.53		2.12		0.20		0.17			0.51		2.32		0.00		0.00		(0.51	)
Comparative Group Average		5.01		1.87		3.14		0.46		0.02			1.39		3.02		0.07		0.01		(0.81	)
Comparative Group Median		4.97		1.76		3.17		0.42		0.05			0.72		2.98		0.00		0.00		(0.10	)
All Public Thrift Average		4.78		1.75		3.04		0.66		0.15			1.11		2.92		0.07		0.02		(0.09	)
All Public Thrift Median		4.82		1.73		3.12		0.50		0.09			0.60		2.85		0.00		0.00		0.30
Comparative Group
BCSB Bancorp, Inc.		4.92		1.73		3.20		0.43		(0.02	)		0.55		2.82		0.39		0.00		0.26
Central Federal Corporation		4.81		1.74		3.08		0.40		0.16			5.16		2.83		0.01		0.00		(4.51	)
Citizens Community Bancorp, Inc.		5.75		2.15		3.59		0.38		(0.21	)		0.68		2.79		0.06		0.00		0.50
CMS Bancorp, Inc.		4.87		1.73		3.14		0.23		0.09			0.12		3.50		0.00		0.00		(0.25	)
First Advantage Bancorp		5.03		1.63		3.40		0.77		(0.30	)		0.29		3.21		0.00		0.00		0.67
First Clover Leaf Financial Corp.		4.50		1.78		2.71		0.19		0.08			0.96		1.64		0.07		0.08		0.30
First Federal of North. Michigan		5.01		1.77		3.24		0.92		0.30			2.69		3.94		0.12		0.00		(2.47	)
GS Financial Corp.		5.18		1.95		3.23		0.31		0.12			0.60		2.98		0.00		0.00		(0.04	)
Hampden Bancorp, Inc.		4.81		1.70		3.11		0.47		0.00			0.76		2.98		0.00		0.00		(0.16	)
WSB Holdings, Inc.		5.25		2.55		2.69		0.53		0.02			2.07		3.56		0.00		0.00		(2.41	)

Source: Fraternity Federal S&LA; SNL Financial; Feldman Financial.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 16
Yield-Cost Structure and Growth Rates
For the Last Twelve Months Ended June 30, 2010

	Avg.		Avg.		Avg. Net
	Int. Earn.		Int.-Bear.		Earning		Avg.		Yield on		Cost of		Net		Asset			Loan			Deposit
	Assets/		Liabs./		Assets/		Equity/		Int.-Earn.		Int-Bear.		Interest		Growth			Growth			Growth
	Assets		Assets		Assets		Assets		Assets		Liabs.		Spread		Rate			Rate			Rate
Fraternity Federal S&LA		98.72		88.18		10.54		10.07		4.71		2.87		1.84		(0.17	)		(4.15	)		(0.32	)
Comparative Group Average		94.85		85.30		11.32		11.64		5.30		2.19		3.11		(0.88	)		2.09			5.36
Comparative Group Median		94.13		85.48		9.81		10.29		5.34		2.07		3.13		(0.44	)		2.26			5.05
All Public Thrift Average		92.88		79.58		11.67		10.90		5.14		2.03		3.13		2.86			(0.06	)		8.20
All Public Thrift Median		92.84		80.34		11.08		10.11		5.14		2.04		3.15		0.84			(1.69	)		5.50
Comparative Group
BCSB Bancorp, Inc.		92.73		89.01		3.72		10.14		5.31		1.94		3.37		6.00			0.14			6.84
Central Federal Corporation		96.60		83.77		12.83		8.67		4.98		2.07		2.91		(4.61	)		(7.38	)		5.28
Citizens Community Bancorp, Inc.		95.35		89.24		6.11		9.75		6.03		2.41		3.62		5.43			7.57			20.53
CMS Bancorp, Inc.		97.68		90.92		6.76		8.93		4.98		1.90		3.08		0.60			4.38			0.43
First Advantage Bancorp		93.86		78.96		14.90		20.14		5.36		2.07		3.29		(1.48	)		21.42			4.82
First Clover Leaf Financial Corp.		97.68		79.49		18.19		8.93		4.73		2.19		2.54		(6.71	)		(3.92	)		(0.79	)
First Federal of North. Michigan		93.04		88.27		4.77		10.56		5.39		2.01		3.38		(5.64	)		(9.84	)		(2.73	)
GS Financial Corp.		94.40		84.25		18.50		10.44		5.49		2.32		3.17		3.48			4.76			7.63
Hampden Bancorp, Inc.		93.60		82.36		20.62		16.69		5.14		2.06		3.08		2.89			7.31			10.11
WSB Holdings, Inc.		93.50		86.72		6.78		12.12		5.61		2.94		2.67		(8.78	)		(3.52	)		1.49

Source: Fraternity Federal S&LA; SNL Financial; Feldman Financial.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 17
Balance Sheet Composition
As of the Last Twelve Months Ended June 30, 2010

	As a Percent of Total Assets
	Cash &		Net		Real		Intang.		Other		Total		Borrowed		Other		Total		Total
	Securities		Loans		Estate		Assets		Assets		Deposits		Funds		Liabs.		Liabs.		Equity
Fraternity Federal S&LA		24.62		70.73		0.00		0.00		4.65		74.89		13.55		1.65		90.09		9.91
Comparative Group Average		24.13		70.30		0.54		0.38		4.65		73.87		13.25		1.12		88.25		11.75
Comparative Group Median		24.21		70.83		0.26		0.01		4.44		75.03		13.63		0.93		89.64		10.36
All Public Thrift Average		25.09		68.94		0.62		0.80		5.07		72.09		15.80		1.10		88.93		11.04
All Public Thrift Median		22.91		70.66		0.33		0.09		4.85		73.39		14.00		0.96		90.02		9.95
Comparative Group
BCSB Bancorp, Inc.		30.45		63.73		0.00		0.01		5.80		86.42		2.73		1.06		90.21		9.79
Central Federal Corporation		14.41		79.36		0.85		0.05		5.33		82.24		10.58		0.94		93.77		6.23
Citizens Community Bancorp, Inc.		15.89		78.97		0.20		1.13		3.82		76.52		13.03		0.67		90.22		9.78
CMS Bancorp, Inc.		23.11		74.40		0.00		0.00		2.49		75.56		14.27		1.42		91.25		8.75
First Advantage Bancorp		29.02		66.37		0.18		0.00		4.43		63.24		16.39		0.65		80.28		19.72
First Clover Leaf Financial Corp.		23.32		70.85		0.33		2.25		3.25		76.18		9.33		0.68		86.18		13.82
First Federal of North. Michigan		20.48		72.43		1.35		0.34		5.40		69.54		19.06		1.05		89.64		10.35
GS Financial Corp.		26.63		68.21		0.72		0.00		4.45		74.50		14.23		0.91		89.64		10.36
Hampden Bancorp, Inc.		25.11		70.81		0.16		0.00		3.93		71.92		11.13		0.72		83.77		16.23
WSB Holdings, Inc.		32.85		57.90		1.63		0.00		7.62		62.61		21.79		3.11		87.51		12.49

Source: Fraternity Federal S&LA; SNL Financial; Feldman Financial.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 18
Regulatory Capital, Credit Risk, and Loan Composition
As of or For the Last Twelve Months Ended June 30, 2010

	Tier 1		Tier 1		Total										Resid.		Other
	Leverage		Risk-		Risk-				Total						First		Real Est.		Non-mtg.
	Capital		based		based		NPLs/		NPAs/		Resrvs./		Resrvs./		Mtgs./		Mtgs./		Loans/
	Ratio		Capital		Capital		Loans		Assets		NPAs		Loans		Loans		Loans		Loans
Fraternity Federal S&LA		9.39		17.91		18.83		2.72		1.94		24.68		0.67		75.04		24.89		0.07
Comparative Group Average		10.47		15.34		16.35		4.29		3.48		44.80		1.89		46.60		41.00		12.40
Comparative Group Median		10.14		16.16		17.20		3.63		2.65		40.23		1.53		48.98		44.03		9.17
All Public Thrift Average		9.83		15.09		16.17		4.43		3.85		55.24		1.86		49.42		32.64		17.94
All Public Thrift Median		8.99		13.62		14.46		2.93		2.25		40.04		1.51		49.59		32.28		18.14
Comparative Group
BCSB Bancorp, Inc.		10.79		17.60		18.58		3.44		2.23		45.31		1.56		53.36		43.06		3.58
Central Federal Corporation		6.87		8.73		10.01		5.06		5.05		72.45		4.41		24.55		55.77		19.68
Citizens Community Bancorp, Inc.		9.57		10.25		10.56		2.01		1.79		33.34		0.75		56.18		0.04		43.78
CMS Bancorp, Inc.		7.67		16.45		17.19		1.39		0.72		47.82		0.46		77.46		20.77		1.77
First Advantage Bancorp		13.44		18.20		19.18		1.33		1.08		80.33		1.29		27.68		60.67		11.65
First Clover Leaf Financial Corp.		10.41		13.90		14.88		3.81		3.07		35.15		1.50		36.72		49.10		14.18
First Federal of North. Michigan		9.33		13.65		14.91		5.95		5.71		24.13		1.87		54.05		39.27		6.68
GS Financial Corp.		9.87		16.37		17.45		5.41		4.32		29.07		1.81		50.98		44.99		4.03
Hampden Bancorp, Inc.		15.85		22.32		23.56		2.51		1.96		55.20		1.50		46.98		36.28		16.74
WSB Holdings, Inc.		10.85		15.94		17.20		12.03		8.86		25.17		3.71		38.05		60.05		1.90

Source: Fraternity Federal S&LA; SNL Financial; Feldman Financial.

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FELDMAN FINANCIAL ADVISORS, INC.

III. MARKET VALUE ADJUSTMENTS

General Overview

     This concluding chapter of the Appraisal identifies certain additional adjustments to the Association’s estimated pro forma market value relative to the Comparative Group selected in Chapter II. The adjustments discussed in this chapter are made from the viewpoints of potential investors, which would include depositors holding subscription rights and unrelated parties who may purchase stock in a community offering. It is assumed that these potential investors are aware of all relevant and necessary facts as they would pertain to the value of the Association relative to other publicly traded thrift institutions and relative to alternative investments.

     Our appraised value is predicated on a continuation of the current operating environment for the Association and thrift institutions in general. Changes in the Association’s operating performance along with changes in the local and national economy, the stock market, interest rates, the regulatory environment, and other external factors may occur from time to time, often with great unpredictability, which could impact materially the pro forma market value of the Association or thrift stocks in general. Therefore, the Valuation Range provided herein is subject to a more current re-evaluation prior to the actual completion of the Conversion.

     In addition to the comparative operating fundamentals discussed in Chapter II, it is important to address additional market value adjustments based on certain financial and other criteria, which include, among other factors:

(1)	Earnings Prospects
(2)	Financial Condition
(3)	Market Area
(4)	Management
(5)	Dividend Policy
(6)	Liquidity of the Issue

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(7)	Subscription Interest
(8)	Recent Acquisition Activity
(9)	Effect of Government Regulations and Regulatory Reform
(10)	Stock Market Conditions
(11)	New Issue Discount

Earnings Prospects

     Earnings prospects are dependent upon the sensitivity of asset yields and liability costs to changes in market interest rates, the credit quality of assets, the stability of non-interest components of income and expense, and the ability to leverage the balance sheet. Each of the foregoing is an important factor for investors in assessing earnings prospects. The Association’s profitability in recent years has varied from low to negative due to a combination of earnings fundamentals reflecting a low net interest margin, low operating expenses, and increased loan loss provisions.

     Fraternity Federal’s core earnings compared unfavorably to the Comparative Group for the recent LTM period. The Association’s pre-tax core earnings amounted to negative 0.51% of average assets versus the Comparative Group median of negative 0.10%. The Association’s lower net interest margin and lower level of non-interest income were the chief factors contributing to the Association’s earnings disadvantage. As discussed earlier, the Association’s historical operating strategy has focused on emphasizing residential mortgage lending, maintaining strong capital levels, and operating efficiently. The Association has also targeted other real estate lending niches such as residential construction loans and commercial real estate loans. However, the Association’s recent foray into speculative residential construction loans proved less than successful and Fraternity Federal has discontinued this type of lending.

     The Association’s reliance on residential mortgage loans funded heavily by certificates of deposit has contributed to its tightened net interest margin. In most recent periods, the

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Association’s net interest income has not surpassed its operating expense. Thus, with such a narrow net interest margin, the Association’s profitability is very susceptible to adverse interest rate movements or elevated credit-related losses in the near term given its current balance sheet exposure. Furthermore, after the Conversion, the Association’s operating expenses are anticipated to increase. The stock-based employee benefit plans will bring further expense charges. Additionally, in an effort to expand its lending activity and market penetration, the Association may hire additional lending personnel. At an appropriate time, the Association may also open another branch office. As the Association attempts to broaden its reach and attract different types of non-residential loans and core deposits, it is likely to encounter increased competition which will place additional pressure on operating margins.

     As its net interest margin is likely to encounter added pressure due to increased competition and possible adverse changes in interest rates, the Association has not yet developed significant sources of non-interest revenue to sustain earnings growth from other business channels as unpredictable gains on sale have been a major contributor. The Association’s large concentration of fixed-rate loans also heightens its exposure to interest rate risk. The Association’s increased capital position following the Conversion will help to improve its net interest margin across changing interest rate and business cycles and provide additional leverage capacity to grow the balance sheet. However, based on the Association’s current earnings fundamentals and recent operating results, we believe that a slight downward adjustment is warranted to the Association’s pro forma market value for fundamental earnings prospects relative to the Comparative Group.

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Financial Condition

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     As discussed and summarized in Chapter I, the Association’s overall loan composition reflects a large concentration of residential mortgage loans. The Association’s overall balance sheet structure reflects a concentration of real estate loans funded by deposits and borrowings. The Association’s deposits primarily consist of certificate accounts, which composed approximately 85% of total deposits at June 30, 2010. Based on the financial comparisons reviewed in the prior chapter, we note that the Association’s balance sheet structure is very similar to that of the Comparative Group on the whole. Before the infusion of net capital proceeds, the Association’s equity ratio at 9.91% of assets was in range of the Comparative Group’s average and median and 11.75% and 10.36%, respectively. The Association has a slightly lower level of non-performing assets than exhibited by the Comparative Group, but it also maintained a lower level of loan loss reserves in relation to total loans and total non-performing assets. While the asset quality of the Association is slightly more favorable than the Comparative Group, most of the Comparative Group companies exhibited satisfactory asset quality ratios on a more diversified loan mix.

     Until the Association achieves its planned diversification into non-residential mortgage lending segments, it is uncertain if such diversification can be accomplished by building a reliable book of business without experiencing a material increase in non-performing assets. The selection criteria for the Comparative Group ensured a collection of companies with solid capital positions and generally satisfactory asset quality, similar to the Association. We believe that the balance sheet, asset quality, and funding structure fundamentals of the Association are largely similar to that of the Comparative Group, with the Association commanding a slight advantage of stronger, enhanced capital ratios on a pro forma basis after the Conversion. Therefore, on the

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whole, we believe that no adjustment is warranted for financial condition relative to the Comparative Group.

Market Area

     The members of the Comparative Group were drawn from the Mid-Atlantic, Midwestern, New England, and Southern regions of the country. The selection criteria parameters produced two public thrifts operating in the Association’s home state of Maryland (BCSB Bancorp based in Baltimore and WSB Holdings headquartered in Bowie), along with another company in the Mid-Atlantic region (CMS Bancorp in White Plains, New York) and two from the Southern states (First Advantage Bancorp in Clarksville, Tennessee and GS Financial in Metarie, Louisiana). The market areas encompassing the Comparative Group companies include metropolitan areas such as Baltimore-MD, Akron-OH, St. Louis-MO, New Orleans-LA, and Springfield-MA, along with smaller metropolitan areas. The Comparative Group companies are characterized by a cross-section of market areas that encompass smaller to mid-sized metropolitan areas with relatively stable economies, steady housing values, and moderate population growth prospects, very similar to that experienced by the Association’s market area. In recognition of these factors, we believe that no adjustment is warranted for market area.

Management

     Management’s principal challenges are to generate profitable results, monitor credit risks, and control operating costs while the Association competes in an increasingly challenging financial services environment. The normal challenges facing the Association in attempting to deliver earnings growth and enhance its competitiveness remain paramount as it attempts to leverage the stock offering proceeds. The Association has a senior management team led by two

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individuals with long tenures at Fraternity Federal and extensive experience in the local banking marketplace. Thomas Sterner serves as Chairman and Chief Executive Officer of the Association, and Richard Schultze serves as President and Chief Operating Officer. As reflected by its historical operating results, we believe that investors will take into account that the Association is professionally and capably managed by an experienced management team. Investors will likely rely upon actual earnings results as the means of evaluating the future performance of Fraternity Federal’s management as the Association pursues its growth objectives following the Conversion. Therefore, based on these considerations, we believe no adjustment is warranted relative to the Comparative Group for this factor.

Dividend Policy

     Following the Conversion, the Board of Directors of Fraternity Federal initially does not intend to declare of pay cash dividends. However, in the future, the Board may declare and pay regular cash dividends or periodic special cash dividends. In determining whether to declare or pay any dividends, the Board will take into account the Company’s and Association’s financial condition, operating results, tax considerations, capital requirements, industry standards, and economic conditions. No assurances are given by Fraternity Federal that any dividends will be paid or that, if paid, will not be reduced or eliminated in future periods.

     Payment of cash dividends has become commonplace among publicly traded thrifts with relatively high capital levels. Of the ten members of the Comparative Group, four currently pay regular cash dividends and another four companies previously paid regular cash dividends but have suspended the practice at the present time. The average dividend yield of the Comparative Group was 1.14% and the median was 0.00% as of October 12, 2010. The average dividend

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yield of the All Public Thrift aggregate was 1.85% and the median was 1.59% as of October 12, 2010. Although Fraternity Federal has yet to establish a policy of paying regular cash dividends, we believe that investors will take note of its solid dividend-paying capacity as evidenced by strong pro forma capital ratios. Therefore, we have concluded that no adjustment was warranted for purposes of dividend policy.

Liquidity of the Issue

     With the increased number of market makers and institutional investors following thrift stocks, the majority of thrift stock conversions are able to develop a public market for their new stock issues. Most publicly traded thrift stocks continue to be traded on the NASDAQ market. All ten members of the Comparative Group are listed on the NASDAQ market. In conjunction with the Conversion, Fraternity Federal will not apply to have its common stock listed for quotation on the NASDAQ market. Instead, the Company intends to lists its common stock for trading on the Over-the-Counter Bulletin Board (“OTCBB”) following completion of the Conversion. The OTCBB is an electronic quotation system that displays real-time quotes, last sale prices, and volume information for many over-the-counter securities that are not listed on the NASDAQ or a national stock exchange.

     The development and maintenance of a public market, having the desirable characteristics of depth, liquidity and orderliness, depend on the existence of willing buyers and sellers. The number of active buyers and sellers of shares of common stock at any particular time may be more limited on the OTCBB versus a national market such as NASDAQ, which may have an adverse effect on the price at which shares of common stock can be sold. Therefore, purchasers of the Company’s shares are likely to encounter a limited trading market for this common stock issue. Because of the Association’s comparatively smaller capital amount

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and asset size, its resulting market capitalization will also be smaller than the average $27.5 million and median $21.7 million market value of the Comparative Group. Of the ten companies in the Comparative Group, all are traded on NASDAQ and indicated an overall average daily trading volume of approximately 2,700 shares during the past year with each company exceeding a minimum average of 1,000 shares per day. The Association’s smaller stock issue and OTCBB listing do not offer the relative depth of liquidity afforded by the Comparative Group’s larger market values and NASDAQ trading history. Therefore, we have concluded that a downward adjustment to the Association’s pro forma market value is warranted to address the anticipated illiquidity of its common stock issue.

Subscription Interest

     The Association has retained the services of Sandler O’Neill & Partners, L.P. to assist in the marketing and sale of the stock offering. The Company’s employee stock ownership plan (“ESOP”) plans to purchase 8.0% of the amount of stock to be sold in the stock offering. Fraternity Federal expects its directors, executive officers and their associates, to purchase 45,000 shares of common stock in the offering for an aggregate amount of $450,000 based on a $10.00 offering price per share. Except for the ESOP, no person may purchase in the aggregate more than $250,000 of the common stock, or 25,000 shares sold in the offering. No person, either alone or together with associates of or persons acting in concert with such person, may purchase more than $400,000 of the common stock, or 40,000 shares sold in the offering. The minimum purchase in the offering will be 25 shares or an aggregate amount of $250.

     Recent subscription interest in thrift stock conversion offerings has been weak to moderate. While a few have experienced robust interest and received orders above the

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maximum offering amount, most converting thrifts have moderately exceeded the minimum of offering ranges and two conversion transactions have been deferred due to an inability to sell sufficient shares. As shown in Table 21, the after-market performance of recently converted thrifts has also been mixed with most of the OTCBB issues notably experiencing no material price change in the after-market following the IPO. However, absent actual results of the Association’s subscription offering, we do not believe any adjustment is warranted at this time.

Recent Acquisition Activity

     Table 19 summarizes recent acquisition activity involving banks and thrifts based in Maryland. The largest recent acquisition of a Maryland bank or thrift involved the purchase in February 2009 of Chevy Chase Association, F.S.B. by Capital One Financial Corporation, which was followed by the acquisition of Provident Bankshares in May 2009 by M&T Bank Corporation. These acquisitions along with the purchase of AmericasBank Corporation in August 2009 and the recent transaction announced in September 2010 to purchase Maryland Bankcorp were characterized by sellers experiencing financial difficulties and subsequently being acquired at prices below book value. However, this profile of the merger and acquisition environment is occurring nationwide as premiums in bank and thrift acquisitions have been pushed downward to historically low levels. Given that there are significant regulatory restrictions on the ability to acquire control of the Company for a period of three years following the Conversion, we do not believe that acquisition premiums are a significant factor to consider in determining the Company’s pro forma market value.

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FELDMAN FINANCIAL ADVISORS, INC.

Table 19
Summary of Recent Maryland Acquisition Activity
Transactions Announced Since January 1, 2006

				Seller’s Prior Financial Data															Offer Value to
				Total		Equity/		YTD			YTD						Offer		Book		Tang.		LTM		Total
			B/T	Assets		Assets		ROA			ROE			Date		Status	Value		Value		Book		EPS		Assets
Buyer	State	Seller	(1)	($Mil.)		(%)		(%)			(%)			Anncd.		(2)	($Mil.)		(%)		(%)		(x)		(%)
Median: 2006 - 2010					144.8		8.24		(0.04	)		(0.41	)	NA		NA		33.4		160.6		167.1		30.1		13.26
Median: 2007 - 2010					348.1		6.61		(0.55	)		(6.40	)	NA		NA		48.8		65.9		66.0		NM		5.75
Median: 2006					96.7		10.08		0.91			7.26		NA		NA		22.6		209.7		209.7		30.1		23.14
Old Line Bancshares, Inc.	MD	Maryland Bankcorp, Inc.	B		348.1		8.73		(0.55	)		(6.40	)		09/01/10	P		20.0		65.9		65.9		NM		5.75
Capital Funding Bancorp	MD	AmericasBank Corp.	B		145.9		5.25		(3.94	)		(54.40	)		04/03/09	C		0.3		3.5		3.5		NM		0.19
M&T Bank Corporation	NY	Provident Bankshares	B		6,410.5		8.46		(0.26	)		(2.64	)		12/18/08	C		402.0		71.5		150.3		NM		6.27
Capital One Financial Corp.	VA	Chevy Chase Bank, F.S.B.	T		15,499.5		5.69		0.03			0.52			12/03/08	C		520.0		58.9		66.0		NM		3.35
Eagle Bancorp, Inc.	MD	Fidelity & Trust Financial	B		452.0		6.61		(1.64	)		(22.35	)		12/02/07	C		48.8		137.3		137.3		NM		10.80
Affinity Financial Corp.	CA	American Partners Bank, FSB	T		140.2		6.39		(3.96	)		(40.69	)		03/06/07	C		NA		NA		NA		NA		NA
Bradford Bank	MD	Senator Bank (3)	T		19.1		7.78		(0.10	)		(1.33	)		01/25/07	C		NA		NA		NA		NA		NA
Bradford Bank	MD	Golden Prague FS&LA (3)	T		29.3		9.27		0.23			2.73			12/28/06	C		NA		NA		NA		NA		NA
Sandy Spring Bancorp, Inc.	MD	CN Bancorp, Inc.	B		151.3		13.58		0.96			7.26			12/13/06	C		44.2		209.7		209.7		30.1		29.23
E*TRADE Financial Corp.	NY	United Medical Bank, FSB	T		29.7		10.12		(10.72	)		(95.20	)		11/15/06	C		NA		NA		NA		NA		NA
PNC Financial Services	PA	Mercantile Bankshares	B		17,002.7		13.32		1.73			12.59			10/08/06	C		6,027.1		257.6		377.7		20.3		35.45
Community Banks, Inc.	PA	BUCS Financial Corp	T		143.7		8.01		0.30			3.72			09/05/06	C		22.6		184.0		184.0		41.4		15.72
Bradford Bancorp, Inc.	MD	Valley Bancorp, Inc.	T		49.9		10.08		0.91			8.92			07/28/06	C		9.6		190.4		190.4		31.6		19.20
Sterling Financial Corp.	PA	Bay Net Financial, Inc.	T		96.7		7.37		1.10			13.62			03/30/06	C		22.3		337.8		337.8		24.5		23.14

(1)	B=bank; T=thrift.
(2)	P=pending; C=completed.
(3)	Mutual to mutual merger.
Source: SNL Financial.

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Effect of Government Regulations and Regulatory Reform

     In response to the financial crisis of 2008 and early 2009, Congress has taken actions that are intended to strengthen confidence and encourage liquidity in financial institutions. The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted on July 21, 2010, and provides for new restrictions and an expanded framework of regulatory oversight for financial institutions and their holding companies. The legislation also provides for the creation of a consumer financial protection bureau that will have broad authority to issue regulations governing the services and products provided by financial institutions. The implemented legislation could increase compliance costs, raise regulatory capital requirements, alter loan loss provisioning practices, and otherwise adversely impact operations of banks and thrifts. The potential also exists for additional federal or state laws and regulations, or changes in policy, affecting lending and funding practices and liquidity standards.

     As a fully converted stock thrift insured by the FDIC and supervised by its primary regulators, Fraternity Federal will continue to operate in the same regulatory environment that is substantially similar to that faced by the Comparative Group companies. As of June 30, 2010, the Association was considered well capitalized, similar to all the members of the Comparative Group. Therefore, given these factors, we believe that no specific adjustment is necessary for the effect of government regulations and regulatory reform.

Stock Market Conditions

     Table 20 displays the performance of the SNL All Public Thrift, SNL All Mid-Atlantic Thrift, SNL <$250 Million-Asset Thrift indexes, as compared to the Standard & Poor’s 500-Stock Index (“S&P 500”) over various periods. Table 20 also includes a pair of market sorted

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indexes: SNL NASDAQ Thrift and SNL OTCBB/Pink. The various public thrift indexes generally tracked the cyclical trends of the broader stock index in calendar 2008, but were outperformed by the S&P 500 during 2009. The All Public Thrift Index declined by 38.2% in 2008, parallel with the 38.5% decline in the S&P 500. The All Public Thrift Index declined further by 10.2% in 2009, while the S&P 500 rebounded firmly and advanced 23.5% in 2009.

Table 20
Comparative Stock Index Performance

	12/31/07-			12/31/08-			12/31/09-			12/31/07-
Index	12/31/08			12/31/09			10/12/10			10/12/10
SNL All Public Thrift		-38.2	%		-10.2	%		-7.2	%		-48.5	%
SNL Mid-Atlantic Thrift		-19.4	%		-8.7	%		0.6	%		-26.0	%
SNL Thrift <$250 Million		-28.6	%		2.4	%		-6.8	%		-31.8	%
SNL NASDAQ Thrift		-5.9	%		-12.0	%		-10.7	%		-26.0	%
SNL OTCBB/Pink Thrift		-65.6	%		-9.8	%		-0.7	%		-69.2	%
S&P 500 Stock Index		-38.5	%		23.5	%		4.9	%		-20.3	%

Source: SNL Financial.

     The market for bank and thrift stocks turned sour in the middle of 2008 and plummeted further in the fall of 2008 through the spring of 2009. Rising concerns over the health of the banking system and the viability of several large financial concerns placed increased pressure on financial stock issues. Market prices of banks and thrift stocks were particularly hard hit by the mortgage crisis and dismal real estate market conditions. Financial stocks rebounded starting in March 2009 as Federal Reserve Board and U.S. Treasury stimulus initiatives began to stabilize

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some of the long-term concerns overhanging the credit and capital markets. While the broader market staged a strong rally in 2009, the financial sector continued to suffer due to intensifying credit losses and mounting failures of distressed institutions.

     As the banking industry showed increased signs of stabilizing into 2010, the public thrift indexes fared better through the first of half of 2010. However, commencing in the month of July 2010, there was a major sell-off in financial stocks. Trading prices of banks and thrifts fell on the lack of consensus regarding the prospects for economic growth and increased uncertainty about the Federal Reserve’s capacity to revive the stumbling economic recovery. The declining market in the summer months also reflected concerns of a potential “double dip” in the U.S. economy, as growth in consumer spending slowed and unemployment remained at historically high levels. Trading prices of bank and thrift stocks turned weaker again in October 2010 on the heels of negative industry news concerning improper mortgage foreclosure practices and fraudulent documentation. The SNL All Public Thrift Index is on pace to match last year’s negative performance as it is down 7.2% on a year-to-date basis through October 12, 2010, while the S&P 500 managed to stay in the positive range at 4.9% over the same period.

     The OTS recently reported that the thrift industry reported positive earnings for the second quarter of 2010, the fourth consecutive quarterly profit for the industry. The second quarter profit of $1.49 billion was down from $1.72 billion in the previous quarter, but up from a loss of $94 million in the second quarter one year earlier. Profitability as measured by ROA was 0.64% in the second quarter, as compared to 0.73% in the first quarter and negative 0.03% in the second quarter a year ago. Asset quality also showed signs of stabilizing. Troubled assets (non-current loans and repossessed assets) fell to 3.21% of assets at the end of the second quarter, from 3.28% at the end of the previous quarter and from 3.50% from one year earlier. However,

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reflecting the challenges that remain, the number of problem thrifts continued to climb and reached 54 thrifts at the end of the second quarter versus 50 at the end of the previous quarter.

     Thrift industry earnings results for the second quarter of 2010 were sustained by improving net interest margins, but continue to be dampened by loan loss provisions. The thrift industry continued to prepare for future asset quality challenges by building its provisions for loan losses. Simultaneously, the industry also managed to maintain a solid capital cushion, with equity capital of 11.27% of assets at the end of the second quarter, up from 10.36% a year earlier. However, we continue to believe the uncertain industry environment and the volatile swings in the market for bank and thrift stocks warrant a downward adjustment.

New Issue Discount

     A “new issue” discount that reflects investor concerns and investment risks inherent in all IPOs is a factor to be considered for purposes of valuing converting thrifts. The magnitude of the new issue discount typically expands during periods of declining thrift stock prices as investors require larger inducements, and narrows during strong market conditions. The thrift conversion market continues to respond to the after-market performance of recent offerings. Table 21 presents a summary of standard full conversion offerings since January 1, 2009.

     Thrift stock conversion activity had diminished considerably in the wake of the sharp marked downturn in market conditions. There were only four standard conversion offerings in 2008, followed by three such transactions in 2009. Thrift conversion activity accelerated in 2010 as improved market conditions in the first half of the year, increased regulatory uncertainty, and mounting capital pressures converged to stimulate interest in the conversion market. Eleven standard thrift conversions have been completed thus far in 2010. The after-market price

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performance of standard thrift conversion IPOs has been mixed. Of the 14 standard conversion offerings completed since January 1, 2009, the average and median one-week price changes were 8.8% and 5.0%, respectively. The after-market performance for thrift conversions listed on the OTCBB exhibited average and median one-week price changes of 3.3% and 2.5%, respectively. As shown in Table 21, the cumulative price changes for OTCBB listed conversions reflected an average of 7.5% and median of 2.5% as compared to the NASDAQ listed conversions posting average and median price gains of 22.8% and 14.2%, respectively.

     In previous market cycles, newly converted thrifts had been trading upward to a range approaching existing thrift stock valuation levels, but found resistance approaching book value until a discernible trend in earnings improvement was evident. To price a new offering at a high ratio in relation to pro forma book value, because of the mathematics of the calculation, would require very large increases in valuations along with the resulting price-to-earnings ratios and produce very marginal returns on equity.

     Accordingly, thrift conversions continue to be priced at discounts to publicly traded companies. This is due to the relatively high pro forma equity ratios, expected low returns on equity, and the uncertainty regarding the prospects of an institution to leverage the balance sheet prudently and effectively in the current low interest rate environment and against the backdrop of unsteady real estate market conditions. Moreover, the uneven after-market price performance of thrift IPOs provides added reason to continue to factor in a new issue discount for valuation of current thrift IPOs.

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Table 21
Summary of Recent Standard Conversion Stock Offerings
Transactions Completed Since January 1, 2009

								Pro Forma Ratios										After-Market Trading
						Gross		Price/		Price/		Price/				10/12/10		Price Change								Change
			IPO	Total		Offering		Book		Tang.		LTM		IPO		Closing		One		One			One			Through
		Stock	Conv.	Assets		Proceeds		Value		Book		EPS		Price		Price		Day		Week			Month			10/12/10
Company	State	Exchange	Date	($Mil.)		($Mil.)		(%)		(%)		(x)		($)		($)		(%)		(%)			(%)			(%)
Average — All Standard Offerings	NA	NA	NA		311.1		33.3		52.6		53.2		19.9		NA		NA		8.0		8.8			8.6			13.5
Median — All Standard Offerings	NA	NA	NA		153.9		10.9		51.8		55.6		18.6		NA		NA		0.0		5.0			5.0			11.5
Average — OTCBB listed	NA	NA	NA		88.3		6.8		47.9		47.9		22.8		NA		NA		0.0		3.3			3.8			7.5
Median — OTCBB listed	NA	NA	NA		67.3		6.1		44.0		44.0		22.5		NA		NA		0.0		2.5			5.0			2.5
Average — NASDAQ listed	NA	NA	NA		619.6		69.2		59.0		60.4		17.1		NA		NA		18.6		17.0			15.1			22.8
Median — NASDAQ listed	NA	NA	NA		441.8		56.2		59.8		59.8		14.9		NA		NA		17.3		14.0			9.9			14.2
Madison Bancorp, Inc.(1)	MD	OTCBB	10/07/10		150.7		6.1		44.0		44.0		NM		10.00		10.00		0.0		NA			NA			0.0
Standard Financial Corp.	PA	NASDAQ	10/07/10		395.8		34.8		49.4		57.0		10.7		10.00		11.85		19.0		NA			NA			18.5
Century Next Financial Corporation	LA	OTCBB	10/01/10		90.7		10.6		61.5		61.5		21.4		10.00		11.50		0.0		15.0			NA			15.0
United-American Savings Bank	PA	OTCBB	08/06/10		60.2		3.0		54.2		54.2		23.7		10.00		10.25		0.0		(5.0	)		5.0			2.5
Peoples Federal Bancshares, Inc.	MA	NASDAQ	07/07/10		487.7		66.1		65.2		65.2		27.8		10.00		10.79		4.0		7.5			4.2			7.9
Fairmount Bancorp, Inc.	MD	OTCBB	06/03/10		67.3		4.4		44.0		44.0		10.1		10.00		12.00		0.0		5.0			10.0			20.0
Harvard Illinois Bancorp, Inc.	IL	OTCBB	04/09/10		157.2		7.8		43.1		43.1		NM		10.00		7.00		0.0		0.0			(1.0	)		(30.0	)
OBA Financial Services, Inc.	MD	NASDAQ	01/22/10		357.9		46.3		59.4		59.4		NM		10.00		11.18		3.9		1.5			3.0			11.8
OmniAmerican Bancorp, Inc.	TX	NASDAQ	01/21/10		1,006.3		119.0		62.0		62.0		NM		10.00		11.66		18.5		14.0			9.9			16.6
Versailles Financial Corporation(1)	OH	OTCBB	01/11/10		41.6		4.3		40.5		40.5		36.0		10.00		10.00		0.0		0.0			0.0			0.0
Athens Bancshares Corporation	TN	NASDAQ	01/07/10		246.0		26.8		58.0		58.8		13.9		10.00		11.12		16.0		15.0			10.6			11.2
Territorial Bancorp Inc.	HI	NASDAQ	07/13/09		1,223.8		122.3		60.1		60.2		15.9		10.00		17.05		49.9		47.2			48.0			70.5
St. Joseph Bancorp, Inc.(1)	MO	Pink	02/02/09		19.4		3.8		46.3		46.3		NM		10.00		10.00		0.0		0.0			0.0			0.0
Hibernia Homestead Bancorp, Inc.	LA	OTCBB	01/28/09		50.2		11.1		48.1		48.1		NM		10.00		14.50		0.0		5.0			5.0			45.0

(1)	There have been no reported trades of this common stock issue through October 12, 2010.
Source: SNL Financial.

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FELDMAN FINANCIAL ADVISORS, INC.

Adjustments Conclusion

     It is our opinion that the Association’s pro forma valuation should be discounted relative to the Comparative Group because of factors associated with earnings prospects, liquidity of the issue, stock market conditions, and the new issue discount. Individual discounts and premiums are not necessarily additive and may, to some extent, offset or overlay each other. Currently, converting thrifts are often valued at meaningful discounts to peer institutions relative to price-to-book and price-to-earnings ratios. It is the judgment of the appraiser to balance the relative dynamics of price-to-book and price-to-earnings discounts or premiums.

Valuation Approach

     In determining the estimated pro forma market value of Fraternity Federal, we have employed the comparative company approach and considered the following pricing ratios: price-to-earnings per share (“P/E”), price-to-book value per share (“P/B”), price-to-tangible book value per share (“P/TB”), and price-to-assets (“P/A”). Table 22 presents the trading market valuation ratios of the Comparative Group and All Public Thrift averages and medians as of October 12, 2010. As shown in Table 22, the median P/B ratio for the Comparative Group was 50.5%, the median P/TB ratio was 52.3%, and the median P/E ratio was 34.7x. On a core earnings basis, the median core P/E of the Comparative Group was 30.2x. Most of the Comparative Group companies reported P/E ratios that were either negative due to losses or distortedly high due to low levels of profitability. Such ratios are represented as not meaningful (“NM”) and are not utilized for comparative analysis.

     Investors continue to make decisions to purchase thrift conversion stocks and more seasoned thrift issues based upon consideration of core earnings profitability and P/B comparisons. The P/E ratio remains an important valuation ratio in the current thrift stock.

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FELDMAN FINANCIAL ADVISORS, INC.

However, as noted above, the P/E ratio is not useful for companies reporting negative earnings such as Fraternity Federal. The Association’s LTM earnings for the period ended June 30, 2010 amounted to a loss of $282,000. On a core earnings basis, which excludes the Association’s gain on sales of investments, the Association’s LTM core earnings amounted to a loss of $465,000. Therefore, in the absence of meaningful earnings data, more reliance is on placed on the P/B and P/TB ratios to determine trading valuation benchmarks.

     Based on our comparative financial and valuation analyses, we concluded that the Association should be discounted relative to the trading valuation ratios of the overall Comparative Group. In consideration of the foregoing factors along with the additional adjustments discussed in this chapter, we have determined a pro forma P/B and P/TB ratio of 45.4% for the Association, which reflects an aggregate midpoint value of $12.0 million based on the assumptions summarized in Exhibit IV. Employing a range of 15% above and below the midpoint, the resulting minimum value of $10.2 million reflects a 41.1% P/B ratio and the resulting maximum value of $13.8 million reflects a 49.3% P/B ratio. The adjusted maximum, computed as an additional 15.0% above the maximum, is positioned at approximately $15.9 million and a P/B ratio of 53.2%.

     The Association’s pro forma midpoint P/B and P/TB ratios of 45.4% reflect a discount of 10.1% to the Comparative Group median P/B ratio of 50.5% and a 13.2% discount to the Comparative Group median P/TB ratio of 52.3%. The Association’s pro forma maximum P/B and P/TB of 49.3% reflect a discount of 2.4% to the Comparative Group median P/B ratio of 50.5% and a 5.7% discount to the Comparative Group median P/TB ratio of 52.3%. At the adjusted maximum, the Association’s pro forma P/B and P/TB ratio of 53.2% is positioned at a 5.3% premium above the Comparative Group median P/B ratio of 50.5% and a 1.7% premium

76

FELDMAN FINANCIAL ADVISORS, INC.

above the Comparative Group median P/TB ratio of 52.3%. Based on the Valuation Range as indicated above, the Association’s pro forma P/E ratios reflected negative values represented as NM due to the Association’s negative earnings position.

     Based on the price-to-assets valuation metric, the Association’s pro forma midpoint of $12.0 million reflects a corresponding P/A ratio of 6.75%, ranging from 5.79% at the pro forma valuation minimum to 7.70% and 8.76% at the maximum and adjusted maximum, respectively. The Association’s strong capitalization level resulted in P/A ratio premiums at the upper end of the range in contrast to the Comparative Group average P/A ratio of 6.38% and median P/A ratio of 4.96%. On a pro forma basis, the Company’s ratio of equity to assets ranges from 14.10% at the valuation minimum and 14.86% at the midpoint to 15.61% and 16.46% at the maximum and adjusted maximum, respectively. However, we note that the Association’s higher pro forma P/A valuation ratios are also indicative of the challenge facing the Association in generating a competitive ROE and advancing the other valuation metrics to trading market levels.

Valuation Conclusion

     It is our opinion that, as of October 12, 2010, the aggregate estimated pro forma market value of the Association on a fully converted basis was within the Valuation Range of $10,200,000 to $13,800,000 with a midpoint of $12,000,000. The Valuation Range was based upon a 15% decrease from the midpoint to determine the minimum and a 15% increase to establish the maximum. An additional 15% increase above the maximum results in an adjusted maximum of $15,870,000.

     Exhibit IV-1 displays the assumptions utilized in calculating the pro forma financial consequences of the stock offering. Exhibit IV-2 displays the pro forma financial data at each

77

FELDMAN FINANCIAL ADVISORS, INC.

level of the Valuation Range. Exhibit IV-3 provides more detailed data at the maximum valuation. Exhibit IV-4 compares the Association’s pro forma valuation ratios with the averages and medians reported by the Comparative Group and All Public Thrifts.

78

FELDMAN FINANCIAL ADVISORS, INC.

Table 22
Comparative Pro Forma Market Valuation Analysis
Fraternity Federal S&LA and the Comparative Group
Computed from Market Price Data as of October 12, 2010

	Current		Total		Price/		Price/		Price/		Price/		Price/		Total		Tang.		Current
	Stock		Market		LTM		Core		Book		Tang.		Total		Equity/		Equity/		Dividend
	Price		Value		EPS		EPS		Value		Book		Assets		Assets		Assets		Yield
Company	($)		($Mil.)		(x)		(x)		(%)		(%)		(%)		(%)		(%)		(%)
Fraternity Federal S&LA(1)
Pro Forma Minimum		10.00		10.2	NM		NM			41.1		41.1		5.79		14.10		14.10		0.00
Pro Forma Midpoint		10.00		12.0	NM		NM			45.4		45.4		6.75		14.86		14.86		0.00
Pro Forma Maximum		10.00		13.8	NM		NM			49.3		49.3		7.70		15.61		15.61		0.00
Pro Forma Adj. Maximum		10.00		15.9	NM		NM			53.2		53.2		8.76		16.46		16.46		0.00
Comparative Group Average		NA		27.5		34.7		25.6		53.9		55.7		6.38		11.75		11.41		1.14
Comparative Group Median		NA		21.7		34.7		30.2		50.5		52.3		4.96		10.36		10.21		0.00
All Public Thrift Average(2)		NA		272.2		18.9		17.4		73.0		80.9		8.00		11.06		10.39		1.85
All Public Thrift Median(2)		NA		56.7		14.4		14.5		74.2		77.5		6.75		9.92		9.14		1.59
Comparative Group
BCSB Bancorp, Inc.		9.61		30.0	NM		NM			59.4		59.5		4.90		9.79		9.78		0.00
Central Federal Corporation		1.00		4.1	NM		NM			40.5		41.1		1.53		6.23		6.18		0.00
Citizens Community Bancorp, Inc.		4.40		22.5		31.4		12.7		39.9		45.1		3.90		9.78		8.75		0.00
CMS Bancorp, Inc.		10.00		18.6	NM		NM			87.8		87.8		7.68		8.75		8.75		0.00
First Advantage Bancorp		10.73		44.7	NM			33.9		66.0		66.0		13.02		19.72		19.72		1.86
First Clover Leaf Financial Corp.		5.70		45.1		38.0		30.2		58.2		69.5		8.03		13.82		11.83		4.21
First Federal of Northern Mich. Bncp.		2.39		6.9	NM		NM			29.3		30.3		3.04		10.35		10.05		0.00
GS Financial Corp.		9.69		12.1	NM		NM			42.9		42.9		4.45		10.36		10.36		4.13
Hampden Bancorp, Inc.		10.00		70.1	NM		NM			75.1		75.1		12.19		16.23		16.23		1.20
WSB Holdings, Inc.		2.65		20.9	NM		NM			40.1		40.1		5.01		12.49		12.49		0.00

(1)	Pro forma ratios assume sale of 100% of the to-be-outstanding common stock, reflecting gross proceeds of $10.2 million at the minimum, $12.0 million at the midpoint, $13.8 million at the maximum, and $15.9 million at the adjusted maximum of the valuation range.
(2)	Excludes companies subject to mutual holding company ownership or pending acquisition.
Source: Fraternity Federal S&LA; SNL Financial; Feldman Financial.

79

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit I
Background of Feldman Financial Advisors, Inc.

Overview of Firm

Feldman Financial Advisors provides consulting and advisory services to financial institutions and mortgage companies in the areas of corporate valuations, mergers and acquisitions, strategic planning, branch sales and purchases, developing and implementing regulatory business and capital plans, and expert witness testimony and analysis. Our senior staff members have been involved in the stock conversion process since 1982 and have valued more than 350 converting institutions.

Feldman Financial Advisors was incorporated in February 1996 by a group of consultants who were previously associated with Credit Suisse First Boston and Kaplan Associates. Each of the principals at Feldman Financial Advisors has more than 10 years experience in consulting and all were officers of their prior firm. Our senior staff collectively has worked with more than 1,000 banks, thrifts and mortgage companies nationwide. The firm’s office is located in Washington, D.C.

Background of Senior Professional Staff

Trent Feldman — President. Trent is a nationally recognized expert in providing strategic advice to and valuing service companies, and advising on mergers and acquisitions. Trent was with Kaplan Associates for 14 years and was one of three founding principals at that firm. Trent also has worked at the Federal Home Loan Bank Board and with the California legislature. Trent holds Bachelors and Masters Degrees from the University of California at Los Angeles.

Peter Williams — Principal. Peter specializes in merger and acquisition analysis, stock and other corporate valuations, strategic business plans and retail delivery analysis. Peter was with Kaplan Associates for 13 years. Peter also served as a Corporate Planning Analyst with the Wilmington Trust Company in Delaware. Peter holds a BA in Economics from Yale University and an MBA in Finance and Investments from George Washington University.

Michael Green — Principal. Mike is an expert in mergers and acquisition analysis, financial institution and corporate valuations, and strategic and business plans. During Mike’s 10 years at Kaplan Associates, his experience also included business restructurings, litigation support, mark-to-market analysis, and goodwill valuations. Mike holds a BA in Finance and Economics from Rutgers College.

Greg Izydorczyk — Senior Vice President. Greg specializes in merger and acquisition analysis and corporate valuations and also has experience in mark-to-market analysis and business plans. Greg was with Kaplan Associates for three years. Previous, Greg worked as a Senior Auditor for First Virginia Bank and Integra Financial and as a Financial Analyst with Airbus Industrie of N.A. Greg holds a BS in Finance from Pennsylvania State University and an MBA in Finance from the Katz Graduate School, University of Pittsburgh.

I-1

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit II-1
Consolidated Balance Sheets
Fraternity Federal Savings and Loan Association
As of December 31, 2008 and 2009 and June 30, 2010
(Dollars in Thousands)

	June 30,		December 31,
	2010		2009			2008
ASSETS
Cash and due from banks	$	2,846	$	4,401		$	2,574
Interest-bearing deposits in other banks		17,288		9,507			8,865
Securities available-for-sale, at fair value		19,650		24,116			8,526
Securities held-to-maturity, at amortized cost		—		—			7,447
Loans receivable, net		118,770		120,092			136,547
Investment in bank-owned life insurance		4,079		3,984			2,319
Property and equipment, net		799		812			699
Federal Home Loan Bank stock, at cost		1,562		1,354			1,597
Ground rents, net of valuation allowance		864		864			885
Accrued interest receivable		687		722			670
Deferred income taxes		—		—			95
Other assets		1,383		1,124			464
TOTAL ASSETS	$	167,928	$	166,976		$	170,688
LIABILITIES AND EQUITY
Deposits	$	125,760	$	125,960		$	124,913
Federal Home Loan Bank advances		22,750		22,917			28,417
Advances by borrowers for taxes and insurance		1,810		644			580
Other liabilities		961		463			303
Total liabilities		151,281		149,984			154,213
Retained earnings		16,592		17,003			16,660
Accumulated other comprehensive income (loss)		55		(11	)		(185	)
Total equity		16,647		16,992			16,475
TOTAL LIABILITIES AND EQUITY	$	167,928	$	166,976		$	170,688

Source: Fraternity Federal, financial statements.

II-1

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit II-2
Consolidated Income Statements
Fraternity Federal Savings and Loan Association
For the Years Ended December 31, 2008 and 2009
And the Six Months Ended June 30, 2009 and 2010
(Dollars in Thousands)

	Six Months Ended						Year Ended
	June 30,						December 31,
	2010			2009			2009			2008
Total interest income	$	3,848		$	4,287		$	8,272		$	8,996
Total interest expense		1,957			2,500			4,805			5,856
Net interest income		1,891			1,787			3,467			3,137
Provision for loan losses		865			51			51			5
Net interest income after provision		1,026			1,736			3,416			3,132
Loss on sale of fixed assets		—			(3	)		(3	)		—
Gain on sale of investments		150			98			229			91
Income on bank-owned life insurance		95			66			165			119
Gain on sale of loans		33			176			224			28
Other income		32			41			78			84
Total non-interest income		311			378			692			323
Salaries and employee benefits		1,124			990			2,007			1,882
Occupancy expense		325			298			608			577
Advertising		27			24			48			64
Data processing expense		124			110			227			211
Directors fees		48			44			88			89
Pension termination expense		—			—			—			300
Other general and administrative expenses		417			340			669			477
Total non-interest expense		2,065			1,805			3,646			3,600
Income (loss) before income tax expense		(728	)		309			462			(145	)
Income tax expense (benefit)		(317	)		95			119			(153	)
Net income	$	(411	)	$	214		$	343		$	8

Source: Fraternity Federal, financial statements.

II-2

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit II-3
Loan Portfolio Composition
As of December 31, 2008 and 2009 and June 30, 2010
(Dollars in Thousands)

	June 30,						December 31,
	2010						2009						2008
	Amount			Percent			Amount			Percent			Amount			Percent
Real estate mortgage loans:
One- to four-family	$	89,617			75.45	%	$	89,313			74.37	%	$	108,696			79.60	%
Lines of credit		13,044			10.98			12,305			10.25			13,154			9.63
Commercial		4,001			3.37			4,197			3.50			3,594			2.63
Residential construction		8,864			7.46			10,437			8.69			7,724			5.66
Land		3,882			3.22			3,939			3.28			3,536			2.59
Total real estate loans		119,348			100.49			120,192			100.09			136,704			100.11
Consumer loans		54			0.05			33			0.03			42			0.03
Commercial loans		28			0.02			27			0.02			29			0.02
Total other loans		82			0.07			60			0.05			71			0.05
Total loans		119,431			100.56			120,252			100.14			136,775			100.16
Less:
Deferred loan origination costs		144			0.12			117			0.10			44			0.03
Allowance for loan losses		(805	)		(0.68	)		(277	)		(0.23	)		(272	)		(0.20	)
Net loans	$	118,770			100.00	%	$	120,092			100.00	%	$	136,547			100.00	%

Source: Fraternity Federal, preliminary prospectus.

II-3

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit II-4
Net Loan Activity
For the Years Ended December 31, 2008 and 2009
And the Six Months Ended June 30, 2009 and 2010
(Dollars in Thousands)

	Six Months Ended						Year Ended
	June 30,						December 31,
	2010			2009			2009			2008
Total loans at beginning of period	$	120,252		$	136,775		$	136,775		$	131,311
Loans originated
Real estate loans:
One-to-four-family		6,207			20,872			29,531			16,363
Lines of credit		3,299			2,931			4,566			7,771
Commercial real estate		535			700			700			1,538
Residential construction		2,628			1,870			5,602			6,084
Land		196			428			428			1,416
Commercial		16			6			17			30
Consumer		40			15			32			27
Total loans originated		12,920			26,823			40,876			33,229
Loans purchased
Real estate loans:
One-to four-family		9			120			248			224
Lines of credit		—			—			—			—
Commercial real estate		—			—			—			—
Residential construction		—			—			—			—
Land		—			—			—			—
Commercial		—			—			—			—
Consumer		—			—			—			—
Total loans purchased		9			120			248			224
Deduct:
Loan principal repayments		(10,921	)		(22,416	)		(36,422	)		(19,634	)
Loan sales		(2,493	)		(17,168	)		(21,179	)		(8,354	)
Charge-offs		(337	)		(4	)		(46	)		—
Net loan activity		(821	)		(12,645	)		(16,523	)		5,464
Total loans at end of period	$	119,430		$	124,130		$	120,252		$	136,775

Source: Fraternity Federal, preliminary prospectus.

II-4

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit II-5
Investment Portfolio Composition
As of December 31, 2008 and 2009 and June 30, 2010
(Dollars in Thousands)

	June 30,				December 31,
	2010				2009				2008
	Amortized		Fair		Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value		Cost		Value
Investments available-for-sale:
U.S. govt. agency obligations	$	13,775	$	13,867	$	12,310	$	12,198	$	3,616	$	3,653
Mortgage-backed securities		4,308		4,320		10,399		10,485		5,211		4,872
Bank notes		1,477		1,463		1,426		1,443		—		—
Investments held-to-maturity:
Mortgage-backed securities		—		—		—		—		7,447		7,567
Total investment securities	$	19,560	$	19,650	$	24,135	$	24,116	$	16,274	$	16,092

Source: Fraternity Federal, preliminary prospectus.

II-5

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit II-6
Deposit Account Distribution
As of December 31, 2008 and 2009 and June 30, 2010
(Dollars in Thousands)

	June 30,					December 31,
	2010					2009					2008
	Amount		Percent			Amount		Percent			Amount		Percent
Non-interest bearing deposits	$	948		0.75	%	$	760		0.60	%	$	685		0.55	%
Interest-bearing deposits:
Time deposits		104,836		83.36			105,706		83.93			104,679		83.80
NOW and money market		4,952		3.94			4,637		3.68			4,490		3.59
Passbook savings		12,735		10.13			12,501		9.92			12,753		10.21
Brokered deposits		2,289		1.82			2,357		1.87			2,305		1.85
Total int.-bearing deposits		124,812		99.25			125,200		99.40			124,228		99.45
Total deposits	$	125,760		100.00	%	$	125,960		100.00	%	$	124,913		100.00	%

(1)	Includes non-demand escrows.
Source:	Fraternity Federal, preliminary prospectus.

II-6

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit II-7
Borrowed Funds Distribution
As of or For the Years Ended December 31, 2008 and 2009
And As of or For the Six Months Ended June 30, 2010
(Dollars in Thousands)

	Six Months
	Ended			Year Ended
	June 30,			December 31,
	2010			2009			2008
FHLB Advances
Average balance outstanding	$	24,486		$	23,493		$	25,521
Maximum outstanding at any month-end	$	27,889			28,306			28,750
Balance outstanding at period-end	$	22,750			22,917			28,417
Weighted average rate during period		3.78	%		3.17	%		3.50	%
Weighted average rate at end of period		3.91	%		3.20	%		2.98	%

Source: Fraternity Federal, preliminary prospectus.

II-7

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit II-8
Office Facilities
As of June 30, 2010
(Dollars in Thousands)

			Approximate			Lease		Net
	Year		Square		Owned/	Expiration		Book
Location	Opened		Footage		Leased	Date		Value		Deposits
Main Office:
764 Washington Boulevard		1913		10,663	Owned	NA		$	279	$	20,820
Baltimore, Maryland 21230
Branch Offices:
Scotts Corner Shopping Center		1995		3,000	Leased		1/31/15	NA			46,642
10283 York Road Cockeysville, Maryland 21030
Normandy Shopping Center		1964		3,388	Leased		4/30/16	NA			56,083
8460 Baltimore National Pike Ellicott City, Maryland 21403
Green Mount Station		2009		2,400	Leased		9/30/24	NA			4,025
1631 N. Main Street Hampstead, Maryland 21074

Source: Fraternity Federal, preliminary prospectus.

II-8

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit III
Financial and Market Data for All Public Thrifts

					Total		Tang.								Closing		Total		Price/		Price/		Price/		Price/		Price/
			Total		Equity/		Equity/		LTM			LTM			Price		Market		LTM		Core		Book		Tang.		Total		Div.
			Assets		Assets		Assets		ROA			ROE			10/12/10		Value		EPS		EPS		Value		Book		Assets		Yield
Company	State	Ticker	($Mil.)		(%)		(%)		(%)			(%)			($)		($Mil.)		(x)		(x)		(%)		(%)		(%)		(%)
All Public Thrifts(1)
Abington Bancorp, Inc.	PA	ABBC		1,268		16.76		16.76		(0.43	)		(2.47	)		10.69		215.7		NM		NM		102.4		102.4		17.16		1.87
Anchor BanCorp Wisconsin Inc.	WI	ABCW		3,999		0.61		0.51		(2.71	)		(194.40	)		0.68		14.7		NM		NM		NM		NM		0.38		0.00
Astoria Financial Corporation	NY	AF		19,670		6.24		5.35		0.22			3.70			13.09		1,281.2		26.7		29.1		104.4		123.0		6.51		3.97
Athens Bancshares Corporation	TN	AFCB		282		17.81		17.67		0.06			0.45			11.12		30.9		NA		NA		61.5		62.1		10.95		1.80
Bank Mutual Corporation	WI	BKMU		3,483		11.49		10.10		0.16			1.38			5.08		232.2		39.1		NM		58.5		67.6		6.67		2.36
BankAtlantic Bancorp, Inc.	FL	BBX		4,656		1.66		1.34		(3.66	)		(112.94	)		0.95		60.0		NM		NM		66.5		82.8		1.10		0.00
BankFinancial Corporation	IL	BFIN		1,566		16.57		15.16		0.01			0.07			9.52		200.5		NM		NM		77.3		85.9		12.81		2.94
BCSB Bancorp, Inc.	MD	BCSB		622		9.79		9.78		(0.21	)		(2.07	)		9.61		30.0		NM		NM		59.4		59.5		4.90		0.00
Beacon Federal Bancorp, Inc.	NY	BFED		1,072		9.92		9.92		0.48			5.08			10.17		66.0		12.3		10.5		62.4		62.4		6.19		1.97
Berkshire Hills Bancorp, Inc.	MA	BHLB		2,748		14.00		8.16		(0.58	)		(3.89	)		17.98		252.4		NM		NM		65.6		120.1		9.19		3.56
BofI Holding, Inc.	CA	BOFI		1,421		9.13		9.13		1.56			19.98			13.47		137.4		6.1		7.8		110.0		110.0		9.69		0.00
Broadway Financial Corporation	CA	BYFC		552		6.02		6.02		(1.01	)		(16.21	)		2.37		4.1		NM		NM		24.0		24.0		0.77		0.00
Brookline Bancorp, Inc.	MA	BRKL		2,659		18.59		17.17		0.96			5.13			9.96		588.0		23.7		25.1		119.4		131.6		22.13		3.41
Cape Bancorp, Inc.	NJ	CBNJ		1,072		12.20		10.27		(1.54	)		(12.49	)		8.32		110.8		NM		NM		84.6		102.8		10.33		0.00
Carver Bancorp, Inc.	NY	CARV		804		7.39		7.37		(0.38	)		(4.60	)		3.25		8.1		NM		NA		20.0		20.1		1.03		3.08
Central Bancorp, Inc.	MA	CEBK		527		8.63		8.24		0.45			5.54			14.94		24.9		12.7		11.0		69.5		74.1		4.82		1.34
Central Federal Corporation	OH	CFBK		275		6.23		6.18		(5.10	)		(58.76	)		1.00		4.1		NM		NM		40.5		41.1		1.53		0.00
CFS Bancorp, Inc.	IN	CITZ		1,095		10.30		10.29		(0.09	)		(0.89	)		5.12		55.5		NM		NM		49.2		49.3		5.07		0.78
Chicopee Bancorp, Inc.	MA	CBNK		557		16.98		16.98		(0.27	)		(1.54	)		11.29		71.2		NM		NM		75.6		75.6		12.84		0.00
Citizens Community Bancorp, Inc.	WI	CZWI		576		9.78		8.75		0.13			1.35			4.40		22.5		31.4		12.7		39.9		45.1		3.90		0.00
Citizens South Banking Corporation	NC	CSBC		1,077		8.95		8.78		(2.22	)		(21.08	)		4.75		51.5		NM		NM		68.6		70.5		4.93		3.37
CMS Bancorp, Inc.	NY	CMSB		243		8.75		8.75		(0.11	)		(1.19	)		10.00		18.6		NM		NM		87.8		87.8		7.68		0.00
Colonial Financial Services, Inc.	NJ	COBK		579		8.37		8.37		0.53			6.56			9.72		40.6		13.0		10.4		83.7		83.7		7.00		0.00
Community Financial Corporation	VA	CFFC		552		9.02		9.02		0.71			7.97			3.73		16.3		5.3		5.3		43.3		43.3		3.01		0.00
Danvers Bancorp, Inc.	MA	DNBK		2,529		11.63		10.42		0.57			4.95			15.54		328.5		23.6		23.2		113.0		127.7		13.13		0.51
Dime Community Bancshares, Inc.	NY	DCOM		4,148		7.59		6.33		0.90			12.05			14.43		498.4		13.5		13.0		158.4		192.4		12.02		3.88
Eagle Bancorp Montana, Inc.	MT	EBMT		326		16.10		16.10		0.78			6.79			9.10		37.2		16.9		17.0		70.9		70.9		11.41		3.08
Elmira Savings Bank, FSB	NY	ESBK		499		11.26		8.89		0.95			8.67			15.40		30.2		9.3		9.6		80.0		122.0		6.27		5.19
ESB Financial Corporation	PA	ESBF		1,948		8.89		6.85		0.66			7.74			14.30		172.1		13.0		11.9		99.2		131.6		8.84		2.80
ESSA Bancorp, Inc.	PA	ESSA		1,067		16.55		16.55		0.47			2.67			12.44		163.0		32.7		35.8		95.2		95.2		15.76		1.61

III-1

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit III (continued)
Financial and Market Data for All Public Thrifts

					Total		Tang.								Closing		Total		Price/		Price/		Price/		Price/		Price/
			Total		Equity/		Equity/		LTM			LTM			Price		Market		LTM		Core		Book		Tang.		Total		Div.
			Assets		Assets		Assets		ROA			ROE			10/12/10		Value		EPS		EPS		Value		Book		Assets		Yield
Company	State	Ticker	($Mil.)		(%)		(%)		(%)			(%)			($)		($Mil.)		(x)		(x)		(%)		(%)		(%)		(%)
FedFirst Financial Corporation	PA	FFCOD		356		12.36		12.01		0.26			2.12			11.25		33.7		37.5		35.7		76.6		79.2		9.46		0.00
FFD Financial Corporation	OH	FFDF		206		8.86		8.86		0.49			5.32			13.94		14.1		14.7		14.7		77.0		77.0		6.82		4.88
Fidelity Bancorp, Inc.	PA	FSBI		708		6.82		6.47		(0.39	)		(5.97	)		5.65		17.2		NM		NM		41.5		44.3		2.46		1.42
First Advantage Bancorp	TN	FABK		345		19.72		19.72		0.20			1.01			10.73		44.7		NM		33.9		66.0		66.0		13.02		1.86
First Bancshares, Inc.	MO	FBSI		NA		NA		NA		NA			NA			7.28		11.3		NM		NM		47.0		47.3		5.28		0.00
First Capital, Inc.	IN	FCAP		458		10.45		9.36		0.52			5.06			15.00		41.8		17.9		17.7		87.5		99.0		9.13		5.07
First Clover Leaf Financial Corp.	IL	FCLF		563		13.82		11.83		0.19			1.47			5.70		45.1		38.0		30.2		58.2		69.5		8.03		4.21
First Community Bank Corporation	FL	FCFL		516		7.38		7.38		(2.89	)		(35.98	)		2.63		14.4		NM		NM		73.3		73.3		2.88		0.00
First Defiance Financial Corp.	OH	FDEF		2,039		11.70		8.82		0.22			1.89			10.00		81.2		33.3		15.0		40.2		59.0		4.05		0.00
First Federal Bancshares	AR	FFBH		678		6.55		6.55		(5.67	)		(72.58	)		1.95		9.5		NM		NM		33.5		33.5		1.43		0.00
First Federal of Northern Michigan	MI	FFNM		227		10.35		10.05		(2.73	)		(25.84	)		2.39		6.9		NM		NM		29.3		30.3		3.04		0.00
First Financial Holdings, Inc.	SC	FFCH		3,324		9.74		8.69		(1.07	)		(10.98	)		11.31		186.9		NM		NM		72.2		84.8		5.73		1.77
First Financial Northwest, Inc.	WA	FFNW		1,307		14.30		14.30		(4.30	)		(24.86	)		3.86		72.6		NM		NM		38.9		38.9		5.56		0.00
First PacTrust Bancorp, Inc.	CA	FPTB		881		10.94		10.94		(0.08	)		(0.71	)		10.50		44.6		NM		NM		57.7		57.7		5.17		1.90
First Place Financial Corp.	OH	FPFC		3,153		8.01		7.75		(0.97	)		(11.45	)		3.63		61.6		NM		NM		33.7		35.4		2.00		0.00
First Savings Financial Group, Inc.	IN	FSFG		501		10.68		9.15		0.51			4.40			13.30		32.1		13.0		9.1		60.0		71.2		6.40		0.00
Flagstar Bancorp, Inc.	MI	FBC		13,694		7.86		7.86		(3.65	)		(61.20	)		2.47		378.8		NM		NM		45.6		45.6		2.82		0.00
Flushing Financial Corporation	NY	FFIC		4,252		8.93		8.55		0.72			8.30			12.26		383.0		12.4		11.3		100.9		105.8		9.01		4.24
Fox Chase Bancorp, Inc.	PA	FXCB		1,243		16.60		16.60		(0.07	)		(0.61	)		9.79		142.4		NM		NM		69.0		69.0		11.46		0.00
GS Financial Corp.	LA	GSLA		274		10.36		10.36		0.03			0.32			9.69		12.1		NM		NM		42.9		42.9		4.45		4.13
Hampden Bancorp, Inc.	MA	HBNK		584		16.23		16.23		(0.06	)		(0.37	)		10.00		70.1		NM		NM		75.1		75.1		12.19		1.20
Harleysville Savings Financial Corp.	PA	HARL		867		6.05		6.05		0.59			9.76			14.60		53.6		10.7		10.6		102.2		102.2		6.19		5.21
HF Financial Corp.	SD	HFFC		1,253		7.54		7.21		0.48			6.82			10.80		75.0		10.8		9.3		79.4		83.2		5.98		4.17
Hingham Institution for Savings	MA	HIFS		972		7.10		7.10		0.99			13.93			37.90		80.5		8.8		8.8		116.7		116.7		8.28		2.53
HMN Financial, Inc.	MN	HMNF		975		9.21		9.21		(0.84	)		(8.70	)		3.72		16.0		NM		NM		24.4		24.4		1.69		0.00
Home Bancorp, Inc.	LA	HBCP		709		18.71		18.49		0.66			2.91			13.39		113.1		28.5		25.1		85.6		86.8		16.01		0.00
Home Federal Bancorp, Inc.	ID	HOME		869		23.68		23.68		0.71			2.81			12.32		205.6		31.6		NM		99.9		99.9		23.65		1.79
HopFed Bancorp, Inc.	KY	HFBC		1,106		10.29		10.21		0.34			4.27			9.08		66.6		14.0		7.0		67.1		67.8		5.91		3.45
Hudson City Bancorp, Inc.	NJ	HCBK		60,933		9.10		8.86		0.94			10.49			12.01		6,322.0		10.5		11.3		114.1		117.4		10.38		5.00
Jacksonville Bancorp, Inc.	IL	JXSB		297		8.78		7.94		0.57			6.50			10.05		19.3		11.8		15.0		74.2		82.9		6.52		2.99
Jefferson Bancshares, Inc.	TN	JFBI		631		8.96		8.60		(3.65	)		(29.65	)		3.45		22.9		NM		NM		40.7		42.5		3.64		0.00

III-2

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit III (continued)
Financial and Market Data for All Public Thrifts

					Total		Tang.								Closing		Total		Price/		Price/		Price/		Price/		Price/
			Total		Equity/		Equity/		LTM			LTM			Price		Market		LTM		Core		Book		Tang.		Total		Div.
			Assets		Assets		Assets		ROA			ROE			10/12/10		Value		EPS		EPS		Value		Book		Assets		Yield
Company	State	Ticker	($Mil.)		(%)		(%)		(%)			(%)			($)		($Mil.)		(x)		(x)		(%)		(%)		(%)		(%)
Legacy Bancorp, Inc.	MA	LEGC		956		12.43		11.00		(0.86	)		(6.53	)		8.03		69.8		NM		NM		58.8		67.5		7.31		2.49
Louisiana Bancorp, Inc.	LA	LABC		328		20.51		20.51		0.74			3.23			14.10		56.4		25.2		28.1		88.3		88.3		18.10		0.00
LSB Financial Corp.	IN	LSBI		379		9.11		9.11		0.23			2.44			9.50		14.8		17.6		17.6		42.8		42.8		3.90		0.00
Mayflower Bancorp, Inc.	MA	MFLR		256		8.01		8.01		0.47			5.80			9.60		20.0		15.7		NA		95.3		95.3		7.89		2.50
Meta Financial Group, Inc.	IA	CASH		961		7.26		6.99		0.95			17.01			33.23		102.5		11.0		14.0		146.8		152.8		10.66		1.56
MutualFirst Financial, Inc.	IN	MFSF		1,442		9.32		8.99		0.22			2.43			8.15		56.9		40.8		14.5		55.5		58.4		4.04		2.94
NASB Financial, Inc.	MO	NASB		1,416		11.68		11.51		0.67			6.14			16.64		130.9		12.8		24.4		79.2		80.5		9.25		0.00
New Hampshire Thrift Bancshares	NH	NHTB		993		9.31		6.58		0.78			8.23			11.25		64.9		9.6		12.8		78.7		121.4		6.60		4.62
New York Community Bancorp, Inc.	NY	NYB		42,011		12.96		7.39		1.34			10.54			16.57		7,217.0		12.8		13.8		132.5		247.4		17.18		6.04
Newport Bancorp, Inc.	RI	NFSB		450		11.20		11.20		0.27			2.37			11.97		43.6		35.2		31.7		86.4		86.4		9.67		0.00
North Central Bancshares, Inc.	IA	FFFD		452		10.76		10.76		0.44			4.16			13.00		17.6		11.7		14.1		45.6		45.6		3.97		0.31
Northwest Bancshares, Inc.	PA	NWBI		8,136		16.11		14.25		0.55			4.11			11.31		1,252.9		29.0		23.9		95.6		110.5		15.40		3.54
OBA Financial Services, Inc.	MD	OBAF		374		21.44		21.44		(0.19	)		(1.24	)		11.18		51.8		NA		NA		64.5		64.5		13.83		0.00
Ocean Shore Holding Co.	NJ	OSHC		799		12.49		12.49		0.68			5.97			10.59		77.4		14.1		14.1		77.5		77.5		9.69		2.27
OceanFirst Financial Corp.	NJ	OCFC		2,220		8.78		8.78		0.86			9.54			12.58		236.8		13.0		12.3		121.5		121.5		10.67		3.82
OmniAmerican Bancorp, Inc.	TX	OABC		1,130		17.78		17.78		0.12			0.98			11.66		138.8		NA		NA		69.1		69.1		12.28		0.00
Oneida Financial Corp.	NY	ONFC		613		9.91		6.12		0.59			5.95			7.36		52.7		15.3		11.2		90.6		157.6		8.63		6.52
Oritani Financial Corp.	NJ	ORIT		2,477		25.97		25.97		0.41			3.26			10.08		566.5		NM		NM		88.1		88.1		22.87		2.98
Park Bancorp, Inc.	IL	PFED		214		10.15		10.15		(2.23	)		(20.46	)		4.39		5.2		NM		NM		24.1		24.1		2.45		0.00
Parkvale Financial Corporation	PA	PVSA		1,842		6.46		4.99		(0.86	)		(10.88	)		6.75		37.3		NM		5.8		42.8		63.6		2.06		1.19
Peoples Federal Bancshares, Inc.	MA	PEOP		575		9.27		9.27		NA			NA			10.79		77.1		NA		NA		NA		NA		NA		0.00
People’s United Financial, Inc.	CT	PBCT		21,950		24.66		18.02		0.38			1.55			13.33		4,943.9		NM		41.3		90.5		134.8		22.33		4.65
Provident Financial Holdings, Inc.	CA	PROV		1,399		9.13		9.13		0.08			0.94			5.96		68.0		45.9		NM		53.2		53.2		4.86		0.67
Provident Financial Services, Inc.	NJ	PFS		6,823		13.35		8.61		0.58			4.45			12.57		753.3		18.0		16.7		82.7		135.3		11.04		3.50
Provident New York Bancorp	NY	PBNY		2,964		14.48		9.44		0.70			4.76			8.88		342.9		17.1		20.8		79.9		129.8		11.57		2.70
Pulaski Financial Corp.	MO	PULB		1,388		8.22		7.95		0.06			0.70			6.76		73.1		NM		NM		83.8		88.2		5.13		5.62
PVF Capital Corp.	OH	PVFC		860		9.68		9.68		0.16			2.20			1.88		48.2		17.1		17.3		57.9		57.9		5.61		0.00
River Valley Bancorp	IN	RIVR		394		8.12		8.11		0.75			10.21			13.99		21.1		7.7		8.1		78.1		78.4		5.43		6.00
Riverview Bancorp, Inc.	WA	RVSB		863		9.98		7.20		(0.47	)		(4.48	)		2.04		45.9		NM		NM		26.1		37.3		2.59		0.00
Severn Bancorp, Inc.	MD	SVBI		1,002		10.54		10.51		(0.71	)		(6.45	)		3.87		39.0		NM		NM		49.3		49.5		3.99		0.00
Standard Financial Corp.	PA	STND		NA		NA		NA		NA			NA			11.85		41.2		NA		NA		NA		NA		NA		0.00

III-3

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit III (continued)
Financial and Market Data for All Public Thrifts

					Total		Tang.								Closing		Total		Price/		Price/		Price/		Price/		Price/
			Total		Equity/		Equity/		LTM			LTM			Price		Market		LTM		Core		Book		Tang.		Total		Div.
			Assets		Assets		Assets		ROA			ROE			10/12/10		Value		EPS		EPS		Value		Book		Assets		Yield
Company	State	Ticker	($Mil.)		(%)		(%)		(%)			(%)			($)		($Mil.)		(x)		(x)		(%)		(%)		(%)		(%)
Superior Bancorp	AL	SUPR		3,358		4.45		4.02		(2.16	)		(32.63	)		0.93		11.7		NM		NM		8.5		9.5		0.35		0.00
Teche Holding Company	LA	TSH		765		9.74		9.30		0.94			9.75			31.00		64.8		9.0		8.8		87.0		91.5		8.47		4.58
Territorial Bancorp Inc.	HI	TBNK		1,447		15.42		15.42		0.60			3.89			17.05		208.6		NA		NA		93.5		93.5		14.42		1.64
TF Financial Corporation	PA	THRD		721		10.17		9.60		0.55			5.54			21.74		58.4		13.9		15.1		79.6		84.9		8.10		3.68
Timberland Bancorp, Inc.	WA	TSBK		732		11.70		10.94		(0.34	)		(2.77	)		3.86		27.2		NM		NM		38.9		42.7		3.79		0.00
TrustCo Bank Corp NY	NY	TRST		3,829		6.66		6.65		0.83			12.35			5.53		425.8		14.2		15.3		166.6		167.0		11.10		4.75
United Community Financial Corp.	OH	UCFC		2,314		9.19		9.17		(1.14	)		(11.78	)		1.43		44.2		NM		NM		20.8		20.8		1.91		0.00
United Financial Bancorp, Inc.	MA	UBNK		1,545		14.44		13.98		0.55			3.54			13.77		224.6		27.0		21.6		101.0		104.9		14.58		2.32
United Western Bancorp, Inc.	CO	UWBK		2,221		5.28		5.28		(3.49	)		(58.22	)		0.38		11.2		NM		NM		9.5		9.5		0.50		0.00
ViewPoint Financial Group, Inc.	TX	VPFG		2,764		7.70		7.66		0.46			5.39			9.47		330.2		28.7		28.2		155.1		155.9		11.94		1.69
Washington Federal, Inc.	WA	WFSL		13,710		13.39		11.74		0.86			6.50			15.34		1,725.4		15.0		37.0		94.0		109.2		12.58		1.30
Wayne Savings Bancshares, Inc.	OH	WAYN		407		9.32		8.86		0.58			6.38			8.10		24.3		10.0		10.1		64.1		67.8		5.97		2.96
Westfield Financial, Inc.	MA	WFD		1,235		19.40		19.40		0.35			1.66			8.00		235.7		NM		NM		97.6		97.6		18.94		3.00
WSB Holdings, Inc.	MD	WSB		418		12.49		12.49		(1.43	)		(11.82	)		2.65		20.9		NM		NM		40.1		40.1		5.01		0.00
WSFS Financial Corporation	DE	WSFS		3,792		8.30		7.98		0.10			1.28			36.79		312.2		NM		NM		99.7		105.1		7.00		1.30
WVS Financial Corp.	PA	WVFC		355		7.84		7.84		0.10			1.22			10.55		21.7		NM		43.9		78.1		78.1		6.12		6.07
Average	NA	NA		2,750		11.06		10.39		(0.21	)		(5.02	)	NA			272.2		18.9		17.4		73.0		80.9		8.00		1.85
Median	NA	NA		967		9.92		9.14		0.22			2.20			NA		56.7		14.4		14.5		74.2		77.5		6.75		1.59

(1)	Public thrifts traded on NYSE, NYSE Amex, and NASDAQ; excludes companies subject to pending acquisitions or mutual holding company ownership.
Source: SNL Financial; Feldman Financial.

III-4

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit IV-1
Pro Forma Assumptions for Conversion Stock Offering

1. The total amount of the net offering proceeds was fully invested at the beginning of the applicable period.

2. The net offering proceeds are invested to yield a return of 0.61%, which represented the yield on two-year U.S. Treasury securities at June 30, 2010. The effective corporate income tax rate was assumed to be 34.0%, resulting in a net after-tax yield of 0.40%.

3. It is assumed that 8.0% of the total shares of common stock to be sold in the offering will be acquired by the Association’s employee stock ownership plan (“ESOP”). Pro forma adjustments have been made to earnings and equity to reflect the impact of the ESOP. The annual expense is estimated based on a 12-year loan to the ESOP from the Company. No re-investment is assumed on proceeds used to fund the ESOP.

4. It is assumed that that the Association’s restricted stock plan (“RSP”) will purchase in the open market a number of shares equal to 4.0% of the total shares sold in the offering. Also, it is assumed that these shares are acquired at the initial public offering price of $10.00 per share. Pro forma adjustments have been made to earnings and equity to reflect the impact of the RSP. The annual expense is estimated based on a five-year vesting period. No re-investment is assumed on proceeds used to fund the RSP.

5. It is assumed that an additional 10.0% of the total shares sold in the offering will be reserved for issuance by the Association’s stock option plan. The pro forma net income has been adjusted to reflect the expense associated with the granting of options at an assumed options value of $3.84 per share. It is further assumed that options for all shares reserved under the plan were granted to plan participants at the beginning of the period, 25% of the options granted were non-qualified options for income tax purposes, the options would vest at a rate of 20% per year, and compensation expense will be recognized on a straight-line basis over the five-year vesting period

6. The fair value of stock options has been estimated at $3.84 per option using the Black-Scholes option pricing model with the following assumptions: a grant-date share price and option exercise price of $10.00; dividend yield of 0.00%; an expected option life of 10 years; a risk-free interest rate of 2.97%; and a volatility rate of 21.83% based on an index of publicly traded thrift institutions.

7. Total offering expenses are estimated at $800,000.

8. No effect has been given to withdrawals from deposit accounts for the purpose of purchasing common stock in the offering.

9. No effect has been given in the pro forma equity calculation for the assumed earnings on the net proceeds.

IV-1

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit IV-2
Pro Forma Conversion Valuation Range
Fraternity Federal Savings and Loan Association
Historical Financial Data as of June 30, 2010
(Dollars in Thousands, Except Per Share Data)

	Minimum			Midpoint			Maximum			Adj. Max.
Shares sold		1,020,000			1,200,000			1,380,000			1,587,000
Offering price	$	10.00		$	10.00		$	10.00		$	10.00
Gross proceeds	$	10,200		$	12,000		$	13,800		$	15,870
Less: estimated offering expenses		(800	)		(800	)		(800	)		(800	)
Net offering proceeds		9,400			11,200			13,000			15,070
Less: ESOP purchase		(816	)		(960	)		(1,104	)		(1,270	)
Less: RRP purchase		(408	)		(480	)		(552	)		(635	)
Net investable proceeds	$	8,176		$	9,760		$	11,344		$	13,165
Net Income:
Historical LTM ended 6/30/10	$	(282	)	$	(282	)	$	(282	)	$	(282	)
Pro forma income on net proceeds		33			39			45			53
Pro forma ESOP adjustment		(45	)		(53	)		(61	)		(70	)
Pro forma RRP adjustment		(54	)		(63	)		(73	)		(84	)
Pro forma option adjustment		(72	)		(84	)		(97	)		(112	)
Pro forma net income	$	(420	)	$	(443	)	$	(468	)	$	(495	)
Pro forma earnings per share	$	(0.44	)	$	(0.40	)	$	(0.37	)	$	(0.34	)
Core Earnings:
Historical LTM ended 6/30/10	$	(465	)	$	(465	)	$	(465	)	$	(465	)
Pro forma income on net proceeds		33			39			45			53
Pro forma ESOP adjustment		(45	)		(53	)		(61	)		(70	)
Pro forma RRP adjustment		(54	)		(63	)		(73	)		(84	)
Pro forma option adjustment		(72	)		(84	)		(97	)		(112	)
Pro forma core earnings	$	(603	)	$	(626	)	$	(651	)	$	(678	)
Pro forma core earnings per share	$	(0.64	)	$	(0.56	)	$	(0.51	)	$	(0.46	)
Total Equity	$	16,647		$	16,647		$	16,647		$	16,647
Net offering proceeds		9,400			11,200			13,000			15,070
Less: ESOP purchase		(816	)		(960	)		(1,104	)		(1,270	)
Less: RRP purchase		(408	)		(480	)		(552	)		(635	)
Pro forma total equity	$	24,823		$	26,407		$	27,991		$	29,812
Pro forma book value	$	24.34		$	22.01		$	20.28		$	18.79
Tangible Equity	$	16,647		$	16,647		$	16,647		$	16,647
Net offering proceeds		9,400			11,200			13,000			15,070
Less: ESOP purchase		(816	)		(960	)		(1,104	)		(1,270	)
Less: RRP purchase		(408	)		(480	)		(552	)		(635	)
Pro forma tangible equity	$	24,823		$	26,407		$	27,991		$	29,812
Pro forma tangible book value	$	24.34		$	22.01		$	20.28		$	18.79
Total Assets	$	167,928		$	167,928		$	167,928		$	167,928
Net offering proceeds		9,400			11,200			13,000			15,070
Less: ESOP purchase		(816	)		(960	)		(1,104	)		(1,270	)
Less: RRP purchase		(408	)		(480	)		(552	)		(635	)
Pro forma total assets	$	176,104		$	177,688		$	179,272		$	181,093
Pro Forma Ratios:
Price / LTM EPS		NM			NM			NM			NM
Price / Core EPS		NM			NM			NM			NM
Price / Book Value		41.1	%		45.4	%		49.3	%		53.2	%
Price / Tangible Book Value		41.1	%		45.4	%		49.3	%		53.2	%
Price / Total Assets		5.79	%		6.75	%		7.70	%		8.76	%
Total Equity / Assets		14.10	%		14.86	%		15.61	%		16.46	%
Tangible Equity / Assets		14.10	%		14.86	%		15.61	%		16.46	%

IV-2

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit IV-3
Pro Forma Conversion Analysis at the Maximum Valuation
Fraternity Federal Savings and Loan Association
Historical Financial Data as of June 30, 2010

Valuation Parameters	Symbol	Data
Net income — LTM	Y	$	-282,000
Core earnings — LTM	Y		-465,000
Net worth	B		16,647,000
Tangible net worth	B		16,647,000
Total assets	A		167,928,000
Expenses in conversion	X		800,000
Other proceeds not reinvested	O		1,656,000
ESOP purchase	E		1,104,000
ESOP expense (pre-tax)	F		92,424
RSP purchase	M		552,000
RSP expense (pre-tax)	N		110,606
Stock option expense (pre-tax)	Q		105,984
Option expense tax-deductible	D		25.00	%
Re-investment rate (after-tax)	R		0.40	%
Tax rate	T		34.00	%
Shares for EPS	S		92.67	%
Pro Forma Valuation Ratios at Maximum Value
Price / LTM EPS	P/E		NM
Price / Core EPS	P/E		NM
Price / Book Value	P/B		49.31	%
Price / Tangible Book	P/TB		49.31	%
Price / Assets	P/A		7.70	%

Pro Forma Calculation at Maximum Value						Based on
V	=	(P/E / S)*((Y-R*(O+X)-(F+N)*(1-T)-(Q-Q*D*T)))	=	$	13,800,000	[LTM earnings]
		1 - (P/E / S) * R
V	=	(P/E / S)*((Y-R*(O+X)-(F+N)*(1-T)-(Q-Q*D*T))	=	$	13,800,000	[Core earings]
		1 - (P/E / S) * R
V	=	P/B * (B - X - E - M)	=	$	13,800,000	[Book value]
		1 - P/B
V	=	P/TB * (B - X - E - M)	=	$	13,800,000	[Tangible book]
		1 - P/TB
V	=	P/A * (B - X - E - M)	=	$	13,800,000	[Total assets]
		1 - P/A

Pro Forma Valuation Range
Minimum =	$	12,000,000	x	0.85	=	$	10,200,000
Midpoint =	$	12,000,000	x	1.00	=	$	12,000,000
Maximum =	$	12,000,000	x	1.15	=	$	13,800,000
Adj. Max. =	$	13,800,000	x	1.15	=	$	15,870,000

IV-3

FELDMAN FINANCIAL ADVISORS, INC.

Exhibit IV-4
Comparative Valuation Ratio Differential
Pro Forma Conversion Valuation Range
Computed from Market Price Data as of October 12, 2010

		Fraternity		Comparative
Valuation		Federal		Group
Ratio	Symbol	S&LA		Average			Median
Price / Book Value	P/B				53.9			50.5
Minimum	(%)		41.1		-23.7	%		-18.6	%
Midpoint			45.4		-15.8	%		-10.1	%
Maximum			49.3		-8.5	%		-2.4	%
Adj. Maximum			53.2		-1.3	%		5.3	%
Price / Tangible Book	P/TB				55.7			52.3
Minimum	(%)		41.1		-26.2	%		-21.4	%
Midpoint			45.4		-18.5	%		-13.2	%
Maximum			49.3		-11.5	%		-5.7	%
Adj. Maximum			53.2		-4.5	%		1.7	%
Price / LTM EPS	P/E				34.7			34.7
Minimum	(x)		NM		NA			NA
Midpoint			NM		NA			NA
Maximum			NM		NA			NA
Adj. Maximum			NM		NA			NA
Price / Core EPS	P/E				25.6			30.2
Minimum	(x)		NM		NA			NA
Midpoint			NM		NA			NA
Maximum			NM		NA			NA
Adj. Maximum			NM		NA			NA
Price / Total Assets	P/A				6.38			4.96
Minimum	(%)		5.79		-9.1	%		16.9	%
Midpoint			6.75		5.9	%		36.3	%
Maximum			7.70		20.7	%		55.4	%
Adj. Maximum			8.76		37.5	%		76.9	%

IV-4

EX-99.2

Exhibit 99.2

Fraternity Federal Savings and Loan Association

Dear Member:

The Board of Directors of Fraternity Federal Savings and Loan Association has voted unanimously in favor of a plan of conversion whereby Fraternity Federal Savings and Loan Association will convert from the mutual form to the stock form of organization and become a wholly owned subsidiary of Fraternity Community Bancorp, Inc., a company we recently formed. We are converting so that Fraternity Federal Savings and Loan Association will be structured in the form of ownership that we believe will best support the Bank’s future growth.

The Proxy Card

To accomplish the conversion, your participation is extremely important. On behalf of the Board, I ask that you help us meet our goal by reading the enclosed material and then casting your vote in favor of the plan of conversion and mailing your signed proxy card immediately in the enclosed postage-paid envelope marked “PROXY RETURN.” If you have an IRA or other Qualified Retirement Plan account for which Fraternity Federal Savings and Loan Association acts as trustee and we do not receive a proxy from you, Fraternity Federal Savings and Loan, as trustee for your account, intends to vote in favor of the plan of conversion on your behalf. If you have more than one account, you may receive more than one proxy. Please vote by returning all proxy cards received.

If the plan of conversion is approved, let me assure you that:

• deposit accounts will continue to be federally insured to the maximum extent permitted by law;

• existing deposit accounts and loans will not undergo any change; and

• voting for approval will not obligate you to buy any shares of common stock.

The Stock Offering

As a qualifying account holder, you may take advantage of your nontransferable rights to subscribe for shares of Fraternity Community Bancorp, Inc. common stock on a priority basis, before the stock is offered to the general public. The enclosed prospectus describes the stock offering and the operations of Fraternity Federal Savings and Loan Association and Fraternity Community Bancorp, Inc.

If you wish to subscribe for shares of common stock, please complete the enclosed stock order form and return it to Fraternity Community Bancorp, Inc., together with your payment for the shares, by mail using the enclosed envelope marked “STOCK ORDER RETURN,” by hand delivery, or by overnight courier to the Fraternity Community Bancorp, Inc. Stock Information Center located at Fraternity Federal Savings and Loan Association’s main office, 764 Washington Boulevard, Baltimore, MD 21230. Your order must be physically received (not postmarked) by Fraternity Community Bancorp, Inc. no later than 2:00 p.m., Eastern time, on ___ day, ___ __, 2011. Please read the prospectus carefully before making an investment decision.

If you have any questions after reading the enclosed material, please call our Stock Information Center at (___) ___-____, Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time.

Sincerely,

Thomas K. Sterner
Chairman, Chief Executive Officer and Chief Financial Officer

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Fraternity Federal Savings and Loan Association, Fraternity Community Bancorp, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus.

Fraternity Federal Savings and Loan Association

Dear Member:

The Board of Directors of Fraternity Federal Savings and Loan Association has voted unanimously in favor of a plan of conversion whereby Fraternity Federal Savings and Loan Association will convert from the mutual form to the stock form of organization and become a wholly owned subsidiary of Fraternity Community Bancorp, Inc., a company we recently formed. We are converting so that Fraternity Federal Savings and Loan Association will be structured in the form of ownership that we believe will best support the Bank’s future growth.

To accomplish the conversion, your participation is extremely important. On behalf of the Board, I ask that you help us meet our goal by reading the enclosed material and then casting your vote in favor of the plan of conversion and mailing your signed proxy card immediately in the enclosed postage-paid envelope marked “PROXY RETURN.” If you have an IRA or other Qualified Retirement Plan account for which Fraternity Federal Savings and Loan Association acts as trustee and we do not receive a proxy from you, Fraternity Federal Savings and Loan, as trustee for your account, intends to vote in favor of the plan of conversion on your behalf. If you have more than one account, you may receive more than one proxy. Please vote by returning all proxy cards received.

If the plan of conversion is approved let me assure you that:

• deposit accounts will continue to be federally insured to the maximum extent permitted by law; and

• existing deposit accounts and loans will not undergo any change.

We regret that we are unable to offer you common stock in the subscription offering because the laws of your state or jurisdiction require us to register (1) the to-be-issued common stock of Fraternity Community Bancorp, Inc. or (2) an agent of Fraternity Federal Savings and Loan Association to solicit the sale of such stock, and the number of eligible subscribers in your state or jurisdiction does not justify the expense of such registration.

If you have any questions after reading the enclosed material, please call our Stock Information Center at (___) ___-____, Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time.

Sincerely,

Thomas K. Sterner
Chairman, Chief Executive Officer and Chief Financial Officer

Fraternity Federal Savings and Loan Association

Dear Friend of Fraternity Federal Savings and Loan Association:

The Board of Directors of Fraternity Federal Savings and Loan Association has voted unanimously in favor of a plan of conversion whereby Fraternity Federal Savings and Loan Association will convert from the mutual form to the stock form of organization and become a wholly owned subsidiary of Fraternity Community Bancorp, Inc., a company we recently formed. We are converting so that Fraternity Federal Savings and Loan Association will be structured in the form of ownership that we believe will best support the Bank’s future growth.

As a former account holder, you may take advantage of your nontransferable right to subscribe for shares of Fraternity Community Bancorp, Inc. common stock on a priority basis, before the stock is offered to the general public. The enclosed prospectus describes the stock offering and the operations of Fraternity Federal Savings and Loan Association and Fraternity Community Bancorp, Inc.

If you wish to subscribe for shares of common stock, please complete the enclosed stock order form and return it to Fraternity Community Bancorp, Inc., together with your payment for the shares, by mail using the enclosed envelope marked “STOCK ORDER RETURN,” by hand delivery, or by overnight courier to the Fraternity Community Bancorp, Inc. Stock Information Center located at Fraternity Federal Savings and Loan Association’s main office, 764 Washington Boulevard, Baltimore, MD 21230. Your order must be physically received (not postmarked) by Fraternity Community Bancorp, Inc. no later than 2:00 p.m., Eastern time, on ___ day, ___ __, 2011. Please read the prospectus carefully before making an investment decision.

If you have any questions after reading the enclosed material, please call our Stock Information Center at (___) ___-____, Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time.

Sincerely,

Thomas K. Sterner
Chairman, Chief Executive Officer and Chief Financial Officer

Fraternity Federal Savings and Loan Association

Dear Potential Investor:

We are pleased to provide you with the enclosed material in connection with the stock offering by Fraternity Community Bancorp, Inc., recently formed to be the parent holding company of Fraternity Federal Savings and Loan Association. We are raising capital to support Fraternity Federal Savings and Loan Association’s future growth.

This information packet includes the following:

PROSPECTUS: This document provides detailed information about the operations of Fraternity Federal Savings and Loan Association and the proposed stock offering by Fraternity Community Bancorp, Inc. Please read it carefully before making an investment decision.

STOCK ORDER FORM: Use this form to subscribe for shares of common stock and return it to Fraternity Community Bancorp, Inc., together with your payment for the shares, by mail using the enclosed stock order return envelope, by hand delivery, or by overnight courier to the Fraternity Community Bancorp, Inc. Stock Information Center located at Fraternity Federal Savings and Loan Association’s main office, 764 Washington Boulevard, Baltimore, MD 21230. Your order must be physically received (not postmarked) by Fraternity Community Bancorp, Inc. no later than 2:00 p.m., Eastern time, on ___ day, ________ __, 2011. Please read the prospectus carefully before making an investment decision.

We are pleased to offer you this opportunity to become one of our shareholders. If you have any questions regarding the stock offering or the prospectus, please call our Stock Information Center at (___) ___-____ , Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time.

Sincerely,

Thomas K. Sterner
Chairman, Chief Executive Officer and Chief Financial Officer

Sandler O’Neill & Partners, L.P.

Dear Customer of Fraternity Federal Savings and Loan Association:

At the request of Fraternity Federal Savings and Loan Association, the proposed new holding company for Fraternity Community Bancorp, Inc., we have enclosed material regarding the offering of common stock of Fraternity Community Bancorp, Inc. The material is offered in connection with the conversion of Fraternity Federal Savings and Loan Association from the mutual to the stock form of organization. These materials include a prospectus and a stock order form, which offer you the opportunity to subscribe for shares of common stock of Fraternity Community Bancorp, Inc.

Please read the prospectus carefully before making an investment decision. If you decide to subscribe for shares, you must return the properly completed and signed stock order form, along with full payment for the shares, to Fraternity Community Bancorp, Inc., by mail using the enclosed stock order return envelope, by hand delivery, or by overnight courier to the Fraternity Community Bancorp, Inc. Stock Information Center located at Fraternity Federal Savings and Loan Association’s main office, 764 Washington Boulevard, Baltimore, MD 21230. Your order must be physically received (not postmarked) by Fraternity Community Bancorp, Inc. no later than 2:00 p.m., Eastern time, on ___ day, ________ __, 2011.

If you have any questions after reading the enclosed material, please call the Stock Information Center at (___) ___-____, Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time, and ask for a Sandler O’Neill representative.

We have been asked to forward these documents to you in view of certain requirements of the securities laws of your jurisdiction. We should not be understood as recommending or soliciting in any way any action by you with regard to the enclosed material.

Sandler O’Neill & Partners, L.P.

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Fraternity Federal Savings and Loan Association, Fraternity Community Bancorp, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus.

[cover page]

Questions & Answers About the Conversion

Fraternity Federal Savings and Loan Association

Questions & Answers

About the Conversion

The Board of Directors of Fraternity Federal Savings and Loan Association has voted unanimously in favor of a plan of conversion whereby Fraternity Federal Savings and Loan Association will convert from the mutual to the stock form of organization, subject to the affirmative vote of a majority of the total number of outstanding votes entitled to be cast by the members of Fraternity Federal Savings and Loan Association at a special meeting of members. In connection with the conversion, Fraternity Federal Savings and Loan Association’s new holding company, Fraternity Community Bancorp, Inc., is offering shares of its common stock for sale in an initial public offering.

Your vote is very important. If you have more than one account, you may receive more than one proxy. Please vote today by returning all proxy cards received.

Your Board of Directors urges you to vote “FOR” the conversion and return your proxy today.

Effect on Deposits and Loans

Q.	Will the conversion affect any of my deposit accounts or loans?
A.	No. The conversion will have no effect on the balance or terms of any deposit account. Your deposits will continue to be federally insured to the fullest extent permissible. The terms, including interest rates, of your loans with us will also be unaffected by the conversion.

About Voting

Q.	Who is eligible to vote on the conversion?
A.	Depositors of Fraternity Federal Savings and Loan Association as of the close of business on _____ __, 2011 (the “Voting Record Date”) are eligible to vote at the special meeting of members.
Q.	How do I vote?
A.	You may vote by mailing your signed proxy card(s) in the enclosed postage-paid envelope marked “PROXY RETURN.” Should you choose to attend the special meeting of members to be held on ______ __, 2011, and decide to change your vote, you may do so by revoking any previously executed proxy.
Q.	Am I required to vote?
A.	No. Depositors are not required to vote. However, because the conversion will produce a fundamental change in the Bank’s corporate structure, the Board of Directors encourages all members to vote.
Q.	Why did I receive several proxies?
A.	If you have more than one account, you may have received more than one proxy, depending upon the ownership structure of your accounts. Please vote, sign, date, and return all proxy cards that you received.

Q.	Does my vote for the conversion mean that I must buy common stock of Fraternity Community Bancorp, Inc.?
A.	No. Voting for the plan of conversion does not obligate you to buy shares of common stock of Fraternity Community Bancorp, Inc.
Q.	Are two signatures required on the proxy card for a joint account?
A.	Only one signature is required on a proxy card for a joint account.
Q.	Who must sign proxies for trust or custodian accounts?
A.	The trustee or custodian must sign proxies for such accounts, not the beneficiary.
Q.	I am the executor (administrator) for a deceased depositor. Can I sign the proxy card?
A.	Yes. Please indicate on the card the capacity in which you are signing.

About The Common Stock

Investment in common stock involves certain risks. For a discussion of these risks and other factors, investors are urged to read the accompanying prospectus.

Q.	Who can purchase stock?
A.	The common stock of Fraternity Community Bancorp, Inc. will be offered in the subscription offering in the following order of priority:

1)	Eligible Account Holders — depositors of Fraternity Federal Savings and Loan Association with accounts totaling $50 or more as of June 30, 2009;
2)	Fraternity Federal Savings and Loan Association’s employee stock ownership plan;
3)	Supplemental Eligible Account Holders — depositors of Fraternity Federal Savings and Loan Association with accounts totaling $50 or more as of ____ __, ____; and
4)	Other Members — depositors of Fraternity Federal Savings and Loan Association with accounts as of _____ __, ____.

	Upon completion of the subscription offering, common stock that is not sold in the subscription offering, if any, will be offered to certain members of the general public in a community offering.
Q.	Am I guaranteed to receive shares by placing an order?
A.	No. It is possible that orders received during the offering period will exceed the number of shares being sold. Such an oversubscription would result in shares being allocated among subscribers starting with subscribers who are Eligible Account Holders. If the offering is oversubscribed in the subscription offering, no orders received in the community offering will be filled.
Q.	Will any account I hold with the Bank be converted into stock?
A.	No. All accounts remain as they were prior to the conversion.
Q.	How many shares of stock are being offered, and at what price?
A.	Fraternity Community Bancorp, Inc. is offering for sale a maximum of 1,380,000 shares of common stock at a subscription price of $10 per share. Under certain circumstances, Fraternity Community Bancorp, Inc. may increase the maximum and sell up to 1,587,000 shares.

Q.	How much stock can I purchase?
A.	The minimum purchase is $250 (25 shares). As more fully discussed in the plan of conversion and in the prospectus, the maximum purchase by any person in the subscription or community offering is $250,000 (25,000 shares); no person by himself or herself, with an associate or group of persons acting in concert, may purchase more than $400,000 (40,000 shares) of common stock in the offering.
Q.	How do I order stock?
A.	If you decide to subscribe for shares, you must return the properly completed and signed stock order form, along with full payment for the shares, to Fraternity Community Bancorp, Inc., by mail using the enclosed envelope marked “STOCK ORDER RETURN,” by hand delivery, or by overnight courier to the Fraternity Community Bancorp, Inc. Stock Information Center located at Fraternity Federal Savings and Loan Association’s main office, 764 Washington Boulevard, Baltimore, MD 21230. Your order must be physically received (not postmarked) by Fraternity Community Bancorp, Inc. no later than 2:00 p.m., Eastern time, on ___ day, ___ __, 2011. Please read the prospectus carefully before making an investment decision.
Q.	How can I pay for my shares of stock?
A.	You can pay for the common stock by check, money order, or withdrawal from your deposit account or certificate of deposit at Fraternity Federal Savings and Loan Association. Checks and money orders must be made payable to Fraternity Community Bancorp, Inc. Withdrawals from a deposit account or a certificate of deposit at Fraternity Federal Savings and Loan Association to buy shares of common stock may be made without penalty. Cash must be converted to a bank check or money order. Please do not send cash in the mail.
Q.	Can I use my Fraternity Federal Savings and Loan Association home equity line of credit to subscribe for shares of common stock?
A.	No. Fraternity Federal Savings and Loan Association cannot knowingly lend funds to anyone for them to subscribe for shares. This includes the use of funds available through a Fraternity Federal Savings and Loan Association home equity line of credit.
Q.	When is the deadline to subscribe for stock?
A.	An executed stock order form with the required full payment must be physically received (not postmarked) by Fraternity Community Bancorp, Inc. no later than 2:00 p.m., Eastern time on ___ day, ______ __, 2011.
Q.	Can I subscribe for shares using funds in my IRA at Fraternity Federal Savings and Loan Association?
A.	No. Federal regulations do not permit the purchase of common stock with your existing IRA or other qualified plan at Fraternity Federal Savings and Loan Association. To use these funds to subscribe for common stock, you need to establish a “self directed” trust account with an unaffiliated trustee. The transfer of these funds takes time, so please make arrangements as soon as possible. However, if you intend to use other funds to subscribe for common stock due to your eligibility as an IRA account holder, you need not close and transfer the IRA account. Please call our Stock Information Center if you require additional information.
Q.	Can I subscribe for shares and add someone else who is not on my account to my stock registration?
A.	No. Applicable regulations prohibit the transfer of subscription rights. Adding the names of other persons who are not owners of your qualifying account(s) will result in the loss of your subscription rights and could result in legal action against you.
Q.	Can I subscribe for shares in my name alone if I have a joint account?
A.	Yes.

Q.	Will payments for common stock earn interest until the conversion closes?
A.	Yes. Any payment made in cash or by check or money order will earn interest at Fraternity Federal Savings and Loan Association’s passbook savings rate from the date of receipt to the completion or termination of the conversion. Depositors who elect to pay for their common stock by a withdrawal authorization will receive interest at the contractual rate on the account until the completion or termination of the offering.
Q.	Will dividends be paid on the stock?
A.	Following the offering, we initially do not expect to pay cash dividends on the common stock.
Q.	Will my stock be covered by deposit insurance?
A.	No.
Q.	Where will the stock be traded?
A.	Following completion of the conversion, our shares of common stock are expected to be quoted on the OTC Bulletin Board.
Q.	Can I change my mind after I place an order to subscribe for stock?
A.	No. After receipt, your order may not be cancelled, modified or withdrawn, unless we extend the offering beyond ____, 2011.

Additional Information

Q.

What if I have additional questions or require more information?

A.

Fraternity Community Bancorp, Inc.’s prospectus that accompanies this brochure describes the conversion in detail. Please read the prospectus carefully before subscribing for stock. If you have any questions after reading the enclosed material, you may call our Stock Information Center at (___) ___-____, Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time. Additional material may only be obtained from the Stock Information Center.

To ensure that each purchaser in the subscription and community offering receives a prospectus at least 48 hours before the applicable expiration date, in accordance with Rule 15c2-8 of the Securities Exchange Act of 1934, as amended, no prospectus will be mailed any later than five days prior to such date or hand delivered any later than two days prior to such date.

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Fraternity Federal Savings and Loan Association, Fraternity Community Bancorp, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus

THIS SALES AND ADVERTISING LITERATURE MUST BE READ IN CONJUNCTION WITH THE PROSPECTUS IN ORDER TO UNDERSTAND FULLY ALL OF THE IMPLICATIONS AND RISKS OF THE OFFERING OF SECURITIES TO WHICH IT RELATES. A COPY OF THE PROSPECTUS MUST BE MADE AVAILABLE TO YOU IN CONNECTION WITH THIS OFFERING.

Fraternity Federal Savings and Loan Association

Dear Member:

As a follow-up to our recent mailing, this is to remind you that your vote is very important.

The Board of Directors of Fraternity Federal Savings and Loan Association has voted unanimously in favor of a plan of conversion whereby Fraternity Federal Savings and Loan Association will convert from the mutual form to the stock form of organization and become a wholly owned subsidiary of Fraternity Community Bancorp, Inc., a company we recently formed. We are converting so that Fraternity Federal Savings and Loan Association will be structured in the form of ownership that we believe will best support the Bank’s future growth.

To accomplish the conversion, your participation is extremely important. On behalf of the Board, I ask that you help us meet our goal by reading the enclosed material and then casting your vote in favor of the plan of conversion and mailing your signed proxy card immediately in the enclosed postage-paid envelope marked “PROXY RETURN.” If you have more than one account, you may receive more than one proxy. Please vote by returning all proxy cards received.

If the plan of conversion is approved, let me assure you that:

• deposit accounts will continue to be federally insured to the maximum extent permitted by law;

• existing deposit accounts and loans will not undergo any change; and

• voting for approval will not obligate you to buy any shares of common stock.

If you have any questions after reading the enclosed material, please call our Stock Information Center at (___) ___-____, Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time.

Sincerely,

Thomas K. Sterner
Chairman, Chief Executive Officer and Chief Financial Officer

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Fraternity Federal Savings and Loan Association, Fraternity Community Bancorp, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus.

PROXY REQUEST
Fraternity Federal Savings and Loan Association
[Logo]

WE NEED YOUR VOTE

Dear Member of Fraternity Federal Savings and Loan Association:

Your vote on our plan of conversion has not yet been received. Your vote is very important to us. Please vote and mail the enclosed proxy today. If you have more than one account, you may receive more than one proxy. Please complete and mail all proxies you receive.

Remember: Voting does not obligate you to buy stock. Your Board of Directors has approved the plan of conversion and urges you to vote in favor of the conversion. Your deposit accounts or loans with Fraternity Federal Savings and Loan Association will not be affected in any way. Deposit accounts will continue to be federally insured to the legal maximum.

A postage-paid envelope is enclosed with the proxy card. If you have any questions, please call our Stock Information Center at (___) ___-____, Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time.

Sincerely,

Thomas K. Sterner
Chairman, Chief Executive Officer and Chief Financial Officer

If you have more than one account, you may receive more than one proxy.

Please vote today by returning all proxy cards received.

Read This First

Office of Thrift Supervision Guidance for Accountholders

Your financial institution is in the process of selling stock to the public, in either a mutual-to-stock conversion or a stock issuance by a subsidiary of a mutual holding company. As an accountholder at this institution, you have certain priority subscription rights to purchase stock in the offering. These priority subscription rights are non-transferable. If you subscribe for stock, you will be asked to sign a statement that the purchase is for your own account, and that you have no agreement or understanding regarding the subsequent sale or transfer of any shares you receive.

On occasion, unscrupulous people attempt to persuade accountholders to transfer subscription rights, or to purchase shares in the offering based on the understanding that the shares will subsequently be transferred to others. Such arrangements violate federal regulations. If you participate in these schemes, you are breaking the law and may be subject to prosecution. If someone attempts to persuade you to participate in such a scheme, please contact the Office of Thrift Supervision (OTS), Consumer Response Center at (800) 842-6929. The OTS is very interested in ensuring that the prohibitions on transfer of subscription rights are not violated.

How will you know if you are being approached illegally? Typically, a fraudulent opportunist will approach you and offer to “loan” you money to purchase a significant amount of stock in the offering. In exchange for that “loan” you most likely will be asked either to transfer control of any stock purchased with that money to an account the other person controls, or sell the stock and give the majority of the profits to the other person. You may be told, untruthfully, that there is no risk to you, that the practice is common, and even if you are caught, that your legal expenses will be covered.

Below is a list of some key concepts that you should keep in mind when considering whether to participate in a mutual-to-stock conversion or stock issuance by a mutual holding company subsidiary. If you have questions, please contact the Stock Information Center listed elsewhere in the literature you are receiving. Alternatively, you can contact us at: ombudsman@ots.treas.gov.

What Investors Need to Know

Key concepts for investors to bear in mind when considering whether to participate in a conversion offering, or a stock offering by a subsidiary of a mutual holding company, include the following:

•	Know the Rules — By law, accountholders cannot sell or transfer their priority subscription rights, or the stock itself, prior to the completion of a financial institution’s conversion. Moreover, accountholders cannot enter into agreements or arrangements to sell or transfer either their subscription rights or the underlying conversion stock.
•	“Neither a Borrower nor a Lender Be” — If someone offers to lend you money so that you can participate — or participate more fully — in a conversion, be extremely wary. Be even more wary if the source of the money is someone you do not know. The loan agreement may make you unable to certify truthfully that you are the true holder of the subscription rights and the true purchaser of the stock and that you have no agreements regarding the sale or transfer of the stock.
•	Watch Out for Opportunists — The opportunist may tell you that he or she is a lawyer — or a consultant or a professional investor or some similarly impressive tale — who has experience with similar mutual conversion transactions. The opportunist may go to extreme lengths to assure you that the arrangement you are entering into is legitimate. They might tell you that they have done scores of these transactions and that this is simply how they work. Or they might downplay the warnings or restrictions in the prospectus or order form, telling you that “everyone” enters into such agreements or that the deal they are offering is legitimate. They may also tell you that you have no risk in the transaction. The cold, hard truth is that these are lies, and if you participate, you are breaking the law.
•	Get the Facts from the Source — If you have any questions about the securities offering, ask the savings bank or savings association for more information. If you have any doubts about a transaction proposed to you by someone else, ask the financial institution whether the proposed arrangement is proper. You may be able to find helpful resources on the institution’s website or by visiting a branch office.
	The bottom line for investors is always to remember that if an opportunity sounds too good to be true, it probably is too good to be true.

An Invitation

We cordially invite you to attend one of our community meetings to learn more about the opportunity to purchase newly issued shares from our proposed holding company, Fraternity Community Bancorp, Inc.

v	Members of senior management will discuss Fraternity Federal Savings and Loan Association’s operations, past performance and financial history.
v	You will be able to meet one-on-one with Fraternity Federal Savings and Loan Association officers to ask questions.
v	There will be no sales pressure. You will receive Fraternity Community Bancorp, Inc. stock offering materials. Then you decide if the stock purchase matches your investment objectives.

Community meetings have been scheduled in _______. For meeting times and to make a reservation, or to receive a prospectus and a stock order form, please call our Stock Information Center at (___) ___-____ Monday through Friday, 10:00 a.m. to 4:00 p.m., Eastern time.

Fraternity Community Bancorp, Inc. (logo)

Proposed Holding Company for

Fraternity Federal Savings and Loan Association

Community Meetings

Day, Month __
Location
Address
City, State Zip Code

v

Day, Month __
Location
Address
City, State Zip Code

Fraternity Community Bancorp, Inc.
(logo)

Proposed Holding Company for
Fraternity Federal Savings and Loan Association

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Fraternity Federal Savings and Loan Association, Fraternity Community Bancorp, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus.

Fraternity Federal Savings and Loan Association
[LOGO]

Please Support Us

Vote Your Proxy Card Today

If you have more than one account, you may have received more than one proxy card depending upon the ownership structure of your accounts. Please vote, sign and return all proxy cards that you received.

Fraternity Community Bancorp, Inc.

_______________, 2011

Dear __________:

The Board of Directors of Fraternity Federal Savings and Loan Association has voted unanimously in favor of a plan of conversion, whereby Fraternity Federal Savings and Loan Association will convert from the mutual to the stock form of organization and become a wholly owned subsidiary of Fraternity Community Bancorp, Inc., a company we recently formed.

To learn more about the stock offering you are cordially invited to join members of our senior management team at a community meeting to be held on ___ at ___:00 _._, Eastern time.

A member of our staff will be calling to confirm your interest in attending the meeting.

If you would like additional information regarding the meeting or our conversion, please call our Stock Information Center at (___) ___-____, Monday through Friday between the hours of 10:00 a.m. to 4:00 p.m., Eastern time.

Sincerely,

Thomas K. Sterner
Chairman, Chief Executive Officer and Chief Financial Officer

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Fraternity Federal Savings and Loan Association, Fraternity Community Bancorp, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus.

(Printed by Stock Information Center)

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Fraternity Federal Savings and Loan Association, Fraternity Community Bancorp, Inc., the Federal Deposit Insurance Corporation or any other government agency.

(Printed by Stock Information Center)

Fraternity Community Bancorp, Inc.

_______________, 2011

Dear Subscriber:

We hereby acknowledge receipt of your order for shares of Fraternity Community Bancorp, Inc. common stock. If you are issued shares, the shares will be registered as indicated above.

At this time, we cannot confirm the number of shares of Fraternity Community Bancorp, Inc. common stock that will be issued to you. Following completion of the stock offering, shares will be allocated in accordance with the plan of conversion.

If you have any questions, please call our Stock Information Center at (___) ___-____, Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time.

Fraternity Community Bancorp, Inc.

Stock Information Center

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Fraternity Federal Savings and Loan Association, Fraternity Community Bancorp, Inc., the Federal Deposit Insurance Corporation or any other government agency.

(Printed by Stock Information Center)

Fraternity Community Bancorp, Inc.

_______________, 2011

Dear Shareholder:

Our subscription offering has been completed and we are pleased to confirm your subscription for shares at a price of $10.00 per share. If your subscription was paid for by check, interest and any refund due to you will be mailed promptly.

The closing of the transaction occurred on ______ __, 2011; this is your stock purchase date. Trading is expected to commence on the OTC Bulletin Board on ________ __, 2011.

Thank you for your interest in Fraternity Community Bancorp, Inc. Your stock certificate will be mailed to you shortly.

Fraternity Community Bancorp, Inc.
Stock Information Center

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Fraternity Federal Savings and Loan Association, Fraternity Community Bancorp, Inc., the Federal Deposit Insurance Corporation or any other government agency.

(Printed by Stock Information Center)

Fraternity Community Bancorp, Inc.

_______________, 2011

Dear Interested Investor:

We recently completed our subscription offering. Unfortunately, due to the excellent response from our Eligible Account Holders, stock was not available for our Supplemental Eligible Account Holders, Other Members or community friends. If your subscription was paid for by check, a refund of any balance due to you with interest will be mailed promptly.

We appreciate your interest in Fraternity Community Bancorp, Inc. and hope you become an owner of our stock in the future. Trading is expected to commence on the OTC Bulletin Board on ________ __, 2011.

Fraternity Community Bancorp, Inc.
Stock Information Center

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Fraternity Federal Savings and Loan Association, Fraternity Community Bancorp, Inc., the Federal Deposit Insurance Corporation or any other government agency.

(Printed by Stock Information Center)

Fraternity Community Bancorp, Inc.

_______________, 2011

Welcome Shareholder:

We are pleased to enclose your stock certificate representing your shares of common stock of Fraternity Community Bancorp, Inc. Please examine your stock certificate to be certain that it is properly registered. If you have any questions about your certificate, you should contact the Transfer Agent immediately at the following address:

XXXXXXXXXXXXXX
XXXXXXXXX
XXXXXX

1.800.XXX-XXXX
email: XXX@XXXXX.com

Please remember that your certificate is a negotiable security that should be stored in a secure place, such as a safe deposit box or on deposit with your stockbroker.

On behalf of the Board of Directors, officers and employees of Fraternity Community Bancorp, Inc., I thank you for supporting our offering.

Sincerely,

Thomas K. Sterner
Chairman, Chief Executive Officer and Chief Financial Officer

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Fraternity Federal Savings and Loan Association, Fraternity Community Bancorp, Inc., the Federal Deposit Insurance Corporation or any other government agency.

(Printed by Stock Information Center)

Fraternity Community Bancorp, Inc.

_______________, 2011

Dear Interested Subscriber:

We regret to inform you that Fraternity Federal Savings and Loan Association and Fraternity Community Bancorp, Inc., the holding company for Fraternity Federal Savings and Loan Association, did not accept your order for shares of Fraternity Community Bancorp, Inc. common stock in its community offering. This action is in accordance with our plan of conversion, which gives Fraternity Federal Savings and Loan Association and Fraternity Community Bancorp, Inc. the absolute right to reject the order of any person, in whole or in part, in the community offering.

If your subscription was paid for by check, enclosed is your original check.

Fraternity Community Bancorp, Inc.
Stock Information Center

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Fraternity Federal Savings and Loan Association, Fraternity Community Bancorp, Inc., the Federal Deposit Insurance Corporation or any other government agency.

(Printed by Stock Information Center)

Sandler O’Neill & Partners, L.P.

______________, 2011

To Our Friends:

We are enclosing material in connection with the stock offering by Fraternity Community Bancorp, Inc., the proposed holding company for Fraternity Federal Savings and Loan Association. Fraternity Community Bancorp, Inc. is raising capital to support Fraternity Federal Savings and Loan Association’s future growth.

Sandler O’Neill & Partners, L.P. is acting as financial and marketing advisor in connection with the subscription offering, which will conclude at _:___ p.m., Eastern time, on _____ __, 2011. In the event that all the stock is not sold in the subscription offering, the remaining stock may be sold in a community offering.

Members of the general public are eligible to participate. If you have any questions about this transaction, please do not hesitate to call.

Sandler O’Neill & Partners, L.P.

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Fraternity Federal Savings and Loan Association, Fraternity Community Bancorp, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus.

(Printed by Sandler O’Neill)

Fraternity Community Bancorp, Inc.
(logo)

An Invitation
To Attend a Community Meeting

Fraternity Community Bancorp, Inc. is offering shares of its common stock in connection with the conversion of Fraternity Federal Savings and Loan Association into the full stock form of organization.

1,020,000 to 1,380,000 shares of Fraternity Community Bancorp, Inc. are being offered at a price of $10.00 per share.

If you would like to learn more about our stock offering, or would like to attend a community meeting, we invite you to obtain a prospectus and offering material by calling our Stock Information Center at (___) ___-____, Monday through Friday between the hours of 10:00 a.m. and 4:00 p.m. Eastern time.

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Fraternity Federal Savings and Loan Association, Fraternity Community Bancorp, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus.

EX-99.3

Exhibit 99.3

Fraternity Community Bancorp, Inc. Subscription & Community Offering Stock Order Form Fraternity Federal Savings and Loan Association Stock Information Center 764 Washington Boulevard Baltimore, MD 21230 (___) ___-____ Expiration Date for Stock Order Forms: ___day ______ __, 2011 2:00 p.m., Eastern time (received not postmarked) IMPORTANT: A properly completed original stock order form must be used to subscribe for common stock. Copies of this form are not required to be accepted. Please read the Stock Ownership Guide and Stock Order Form Instructions as you complete this form. (1) Number of Shares Subscription Price X 10.00 = (2) Total Payment Due Minimum number of shares: 25 shares ($250.) Maximum number of shares: 25,000 shares ($250,000) Maximum number of shares for associates or group: 40,000 shares ($400,000) See Instructions. $ (3) Employee/Officer/Director Information Check here if you are an employee, officer or director of Fraternity Federal Savings and Loan Association or member of such person’s immediate family living in the same household. (4) Method of Payment by Check Enclosed is a check, bank draft or money order payable to Fraternity Community Bancorp, Inc. in the amount indicated in this box. Total Check Amount $ . (5) Method of Payment by Withdrawal — The undersigned authorizes withdrawal from the following account(s) at Fraternity Federal Savings and Loan Association. There is no early withdrawal penalty for this form of payment. Individual Retirement Accounts maintained at Fraternity Federal Savings and Loan Association cannot be used unless special transfer arrangements are made. Bank Use Account Number(s) To Withdraw $ Withdrawal Amount $ . $ . (6) Purchaser Information Subscription Offering — Check here and list account(s) below if you are: a. An Eligible Account Holder with a deposit account(s) totaling $50.00 or more on _____ __, 2009. b. A Supplemental Eligible Account Holder with a deposit account(s) totaling $50.00 or more on ____ __, 2011 but are not an Eligible Account Holder. c. An Other Member with a deposit account(s) on _____ __, 2011 but are not an Eligible Account Holder or Supplemental Eligible Account Holder. Community Offering — Check here if you are: d. A community member (Indicate county of residence in #9 below). PLEASE NOTE: FAILURE TO LIST ALL YOUR ACCOUNTS MAY RESULT IN THE LOSS OF PART OR ALL OF YOUR SUBSCRIPTION RIGHTS. SEE REVERSE SIDE FOR ADDITIONAL SPACE. Bank Use Account Number(s) Account Title (Name(s) on Account) (7) Form of Stock Ownership & SS# or Tax ID#: SS#/Tax ID# Individual Joint Tenants Tenants in Common Fiduciary (i.e., trust, estate) Uniform Transfers to Minors Act (Indicate SS# of Minor only) Company/Corporation/ Partnership IRA or other qualified plan (Both Tax ID# & SS# for IRAs) SS#/Tax ID# (8) Stock Registration and Mailing Address: Name and address to appear on stock certificate. Adding the names of other persons who are not owners of your qualifying account(s) will result in the loss of your subscription rights. Name: Name Continued: Mail to- Street: City: State: Zip Code: (9) Telephone Daytime/Evening ( ) — ( ) — County of Residence: (10) Associates/Acting in Concert Check here and complete the reverse side of this form if you or any associates or persons acting in concert with you have submitted other orders for shares. (11) Acknowledgment To be effective, this stock order form must be properly completed and physically received (not postmarked) by Fraternity Community Bancorp, Inc. no later than 2:00 p.m., Eastern time, on ______ __, 2011, unless extended; otherwise this stock order form and all subscription rights will be void. The undersigned agrees that aft er receipt by Fraternity Community Bancorp, Inc., this stock order form may not be modified, withdrawn or canceled without Fraternity Community Bancorp, Inc.’s consent and if authorization to withdraw from deposit accounts at Fraternity Federal Savings and Loan Association has been given as payment for shares, the amount authorized for withdrawal shall not otherwise be available for withdrawal by the undersigned. Under penalty of perjury, I hereby certify that the Social Security or Tax ID Number and the information provided on this stock order form are true, correct and complete and that I am not subject to back-up tax withholding. It is understood that this stock order form will be accepted in accordance with, and subject to, the terms and conditions of the plan of conversion of Fraternity Federal Savings and Loan Association described in the accompanying prospectus. Federal regulations prohibit any person from transferring, or entering into any agreement, directly or indirectly, to transfer the legal or beneficial ownership of conversion subscription rights or the underlying securities to the account of another. Fraternity Federal Savings and Loan Association and Fraternity Community Bancorp, Inc. will pursue any and all legal and equitable remedies in the event they become aware of the transfer of subscription rights and will not honor orders known by them to involve such transfer. Under penalty of perjury, I certify that I am purchasing shares solely for my account and that there is no agreement or understanding regarding the sale or transfer of such shares, or my right to subscribe for shares. By signing below, I also acknowledge that I have read the Certification Form on the reverse side of this form. Bank Use Signature Date Signature Date

Item (6) Purchaser Account Information continued:
	Bank Use	Account Number(s)	Account Title (Name(s) on Account)

Item (10) Associates/Acting In Concert continued: If you checked the box in item #10 on the reverse side of this form, list below all other orders submitted by you or associates (as defined below) or by persons acting in concert with you (also defined below).
	Name(s) listed on other stock order forms	Number of shares ordered

Associate — The term “associate” of a particular person means:

(1) a corporation or organization, other than Fraternity Federal Savings and Loan Association, Fraternity Community Bancorp, Inc. or a majority-owned subsidiary of Fraternity Federal Savings and Loan Association or Fraternity Community Bancorp, Inc., of which a person is a director, officer or partner, or beneficially owns, directly or indirectly, 10% or more of any class of equity securities of such corporation or organization;

(2) a trust or other estate in which a person has a substantial beneficial interest or as to which a person serves as trustee or in a similar fiduciary capacity; provided, however, that

such term shall not include any tax-qualified employee stock benefit plan of Fraternity Federal Savings and Loan Association or Fraternity Community Bancorp, Inc. in which such person has a substantial interest or may serve as trustee or in a similar fiduciary capacity; and

(3) any person who is related by blood or marriage and who either has the same home as a person or who is a director or officer of Fraternity Federal Savings and Loan Association or Fraternity Community Bancorp, Inc. or any of their subsidiaries.

Acting in concert — The term “acting in concert” means:

(1) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement; or

(2) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise.

In general, a person who acts in concert with another party will also be deemed to be acting in concert with any person who is also acting in concert with that other party.

We may presume that certain persons are acting in concert based upon various facts, among other things, joint account relationships, common addresses on our records and the fact that such persons may have filed joint Schedules 13D or 13G with the Securities and Exchange Commission with respect to other companies.

We have sole discretion to determine whether prospective purchasers are “associates” or “acting in concert.”

CERTIFICATION FORM

I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR GUARANTEED, AND IS NOT GUARANTEED BY FRATERNITY FEDERAL SAVINGS AND LOAN ASSOCIATION, OR BY THE FEDERAL GOVERNMENT.

If anyone asserts that this security is federally insured or guaranteed, or is as safe as an insured deposit, I should call the Office of Thrift Supervision Consumer Response Center at (800) 842-6929.

I further certify that, before purchasing the common stock, par value $0.01 per share, of Fraternity Community Bancorp, Inc., the holding company for Fraternity Federal Savings and Loan Association, I received a prospectus of Fraternity Community Bancorp, Inc. dated _____, 2011 relating to such offer of common stock.

The prospectus that I received contains disclosure concerning the nature of the common stock being offered by Fraternity Community Bancorp, Inc. and describes in the “Risk Factors” section beginning on page xx, the risks involved in the investment in this common stock, including but not limited to the following:

[TITLES OF RISK FACTORS TO BE INSERTED]

(By Signing the Front of this Form the Investor is Not Waiving Any Rights Under the Federal Securities Laws,
Including the Securities Act of 1933 and the Securities Exchange Act of 1934)

Fraternity Community Bancorp, Inc.

Stock Ownership Guide

Individual

Include the first name, middle initial and last name of the shareholder. Avoid the use of two initials. Please omit words that do not affect ownership rights, such as “Mrs.”, “Mr.”, “Dr.”, “special account”, “single person”, etc.

Joint Tenants

Joint tenants with right of survivorship may be specified to identify two or more owners. When stock is held by joint tenants with right of survivorship, ownership is intended to pass automatically to the surviving joint tenant(s) upon the death of any joint tenant. All parties must agree to the transfer or sale of shares held by joint tenants.

Tenants in Common

Tenants in common may also be specified to identify two or more owners. When stock is held by tenants in common, upon the death of one co-tenant, ownership of the stock will be held by the surviving co-tenant(s) and by the heirs of the deceased co-tenant. All parties must agree to the transfer or sale of shares held by tenants in common.

Uniform Transfers to Minors Act (“UTMA”)

Stock may be held in the name of a custodian for a minor under the Uniform Transfers to Minors Act of each state. There may be only one custodian and one minor designated on a stock certificate. The standard abbreviation for Custodian is “CUST”, while the Uniform Transfers to Minors Act is “UTMA”. Standard U.S. Postal Service state abbreviations should be used to describe the appropriate state. For example, stock held by John Doe as custodian for Susan Doe under the MD Uniform Transfers to Minors Act will be abbreviated John Doe, CUST Susan Doe UTMA MD (use minor’s social security number).

Fiduciaries

Information provided with respect to stock to be held in a fiduciary capacity must contain the following:

• The name(s) of the fiduciary. If an individual, list the first name, middle initial and last name. If a corporation, list the full corporate title (name). If an individual and a corporation, list the corporation’s title before the individual.

• The fiduciary capacity, such as administrator, executor, personal representative, conservator, trustee, committee, etc.

• A description of the document governing the fiduciary relationship, such as a trust agreement or court order. Documentation establishing a fiduciary relationship may be required to register your stock in a fiduciary capacity.

• The date of the document governing the relationship, except that the date of a trust created by a will need not be included in the description.

• The name of the maker, donor or testator and the name of the beneficiary.

An example of fiduciary ownership of stock in the case of a trust is: John Doe, Trustee Under Agreement Dated 10-1-93 for Susan Doe.

Stock Order Form Instructions

Items 1 and 2 — Number of Shares and Total Payment Due

Fill in the number of shares that you wish to purchase and the total payment due. The amount due is determined by multiplying the number of shares by the subscription price of $10.00 per share. The minimum purchase in the subscription offering is $250 (25 shares) of common stock. As more fully described in the plan of conversion outlined in the prospectus, the maximum purchase in any category of the subscription offering is $250,000 (25,000 shares) of common stock, and the maximum purchase in the community offering (if held) by any person, is $250,000 (25,000 shares) of common stock. No person, together with associates and persons acting in concert with such person, may purchase in the aggregate more than $400,000 (40,000 shares) of common stock.

Item 3 — Employee / Officer / Director Information

Check this box to indicate whether you are an employee, officer or director of Fraternity Federal Savings and Loan Association or a member of such person’s immediate family living in the same household.

Item 4 — Method of Payment by Check

If you pay for your stock by check, bank draft or money order, indicate the total amount in this box. Payment for shares may be made by check, bank draft or money order payable to Fraternity Community Bancorp, Inc. Cash must be converted to a bank check or money order. Your funds will earn interest at Fraternity Federal Savings and Loan Association’s passbook savings rate of interest until the stock offering is completed.

Item 5 — Method of Payment by Withdrawal

If you pay for your stock by a withdrawal from a deposit account at Fraternity Federal Savings and Loan Association, indicate the account number(s) and the amount of your withdrawal authorization for each account. The total amount withdrawn should equal the amount of your stock purchase. There will be no penalty assessed for early withdrawals from certificate accounts used for stock purchases. This form of payment may not be used if your account is an Individual Retirement Account.

Item 6 — Purchaser Information

Subscription Offering

a.	Check this box if you had a deposit account(s) totaling $50.00 or more on June 30, 2009 (“Eligible Account Holder”).
b.	Check this box if you had a deposit account(s) totaling $50.00 or more on ____ __, ____ but are not an Eligible Account Holder (“Supplemental Eligible Account Holder”).
c.	Check this box if you had a deposit account(s) on _____ __, ____ but are not an Eligible Account Holder or Supplemental Account Holder (“Other Member”).

Please list all account numbers and all names on accounts you had on these dates in order to insure proper identification of your purchase rights.

Note: Failure to list all your accounts may result in the loss of part or all of your subscription rights.

Community Offering

d. Check this box if you are a community member (Indicate parish of residence in item 9).

Items 7 and 8 — Form of Stock Ownership, SS# or Tax ID#, Stock Registration and Mailing Address

Check the box that applies to your requested form of stock ownership and indicate your social security or tax ID number(s) in item 7. Complete the requested stock certificate registration, mailing address in item 8. The stock transfer industry has developed a uniform system of shareholder registrations that will be used in the issuance of your common stock. If you have any questions regarding the registration of your stock, please consult your legal advisor. Stock ownership must be registered in one of the ways described above under “Stock Ownership Guide.” Adding the names of other persons who are not owners of your qualifying account(s) will result in the loss of your subscription rights.

Item 9 — Telephone Number(s) and County

Indicate your daytime and evening telephone number(s) and county. We may need to call you if we have any questions regarding your order or we cannot execute your order as given.

Item 10 — Associates/Acting in Concert

Check this box if you or any associate or person acting in concert with you (as defined on the reverse side of the stock order form) has submitted another order for shares and complete the reverse side of the stock form.

Item 11 — Acknowledgment

Please review the prospectus carefully before making an investment decision. Sign and date the stock order form where indicated. Before you sign, review the stock order form, including the acknowledgment and certification. Normally, one signature is required. An additional signature is required only when payment is to be made by withdrawal from a deposit account that requires multiple signatures to withdraw funds.

Your properly completed signed stock order form and payment in full (or withdrawal authorization) at the subscription price must be physically received (not postmarked) by Fraternity Community Bancorp, Inc. no later than 2:00 p.m., Eastern time, on _______ __, 2011 or it will become void.

Delivery Instructions: You may deliver your stock order form by mail using the enclosed stock order return envelope, by hand delivery, or by overnight courier to the Fraternity Community Bancorp, Inc. Stock Information Center located at Fraternity Federal Savings and Loan Association’s main office, 764 Washington Boulevard, Baltimore, MD 21230.

If you have any remaining questions, or if you would like assistance in completing your stock order form, you may call our Stock Information Center at (___) ___-____, Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time.

Fraternity Federal Savings and Loan Association
Stock Information Center

764 Washington Boulevard

Baltimore, MD 21230

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