10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

Commission file number: 001-35309

BSB BANCORP, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	80-0752082
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S Employer Identification No.)
2 Leonard Street Belmont, Massachusetts	02478
(Address of Principal Executive Officers)	(Zip Code)

(617) 484-6700

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (Check one):

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The Registrant had 9,101,433 shares of common stock, par value $0.01 per share, outstanding as of July 29, 2016.

BSB BANCORP, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements		3
	- Consolidated Balance Sheets as of June 30, 2016 (unaudited) and December 31, 2015
	- Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2016 and 2015 (unaudited)		4
	- Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2016 and 2015 (unaudited)		5
	- Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2016 and 2015 (unaudited)		6
	- Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015 (unaudited)		7
	- Notes to Unaudited Consolidated Financial Statements		9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		44
Item 4.	Controls and Procedures		44
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		45
Item 1A.	Risk Factors		45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		45
Item 3.	Defaults Upon Senior Securities		46
Item 4.	Mine Safety Disclosures		46
Item 5.	Other Information		46
Item 6.	Exhibits		46

2

PART I. FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements

BSB BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

	June 30, 2016			December 31, 2015
	(unaudited)
ASSETS
Cash and due from banks	$	1,603		$	1,871
Interest-bearing deposits in other banks		52,240			49,390
Cash and cash equivalents		53,843			51,261
Interest-bearing time deposits with other banks		134			131
Investments in available-for-sale securities		22,122			21,876
Investments in held-to-maturity securities (fair value of $139,496 as of June 30, 2016 (unaudited) and $136,728 as of December 31, 2015)		137,341			137,119
Federal Home Loan Bank stock, at cost		21,824			18,309
Loans held for sale		—			1,245
Loans, net of allowance for loan losses of $12,543 as of June 30, 2016 (unaudited) and $11,240 as of December 31, 2015		1,689,295			1,534,957
Premises and equipment, net		2,561			2,657
Accrued interest receivable		4,351			3,781
Deferred tax asset, net		7,336			6,726
Income taxes receivable		692			—
Bank-owned life insurance		35,261			29,787
Other assets		4,337			5,067
Total assets	$	1,979,097		$	1,812,916
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	185,149		$	192,476
Interest-bearing		1,199,476			1,077,043
Total deposits		1,384,625			1,269,519
Federal Home Loan Bank advances		423,250			374,000
Securities sold under agreements to repurchase		1,771			3,695
Other borrowed funds		—			1,020
Accrued interest payable		1,016			993
Deferred compensation liability		6,901			6,434
Income taxes payable		—			184
Other liabilities		8,496			10,868
Total liabilities		1,826,059			1,666,713
Stockholders’ Equity:
Common stock; $0.01 par value, 100,000,000 shares authorized; 9,100,815 and 9,086,639 shares issued and outstanding at June 30, 2016 (unaudited) and December 31, 2015, respectively		91			91
Additional paid-in capital		90,745			89,648
Retained earnings		66,008			60,517
Accumulated other comprehensive income (loss)		54			(116	)
Unearned compensation - ESOP		(3,860	)		(3,937	)
Total stockholders’ equity		153,038			146,203
Total liabilities and stockholders’ equity	$	1,979,097		$	1,812,916

The accompanying notes are an integral part of these consolidated financial statements.

3

BSB BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

	Three months ended June 30,				Six months ended June 30,
	2016		2015		2016		2015
	(unaudited)				(unaudited)
Interest and dividend income:
Interest and fees on loans	$	14,138	$	10,679	$	27,550	$	20,911
Interest on taxable debt securities		801		738		1,629		1,479
Dividends		186		64		341		122
Other interest income		39		22		84		44
Total interest and dividend income		15,164		11,503		29,604		22,556
Interest expense:
Interest on deposits		2,348		1,941		4,472		3,696
Interest on Federal Home Loan Bank advances		1,108		527		2,135		1,058
Interest on securities sold under agreements to repurchase		1		1		2		1
Interest on other borrowed funds		—		7		5		14
Total interest expense		3,457		2,476		6,614		4,769
Net interest and dividend income		11,707		9,027		22,990		17,787
Provision for loan losses		741		365		1,340		704
Net interest and dividend income after provision for loan losses		10,966		8,662		21,650		17,083
Noninterest income:
Customer service fees		224		204		450		415
Income from bank-owned life insurance		237		202		470		389
Net gain on sales of loans		106		293		167		332
Loan servicing fee income		92		143		205		304
Other income		46		106		75		264
Total noninterest income		705		948		1,367		1,704
Noninterest expense:
Salaries and employee benefits		4,359		4,377		8,959		8,721
Director compensation		247		215		481		492
Occupancy expense		240		264		492		557
Equipment expense		109		140		214		284
Deposit insurance		287		232		567		450
Data processing		879		772		1,761		1,527
Professional fees		187		177		422		389
Marketing		208		266		429		519
Other expense		468		545		915		985
Total noninterest expense		6,984		6,988		14,240		13,924
Income before income tax expense		4,687		2,622		8,777		4,863
Income tax expense		1,735		1,019		3,286		1,886
Net income	$	2,952	$	1,603	$	5,491	$	2,977
Earnings per share
Basic	$	0.34	$	0.19	$	0.63	$	0.34
Diluted	$	0.33	$	0.18	$	0.61	$	0.34

The accompanying notes are an integral part of these consolidated financial statements.

4

BSB BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

	Three months ended June 30,					Six months ended June 30,
	2016		2015			2016		2015
	(unaudited)					(unaudited)
Net income	$	2,952	$	1,603		$	5,491	$	2,977
Other comprehensive income (loss), net of tax: Net change in fair value of securities available for sale		94		(93	)		170		(10	)
Total other comprehensive income (loss)		94		(93	)		170		(10	)
Total comprehensive income	$	3,046	$	1,510		$	5,661	$	2,967

The accompanying notes are an integral part of these consolidated financial statements.

5

BSB BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2016 AND 2015

(Dollars in thousands)

(Unaudited)

									Accumulated Other Comprehensive (Loss) Income
					Additional Paid-In Capital							Unearned Compensation - ESOP			Total Stockholders’ Equity
	Common Stock						Retained Earnings
	Shares		Amount
Balance at December 31, 2014		9,067,792	$	91	$	87,428	$	53,603	$	(22	)	$	(4,090	)	$	137,010
Net income		—		—		—		2,977		—			—			2,977
Other comprehensive loss		—		—		—		—		(10	)		—			(10	)
Release of ESOP stock		—		—		79		—		—			77			156
Stock based compensation-restricted stock awards		—		—		424		—		—			—			424
Stock based compensation-stock options		—		—		386		—		—			—			386
Tax benefit from stock based compensation		—		—		44		—		—			—			44
Stock option exercises, net of shares surrendered		16,289		—		166		—		—			—			166
Balance at June 30, 2015		9,084,081	$	91	$	88,527	$	56,580	$	(32	)	$	(4,013	)	$	141,153
Balance at December 31, 2015		9,086,639	$	91	$	89,648	$	60,517	$	(116	)	$	(3,937	)	$	146,203
Net income		—		—		—		5,491		—			—			5,491
Other comprehensive income		—		—		—		—		170			—			170
Release of ESOP stock		—		—		95		—		—			77			172
Stock based compensation-restricted stock awards		—		—		425		—		—			—			425
Stock based compensation-stock options		—		—		387		—		—			—			387
Tax benefit from stock based compensation		—		—		54		—		—			—			54
Stock option exercises, net of shares surrendered		14,176		—		136		—		—			—			136
Balance at June 30, 2016		9,100,815	$	91	$	90,745	$	66,008	$	54		$	(3,860	)	$	153,038

The accompanying notes are an integral part of these consolidated financial statements.

6

BSB BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Six months ended June 30,
	2016			2015
Cash flows from operating activities:
Net income	$	5,491		$	2,977
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of securities, net		381			334
Gain on sales of loans, net		(167	)		(332	)
Loans originated for sale		(5,151	)		(10,137	)
Proceeds from sales of loans		6,562			20,585
Provision for loan losses		1,340			704
Change in net unamortized mortgage premiums		(823	)		(241	)
Change in net deferred loan costs		675			(124	)
ESOP expense		172			156
Stock based compensation expense		812			810
Excess tax benefit from stock based compensation		(54	)		(44	)
Depreciation and amortization expense		308			383
Deferred income tax benefit		(724	)		(210	)
Increase in bank-owned life insurance		(470	)		(389	)
Net change in:
Accrued interest receivable		(570	)		(266	)
Other assets		730			(132	)
Income taxes receivable		(692	)		(426	)
Income taxes payable		(130	)		—
Accrued interest payable		23			30
Deferred compensation liability		467			441
Other liabilities		(2,510	)		(187	)
Net cash provided by operating activities		5,670			13,932
Cash flows from investing activities:
Maturities of interest-bearing time deposits with other banks		131			—
Purchases of interest-bearing time deposits with other banks		(134	)		—
Proceeds from maturities, payments, and calls of held-to-maturity securities		11,586			9,604
Purchases of held-to-maturity securities		(12,151	)		(20,175	)
Redemption of Federal Home Loan Bank stock		1,240			—
Purchases of Federal Home Loan Bank stock		(4,755	)		(1,370	)
Recoveries of loans previously charged off		13			19
Loan originations and principal collections, net		(7,050	)		(26,964	)
Purchases of loans		(149,512	)		(96,384	)
Capital expenditures		(212	)		(205	)
Premiums paid on bank-owned life insurance		(5,004	)		(5,005	)
Net cash used in investing activities		(165,848	)		(140,480	)

7

BSB BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

(Continued)

	Six months ended June 30,
	2016			2015
Cash flows from financing activities:
Net increase in demand deposits, NOW and savings accounts		63,934			130,795
Net increase in time deposits		51,172			34,400
Net proceeds from long-term Federal Home Loan Bank borrowings		116,250			15,000
Net change in short-term Federal Home Loan Bank advances		(67,000	)		(59,000	)
Net (decrease) increase in securities sold under agreement to repurchase		(1,924	)		1,068
Repayment of principal on other borrowed funds		—			(23	)
Net increase (decrease) in mortgagors’ escrow accounts		138			(165	)
Net proceeds from exercise of stock options		136			166
Excess tax benefit from stock based compensation		54			44
Net cash provided by financing activities		162,760			122,285
Net increase (decrease) in cash and cash equivalents		2,582			(4,263	)
Cash and cash equivalents at beginning of period		51,261			51,767
Cash and cash equivalents at end of period	$	53,843		$	47,504
Supplemental disclosures:
Interest paid	$	6,591		$	4,739
Income taxes paid		4,832			2,522
Transfer of loans held for investment to loans held for sale		—			10,116
Derecognition of loans and related recourse obligation in other borrowings		1,020			—

The accompanying notes are an integral part of these consolidated financial statements.

8

BSB BANCORP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of BSB Bancorp, Inc. have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The consolidated financial statements of BSB Bancorp, Inc. include the balances and results of operations of BSB Bancorp, Inc., a Maryland corporation, and its wholly-owned subsidiaries, Belmont Savings Bank and BSB Funding Corporation and the Bank’s wholly owned subsidiary, BSB Investment Corporation (referred to herein as “the Company,” “we,” “us,” or “our”). Intercompany transactions and balances are eliminated in the consolidation.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position as of June 30, 2016 and December 31, 2015 and the results of operations and cash flows for the interim periods ended June 30, 2016 and 2015. All interim amounts have not been audited, and the results of operations for the interim periods herein are not necessarily indicative of the results of operations to be expected for the fiscal year. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

Certain previously reported amounts have been reclassified to conform to the current period’s presentation.

NOTE 2 – RECENT ACCOUNTING STANDARDS UPDATES

In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new ASU will require both types of leases to be recognized on the balance sheet. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods therein. Early adoption is permitted. We are currently evaluating the impact of adopting the new guidance on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This update makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted. We are currently evaluating the impact of adopting the new guidance on the Company’s consolidated financial statements.

9

In June 2016, the FASB issue ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The update changes the impairment model for most financial assets and sets forth a “current expected credit loss” (CECL) model which will require the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This method is forward-looking and will generally result in earlier recognition of allowances for losses.This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and also applies to some off-balance sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this ASU on its consolidated financial statements.

NOTE 3—INVESTMENTS IN SECURITIES

The amortized cost basis of available-for-sale and held-to-maturity securities and their approximate fair values were as follows at the dates indicated (in thousands):

	June 30, 2016									December 31, 2015
	Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(unaudited)
Available-for-sale securities:
Corporate debt securities	$	22,088	$	49	$	(15	)	$	22,122	$	22,126	$	35	$	(285	)	$	21,876
	$	22,088	$	49	$	(15	)	$	22,122	$	22,126	$	35	$	(285	)	$	21,876
Held-to-maturity securities:
U.S. government sponsored mortgage-backed securities	$	119,713	$	1,488	$	(63	)	$	121,138	$	119,517	$	460	$	(965	)	$	119,012
Corporate debt securities		17,628		730		—			18,358		17,602		141		(27	)		17,716
	$	137,341	$	2,218	$	(63	)	$	139,496	$	137,119	$	601	$	(992	)	$	136,728

The amortized cost basis and estimated fair value of debt securities by contractual maturity at June 30, 2016 is as follows (in thousands and unaudited). Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2016
	Available-for-Sale				Held-to-Maturity
	Amortized Cost Basis		Fair Value		Amortized Cost Basis		Fair Value
	(unaudited)				(unaudited)
Due within one year	$	—	$	—	$	16	$	16
Due after one year through five years		12,780		12,828		9,110		9,173
Due after five years through ten years		9,308		9,294		51,982		53,249
Due after ten years		—		—		76,233		77,058
	$	22,088	$	22,122	$	137,341	$	139,496

When securities are sold, the adjusted cost basis of the specific security sold is used to compute the gain or loss on the sale. During the three and six months ended June 30, 2016 (unaudited) and June 30, 2015 (unaudited), there were no sales of available-for-sale securities.

10

Information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position is as follows (in thousands):

			Less than 12 Months					Over 12 Months
	# of Holdings		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2016 (unaudited):
Available-for-sale
Corporate debt securities		1	$	4,985	$	(15	)	$	—	$	—
Held-to-maturity
U.S. government sponsored mortgage-backed securities		14		5,939		(20	)		7,428		(43	)
Total temporarily impaired securities		15	$	10,924	$	(35	)	$	7,428	$	(43	)
December 31, 2015:
Available-for-sale
Corporate debt securities		4	$	9,745	$	(75	)	$	4,127	$	(210	)
Held-to-maturity
Corporate debt securities		3		4,733		(27	)		—		—
U.S. government sponsored mortgage-backed securities		52		89,366		(822	)		5,430		(143	)
Total temporarily impaired securities		59	$	103,844	$	(924	)	$	9,557	$	(353	)

The investment securities portfolio is generally evaluated for other-than-temporary impairment under Accounting Standards Codification (“ASC”) 320-10, “Investments - Debt and Equity Securities.”

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. At June 30, 2016 (unaudited), 15 debt securities were in an unrealized loss position. When there are securities in an unrealized loss position, consideration is given to (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, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Based on the Company’s June 30, 2016 (unaudited) quarterly review of securities in the investment portfolio, management has determined that unrealized losses related to 15 debt securities with aggregate depreciation of 0.42% from the Company’s amortized cost basis were caused primarily by changes in market interest rates. The contractual terms of these investments do not permit the companies to settle the security at a price less than the par value of the investment. The Company currently does not believe it is probable that it will be unable to collect all amounts due according to the contractual terms of the investments. Therefore, it is expected that the securities would not be settled at a price less than the par value of the investment. Because the Company does not intend to sell the investments and it is more likely than not that the Company will not be required to sell the investments before recovery of their amortized cost basis, it does not consider these investments to be other-than-temporarily impaired at June 30, 2016.

At December 31, 2015, 59 debt securities had unrealized losses with aggregate depreciation of 1.11% from the Company’s amortized cost basis. The Company’s unrealized losses on investments in corporate bonds and mortgage-backed securities are primarily caused by changes in market interest rates.

In addition to the securities listed above, the Company holds investments in a Rabbi Trust that are used to fund the executive and director non-qualified deferred compensation plan. These investments are available to satisfy the claims of general creditors of the Company in the event of bankruptcy and are included in our consolidated balance sheets in other assets. The investments consisted primarily of mutual funds and are classified as trading securities and recorded at fair value. The fair value of these investments at June 30, 2016 (unaudited) and December 31, 2015 was $2.5 million and $2.5 million, respectively. For the three and six month periods ending June 30, 2016 (unaudited), the net gain on these investments still held at the reporting date was $13,000 and $14,000, respectively. For the three and six month periods ending June 30, 2015 (unaudited), the net loss and net gain on these investments still held at the reporting date was $(9,000) and $30,000, respectively. Refer to Note 7 – Employee and Director Benefit Plans, for more information.

11

NOTE 4 – LOANS, ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, deferred fees or costs on originated loans, and any premiums or discounts on purchased loans.

Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

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

Payments received on impaired loans are applied to reduce the recorded investment in the loan principal to the extent necessary to eliminate doubt as to the collectability of the net carrying amount of the loan. Some or all of the payments received on impaired loans are recognized as interest income if the remaining net carrying amount of the loan is deemed to be fully collectible. When recognition of interest income on an impaired loan on a cash basis is appropriate, the amount of income that is recognized is limited to that which would have been accrued on the net carrying amount of the loan at the contractual interest rate. Any cash interest payments received in excess of the limit and not applied to reduce the net carrying amount of the loan are recorded as recoveries of charge-offs until the charge-offs are fully recovered.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

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

General Component:

The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: residential real estate, home equity lines of credit, commercial real estate, construction, commercial, indirect auto and other consumer. Management uses a rolling average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; trends in volume and terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; experience/ability/depth of lending management and staff; and national and local economic trends and conditions. There were no changes in the Company’s policies or methodology pertaining to the general component of the allowance for loan losses during the six months ended June 30, 2016 or during fiscal year 2015.

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

Residential real estate loans and home equity lines of credit – The Company generally does not originate or purchase loans with a loan-to-value ratio greater than 80 percent and generally does not grant subprime loans. Loans in this segment are generally collateralized by owner-occupied residential real estate and repayment is dependent on the cash flow and credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Commercial real estate loans – Loans in this segment are primarily secured by income-producing properties in eastern Massachusetts. The underlying cash flows generated by the properties may be adversely impacted by a downturn in the economy and increased

vacancy rates, which in turn, will have an effect on the credit quality in this segment. Management generally obtains rent rolls annually and continually monitors the cash flows of these borrowers.

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

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

Indirect auto loans – Loans in this segment are secured installment loans that were originated through a network of select regional automobile dealerships. The Company’s interest in the vehicle is secured with a recorded lien on the state title of each automobile. Collections are sensitive to changes in borrower financial circumstances, and the collateral can depreciate or be damaged in the event of repossession. Repayment is primarily dependent on the credit worthiness and the cash flow of the individual borrower and secondarily, liquidation of the collateral.

Other consumer loans—Loans in this segment include secured and unsecured consumer loans including passbook loans, consumer lines of credit and overdraft protection, and consumer unsecured loans. Repayment is dependent on the credit quality and the cash flow of the individual borrower.

Allocated Component:

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

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

Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral-dependent. Generally, TDRs are measured for impairment using the discounted cash flow method except in instances where foreclosure is probable in which case the fair value of collateral method is used. When the fair value of the impaired loan is determined to be less than the recorded investment in the loan, the impairment is recorded through the valuation allowance. However, for collateral dependent loans, the amount of the recorded investment in a loan that exceeds the fair value of the collateral is charged-off against the allowance for loan losses in lieu of an allocation of a specific allowance amount when such an amount has been identified definitively as uncollectable.

Unallocated Component:

An unallocated component may be maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio. At June 30, 2016 (unaudited) and December 31, 2015, the Company had unallocated reserves of $476,000 and $213,000, respectively.

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Loans consisted of the following (dollars in thousands):

	June 30, 2016						December 31, 2015
	Amount			Percent			Amount			Percent
	(unaudited)
Mortgage loans:
Residential one-to-four family	$	833,607			49.26	%	$	709,426			46.15	%
Commercial real estate loans (1)		484,328			28.61			449,391			29.24
Home equity lines of credit		170,363			10.06			160,040			10.41
Construction loans		63,034			3.72			60,722			3.95
Total mortgage loans		1,551,332			91.65			1,379,579			89.75
Commercial loans		60,249			3.56			53,192			3.46
Consumer loans:
Indirect auto loans		80,656			4.76			103,965			6.76
Other consumer loans		445			0.03			453			0.03
		141,350			8.35			157,610			10.25
Total loans		1,692,682			100.00	%		1,537,189			100.00	%
Net deferred loan costs		3,988						4,663
Net unamortized mortgage premiums		5,168						4,345
Allowance for loan losses		(12,543	)					(11,240	)
Total loans, net	$	1,689,295					$	1,534,957

(1) Includes multi-family real estate loans.

The following tables (in thousands) present the activity in the allowance for loan losses by portfolio class for the three and six months ended June 30, 2016 and 2015 (unaudited); and the balances of the allowance for loan losses and recorded investment in loans by portfolio class based on impairment method at June 30, 2016 (unaudited) and December 31, 2015. The recorded investment in loans in any of the following tables does not include accrued and unpaid interest or any deferred loan fees or costs, as amounts are not significant.

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	Three Months Ended June 30, 2016
	Beginning balance		Provision (benefit)			Charge-offs			Recoveries		Ending balance
Residential one-to-four family	$	3,980	$	175		$	—		$	—	$	4,155
Commercial real estate		4,868		(58	)		—			—		4,810
Construction		679		185			—			—		864
Commercial		505		193			—			—		698
Home equity lines of credit		1,008		30			—			—		1,038
Indirect auto		554		(36	)		(28	)		2		492
Other consumer		9		4			(4	)		1		10
Unallocated		228		248			—			—		476
Total	$	11,831	$	741		$	(32	)	$	3	$	12,543
	Three Months Ended June 30, 2015
	Beginning balance		Provision (benefit)			Charge-offs			Recoveries		Ending balance
Residential one-to-four family	$	2,579	$	161		$	—		$	—	$	2,740
Commercial real estate		4,035		87			—			—		4,122
Construction		473		112			—			—		585
Commercial		416		(61	)		—			—		355
Home equity lines of credit		740		87			—			—		827
Indirect auto		770		(31	)		(33	)		7		713
Other consumer		13		4			(5	)		—		12
Unallocated		177		6			—			—		183
Total	$	9,203	$	365		$	(38	)	$	7	$	9,537

	Six Months Ended June 30, 2016
	Beginning balance		Provision (benefit)			Charge-offs			Recoveries		Ending balance
Residential one-to-four family	$	3,574	$	581		$	—		$	—	$	4,155
Commercial real estate		4,478		332			—			—		4,810
Construction		801		63			—			—		864
Commercial		613		85			—			—		698
Home equity lines of credit		928		110			—			—		1,038
Indirect auto		623		(100	)		(42	)		11		492
Other consumer		10		6			(8	)		2		10
Unallocated		213		263			—			—		476
Total	$	11,240	$	1,340		$	(50	)	$	13	$	12,543
	Six Months Ended June 30, 2015
	Beginning balance		Provision (benefit)			Charge-offs			Recoveries		Ending balance
Residential one-to-four family	$	2,364	$	376		$	—		$	—	$	2,740
Commercial real estate		4,043		79			—			—		4,122
Construction		228		357			—			—		585
Commercial		458		(103	)		—			—		355
Home equity lines of credit		828		(1	)		—			—		827
Indirect auto		778		(24	)		(59	)		18		713
Other consumer		11		8			(8	)		1		12
Unallocated		171		12			—			—		183
Total	$	8,881	$	704		$	(67	)	$	19	$	9,537

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	June 30, 2016
	Individually evaluated for impairment				Collectively evaluated for impairment				Total
	Loan balance		Allowance		Loan balance		Allowance		Loan balance		Allowance
Residential one-to-four family	$	4,272	$	174	$	829,335	$	3,981	$	833,607	$	4,155
Commercial real estate		3,524		2		480,804		4,808		484,328		4,810
Construction		—		—		63,034		864		63,034		864
Commercial		—		—		60,249		698		60,249		698
Home equity lines of credit		200		—		170,163		1,038		170,363		1,038
Indirect auto		—		—		80,656		492		80,656		492
Other consumer		—		—		445		10		445		10
Unallocated		—		—		—		476		—		476
Total	$	7,996	$	176	$	1,684,686	$	12,367	$	1,692,682	$	12,543
	December 31, 2015
	Individually evaluated for impairment				Collectively evaluated for impairment				Total
	Loan balance		Allowance		Loan balance		Allowance		Loan balance		Allowance
Residential one-to-four family	$	4,341	$	260	$	705,085	$	3,314	$	709,426	$	3,574
Commercial real estate		6,083		133		443,308		4,345		449,391		4,478
Construction		—		—		60,722		801		60,722		801
Commercial		—		—		53,192		613		53,192		613
Home equity lines of credit		200		—		159,840		928		160,040		928
Indirect auto		15		—		103,950		623		103,965		623
Other consumer		—		—		453		10		453		10
Unallocated		—		—		—		213		—		213
Total	$	10,639	$	393	$	1,526,550	$	10,847	$	1,537,189	$	11,240

Information about loans that meet the definition of an impaired loan in ASC 310-10-35 is as follows as of June 30, 2016 (unaudited and in thousands):

	Impaired loans with a related allowance for credit losses
	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Residential one-to-four family	$	1,396	$	1,448	$	174
Commercial real estate		2,972		2,972		2
Totals	$	4,368	$	4,420	$	176
	Impaired loans with no related allowance for credit losses
	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Residential one-to-four family	$	2,876	$	2,918	$	—
Commercial real estate		552		552		—
Home equity lines of credit		200		200		—
Totals	$	3,628	$	3,670	$	—

Information about loans that meet the definition of an impaired loan in ASC 310-10-35 is as follows as of December 31, 2015 (in thousands):

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	Impaired loans with a related allowance for credit losses
			Unpaid
	Recorded		Principal		Specific
	Investment		Balance		Allowance
Residential one-to-four family	$	1,450	$	1,476	$	260
Commercial real estate		5,426		5,426		133
Totals	$	6,876	$	6,902	$	393
	Impaired loans with no related allowance for credit losses
	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Residential one-to-four family	$	2,891	$	2,933	$	—
Commercial real estate		657		657		—
Home equity lines of credit		200		200		—
Indirect auto		15		15		—
Totals	$	3,763	$	3,805	$	—

The following tables set forth information regarding interest income recognized on impaired loans, by portfolio, for the periods indicated (unaudited and in thousands):

	Three months ended June 30, 2016				Three months ended June 30, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
With an allowance recorded	Investment		Recognized		Investment		Recognized
Residential one-to-four family	$	1,400	$	8	$	1,178	$	8
Commercial real estate		2,977		30		3,035		31
Totals	$	4,377	$	38	$	4,213	$	39
	Three months ended June 30, 2016				Three months ended June 30, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
Without an allowance recorded	Investment		Recognized		Investment		Recognized
Residential one-to-four family	$	2,882	$	19	$	5,032	$	25
Commercial real estate		569		6		772		8
Home equity lines of credit		200		2		294		2
Indirect auto		15		—		—		—
Totals	$	3,666	$	27	$	6,098	$	35

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	Six months ended June 30, 2016				Six months ended June 30, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
With an allowance recorded	Investment		Recognized		Investment		Recognized
Residential one-to-four family	$	1,407	$	16	$	1,179	$	17
Commercial real estate		3,783		85		3,043		62
Totals	$	5,190	$	101	$	4,222	$	79
	Six months ended June 30, 2016				Six months ended June 30, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
Without an allowance recorded	Investment		Recognized		Investment		Recognized
Residential one-to-four family	$	2,886	$	39	$	5,043	$	50
Commercial real estate		596		13		787		16
Home equity lines of credit		200		4		295		4
Indirect auto		19		—		—		—
Totals	$	3,701	$	56	$	6,125	$	70

The following is a summary of past due and non-accrual loans (in thousands):

	June 30, 2016 (unaudited)
	30–59 Days		60–89 Days		90 Days or More		Total Past Due		90 days or more and accruing		Loans on Non-accrual
Real estate loans:
Residential one-to-four family	$	679	$	627	$	497	$	1,803	$	—	$	1,146
Home equity lines of credit		48		—		—		48		—		—
Other loans:
Indirect auto		429		42		—		471		—		—
Total	$	1,156	$	669	$	497	$	2,322	$	—	$	1,146
	December 31, 2015
	30–59 Days		60–89 Days		90 Days or More		Total Past Due		90 days or more and accruing		Loans on Non-accrual
Real estate loans:
Residential one-to-four family	$	1,579	$	81	$	411	$	2,071	$	—	$	1,192
Commercial real estate		—		—		—		—		—		2,424
Home equity lines of credit		634		—		—		634		—		—
Other loans:
Indirect auto		551		47		15		613		—		15
Total	$	2,764	$	128	$	426	$	3,318	$	—	$	3,631

Credit Quality Information

The Company utilizes a nine grade internal loan rating system for commercial, commercial real estate and construction loans, and a five grade internal loan rating system for certain residential real estate and home equity lines of credit that are rated if the loans become delinquent.

Loans rated 1, 2, 2.5, 3 and 3.5: Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 4: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 5: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

Loans rated 6: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 7: Loans in this category are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted.

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On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial, commercial real estate loans, and construction loans. On an annual basis, the Company engages an independent third party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process.

On a quarterly basis, the Company formally reviews the ratings on all residential real estate and home equity lines of credit if they have become delinquent. Criteria used to determine the rating consists of loan-to-value and days delinquent.

The following tables present the Company’s loans by risk rating at June 30, 2016 (unaudited and in thousands) and December 31, 2015 (in thousands). There were no loans rated as 6 (“doubtful”) or 7 (“loss”) at the dates indicated.

	June 30, 2016
	Loans rated 1-3.5		Loans rated 4		Loans rated 5		Loans not rated (A)		Total
Residential one-to-four family	$	—	$	355	$	1,860	$	831,392	$	833,607
Commercial real estate		450,994		28,840		4,494		—		484,328
Construction		63,034		—		—		—		63,034
Commercial		60,249		—		—		—		60,249
Home equity lines of credit		—		—		799		169,564		170,363
Indirect auto		—		—		—		80,656		80,656
Other consumer		—		—		—		445		445
Total	$	574,277	$	29,195	$	7,153	$	1,082,057	$	1,692,682

	December 31, 2015
	Loans rated 1-3.5		Loans rated 4		Loans rated 5		Loans not rated (A)		Total
Residential one-to-four family	$	—	$	359	$	1,915	$	707,152	$	709,426
Commercial real estate		427,160		15,159		7,072		—		449,391
Construction		56,459		4,263		—		—		60,722
Commercial		53,192		—		—		—		53,192
Home equity lines of credit		—		—		799		159,241		160,040
Indirect auto		—		—		—		103,965		103,965
Consumer		—		—		—		453		453
Total	$	536,811	$	19,781	$	9,786	$	970,811	$	1,537,189

(A) Residential real estate and home equity lines of credit are not formally risk rated by the Company unless the loans become delinquent.

The Company periodically modifies loans to extend the term or make other concessions to help a borrower stay current on their loan and to avoid foreclosure. Any loans that are modified are reviewed by the Company to identify if a TDR has occurred, which is when, for economic or legal reasons related to a borrower’s financial difficulties, the Bank grants a concession to the borrower that it would not otherwise consider. During the three and six months ended June 30, 2016 and June 30, 2015 (unaudited), there were no loans modified and determined to be TDRs. At June 30, 2016 (unaudited), the Company had $7.6 million of troubled debt restructurings related to ten loans.

The following table shows the Company’s total TDRs and other pertinent information as of the dates indicated (in thousands):

	June 30, 2016			December 31, 2015
		(unaudited	)
TDRs on Accrual Status	$	6,850		$	7,007
TDRs on Nonaccrual Status		772			781
Total TDRs	$	7,622		$	7,788
Amount of specific allocation included in the allowance for loan losses associated with TDRs	$	165		$	170
Additional commitments to lend to a borrower who has been a party to a TDR	$	—		$	—

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For purposes of this table the Company generally considers a loan to have defaulted when it reaches 90 days past due. The following table shows the loans that have been modified during the past twelve months which have subsequently defaulted during the periods indicated (unaudited and in thousands except for number of contracts):

	For the three months ended June 30,
	2016				2015
	Number		Recorded		Number		Recorded
	of Contracts		Investment		of Contracts		Investment
Real estate loans:
Residential one-to-four family		1	$	497		—	$	—
Total		1	$	497		—	$	—
	For the six months ended June 30,
	2016				2015
	Number		Recorded		Number		Recorded
	of Contracts		Investment		of Contracts		Investment
Real estate loans:
Residential one-to-four family		1	$	497		—	$	—
Total		1	$	497		—	$	—

Foreclosure Proceedings

Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled $497,000 as of June 30, 2016 (unaudited) and $412,000 as of December 31, 2015. We did not have any foreclosed residential real estate property as of June 30, 2016 (unaudited) and as of December 31, 2015.

NOTE 5 – TRANSFERS AND SERVICING

Certain residential mortgage loans are periodically sold by the Company to the secondary market. Generally, these loans are sold without recourse or other credit enhancements. The Company sells loans and both releases and retains the servicing rights. For loans sold with the servicing rights retained, we provide the servicing for the loans on a per-loan fee basis. The Company has also periodically sold auto loans to other financial institutions without recourse or other credit enhancements, and the Company generally provides servicing for these loans.

At June 30, 2016 (unaudited) and December 31, 2015, residential loans previously sold and serviced by the Company were $65.8 million and $65.9 million, respectively. At June 30, 2016 (unaudited) and December 31, 2015, indirect auto loans previously sold and serviced by the Company were $41.6 million and $57.8 million, respectively.

On March 16, 2006, seventeen loans with an aggregate principal balance of $10.5 million were sold to another financial institution. The agreement related to this sale contained provisions requiring the Company to repurchase any loan that became 90 days past due during the initial 120 months. The Company would repurchase the past due loan for 100 percent of the unpaid principal plus interest to repurchase date. During the six months ended June 30, 2016, the recourse provision expired and both the loans and recourse obligation were derecognized from the consolidated balance sheet. As of June 30, 2016 (unaudited) and December 31, 2015, the Company’s recorded balance of these loans sold with recourse amounted to $0 and $1.0 million, respectively. The Company did not incur any losses related to these loans.

Mortgage servicing rights (MSR) are initially recorded as an asset and measured at fair value when loans are sold to third parties with servicing rights retained. MSR assets are amortized in proportion to, and over the period of, estimated net servicing revenues. The carrying value of these assets is periodically reviewed for impairment using the lower of amortized cost or fair value methodology. The fair value of the servicing rights is determined by estimating the present value of future net cash flows, taking into consideration market loan prepayment speeds, discount rates, servicing costs and other economic factors. For purposes of measuring impairment, the underlying loans are stratified into relatively homogeneous pools based on predominant risk characteristics which include product type

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(i.e., fixed or adjustable) and interest rate bands. If the aggregate carrying value of the capitalized mortgage servicing rights for a stratum exceeds its fair value, MSR impairment is recognized in earnings through a valuation allowance for the difference. As the loans are repaid and net servicing revenue is earned, the MSR asset is amortized as an offset to loan servicing income. Servicing revenues are expected to exceed this amortization expense. However, if actual prepayment experience or defaults exceed what was originally anticipated, net servicing revenues may be less than expected and mortgage servicing rights may be impaired. No servicing assets or liabilities related to auto loans were recorded, as the contractual servicing fees are adequate to compensate the Company for its servicing responsibilities.

Changes in mortgage servicing rights, which are included in other assets, were as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
	(unaudited)						(unaudited)
Balance at beginning of period	$	466		$	463		$	479		$	476
Capitalization		29			55			46			77
Amortization		(24	)		(24	)		(45	)		(47	)
Valuation allowance adjustment		(14	)		(19	)		(23	)		(31	)
Balance at end of period	$	457		$	475		$	457		$	475

NOTE 6 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED FUNDS

The securities sold under agreements to repurchase as of June 30, 2016 (unaudited) and December 31, 2015 are securities sold on a short-term basis by the Company that have been accounted for not as sales but as borrowings. The securities consisted of mortgage-backed securities issued by U.S. government sponsored entities. The securities were held in the Company’s safekeeping account at the Federal Home Loan Bank of Boston under the control of the Company. The securities are pledged to the purchasers of the securities. The purchasers have agreed to sell to the Company identical securities at the maturity of the agreements. The balance of securities sold under agreements to repurchase as of June 30, 2016 (unaudited) and December 31, 2015 was $1.8 million and $3.7 million, respectively.

Other borrowed funds consist of the recourse obligation recorded in connection with the loans sold with recourse discussed in Note 5. The balance of the recourse obligation at June 30, 2016 (unaudited) and December 31, 2015 was $0 and $1.0 million, respectively.

NOTE 7 – EMPLOYEE AND DIRECTOR BENEFIT PLANS

Belmont Savings Bank Supplemental Executive Retirement Plan

The purpose of the Belmont Savings Bank Supplemental Executive Retirement Plan is to remain competitive with our peers in our compensation arrangements and to help us retain certain executive officers of the Company. At June 30, 2016 (unaudited) and December 31, 2015, there were four participants in the Plan. Participants are fully vested after the completion of between five and ten years of service. The plan is unfunded. The estimated liability at June 30, 2016 (unaudited) and December 31, 2015 relating to this plan was $1.5 million and $1.3 million, respectively.

Other Supplemental Retirement Plans

The Company has supplemental retirement plans for eligible executive officers that provide for a lump sum benefit upon termination of employment at or after age 55 and completing 10 or more years of service (certain reduced benefits are available prior to attaining age 55 or fewer than 10 years of service), subject to certain limitations as set forth in the agreements. The present value of these future payments is being accrued over the service period. The estimated liability at June 30, 2016 (unaudited) and December 31, 2015 relating to these plans was $2.2 million and $2.0 million, respectively.

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The Company has a supplemental retirement plan for eligible directors that provides for monthly benefits based upon years of service to the Company, subject to certain limitations as set forth in the agreements. The present value of these future payments is being accrued over the estimated period of service. The estimated liability at June 30, 2016 (unaudited) and December 31, 2015 relating to this plan was $649,000 and $635,000, respectively.

Incentive Compensation Plan

The Incentive Compensation Plan is a discretionary annual cash-based incentive plan that is an integral part of the participant’s total compensation package and supports the continued growth, profitability and risk management of Belmont Savings Bank. Each year participants are awarded for the achievement of certain performance objectives on a company-wide and individual basis. Compensation expense recognized was $523,000 and $555,000 for the three months ended June 30, 2016 and 2015 (unaudited), respectively, and $921,000 and $922,000 for the six months ended June 30, 2016 and 2015 (unaudited), respectively.

Defined Contribution Plan

The Company sponsors a 401(k) plan covering substantially all employees meeting certain eligibility requirements. Under the provisions of the plan, employees are able to contribute up to an annual limit of the lesser of 75% of eligible compensation or the maximum allowed by the Internal Revenue Service. The Company’s contributions for the three months ended June 30, 2016 and 2015 (unaudited) totaled $196,000 and $192,000, respectively, and $430,000 and $429,000 for the six months ended June 30, 2016 and 2015 (unaudited), respectively.

Deferred Compensation Plan

The Company has a compensation deferral plan by which selected employees and directors of the Company are entitled to elect, prior to the beginning of each year, to defer the receipt of an amount of their compensation for the forthcoming year. Each agreement allows for the individual to elect to defer a portion of his or her compensation to an individual deferred compensation account established by Belmont Savings Bank. In April 2013, Belmont Savings Bank created a Rabbi Trust, or grantor trust. The Rabbi Trust is maintained by the Company primarily for purposes of holding deferred compensation for certain directors and employees of the Company. The plan is administered by a third party and permits participants to select from a number of investment options for the investment of their account balances. Each participant is always 100% vested in his or her deferred compensation account balance. As of June 30, 2016 (unaudited) and December 31, 2015, the recorded liability relating to the Rabbi Trust was $2.5 million and $2.5 million, respectively.

Employee Stock Ownership Plan

The Company maintains an Employee Stock Ownership Plan (“ESOP”) to provide eligible employees the opportunity to own Company stock. This plan is a tax-qualified retirement plan for the benefit of all Company employees. Contributions are allocated to eligible participants on the basis of compensation, subject to federal tax law limits.

The Company contributed funds to a subsidiary to enable it to grant a loan to the ESOP for the purchase of 458,643 shares of the Company’s common stock at a price of $10.00 per share. The loan obtained by the ESOP from the Company’s subsidiary to purchase Company common stock is payable annually over 30 years at a rate per annum equal to the Prime Rate (3.5% at June 30, 2016, unaudited). Loan payments are principally funded by cash contributions from the Bank. The loan is secured by the shares purchased, which are held in a suspense account for allocation among participants as the loan is repaid. Cash dividends paid on allocated shares are distributed to participants and cash dividends paid on unallocated shares are used to repay the outstanding debt of the ESOP. Shares used as collateral to secure the loan are released and available for allocation to eligible employees as the principal and interest on the loan is paid. The Company incurred expenses of $87,000 and $84,000 for the three months ended June 30, 2016 and 2015 (unaudited), respectively, and $172,000 and $156,000 for the six months ended June 30, 2016 and 2015 (unaudited), respectively.

Severance Agreements

The Company has entered into employment agreements and change in control agreements with certain executive officers which would provide the executive officers with severance payments based on salary, and the continuation of other benefits, upon a change in control as defined in the agreements.

NOTE 8 – PLEDGED ASSETS

The following securities and loans were pledged to secure securities sold under agreements to repurchase, FHLB advances and credit facilities available (in thousands).

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June 30, 2016 (unaudited)	Securities held to		Loans		Total pledged
	maturity (at cost)		receivable		assets
Repurchase agreements	$	5,266	$	—	$	5,266
FHLB borrowings		42,870		865,112		907,982
Federal Reserve Bank line of credit		15,720		—		15,720
Total pledged assets	$	63,856	$	865,112	$	928,968
December 31, 2015	Securities held to		Loans		Total pledged
	maturity (at cost)		receivable		assets
Repurchase agreements	$	5,731	$	—	$	5,731
FHLB borrowings		48,105		735,818		783,923
Federal Reserve Bank line of credit		15,700		—		15,700
Total pledged assets	$	69,536	$	735,818	$	805,354

NOTE 9 – EARNINGS PER SHARE

Basic earnings per share (“EPS”) excludes dilution and is calculated by dividing net income allocated to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted EPS is computed in a manner similar to that of basic EPS except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares (computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents (such as stock options and unvested restricted stock not meeting the definition of a participating security) were issued during the period.

Earnings per share consisted of the following components for the periods indicated (unaudited and dollars in thousands except per share data):

23

	Three months ended						Six months ended
	June 30,						June 30,
	2016			2015			2016			2015
Net income	$	2,952		$	1,603		$	5,491		$	2,977
Undistributed earnings attributable to participating securities		(49	)		(40	)		(92	)		(75	)
Net income allocated to common stockholders	$	2,903		$	1,563		$	5,399		$	2,902
Weighted average shares outstanding, basic		8,560,039			8,450,099			8,555,212			8,446,266
Effect of dilutive shares		266,700			230,572			260,623			196,672
Weighted average shares outstanding, assuming dilution		8,826,739			8,680,671			8,815,835			8,642,938
Basic EPS	$	0.34		$	0.19		$	0.63		$	0.34
Effect of dilutive shares		(0.01	)		(0.01	)		(0.02	)		—
Diluted EPS	$	0.33		$	0.18		$	0.61		$	0.34

The following table illustrates average options to purchase shares of common stock that were outstanding but not included in the computation of EPS because they were antidilutive under the treasury stock method (unaudited):

	Three months ended				Six months ended
	June 30,				June 30,
	2016		2015		2016		2015
Stock options		27,500		23,242		18,434		27,324

Unallocated common shares held by the ESOP are shown as a reduction in stockholders’ equity and are not included in the weighted-average number of common shares outstanding for either basic or diluted earnings per share calculations.

On June 22, 2013, the Company’s Board of Directors authorized a program to repurchase, from time-to-time and as market and business conditions warrant, up to 500,000 shares of the Company’s common stock. During the six months ended June 30, 2016 and 2015 (unaudited), the Company did not repurchase any shares under the repurchase program.

NOTE 10 – STOCK BASED COMPENSATION

The following table presents the pre-tax expense associated with stock options and restricted stock awards and the related tax benefits recognized (in thousands and unaudited):

	Three months ended				Six months ended
	June 30,				June 30,
	2016		2015		2016		2015
Stock options	$	198	$	198	$	387	$	386
Restricted stock awards		215		216		425		424
Total stock based compensation expense	$	413	$	414	$	812	$	810
Related tax benefits recognized in earnings	$	122	$	119	$	241	$	235

Total compensation cost related to non-vested awards not yet recognized and the weighted average period (in years) over which it is expected to be recognized is as follows (in thousands):

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	As of June 30, 2016				As of December 31, 2015
	(unaudited)
			Weighted average period				Weighted average period
	Amount				Amount
Stock options	$	1,200		1.85	$	1,476		2.07
Restricted stock		1,178		1.46		1,562		1.95
Total	$	2,378			$	3,038

NOTE 11 – FAIR VALUE MEASUREMENTS

Determination of Fair Value

The fair value of an asset or liability is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified from one level to another. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various assets and liabilities. In cases where quoted market prices are not available, fair values are based on estimates using present value of cash flows or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

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

Level 1 - Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 - Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 - Level 3 inputs are unobservable inputs for the asset or liability.

For assets and liabilities, fair value is based upon the lowest level of input that is significant to the fair value measurement.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon models that primarily use, as inputs, observable market based parameters. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein. A more detailed description of the valuation methodologies used for assets and liabilities measured at fair value is set forth below. A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value for June 30, 2016 and December 31, 2015. There were no significant transfers between level 1 and level 2 of the fair value hierarchy during the six months ended June 30, 2016 (unaudited) and the year ended December 31, 2015.

Financial Assets and Financial Liabilities: Financial assets and financial liabilities measured at fair value on a recurring basis include the following:

Securities Available for Sale: The Company’s investment in corporate debt securities is generally classified within level 2 of the fair value hierarchy. For these securities, the Company obtains fair value measurements from independent pricing services. The fair value measurements consider observable data that may include reported trades, dealer quotes, market spreads, cash flows, the U.S. treasury yield curve, trading levels, market consensus prepayment speeds, credit information and the instrument’s terms and conditions.

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Investments held in the Rabbi Trust: Investments held in the Rabbi Trust consist primarily of exchange-traded mutual funds and were recorded at fair value and included in other assets. The purpose of these investments is to fund certain director and executive non-qualified retirement benefits and deferred compensation. The exchange-traded mutual funds were valued based on quoted prices from the market and are categorized as Level 1.

The following table summarizes financial assets measured at fair value on a recurring basis as of June 30, 2016 and December 31, 2015, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total Fair Value
At June 30, 2016 (unaudited) Securities available-for-sale Corporate debt securities	$	—	$	22,122	$	—	$	22,122
Trading securities Rabbi trust investments		2,530		—		—		2,530
Totals	$	2,530	$	22,122	$	—	$	24,652
							Total
	Level 1		Level 2		Level 3		Fair Value
At December 31, 2015 Securities available-for-sale Corporate debt securities	$	—	$	21,876	$	—	$	21,876
Trading securities Rabbi trust investments		2,460		—		—		2,460
Totals	$	2,460	$	21,876	$	—	$	24,336

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets measured at fair value on a non-recurring basis during the reported periods include certain impaired loans reported at the fair value of the underlying collateral. Fair value was measured using appraised values of collateral and adjusted as necessary by management based on unobservable inputs for specific properties. However, the choice of observable data is subject to significant judgment, and there are often adjustments based on judgment in order to make observable data comparable and to consider the impact of time, the condition of properties, interest rates, and other market factors on current values. Additionally, commercial real estate appraisals frequently involve discounting of projected cash flows, which relies inherently on unobservable data. Therefore, real estate collateral related nonrecurring fair value measurement adjustments have generally been classified as Level 3. Estimates of fair value used for other collateral supporting commercial loans generally are based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3. Financial assets measured at fair value on a non-recurring basis during the reported periods also include loans held-for-sale. Residential mortgage loans held-for-sale are recorded at the lower of cost or fair value and are therefore measured at fair value on a non-recurring basis. The fair values for loans held-for-sale are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality and are included in Level 3.

The following table (in thousands) presents certain impaired loans that were re-measured and reported at fair value through a specific valuation allowance allocation of the allowance for loan losses or charge off based upon the fair value of the underlying collateral and loans held-for-sale at June 30, 2016 (unaudited) and December 31, 2015.

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	June 30, 2016
	Level 1		Level 2		Level 3
Impaired loans	$	—	$	—	$	632
Totals	$	—	$	—	$	632
	December 31, 2015
	Level 1		Level 2		Level 3
Impaired loans	$	—	$	—	$	2,886
Loans held-for-sale		—		—		1,245
Totals	$	—	$	—	$	4,131

Non-Financial Assets and Non-Financial Liabilities: The Company has no non-financial assets or non-financial liabilities measured at fair value on a recurring basis. Non-financial assets measured at fair value on a non-recurring basis during the reported periods include certain foreclosed assets which, upon initial recognition, were re-measured and reported at fair value through a charge-off to the allowance for loan losses. Non financial assets also include mortgage servicing right assets that are remeasured and reported at the lower of cost or fair value.

The following table (in thousands) presents the non-financial assets that were re-measured and reported at the lower of cost or fair value at the periods indicated:

	June 30, 2016
	Level 1		Level 2		Level 3
			(unaudited)
Mortgage servicing rights	$	—	$	—	$	457
Totals	$	—	$	—	$	457
	December 31, 2015
	Level 1		Level 2		Level 3
Mortgage servicing rights	$	—	$	—	$	479
Totals	$	—	$	—	$	479

ASC Topic 825, “Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The estimated fair value approximates carrying value for cash and cash equivalents, FHLB stock, accrued interest, bank owned life insurance, securities sold under agreements to repurchase and mortgagors’ escrow accounts. The methodologies for other significant financial assets and financial liabilities are discussed below:

Securities held to maturity-The fair values presented are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments and/or discounted cash flow analyses.

Loans- For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

Deposits- The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for

fixed-rate certificate accounts are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on certificate accounts.

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

Other borrowed funds-This balance represents the balance of loans sold with recourse. Fair values are determined consistent with that of our loans.

Summary of Fair Values of Financial Instruments not Carried at Fair Value

The estimated fair values, and related carrying or notional amounts, of the Company’s financial instruments are as follows (in thousands):

	June 30, 2016
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
					(unaudited)
Financial assets:
Cash and cash equivalents	$	53,843	$	53,843	$	53,843	$	—	$	—
Interest-bearing time deposits with other banks		134		134		—		134		—
Held-to-maturity securities		137,341		139,496		—		139,496		—
Federal Home Loan Bank stock		21,824		21,824		—		21,824		—
Loans, net		1,689,295		1,691,009		—		—		1,691,009
Accrued interest receivable		4,351		4,351		4,351		—		—
Bank-owned life insurance		35,261		35,261		—		35,261		—
Financial liabilities:
Deposits		1,384,625		1,388,306		1,075,018		313,288		—
Federal Home Loan Bank advances		423,250		426,606		—		426,606		—
Securities sold under agreements to repurchase		1,771		1,771		—		1,771		—
Accrued interest payable		1,016		1,016		1,016		—		—
Mortgagors’ escrow accounts		2,553		2,553		—		2,553		—

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	December 31, 2015
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	51,261	$	51,261	$	51,261	$	—	$	—
Interest-bearing time deposits with other banks		131		131		—		131		—
Held-to-maturity securities		137,119		136,728		—		136,728		—
Federal Home Loan Bank stock		18,309		18,309		—		18,309		—
Loans, net		1,534,957		1,518,476		—		—		1,518,476
Accrued interest receivable		3,781		3,781		3,781		—		—
Bank-owned life insurance		29,787		29,787		—		29,787		—
Financial liabilities:
Deposits		1,269,519		1,271,278		1,011,084		260,194		—
Federal Home Loan Bank advances		374,000		373,840		—		373,840		—
Securities sold under agreements to repurchase		3,695		3,695		—		3,695		—
Other borrowed funds		1,020		999		—		999		—
Accrued interest payable		993		993		993		—		—
Mortgagors’ escrow accounts		2,414		2,414		—		2,414		—

NOTE 12 – OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents a reconciliation of the changes in the components of other comprehensive income(loss) for the dates indicated, including the amount of income tax expense (benefit) allocated to each component of other comprehensive income (loss):

	Three months ended June 30, 2016							Three months ended June 30, 2015
	(unaudited and in thousands)							(unaudited and in thousands)
	Pre Tax		Tax			After Tax		Pre Tax			Tax		After Tax
	Amount		Expense			Amount		Amount			Benefit		Amount
Securities available-for-sale:
Change in fair value of securities available-for-sale	$	156	$	(62	)	$	94	$	(154	)	$	61	$	(93	)
Total other comprehensive income (loss)	$	156	$	(62	)	$	94	$	(154	)	$	61	$	(93	)

	Six months ended June 30, 2016							Six months ended June 30, 2015
	(unaudited and in thousands)							(unaudited and in thousands)
	Pre Tax		Tax			After Tax		Pre Tax			Tax		After Tax
	Amount		Expense			Amount		Amount			Benefit		Amount
Securities available-for-sale:
Change in fair value of securities available-for-sale	$	284	$	(114	)	$	170	$	(18	)	$	8	$	(10	)
Total other comprehensive income (loss)	$	284	$	(114	)	$	170	$	(18	)	$	8	$	(10	)

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The components of accumulated other comprehensive income (loss), included in stockholders’ equity, are as follows: (in thousands):

	June 30, 2016		December 31, 2015
	(unaudited)
Net unrealized holding gain (loss) on available-for-sale securities, net of tax	$	20	$	(150	)
Unrecognized benefit pertaining to defined benefit plan, net of tax		34		34
Accumulated other comprehensive income (loss)	$	54	$	(116	)

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

The following analysis discusses the changes in financial condition and results of operation of the Company, and should be read in conjunction with both the unaudited consolidated interim financial statements and notes thereto, appearing in Part 1, Item 1 of this report.

Forward-Looking Statements

This report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “may” and words of similar meaning. These forward-looking statements include, but are not limited to:

• statements of our goals, intentions and expectations;

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

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

• estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We do not undertake any obligation to update any forward-looking statements after the date of this document, except as required by law.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

• our ability to successfully implement our business strategy, which includes significant asset and liability growth;

• our ability to increase our market share in our market areas and capitalize on growth opportunities;

• our ability to successfully implement our branch network expansion strategy;

• general economic conditions, either nationally or in our market areas, and conditions in the real estate markets that could affect the demand for our loans and other products and the ability of borrowers to repay loans, lead to declines in credit quality and increased loan losses, and negatively affect the value and salability of the real estate that is the collateral for many of our loans;

• competition among depository and other financial institutions;

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

• adverse changes in the securities markets;

• changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

• increases in Federal Deposit Insurance Corporation (“FDIC”) deposit insurance premiums and assessments could adversely affect our financial condition;

• government shutdowns;

• severe weather, natural disasters, acts of war or terrorism and other external events which could significantly impact our business;

• our inability to adapt to changes in information technology;

• system failures or breaches of our network security;

• electronic fraudulent activity within the financial services industry;

• our ability to successfully integrate acquired entities, if any;

• changes in consumer spending, borrowing and savings habits;

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

• changes in our organization, compensation and benefit plans;

• changes in our financial condition or results of operations that reduce capital available; and

• changes in the financial condition or future prospects of issuers of securities that we own.

Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the filings made by BSB Bancorp, Inc. with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended December 31, 2015 under the heading “Item 1A. Risk Factors.” Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

Critical Accounting Policies

There are no material changes to the critical accounting policies from those disclosed in BSB Bancorp, Inc.’s 2015 Annual Report on Form 10-K. In applying these accounting policies, management is required to exercise judgment in determining many of the methodologies, assumptions and estimates to be utilized. As discussed in the Company’s 2015 Annual Report on Form 10-K, the most significant areas in which management applies critical assumptions and estimates that are particularly susceptible to change relate to the determination of the allowance for loan losses, investment classification and impairment and deferred income taxes. Management’s estimates and assumptions affect the reported amounts of assets and liabilities as of the balance sheet date and revenues and expenses for the period. Actual results could differ from the amount derived from management’s estimates and assumptions under different conditions.

Comparison of Financial Condition at June 30, 2016 and December 31, 2015

Total Assets. Total assets increased $166.18 million to $1.98 billion at June 30, 2016, from $1.81 billion at December 31, 2015. The increase was primarily the result of a $154.34 million or 10.1% increase in net loans and a $5.47 million or 18.4% increase in bank-owned life insurance.

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Loans. Our plan to prudently increase our loan portfolios is working as we experienced solid growth in our residential real estate loans and commercial real estate loans during the six months ended June 30, 2016. Net loans increased by $154.34 million or 10.1% to $1.69 billion at June 30, 2016 from $1.53 billion at December 31, 2015. The increase in net loans was primarily due to increases of $124.18 million or 17.5% in residential one-to-four family loans, $34.94 million or 7.8% in commercial real estate loans, $10.32 million or 6.5% in home equity lines of credit, and $7.06 milion or 13.3% in commercial loans. Partially offsetting these increases was a decrease in indirect auto loans of $23.31 million or 22.4% driven by the suspension of new originations due to current market conditions.

Investment Securities. Total investment securities increased $468,000 to $159.46 million at June 30, 2016 from $158.99 million at December 31, 2015.

Cash and Cash Equivalents. Cash and cash equivalents increased by $2.58 million or 5.0% to $53.84 million at June 30, 2016 from $51.26 million at December 31, 2015.

Bank-Owned Life Insurance. We invest in bank-owned life insurance to help defray the cost of our benefit plan obligations. Bank-owned life insurance also generally provides noninterest income that is nontaxable. At June 30, 2016, our investment in bank-owned life insurance was $35.26 million or an increase of $5.47 million from $29.79 million at December 31, 2015. This increase was driven by purchases of $5.00 million in new policies and $470,000 in income from bank owned life insurance during the six months ended June 30, 2016.

Deposits. Deposits increased $115.11 million or 9.1% to $1.38 billion at June 30, 2016 from $1.27 billion at December 31, 2015. The increase in deposits was due to an increase of $50.36 million or 7.4% in savings accounts, an increase of $51.17 million or 19.8% in certificates of deposit (“CDs”) and an increase of $20.86 million or 16.5% in interest bearing checking accounts, partially offset by a decrease of $7.33 million or 3.8% in demand deposits. Core deposits, which we consider to include all deposits other than CDs and brokered CDs, increased by $63.93 million or 6.3%. Deposit growth momentum continued in the second quarter. This strong performance was driven by the success of our ongoing targeted focus on key business segments such as municipalities and the legal profession. In addition, the effective cross selling of our expanding commercial real estate customer base continued to contribute to these results.

The following table sets forth the Company’s deposit accounts at the dates indicated (dollars in thousands):

	June 30, 2016					December 31, 2015
	Amount		Percent			Amount		Percent
	(unaudited)
Deposit type:
Demand deposits	$	185,149		13.37	%	$	192,476		15.16	%
Interest-bearing checking accounts		147,382		10.64			126,519		9.97
Savings accounts		734,295		53.04			683,940		53.87
Money market deposits		8,192		0.59			8,149		0.64
Total transaction accounts		1,075,018		77.64			1,011,084		79.64
Term certificates less than $100,000		183,181		13.23			162,462		12.80
Term certificates $100,000 or more		126,426		9.13			95,973		7.56
Total certificate accounts		309,607		22.36			258,435		20.36
Total deposits	$	1,384,625		100.00	%	$	1,269,519		100.00	%

Borrowings. At June 30, 2016, borrowings consisted of advances from the Federal Home Loan Bank of Boston and securities sold to customers under agreements to repurchase, or “repurchase agreements.” Other borrowed funds that existed at December 31, 2015 with a balance of $1.02 million have been derecognized from the consolidated balance sheets as of June 30, 2016. The balance was related to loans that were sold with recourse to another financial institution in March of 2006 that were accounted for as secured borrowings due to a recourse provision. The recourse provision expired during the quarter ended March 31, 2016 and both the loans and recourse obligation were derecognized.

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Total borrowings increased $46.31 million or 12.2% to $425.02 million at June 30, 2016, from $378.72 million at December 31, 2015. Advances from the Federal Home Loan Bank of Boston drove this increase as such advances increased $49.25 million to $423.25 million at June 30, 2016, from $374.00 million at December 31, 2015.

The following table sets forth the Company’s short-term borrowings and long-term debt for the dates indicated (in thousands):

	June 30, 2016		December 31, 2015
	(unaudited)
Long-term borrowed funds:
Federal Home Loan Bank of Boston long-term advances	$	289,250	$	173,000
Other borrowed funds		—		1,020
		289,250		174,020
Short-term borrowed funds:
Federal Home Loan Bank of Boston short-term advances		134,000		201,000
Repurchase agreements		1,771		3,695
		135,771		204,695
Total borrowed funds	$	425,021	$	378,715

Stockholders’ Equity. Total stockholders’ equity increased $6.84 million, or 4.7%, to $153.04 million at June 30, 2016 from $146.20 million as of December 31, 2015. This increase is primarily the result of earnings of $5.49 million and a $1.10 million increase in additional paid-in capital related to stock-based compensation.

Non-Performing Assets. The following table sets forth the amounts and categories of our non-performing assets at the dates indicated (dollars in thousands):

	At June 30,			At December 31,
	2016			2015
	(unaudited)
Non-accrual loans:
Real estate loans:
Residential one-to-four family	$	1,146		$	1,192
Commercial real estate		—			2,424
Consumer loans:
Indirect auto loans		—			15
Total non-accrual loans	$	1,146		$	3,631
Total non-performing loans		1,146			3,631
Repossessed automobiles		50			8
Total non-performing assets (NPAs)	$	1,196		$	3,639
Troubled debt restructurings:
Troubled debt restructures included in NPAs	$	772		$	781
Troubled debt restructures not included in NPAs		6,850			7,007
Total troubled debt restructures	$	7,622		$	7,788
Ratios:
Non-performing loans to total loans		0.07	%		0.24	%
Non-performing assets to total assets		0.06	%		0.20	%

It is the general policy of the Bank to consider any loan on non-accrual as an impaired loan. Exceptions to this policy can be made when, in the opinion of senior management, a loan is adequately secured, properly documented and clearly in the process of collection. Any exceptions to policy are reviewed on a monthly basis and must be approved by senior management. At June 30, 2016

and December 31, 2015, there were no loans on non-accrual that were determined to not be impaired. At June 30, 2016 and December 31, 2015 there were no loans delinquent 90 days or more and still accruing.

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Troubled Debt Restructurings. We occasionally modify loans to extend the term or make other concessions to help a borrower stay current on their loan and to avoid foreclosure or collection activity. We generally do not forgive principal or interest on loans. At June 30, 2016, we had $7.62 million of troubled debt restructurings related to ten loans as compared to $7.79 million of troubled debt restructurings related to ten loans at December 31, 2015. The decrease in the balance was driven by paydowns.

Comparison of Operating Results for the Three Months Ended June 30, 2016 and 2015

General. Net income for the three months ended June 30, 2016 was $2.95 million, compared to net income of $1.60 million for the three months ended June 30, 2015. The improvement in operating results of $1.35 million or 84.2% for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 resulted from an increase in net interest and dividend income after the provision for loan losses of $2.30 million, partially offset by an increase in income tax expense of $716,000 and a decrease in noninterest income of $243,000.

Net Interest and Dividend Income. Net interest and dividend income increased $2.68 million or 29.7% to $11.71 million for the three months ended June 30, 2016, compared to $9.03 million for the three months ended June 30, 2015. The increase in net interest and dividend income was primarily due to an increase in average net interest-earning assets of $17.06 million or 6.2% to $293.49 million for the three months ended June 30, 2016, from $276.43 million for the three months ended June 30, 2015 as well as an increase in our net interest margin of 2 basis points to 2.49% during the three months ended June 30, 2016 from 2.47% during the three months ended June 30, 2015.

Interest and Dividend Income. Interest and dividend income increased $3.66 million, or 31.8%, to $15.16 million for the three months ended June 30, 2016, from $11.50 million for the three months ended June 30, 2015. The increase in interest and dividend income was primarily due to a $3.46 million increase in interest and fees on loans. The increase in interest and fees on loans resulted primarily from an increase in the average balance of loans of $395.83 million to $1.66 billion for the three months ended June 30, 2016, from $1.27 billion for the three months ended June 30, 2015 as well as a 4 basis point increase in the average yield on loans to 3.42% for the three months ended June 30, 2016 from 3.38% for the three months ended June 30, 2015.

Interest Expense. Interest expense increased $981,000 or 39.6%, to $3.46 million for the three months ended June 30, 2016 from $2.48 million for the three months ended June 30, 2015. The increase resulted from a $392.81 million or 33.4% increase in the average balance of interest-bearing liabilities to $1.57 billion for the three months ended June 30, 2016 from $1.18 billion for the three months ended June 30, 2015 as well as a 5 basis point increase in the cost of interest-bearing liabilities to 0.89% during the three months ended June 30, 2016 from 0.84% during the three months ended June 30, 2015.

Interest expense on interest-bearing deposits increased by $407,000 to $2.35 million for the three months ended June 30, 2016, from $1.94 million for the three months ended June 30, 2015. This increase was primarily due to an increase in the interest expense on savings accounts, CDs and interest-bearing checking accounts of $211,000, $125,000 and $73,000, respectively. The increase in interest expense on savings accounts of $211,000 from $868,000 to $1.08 million was driven by an increase in the average balance of $155.14 million, partially offset by a 1 basis point decrease in the cost of savings accounts to 0.59% from 0.60%. The increase in interest expense on CDs of $125,000 from $998,000 to $1.12 million was driven by an increase in the average balance of $42.87 million, partially offset by a 5 basis point decrease in the cost of CD accounts to 1.51% from 1.56%. The increase in interest expense on interest-bearing checking accounts of $73,000 from $73,000 to $146,000 was driven by an increase in the average balance of $55.78 million as well as an 8 basis point increase in the cost of interest-bearing checking accounts to 0.42% from 0.34%.

Interest expense on total borrowings increased $574,000 to $1.11 million for the three months ended June 30, 2016 from $535,000 for the three months ended June 30, 2015. This increase was primarily due to an increase in the average balance of FHLB advances of $140.65 million or 57.8% to $383.97 million for the three months ended June 30, 2016 from $243.32 million for the three months ended June 30, 2015 and an increase in the average cost of FHLB advances of 29 basis points to 1.16% for the three months ended June 30, 2016 from 0.87% for the three months ended June 30, 2015, as we have increased the balance of our long term advances.

Provision for Loan Losses. Based on our methodology for establishing the allowance for loan losses and provision for loan losses as discussed in Note 4 to the Consolidated Financial Statements included in this Form 10-Q, we recorded a provision for loan losses of $741,000 for the three months ended June 30, 2016, compared to $365,000 for the three months ended June 30, 2015. The allowance for loan losses was $12.54 million or 0.74% of total loans at June 30, 2016, compared to $11.24 million or 0.73% of total loans at December 31, 2015.

Noninterest Income. Noninterest income decreased by $243,000 to $705,000 for the three months ended June 30, 2016, from $948,000 for the three months ended June 30, 2015. This decrease was primarily driven by a decrease in net gains on sales of loans and a decline in auto loan servicing and other auto related fee income. Partially offsetting these decreases was an increase in income from bank-owned life insurance due to $5.00 million of additional policies purchased during the second quarter of 2015 as well as $5.00 million purchased during the second quarter of 2016.

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Noninterest Expense. Noninterest expense decreased $4,000 or 0.1% to $6.98 million for the three months ended June 30, 2016, from $6.99 million for the three months ended June 30, 2015. Our efficiency ratio improved to 56.3% during the three months ended June 30, 2016 from 70.1% during the three months ended June 30, 2015 as we continue to grow the balance sheet and manage costs.

Income Tax Expense. We recorded income tax expense of $1.74 million for the three months ended June 30, 2016 compared to income tax expense of $1.02 million for the three months ended June 30, 2015. The effective tax rate for the three months ended June 30, 2016 was 37.0% compared to 38.9% for the three months ended June 30, 2015. The decrease in our effective tax rate was driven by an increase in our deferred tax assets related to an increase in our statutory federal income tax rate. In addition, our effective tax rate benefited from the impact of federally tax exempt industrial revenue bond interest income and the lower impact of non-deductible stock based compensation. Partially offsetting these decreases to our effective tax rate was increased income tax expense as a result of the increase in our statutory federal income tax rate.

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The following tables set forth average balances of assets and liabilities, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.

	For the Three Months Ended June 30,
	(unaudited)
	2016							2015
	(Dollars in thousands)
	Average Outstanding Balance		Interest		Yield/Rate(1)			Average Outstanding Balance		Interest		Yield/Rate(1)
Interest-earning assets:
Total loans	$	1,664,562	$	14,138		3.42	%	$	1,268,728	$	10,679		3.38	%
Securities		156,286		801		2.06	%		144,385		738		2.05	%
Other		42,303		39		0.37	%		40,170		22		0.22	%
Total interest-earning assets (5)		1,863,151	$	14,978		3.23	%		1,453,283	$	11,439		3.15	%
Non-interest-earning assets		59,182							48,905
Total assets	$	1,922,333						$	1,502,188
Interest-bearing liabilities:
Savings accounts	$	733,870	$	1,079		0.59	%	$	578,729	$	868		0.60	%
Checking accounts		141,292		146		0.42	%		85,510		73		0.34	%
Money market accounts		8,202		—		0.00	%		9,027		2		0.09	%
Certificates of deposit		299,924		1,123		1.51	%		257,057		998		1.56	%
Total interest-bearing deposits		1,183,288		2,348		0.80	%		930,323		1,941		0.84	%
Federal Home Loan Bank advances		383,967		1,108		1.16	%		243,320		527		0.87	%
Securities sold under agreements to repurchase		2,402		1		0.17	%		2,157		1		0.19	%
Other borrowed funds		—		—		0.00	%		1,051		7		2.67	%
Total interest-bearing liabilities		1,569,657	$	3,457		0.89	%		1,176,851	$	2,476		0.84	%
Non-interest-bearing liabilities		200,718							184,687
Total liabilities		1,770,375							1,361,538
Stockholders’ Equity		151,958							140,650
Total liabilities and stockholders’ equity	$	1,922,333						$	1,502,188
Net interest income			$	11,521						$	8,963
Net interest rate spread (2)						2.34	%						2.31	%
Net interest-earning assets (3)	$	293,494						$	276,432
Net interest margin (4)						2.49	%						2.47	%
Average interest-earning assets to interest-bearing liabilities						118.70	%						123.49	%

(1) Yields and rates for the three-month periods ended June 30, 2016 and 2015 are annualized.

(2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(3) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(4) Net interest margin represents net interest income divided by average total interest-earning assets.

(5) FHLB stock dividends of $186,000 and $64,000 for the three months ended June 30, 2016 and 2015, respectively, are not included.

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The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.

	Three Months Ended June 30,
	2016 vs. 2015 (unaudited)
	Change			Change
	Due to			Due to			Total
	Volume			Rate			Change
	(In thousands)
Income on interest-earning assets:
Loans	$	3,332		$	127		$	3,459
Securities		59			4			63
Other		1			16			17
Total interest-earning assets (1)	$	3,392		$	147		$	3,539
Expense on interest-bearing liabilities:
Savings accounts	$	226		$	(15	)	$	211
Checking accounts		55			18			73
Money market accounts		—			(2	)		(2	)
Certificates of deposit		159			(34	)		125
Total interest-bearing deposits		440			(33	)		407
Federal Home Loan Bank advances		367			214			581
Securities sold under agreements to repurchase		—			—			—
Other borrowed funds		(4	)		(3	)		(7	)
Total interest-bearing liabilities		803			178			981
Change in net interest income	$	2,589		$	(31	)	$	2,558

(1) Does not include dividends on FHLB stock of $186,000 and $64,000 for the three months ended June 30, 2016 and 2015, respectively.

Comparison of Operating Results for the Six Months Ended June 30, 2016 and 2015

General. Net income for the six months ended June 30, 2016 was $5.49 million, compared to net income of $2.98 million for the six months ended June 30, 2015. The improvement in operating results of $2.51 million or 84.4% for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 resulted from an increase in net interest and dividend income after the provision for loan losses of $4.57 million, partially offset by an increase in income tax expense of $1.40 million, an increase in noninterest expense of $316,000 and a decrease in noninterest income of $337,000.

Net Interest and Dividend Income. Net interest and dividend income increased $5.20 million or 29.3% to $22.99 million for the six months ended June 30, 2016, compared to $17.79 million for the six months ended June 30, 2015. The increase in net interest and dividend income was primarily due to an increase in average net interest-earning assets of $17.74 million or 6.5% to $292.76 million for the six months ended June 30, 2016, from $275.02 million for the six months ended June 30, 2015 as well as an increase in our net interest margin of 1 basis points to 2.51% during the six months ended June 30, 2016 from 2.50% during the six months ended June 30, 2015.

Interest and Dividend Income. Interest and dividend income increased $7.05 million, or 31.2%, to $29.60 million for the six months ended June 30, 2016, from $22.56 million for the six months ended June 30, 2015. The increase in interest and dividend

37

income was primarily due to a $6.64 million increase in interest and fees on loans. The increase in interest and fees on loans resulted primarily from an increase in the average balance of loans of $377.28 million to $1.62 billion for the six months ended June 30, 2016, from $1.24 billion for the six months ended June 30, 2015 as well as a 2 basis point increase in the average yield on loans to 3.42% for the six months ended June 30, 2016 from 3.40% for the six months ended June 30, 2015.

Interest Expense. Interest expense increased $1.85 million or 38.7% to $6.61 million for the six months ended June 30, 2016 from $4.77 million for the six months ended June 30, 2015. The increase resulted from a $374.37 million or 32.6% increase in the average balance of interest-bearing liabilities to $1.52 billion for the six months ended June 30, 2016, from $1.15 billion for the six months ended June 30, 2015 as well as a 3 basis point increase in the cost of interest-bearing liabilities to 0.87% during the six months ended June 30, 2016 from 0.84% during the six months ended June 30, 2015.

Interest expense on interest-bearing deposits increased by $776,000 to $4.47 million for the six months ended June 30, 2016, from $3.70 million for the six months ended June 30, 2015. This increase was primarily due to an increase in the interest expense on savings accounts, CDs and interest-bearing checking accounts of $416,000, $228,000 and $134,000, respectively. The increase in interest expense on savings accounts of $416,000 from $1.64 million to $2.05 million was driven by an increase in the average balance of $164.67 million, partially offset by a 2 basis point decrease in the cost of savings accounts to 0.59% from 0.61%. The increase in interest expense on CDs of $228,000 from $1.91 million to $2.14 million was driven by an increase in the average balance of $37.51 million, partially offset by a 5 basis point decrease in the cost of CD accounts to 1.52% from 1.57%. The increase in interest expense on interest-bearing checking accounts of $134,000 from $142,000 to $276,000 was driven by an increase in the average balance of $50.89 million as well as a 7 basis point increase in the cost of interest-bearing checking to 0.42% from 0.35%.

Interest expense on total borrowings increased $1.07 million to $2.14 million for the six months ended June 30, 2016 from $1.07 million for the six months ended June 30, 2015. This increase was primarily due to an increase in the average balance of FHLB advances of $122.31 million or 45.3% to $392.48 million for the six months ended June 30, 2016 from $270.17 million for the six months ended June 30, 2015 and an increase in the average cost of FHLB advances of 30 basis points to 1.09% for the six months ended June 30, 2016 from 0.79% for the six months ended June 30, 2015, as we have increased the balance of our long term advances.

Provision for Loan Losses. Based on our methodology for establishing the allowance for loan losses and provision for loan losses as discussed in Note 4 to the Consolidated Financial Statements included in this Form 10-Q, we recorded a provision for loan losses of $1.34 million for the six months ended June 30, 2016 compared to $704,000 for the six months ended June 30, 2015. The allowance for loan losses was $12.54 million or 0.74% of total loans at June 30, 2016, compared to $11.24 million or 0.73% of total loans at December 31, 2015.

Noninterest Income. Noninterest income decreased by $337,000 to $1.37 million for the six months ended June 30, 2016, from $1.70 million for the six months ended June 30, 2015. This decrease was primarily driven by a decrease in net gains on sales of loans and a decline in auto loan servicing and other auto related fee income. Partially offsetting these decreases was an increase in income from bank-owned life insurance due to $5.00 million of additional policies purchased during the second quarter of 2015 as well as $5.00 million purchased during the second quarter of 2016.

Noninterest Expense. Noninterest expense increased $316,000 or 2.3% to $14.24 million for the six months ended June 30, 2016, from $13.92 million for the six months ended June 30, 2015. Our efficiency ratio improved to 58.46% during the six months ended June 30, 2016 from 71.44% during the six months ended June 30, 2015 as we continue to grow the balance sheet and manage costs.

Income Tax Expense. We recorded income tax expense of $3.29 million for the six months ended June 30, 2016 compared to income tax expense of $1.89 million for the six months ended June 30, 2015. The effective tax rate for the six months ended June 30, 2016 was 37.4% compared to 38.8% for the six months ended June 30, 2015. The decrease in our effective tax rate was driven by an increase in our deferred tax assets related to an increase in our statutory federal income tax rate. In addition, our effective tax rate benefited from the impact of federally tax exempt industrial revenue bond interest income and the lower impact of non-deductible stock based compensation. Partially offsetting these decreases to our effective tax rate was increased income tax expense as a result of the increase in our statutory federal income tax rate.

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The following tables set forth average balances of assets and liabilities, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.

	For the Six Months Ended June 30,
	(unaudited)
	2016							2015
	(Dollars in thousands)
	Average Outstanding Balance		Interest		Yield/Rate(1)			Average Outstanding Balance		Interest		Yield/Rate(1)
Interest-earning assets:
Total loans	$	1,618,045	$	27,550		3.42	%	$	1,240,762	$	20,911		3.40	%
Securities		157,170		1,629		2.08	%		142,565		1,479		2.09	%
Other		41,594		84		0.41	%		41,374		44		0.21	%
Total interest-earning assets (5)		1,816,809	$	29,263		3.24	%		1,424,701	$	22,434		3.18	%
Non-interest-earning assets		58,497							47,976
Total assets	$	1,875,306						$	1,472,677
Interest-bearing liabilities:
Savings accounts	$	704,657	$	2,053		0.59	%	$	539,989	$	1,637		0.61	%
Checking accounts		132,782		276		0.42	%		81,895		142		0.35	%
Money market accounts		8,224		1		0.02	%		9,180		3		0.07	%
Certificates of deposit		283,033		2,142		1.52	%		245,519		1,914		1.57	%
Total interest-bearing deposits		1,128,696		4,472		0.80	%		876,583		3,696		0.85	%
Federal Home Loan Bank advances		392,484		2,135		1.09	%		270,172		1,058		0.79	%
Securities sold under agreements to repurchase		2,365		2		0.17	%		1,867		1		0.11	%
Other borrowed funds		502		5		2.00	%		1,056		14		2.67	%
Total interest-bearing liabilities		1,524,047	$	6,614		0.87	%		1,149,678	$	4,769		0.84	%
Non-interest-bearing liabilities		201,029							183,416
Total liabilities		1,725,076							1,333,094
Stockholders’ Equity		150,230							139,583
Total liabilities and stockholders’ equity	$	1,875,306						$	1,472,677
Net interest income			$	22,649						$	17,665
Net interest rate spread (2)						2.37	%						2.34	%
Net interest-earning assets (3)	$	292,762						$	275,023
Net interest margin (4)						2.51	%						2.50	%
Average interest-earning assets to interest-bearing liabilities						119.21	%						123.92	%

(1) Yields and rates for the six-month periods ended June 30, 2016 and 2015 are annualized.

(2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(3) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(4) Net interest margin represents net interest income divided by average total interest-earning assets.

(5) FHLB stock dividends of $341,000 and $122,000 for the six months ended June 30, 2016 and 2015, respectively, are not included.

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The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.

	Six Months Ended June 30,
	2016 vs. 2015 (unaudited)
	Change			Change
	Due to			Due to			Total
	Volume			Rate			Change
	(In thousands)
Income on interest-earning assets:
Loans	$	6,479		$	160		$	6,639
Securities		155			(5	)		150
Other		—			40			40
Total interest-earning assets (1)	$	6,634		$	195		$	6,829
Expense on interest-bearing liabilities:
Savings accounts	$	486		$	(70	)	$	416
Checking accounts		102			32			134
Money market accounts		—			(2	)		(2	)
Certificates of deposit		290			(62	)		228
Total interest-bearing deposits		878			(102	)		776
Federal Home Loan Bank advances		582			495			1,077
Securities sold under agreements to repurchase		—			1			1
Other borrowed funds		(6	)		(3	)		(9	)
Total interest-bearing liabilities		1,454			391			1,845
Change in net interest income	$	5,180		$	(196	)	$	4,984

(1) Does not include dividends on FHLB stock of $341,000 and $122,000 for the six months ended June 30, 2016 and 2015, respectively.

Management of Market Risk

General. The Bank’s most significant form of market risk is interest rate risk because, as a financial institution, the majority of assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of the Bank’s operations is to manage interest rate risk and limit the exposure of the Bank’s financial condition and results of operations to changes in market interest rates. The Bank’s Asset/Liability Management Committee is responsible for evaluating the interest rate risk inherent in the Bank’s assets and liabilities, for determining the level of risk that is appropriate, given the Bank’s business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our Board of Directors.

Exposure to interest rate risk is managed by Belmont Savings Bank through periodic evaluations of the current interest rate risk inherent in its rate-sensitive assets and liabilities, primarily deposits, borrowings, loans and investment securities, coupled with

40

determinations of the level of risk considered appropriate given Belmont Savings Bank’s capital and liquidity requirements, business strategy and performance objectives. Through such management, Belmont Savings Bank seeks to manage the vulnerability of its net interest income to changes in interest rates.

Strategies used by Belmont Savings Bank to manage the potential volatility of its earnings may include:

• The origination and retention of adjustable rate residential one-to-four family loans, adjustable rate home equity lines of credit, adjustable rate commercial loans, commercial real estate loans and indirect automobile loans;

• The sale of fixed rate loans;

• Investing in securities with relatively short maturities and/or expected average lives;

• Emphasizing growth in low-cost core deposits; and

• Lengthening liabilities such as term certificates of deposit, brokered certificates of deposit and Federal Home Loan Bank of Boston borrowings as appropriate.

Net Interest Income Analysis. The Bank analyzes its sensitivity to changes in interest rates through a net interest income model. Net interest income is the difference between the interest income the Bank earns on its interest-earning assets, such as loans and securities, and the interest the Bank pays on its interest-bearing liabilities, such as deposits and borrowings. The Bank estimates what its net interest income would be for a one-year period based on current interest rates. The Bank then calculates what the net interest income would be for the same period under different interest rate assumptions. The Bank also estimates the impact over a five year time horizon. The following table shows the estimated impact on net interest income (“NII”) for the one-year period beginning June 30, 2016 resulting from potential changes in interest rates. These estimates require the Bank to make certain assumptions including loan and mortgage-related investment prepayment speeds, reinvestment rates, and deposit maturities and decay rates. These assumptions are inherently uncertain and, as a result, the Bank cannot precisely predict the impact of changes in interest rates on its net interest income. Although the net interest income table below provides an indication of the Bank’s interest rate risk exposure at a particular point in time, such estimates are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on its net interest income and will differ from actual results.

Change in Interest Rates (basis points) (1)	NII Change Year One (% Change From Year One Base)
Shock +300		-12.2	%
Ramp +200		-5.1	%
Ramp - 100		-0.1	%

(1) The calculated change for a ramp -100 BPS and a ramp +200 BPS, assumes a gradual parallel shift across the yield curve over a one-year period. The calculated change for shock +300 assumes that market rates experience an instantaneous and sustained increase of 300 BPS.

The table above indicates that at June 30, 2016, in the event of an instantaneous and sustained 300 basis point increase in interest rates the Bank would experience a 12.2% decrease in net interest income. At the same date, in the event of a 200 basis point increase in interest rates over a one year period, assuming a gradual parallel shift across the yield curve over such period, the Bank would experience a 5.1% decrease in net interest income. At the same date, in the event of a 100 basis point decrease in interest rates over a one year period, assuming a gradual parallel shift across the yield curve over such period, the Bank would experience a 0.1% decrease in net interest income.

Economic Value of Equity Analysis. The Bank also analyzes the sensitivity of its financial condition to changes in interest rates through an economic value of equity model. This analysis measures the difference between predicted changes in the present value of its assets and predicted changes in the present value of its liabilities assuming various changes in current interest rates. The economic value of equity analysis as of June 30, 2016 estimated that, in the event of an instantaneous 200 basis point increase in interest rates, the Bank would experience a 12.9% decrease in the economic value of its equity. At the same date, the analysis estimated that, in the event of an instantaneous 100 basis point decrease in interest rates, the Bank would experience a 26.0% decrease in the economic value of its equity. The estimates of changes in the economic value of the Bank’s equity require management to make certain assumptions including loan and mortgage-related investment prepayment speeds, reinvestment rates, and deposit maturities and decay rates. These assumptions are inherently uncertain and, as a result, management cannot precisely predict the impact of changes in interest rates on the economic value of the Bank’s equity. Although the economic value of equity analysis provides an

41

indication of the Bank’s interest rate risk exposure at a particular point in time, such estimates are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on the economic value of the Bank’s equity and will differ from actual results.

Liquidity and Capital Resources. Liquidity is the ability to meet current and future financial obligations. Our primary sources of funds consist of deposit inflows, loan repayments, advances from the Federal Home Loan Bank of Boston, security repayments and loan sales. 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. Our Asset/Liability Management Committee is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We believe that we had enough sources of liquidity at June 30, 2016 to satisfy our short- and long-term liquidity needs as of that date.

We regularly monitor and adjust our investments in liquid assets based on our assessment of:

• expected loan demand;

• expected deposit flows and borrowing maturities;

• yields available on interest-earning deposits and securities; and

• the objectives of our asset/liability management program.

Excess liquid assets are invested generally in interest-earning deposits and short-term securities and may also be used to pay off short-term borrowings.

Our most liquid assets are cash and cash equivalents. The level of these assets is dependent on our operating, financing, lending and investing activities during any given period. At June 30, 2016, cash and cash equivalents totaled $53.84 million.

Our cash flows are derived from operating activities, investing activities and financing activities as reported in our Consolidated Statements of Cash Flows included in our Consolidated Financial Statements.

At June 30, 2016, we had $106.39 million in loan commitments outstanding. In addition to commitments to originate and purchase loans, we had $264.78 million in unused lines of credit to borrowers and $16.49 million in unadvanced funds on construction loans.

Certificates of deposit due within one year of June 30, 2016 totaled $99.02 million, or 7.15%, of total deposits. If these deposits do not remain with us, we may be required to seek other sources of funds, including loan sales, brokered deposits, repurchase agreements and Federal Home Loan Bank advances. 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, 2017. We believe, however, based on historical experience and current market interest rates that we will retain upon maturity a large portion of our certificates of deposit with maturities of one year or less as of June 30, 2016.

Our primary investing activity is originating and purchasing loans. During the six months ended June 30, 2016 and the year ended December 31, 2015, we originated and purchased $379.04 million and $749.88 million of loans, respectively.

Financing activities consist primarily of activity in deposit accounts, Federal Home Loan Bank advances and, to a lesser extent, brokered deposits. We experienced net increases in deposits of $115.11 million and $284.96 million for the six months ended June 30, 2016 and for the year ended December 31, 2015, respectively. At June 30, 2016 and December 31, 2015, the levels of brokered deposits were $136.14 million and $114.03 million, respectively. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors, and by other factors.

Liquidity management is both a daily and long-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the Federal Home Loan Bank of Boston, which provide an additional source of funds. At June 30, 2016, we had $423.25 million of Federal Home Loan Bank advances. Based on available collateral at that date, we had the ability to borrow up to an additional $208.38 million from the Federal Home Loan Bank of Boston.

We are obligated to make future payments according to various contracts. As of June 30, 2016, our contractual obligations have not changed materially from those disclosed in our 2015 Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 11, 2016.

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BSB Bancorp, Inc. and Belmont Savings Bank are subject to various regulatory capital requirements, 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, 2016, BSB Bancorp, Inc. and Belmont Savings Bank exceeded all regulatory capital requirements and are considered “well capitalized” under regulatory guidelines.

The net proceeds from our stock offering completed in October 2011 had significantly increased our liquidity and capital resources however, over time, the level of liquidity has been reduced as net proceeds from the stock offering and additions to capital from income generated are used for general corporate purposes, including the funding of loans. We have seen our financial condition and results of operations enhanced by the continued investment of the net proceeds from the stock offering, resulting in increased net interest-earning assets and net interest and dividend income. However, due to the increase in equity resulting from the net proceeds raised in the stock offering, our return on equity has been adversely affected following the stock offering.

At the time of conversion from a mutual holding company to a stock holding company, BSB Bancorp, Inc. substantially restricted retained earnings by establishing a liquidation account and the Bank established a parallel liquidation account. The liquidation account will be maintained for the benefit of eligible holders who continue to maintain their accounts at the Bank after conversion. The liquidation account is reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holder’s interest in the liquidation account. In the event of a complete liquidation of the Bank, and only in such event, each account holder will be entitled to receive a distribution from the liquidation account in an amount proportionate to the adjusted qualifying account balances then held. The Bank may not pay dividends if those dividends would reduce equity capital below the required liquidation account amount.

The Company’s total stockholders’ equity increased to $153.04 million at June 30, 2016 from $146.20 million at December 31, 2015. This increase is primarily the result of earnings of $5.49 million and a $1.10 million increase in additional paid-in capital related to stock-based compensation.

Basel III Capital Rules. In July 2013, the Federal Deposit Insurance Corporation and the other federal bank regulatory agencies issued a final rule that will revise their leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. Among other things, the rule establishes a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increases the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigns a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The final rule also requires unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital unless a one-time opt-out is exercised. The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements. The final rule became effective for the Company and the Bank on January 1, 2015. The capital conservation buffer requirement started being phased in on January 1, 2016 and will continue to be phased in through January 1, 2019, when the full capital conservation buffer requirement will be effective.

The following table presents actual and required capital ratios as of June 30, 2016 and December 31, 2015 for the Company and the Bank under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels as of June 30, 2016 and December 31, 2015 based on the phase-in provisions of the Basel III Capital Rules and the minimum required capital levels as of January 1, 2019 when the Basel III Capital Rules have been fully phased-in. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

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	Actual					Minimum Capital Required For Capital Adequacy					Minimum Capital Required For Capital Adequacy Plus Capital Conservation Buffer Basel III Phase-In Schedule					Minimum Capital Required For Capital Adequacy Plus Capital Conservation Buffer Basel III Fully Phased In					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
As of June 30, 2016:
Total Capital (to Risk Weighted Assets)
Consolidated	$	165,621		11.88	%	$	120,214		8.00	%	$	120,214		8.625	%	$	146,347		10.50	%		N/A		N/A
Belmont Savings Bank		160,684		11.53	%		120,207		8.00	%		120,207		8.625	%		146,339		10.50	%	$	139,371		10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	152,983		10.98	%	$	92,338		6.00	%	$	92,338		6.625	%	$	118,471		8.50	%		N/A		N/A
Belmont Savings Bank		148,045		10.62	%		92,333		6.00	%		92,333		6.625	%		118,465		8.50	%		111,496		8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	152,983		10.98	%	$	71,431		4.50	%	$	71,431		5.125	%	$	97,565		7.00	%		N/A		N/A
Belmont Savings Bank		148,045		10.62	%		71,427		4.50	%		71,427		5.125	%		97,559		7.00	%		90,591		6.50	%
Tier 1 Capital (to Average Assets)
Consolidated	$	152,983		7.96	%	$	76,898		4.00	%	$	76,898		4.0	%	$	76,898		4.00	%		N/A		N/A
Belmont Savings Bank		148,045		7.70	%		76,895		4.00	%		76,895		4.0	%		76,895		4.00	%		96,119		5.00	%
	Actual					Minimum Capital Required For Capital Adequacy					Minimum Capital Required For Capital Adequacy Plus Capital Conservation Buffer Basel III Phase-In Schedule					Minimum Capital Required For Capital Adequacy Plus Capital Conservation Buffer Basel III Fully Phased In					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2015:
Total Capital (to Risk Weighted Assets)
Consolidated	$	157,640		12.22	%	$	103,186		8.00	%	$	103,186		8.00	%	$	135,432		10.50	%		N/A		N/A
Belmont Savings Bank		152,809		11.85	%		103,186		8.00	%		103,186		8.00	%		135,432		10.50	%	$	128,982		10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	146,319		11.34	%	$	77,390		6.00	%	$	77,390		6.00	%	$	109,636		8.50	%		N/A		N/A
Belmont Savings Bank		141,488		10.97	%		77,389		6.00	%		77,389		6.00	%		109,635		8.50	%		103,186		8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Consolidated	$	146,319		11.34	%	$	58,042		4.50	%	$	58,042		4.50	%	$	90,288		7.00	%		N/A		N/A
Belmont Savings Bank		141,488		10.97	%		58,042		4.50	%		58,042		4.50	%		90,288		7.00	%		83,839		6.50	%
Tier 1 Capital (to Average Assets)
Consolidated	$	146,319		8.37	%	$	69,887		4.00	%	$	69,887		4.00	%	$	69,887		4.00	%		N/A		N/A
Belmont Savings Bank		141,488		8.10	%		69,886		4.00	%		69,886		4.00	%		69,886		4.00	%		87,357		5.00	%

Off-Balance Sheet Arrangements

As a financial services provider, we routinely are a party to various financial instruments with off-balance sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our potential future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. In addition, from time to time we enter into commitments to sell mortgage loans that we originate. For the three months ended June 30, 2016, we engaged in no off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is included in Item 2 of this report under “Management of Market Risk.”

Item 4. Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, (1) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) is accumulated and communicated to our management, including our Principal Executive and Principal Financial officers as appropriate to allow timely discussions regarding required disclosures.

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The effectiveness of a system of disclosure controls and procedures is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Due to such inherent limitations, there can be no assurance that any system of disclosure controls and procedures will be successful in preventing all errors or fraud, or in making all material information known in a timely manner to the appropriate levels of management.

There were no changes in the Company’s internal control over financial reporting during the three months ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Periodically, there have been 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.

Item 1A. Risk Factors.

For information regarding the Company’s risk factors, see “Risk Factors” in the Company’s 2015 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 11, 2016. As of June 30, 2016, the risk factors of the Company have not changed materially from those disclosed in the 2015 Annual Report on Form 10-K.

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

(a) Unregistered Sales of Equity Securities. None

(b) Use of Proceeds. None

(c) Repurchase of Equity Securities.

The following table provides certain information with regard to shares repurchased by the Company in the second quarter of 2016.

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)		(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(1)
April 1 - April 30		—	$	—		—		500,000
May 1 - May 31		—		—		—		500,000
June 1 - June 30		—		—		—		500,000
Total		—	$	—		—

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(1) On June 22, 2013, the Company’s Board of Directors authorized a stock repurchase program to acquire up to 500,000 shares, or 5.5% of the Company’s then outstanding common stock. Repurchases will be made from time to time depending on market conditions and other factors, and will be conducted through open market or private transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. There is no guarantee as to the exact number of shares to be repurchased by the Company.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

Item 6. Exhibits

31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32.0	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer.*
101.0	The following data from the BSB Bancorp, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) the related notes.

* This information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

46

Signatures

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

	BSB BANCORP, INC.
Date: August 5, 2016	By:	/s/ Robert M. Mahoney
		Robert M. Mahoney
		President, Chief Executive Officer and Director (Principal Executive Officer)
Date: August 5, 2016	By:	/s/ John A. Citrano
		John A. Citrano
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

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EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Robert M. Mahoney, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of BSB Bancorp, Inc.;

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

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

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

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

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

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

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

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

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

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

Date: August 5, 2016	By:	/s/ Robert M. Mahoney
			Robert M. Mahoney
			President, Chief Executive Officer and Director

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John A. Citrano, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of BSB Bancorp, Inc.;

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

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

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

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

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

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

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

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

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

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

Date: August 5, 2016	By:	/s/ John A. Citrano
			John A. Citrano
			Executive Vice President and Chief Financial Officer

EX-32.0

Exhibit 32.0

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-

Oxley Act of 2002

Robert M. Mahoney, President and Chief Executive Officer of BSB Bancorp, Inc., (the “Company”) and John A. Citrano, Executive Vice President and Chief Financial Officer of the Company, each certify in his capacity as an officer of the Company that he has reviewed the quarterly report on Form 10-Q for the quarter ended June 30, 2016 (the “Report”) and that to the best of his knowledge:

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

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 5, 2016	/s/ Robert M. Mahoney
		Robert M. Mahoney
		President, Chief Executive Officer and Director
Date: August 5, 2016	/s/ John A. Citrano
		John A. Citrano
		Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Jul. 29, 2016
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Trading Symbol	BLMT
Entity Registrant Name	BSB BANCORP, INC.
Entity Central Index Key	0001522420
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		9,101,433

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
ASSETS
Cash and due from banks	$ 1,603	$ 1,871
Interest-bearing deposits in other banks	52,240	49,390
Cash and cash equivalents	53,843	51,261
Interest-bearing time deposits with other banks	134	131
Investments in available-for-sale securities	22,122	21,876
Investments in held-to-maturity securities (fair value of $139,496 as of June 30, 2016 (unaudited) and $136,728 as of December 31, 2015)	137,341	137,119
Federal Home Loan Bank stock, at cost	21,824	18,309
Loans held for sale		1,245
Loans, net of allowance for loan losses of $12,543 as of June 30, 2016 (unaudited) and $11,240 as of December 31, 2015	1,689,295	1,534,957
Premises and equipment, net	2,561	2,657
Accrued interest receivable	4,351	3,781
Deferred tax asset, net	7,336	6,726
Income taxes receivable	692
Bank-owned life insurance	35,261	29,787
Other assets	4,337	5,067
Total assets	1,979,097	1,812,916
Deposits:
Noninterest-bearing	185,149	192,476
Interest-bearing	1,199,476	1,077,043
Total deposits	1,384,625	1,269,519
Federal Home Loan Bank advances	423,250	374,000
Securities sold under agreements to repurchase	1,771	3,695
Other borrowed funds		1,020
Accrued interest payable	1,016	993
Deferred compensation liability	6,901	6,434
Income taxes payable		184
Other liabilities	8,496	10,868
Total liabilities	1,826,059	1,666,713
Stockholders' Equity:
Common stock; $0.01 par value, 100,000,000 shares authorized; 9,100,815 and 9,086,639 shares issued and outstanding at June 30, 2016 (unaudited) and December 31, 2015, respectively	91	91
Additional paid-in capital	90,745	89,648
Retained earnings	66,008	60,517
Accumulated other comprehensive income (loss)	54	(116)
Unearned compensation - ESOP	(3,860)	(3,937)
Total stockholders' equity	153,038	146,203
Total liabilities and stockholders' equity	$ 1,979,097	$ 1,812,916

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Investments in held-to-maturity securities, fair value	$ 139,496	$ 136,728
Loans, allowance for loan losses	$ 12,543	$ 11,240
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	9,100,815	9,086,639
Common stock, shares outstanding	9,100,815	9,086,639

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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Interest and dividend income:
Interest and fees on loans	$ 14,138	$ 10,679	$ 27,550	$ 20,911
Interest on taxable debt securities	801	738	1,629	1,479
Dividends	186	64	341	122
Other interest income	39	22	84	44
Total interest and dividend income	15,164	11,503	29,604	22,556
Interest expense:
Interest on deposits	2,348	1,941	4,472	3,696
Interest on Federal Home Loan Bank advances	1,108	527	2,135	1,058
Interest on securities sold under agreements to repurchase	1	1	2	1
Interest on other borrowed funds		7	5	14
Total interest expense	3,457	2,476	6,614	4,769
Net interest and dividend income	11,707	9,027	22,990	17,787
Provision for loan losses	741	365	1,340	704
Net interest and dividend income after provision for loan losses	10,966	8,662	21,650	17,083
Noninterest income:
Customer service fees	224	204	450	415
Income from bank-owned life insurance	237	202	470	389
Net gain on sales of loans	106	293	167	332
Loan servicing fee income	92	143	205	304
Other income	46	106	75	264
Total noninterest income	705	948	1,367	1,704
Noninterest expense:
Salaries and employee benefits	4,359	4,377	8,959	8,721
Director compensation	247	215	481	492
Occupancy expense	240	264	492	557
Equipment expense	109	140	214	284
Deposit insurance	287	232	567	450
Data processing	879	772	1,761	1,527
Professional fees	187	177	422	389
Marketing	208	266	429	519
Other expense	468	545	915	985
Total noninterest expense	6,984	6,988	14,240	13,924
Income before income tax expense	4,687	2,622	8,777	4,863
Income tax expense	1,735	1,019	3,286	1,886
Net income	$ 2,952	$ 1,603	$ 5,491	$ 2,977
Earnings per share
Basic	$ 0.34	$ 0.19	$ 0.63	$ 0.34
Diluted	$ 0.33	$ 0.18	$ 0.61	$ 0.34

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Net income	$ 2,952	$ 1,603	$ 5,491	$ 2,977
Other comprehensive income (loss), net of tax:
Net change in fair value of securities available for sale	94	(93)	170	(10)
Total other comprehensive income (loss)	94	(93)	170	(10)
Total comprehensive income	$ 3,046	$ 1,510	$ 5,661	$ 2,967

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive (Loss) Income	Employee Stock Ownership Plan Unearned Compensation
Balance (in shares) at Dec. 31, 2014		9,067,792
Balance at Dec. 31, 2014	$ 137,010	$ 91	$ 87,428	$ 53,603	$ (22)	$ (4,090)
Net income	2,977			2,977
Other comprehensive income (loss)	(10)				(10)
Release of ESOP stock	156		79			77
Stock based compensation-restricted stock awards	424		424
Stock based compensation-stock options	386		386
Tax benefit from stock based compensation	44		44
Stock option exercises, net of shares surrendered	166		166
Stock option exercises, net of shares surrendered (in shares)		16,289
Balance (in shares) at Jun. 30, 2015		9,084,081
Balance at Jun. 30, 2015	$ 141,153	$ 91	88,527	56,580	(32)	(4,013)
Balance (in shares) at Dec. 31, 2015	9,086,639	9,086,639
Balance at Dec. 31, 2015	$ 146,203	$ 91	89,648	60,517	(116)	(3,937)
Net income	5,491			5,491
Other comprehensive income (loss)	170				170
Release of ESOP stock	172		95			77
Stock based compensation-restricted stock awards	425		425
Stock based compensation-stock options	387		387
Tax benefit from stock based compensation	54		54
Stock option exercises, net of shares surrendered	$ 136		136
Stock option exercises, net of shares surrendered (in shares)		14,176
Balance (in shares) at Jun. 30, 2016	9,100,815	9,100,815
Balance at Jun. 30, 2016	$ 153,038	$ 91	$ 90,745	$ 66,008	$ 54	$ (3,860)

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities:
Net income	$ 5,491	$ 2,977
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of securities, net	381	334
Gain on sales of loans, net	(167)	(332)
Loans originated for sale	(5,151)	(10,137)
Proceeds from sales of loans	6,562	20,585
Provision for loan losses	1,340	704
Change in net unamortized mortgage premiums	(823)	(241)
Change in net deferred loan costs	675	(124)
ESOP expense	172	156
Stock based compensation expense	812	810
Excess tax benefit from stock based compensation	(54)	(44)
Depreciation and amortization expense	308	383
Deferred income tax benefit	(724)	(210)
Increase in bank-owned life insurance	(470)	(389)
Net change in:
Accrued interest receivable	(570)	(266)
Other assets	730	(132)
Income taxes receivable	(692)	(426)
Income taxes payable	(130)
Accrued interest payable	23	30
Deferred compensation liability	467	441
Other liabilities	(2,510)	(187)
Net cash provided by operating activities	5,670	13,932
Cash flows from investing activities:
Maturities of interest-bearing time deposits with other banks	131
Purchases of interest-bearing time deposits with other banks	(134)
Proceeds from maturities, payments, and calls of held-to-maturity securities	11,586	9,604
Purchases of held-to-maturity securities	(12,151)	(20,175)
Redemption of Federal Home Loan Bank stock	1,240
Purchases of Federal Home Loan Bank stock	(4,755)	(1,370)
Recoveries of loans previously charged off	13	19
Loan originations and principal collections, net	(7,050)	(26,964)
Purchases of loans	(149,512)	(96,384)
Capital expenditures	(212)	(205)
Premiums paid on bank-owned life insurance	(5,004)	(5,005)
Net cash used in investing activities	(165,848)	(140,480)
Cash flows from financing activities:
Net increase in demand deposits, NOW and savings accounts	63,934	130,795
Net increase in time deposits	51,172	34,400
Net proceeds from long-term Federal Home Loan Bank borrowings	116,250	15,000
Net change in short-term Federal Home Loan Bank advances	(67,000)	(59,000)
Net (decrease) increase in securities sold under agreement to repurchase	(1,924)	1,068
Repayment of principal on other borrowed funds		(23)
Net increase (decrease) in mortgagors' escrow accounts	138	(165)
Net proceeds from exercise of stock options	136	166
Excess tax benefit from stock based compensation	54	44
Net cash provided by financing activities	162,760	122,285
Net increase (decrease) in cash and cash equivalents	2,582	(4,263)
Cash and cash equivalents at beginning of period	51,261	51,767
Cash and cash equivalents at end of period	53,843	47,504
Supplemental disclosures:
Interest paid	6,591	4,739
Income taxes paid	4,832	2,522
Transfer of loans held for investment to loans held for sale		$ 10,116
Derecognition of loans and related recourse obligation in other borrowings	$ 1,020

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BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2016

BASIS OF PRESENTATION

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of BSB Bancorp, Inc. have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The consolidated financial statements of BSB Bancorp, Inc. include the balances and results of operations of BSB Bancorp, Inc., a Maryland corporation, and its wholly-owned subsidiaries, Belmont Savings Bank and BSB Funding Corporation and the Bank’s wholly owned subsidiary, BSB Investment Corporation (referred to herein as “the Company,” “we,” “us,” or “our”). Intercompany transactions and balances are eliminated in the consolidation.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company’s financial position as of June 30, 2016 and December 31, 2015 and the results of operations and cash flows for the interim periods ended June 30, 2016 and 2015. All interim amounts have not been audited, and the results of operations for the interim periods herein are not necessarily indicative of the results of operations to be expected for the fiscal year. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

Certain previously reported amounts have been reclassified to conform to the current period’s presentation.

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RECENT ACCOUNTING STANDARDS UPDATES

6 Months Ended

Jun. 30, 2016

RECENT ACCOUNTING STANDARDS UPDATES

NOTE 2 – RECENT ACCOUNTING STANDARDS UPDATES

In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (vii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new ASU will require both types of leases to be recognized on the balance sheet. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods therein. Early adoption is permitted. We are currently evaluating the impact of adopting the new guidance on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This update makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted. We are currently evaluating the impact of adopting the new guidance on the Company’s consolidated financial statements.

In June 2016, the FASB issue ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The update changes the impairment model for most financial assets and sets forth a “current expected credit loss” (CECL) model which will require the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This method is forward-looking and will generally result in earlier recognition of allowances for losses.This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and also applies to some off-balance sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this ASU on its consolidated financial statements.

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INVESTMENTS IN SECURITIES

6 Months Ended

Jun. 30, 2016

INVESTMENTS IN SECURITIES

NOTE 3—INVESTMENTS IN SECURITIES

The amortized cost basis of available-for-sale and held-to-maturity securities and their approximate fair values were as follows at the dates indicated (in thousands):

	June 30, 2016									December 31, 2015
	Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(unaudited)
Available-for-sale securities:
Corporate debt securities	$	22,088	$	49	$	(15	)	$	22,122	$	22,126	$	35	$	(285	)	$	21,876
	$	22,088	$	49	$	(15	)	$	22,122	$	22,126	$	35	$	(285	)	$	21,876
Held-to-maturity securities:
U.S. government sponsored mortgage-backed securities	$	119,713	$	1,488	$	(63	)	$	121,138	$	119,517	$	460	$	(965	)	$	119,012
Corporate debt securities		17,628		730		—			18,358		17,602		141		(27	)		17,716
	$	137,341	$	2,218	$	(63	)	$	139,496	$	137,119	$	601	$	(992	)	$	136,728

The amortized cost basis and estimated fair value of debt securities by contractual maturity at June 30, 2016 is as follows (in thousands and unaudited). Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2016
	Available-for-Sale				Held-to-Maturity
	Amortized Cost Basis		Fair Value		Amortized Cost Basis		Fair Value
	(unaudited)				(unaudited)
Due within one year	$	—	$	—	$	16	$	16
Due after one year through five years		12,780		12,828		9,110		9,173
Due after five years through ten years		9,308		9,294		51,982		53,249
Due after ten years		—		—		76,233		77,058
	$	22,088	$	22,122	$	137,341	$	139,496

When securities are sold, the adjusted cost basis of the specific security sold is used to compute the gain or loss on the sale. During the three and six months ended June 30, 2016 (unaudited) and June 30, 2015 (unaudited), there were no sales of available-for-sale securities.

Information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position is as follows (in thousands):

			Less than 12 Months					Over 12 Months
	# of Holdings		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2016 (unaudited):
Available-for-sale
Corporate debt securities		1	$	4,985	$	(15	)	$	—	$	—
Held-to-maturity
U.S. government sponsored mortgage-backed securities		14		5,939		(20	)		7,428		(43	)
Total temporarily impaired securities		15	$	10,924	$	(35	)	$	7,428	$	(43	)
December 31, 2015:
Available-for-sale
Corporate debt securities		4	$	9,745	$	(75	)	$	4,127	$	(210	)
Held-to-maturity
Corporate debt securities		3		4,733		(27	)		—		—
U.S. government sponsored mortgage-backed securities		52		89,366		(822	)		5,430		(143	)
Total temporarily impaired securities		59	$	103,844	$	(924	)	$	9,557	$	(353	)

The investment securities portfolio is generally evaluated for other-than-temporary impairment under Accounting Standards Codification (“ASC”) 320-10, “Investments - Debt and Equity Securities.”

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. At June 30, 2016 (unaudited), 15 debt securities were in an unrealized loss position. When there are securities in an unrealized loss position, consideration is given to (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, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Based on the Company’s June 30, 2016 (unaudited) quarterly review of securities in the investment portfolio, management has determined that unrealized losses related to 15 debt securities with aggregate depreciation of 0.42% from the Company’s amortized cost basis were caused primarily by changes in market interest rates. The contractual terms of these investments do not permit the companies to settle the security at a price less than the par value of the investment. The Company currently does not believe it is probable that it will be unable to collect all amounts due according to the contractual terms of the investments. Therefore, it is expected that the securities would not be settled at a price less than the par value of the investment. Because the Company does not intend to sell the investments and it is more likely than not that the Company will not be required to sell the investments before recovery of their amortized cost basis, it does not consider these investments to be other-than-temporarily impaired at June 30, 2016.

At December 31, 2015, 59 debt securities had unrealized losses with aggregate depreciation of 1.11% from the Company’s amortized cost basis. The Company’s unrealized losses on investments in corporate bonds and mortgage-backed securities are primarily caused by changes in market interest rates.

In addition to the securities listed above, the Company holds investments in a Rabbi Trust that are used to fund the executive and director non-qualified deferred compensation plan. These investments are available to satisfy the claims of general creditors of the Company in the event of bankruptcy and are included in our consolidated balance sheets in other assets. The investments consisted primarily of mutual funds and are classified as trading securities and recorded at fair value. The fair value of these investments at June 30, 2016 (unaudited) and December 31, 2015 was $2.5 million and $2.5 million, respectively. For the three and six month periods ending June 30, 2016 (unaudited), the net gain on these investments still held at the reporting date was $13,000 and $14,000, respectively. For the three and six month periods ending June 30, 2015 (unaudited), the net loss and net gain on these investments still held at the reporting date was $(9,000) and $30,000, respectively. Refer to Note 7 – Employee and Director Benefit Plans, for more information.

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LOANS, ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY

6 Months Ended

Jun. 30, 2016

LOANS, ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY

NOTE 4 – LOANS, ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, deferred fees or costs on originated loans, and any premiums or discounts on purchased loans.

Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

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

Payments received on impaired loans are applied to reduce the recorded investment in the loan principal to the extent necessary to eliminate doubt as to the collectability of the net carrying amount of the loan. Some or all of the payments received on impaired loans are recognized as interest income if the remaining net carrying amount of the loan is deemed to be fully collectible. When recognition of interest income on an impaired loan on a cash basis is appropriate, the amount of income that is recognized is limited to that which would have been accrued on the net carrying amount of the loan at the contractual interest rate. Any cash interest payments received in excess of the limit and not applied to reduce the net carrying amount of the loan are recorded as recoveries of charge-offs until the charge-offs are fully recovered.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

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

General Component:

The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: residential real estate, home equity lines of credit, commercial real estate, construction, commercial, indirect auto and other consumer. Management uses a rolling average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; trends in volume and terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; experience/ability/depth of lending management and staff; and national and local economic trends and conditions. There were no changes in the Company’s policies or methodology pertaining to the general component of the allowance for loan losses during the six months ended June 30, 2016 or during fiscal year 2015.

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

Residential real estate loans and home equity lines of credit – The Company generally does not originate or purchase loans with a loan-to-value ratio greater than 80 percent and generally does not grant subprime loans. Loans in this segment are generally collateralized by owner-occupied residential real estate and repayment is dependent on the cash flow and credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Commercial real estate loans – Loans in this segment are primarily secured by income-producing properties in eastern Massachusetts. The underlying cash flows generated by the properties may be adversely impacted by a downturn in the economy and increased

vacancy rates, which in turn, will have an effect on the credit quality in this segment. Management generally obtains rent rolls annually and continually monitors the cash flows of these borrowers.

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

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

Indirect auto loans – Loans in this segment are secured installment loans that were originated through a network of select regional automobile dealerships. The Company’s interest in the vehicle is secured with a recorded lien on the state title of each automobile. Collections are sensitive to changes in borrower financial circumstances, and the collateral can depreciate or be damaged in the event of repossession. Repayment is primarily dependent on the credit worthiness and the cash flow of the individual borrower and secondarily, liquidation of the collateral.

Other consumer loans—Loans in this segment include secured and unsecured consumer loans including passbook loans, consumer lines of credit and overdraft protection, and consumer unsecured loans. Repayment is dependent on the credit quality and the cash flow of the individual borrower.

Allocated Component:

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

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

Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral-dependent. Generally, TDRs are measured for impairment using the discounted cash flow method except in instances where foreclosure is probable in which case the fair value of collateral method is used. When the fair value of the impaired loan is determined to be less than the recorded investment in the loan, the impairment is recorded through the valuation allowance. However, for collateral dependent loans, the amount of the recorded investment in a loan that exceeds the fair value of the collateral is charged-off against the allowance for loan losses in lieu of an allocation of a specific allowance amount when such an amount has been identified definitively as uncollectable.

Unallocated Component:

An unallocated component may be maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating allocated and general reserves in the portfolio. At June 30, 2016 (unaudited) and December 31, 2015, the Company had unallocated reserves of $476,000 and $213,000, respectively.

Loans consisted of the following (dollars in thousands):

	June 30, 2016						December 31, 2015
	Amount			Percent			Amount			Percent
	(unaudited)
Mortgage loans:
Residential one-to-four family	$	833,607			49.26	%	$	709,426			46.15	%
Commercial real estate loans (1)		484,328			28.61			449,391			29.24
Home equity lines of credit		170,363			10.06			160,040			10.41
Construction loans		63,034			3.72			60,722			3.95
Total mortgage loans		1,551,332			91.65			1,379,579			89.75
Commercial loans		60,249			3.56			53,192			3.46
Consumer loans:
Indirect auto loans		80,656			4.76			103,965			6.76
Other consumer loans		445			0.03			453			0.03
		141,350			8.35			157,610			10.25
Total loans		1,692,682			100.00	%		1,537,189			100.00	%
Net deferred loan costs		3,988						4,663
Net unamortized mortgage premiums		5,168						4,345
Allowance for loan losses		(12,543	)					(11,240	)
Total loans, net	$	1,689,295					$	1,534,957

(1) Includes multi-family real estate loans.

The following tables (in thousands) present the activity in the allowance for loan losses by portfolio class for the three and six months ended June 30, 2016 and 2015 (unaudited); and the balances of the allowance for loan losses and recorded investment in loans by portfolio class based on impairment method at June 30, 2016 (unaudited) and December 31, 2015. The recorded investment in loans in any of the following tables does not include accrued and unpaid interest or any deferred loan fees or costs, as amounts are not significant.

	Three Months Ended June 30, 2016
	Beginning balance		Provision (benefit)			Charge-offs			Recoveries		Ending balance
Residential one-to-four family	$	3,980	$	175		$	—		$	—	$	4,155
Commercial real estate		4,868		(58	)		—			—		4,810
Construction		679		185			—			—		864
Commercial		505		193			—			—		698
Home equity lines of credit		1,008		30			—			—		1,038
Indirect auto		554		(36	)		(28	)		2		492
Other consumer		9		4			(4	)		1		10
Unallocated		228		248			—			—		476
Total	$	11,831	$	741		$	(32	)	$	3	$	12,543
	Three Months Ended June 30, 2015
	Beginning balance		Provision (benefit)			Charge-offs			Recoveries		Ending balance
Residential one-to-four family	$	2,579	$	161		$	—		$	—	$	2,740
Commercial real estate		4,035		87			—			—		4,122
Construction		473		112			—			—		585
Commercial		416		(61	)		—			—		355
Home equity lines of credit		740		87			—			—		827
Indirect auto		770		(31	)		(33	)		7		713
Other consumer		13		4			(5	)		—		12
Unallocated		177		6			—			—		183
Total	$	9,203	$	365		$	(38	)	$	7	$	9,537

	Six Months Ended June 30, 2016
	Beginning balance		Provision (benefit)			Charge-offs			Recoveries		Ending balance
Residential one-to-four family	$	3,574	$	581		$	—		$	—	$	4,155
Commercial real estate		4,478		332			—			—		4,810
Construction		801		63			—			—		864
Commercial		613		85			—			—		698
Home equity lines of credit		928		110			—			—		1,038
Indirect auto		623		(100	)		(42	)		11		492
Other consumer		10		6			(8	)		2		10
Unallocated		213		263			—			—		476
Total	$	11,240	$	1,340		$	(50	)	$	13	$	12,543
	Six Months Ended June 30, 2015
	Beginning balance		Provision (benefit)			Charge-offs			Recoveries		Ending balance
Residential one-to-four family	$	2,364	$	376		$	—		$	—	$	2,740
Commercial real estate		4,043		79			—			—		4,122
Construction		228		357			—			—		585
Commercial		458		(103	)		—			—		355
Home equity lines of credit		828		(1	)		—			—		827
Indirect auto		778		(24	)		(59	)		18		713
Other consumer		11		8			(8	)		1		12
Unallocated		171		12			—			—		183
Total	$	8,881	$	704		$	(67	)	$	19	$	9,537

	June 30, 2016
	Individually evaluated for impairment				Collectively evaluated for impairment				Total
	Loan balance		Allowance		Loan balance		Allowance		Loan balance		Allowance
Residential one-to-four family	$	4,272	$	174	$	829,335	$	3,981	$	833,607	$	4,155
Commercial real estate		3,524		2		480,804		4,808		484,328		4,810
Construction		—		—		63,034		864		63,034		864
Commercial		—		—		60,249		698		60,249		698
Home equity lines of credit		200		—		170,163		1,038		170,363		1,038
Indirect auto		—		—		80,656		492		80,656		492
Other consumer		—		—		445		10		445		10
Unallocated		—		—		—		476		—		476
Total	$	7,996	$	176	$	1,684,686	$	12,367	$	1,692,682	$	12,543
	December 31, 2015
	Individually evaluated for impairment				Collectively evaluated for impairment				Total
	Loan balance		Allowance		Loan balance		Allowance		Loan balance		Allowance
Residential one-to-four family	$	4,341	$	260	$	705,085	$	3,314	$	709,426	$	3,574
Commercial real estate		6,083		133		443,308		4,345		449,391		4,478
Construction		—		—		60,722		801		60,722		801
Commercial		—		—		53,192		613		53,192		613
Home equity lines of credit		200		—		159,840		928		160,040		928
Indirect auto		15		—		103,950		623		103,965		623
Other consumer		—		—		453		10		453		10
Unallocated		—		—		—		213		—		213
Total	$	10,639	$	393	$	1,526,550	$	10,847	$	1,537,189	$	11,240

Information about loans that meet the definition of an impaired loan in ASC 310-10-35 is as follows as of June 30, 2016 (unaudited and in thousands):

	Impaired loans with a related allowance for credit losses
	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Residential one-to-four family	$	1,396	$	1,448	$	174
Commercial real estate		2,972		2,972		2
Totals	$	4,368	$	4,420	$	176
	Impaired loans with no related allowance for credit losses
	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Residential one-to-four family	$	2,876	$	2,918	$	—
Commercial real estate		552		552		—
Home equity lines of credit		200		200		—
Totals	$	3,628	$	3,670	$	—

Information about loans that meet the definition of an impaired loan in ASC 310-10-35 is as follows as of December 31, 2015 (in thousands):

	Impaired loans with a related allowance for credit losses
			Unpaid
	Recorded		Principal		Specific
	Investment		Balance		Allowance
Residential one-to-four family	$	1,450	$	1,476	$	260
Commercial real estate		5,426		5,426		133
Totals	$	6,876	$	6,902	$	393
	Impaired loans with no related allowance for credit losses
	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Residential one-to-four family	$	2,891	$	2,933	$	—
Commercial real estate		657		657		—
Home equity lines of credit		200		200		—
Indirect auto		15		15		—
Totals	$	3,763	$	3,805	$	—

The following tables set forth information regarding interest income recognized on impaired loans, by portfolio, for the periods indicated (unaudited and in thousands):

	Three months ended June 30, 2016				Three months ended June 30, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
With an allowance recorded	Investment		Recognized		Investment		Recognized
Residential one-to-four family	$	1,400	$	8	$	1,178	$	8
Commercial real estate		2,977		30		3,035		31
Totals	$	4,377	$	38	$	4,213	$	39
	Three months ended June 30, 2016				Three months ended June 30, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
Without an allowance recorded	Investment		Recognized		Investment		Recognized
Residential one-to-four family	$	2,882	$	19	$	5,032	$	25
Commercial real estate		569		6		772		8
Home equity lines of credit		200		2		294		2
Indirect auto		15		—		—		—
Totals	$	3,666	$	27	$	6,098	$	35

	Six months ended June 30, 2016				Six months ended June 30, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
With an allowance recorded	Investment		Recognized		Investment		Recognized
Residential one-to-four family	$	1,407	$	16	$	1,179	$	17
Commercial real estate		3,783		85		3,043		62
Totals	$	5,190	$	101	$	4,222	$	79
	Six months ended June 30, 2016				Six months ended June 30, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
Without an allowance recorded	Investment		Recognized		Investment		Recognized
Residential one-to-four family	$	2,886	$	39	$	5,043	$	50
Commercial real estate		596		13		787		16
Home equity lines of credit		200		4		295		4
Indirect auto		19		—		—		—
Totals	$	3,701	$	56	$	6,125	$	70

The following is a summary of past due and non-accrual loans (in thousands):

	June 30, 2016 (unaudited)
	30–59 Days		60–89 Days		90 Days or More		Total Past Due		90 days or more and accruing		Loans on Non-accrual
Real estate loans:
Residential one-to-four family	$	679	$	627	$	497	$	1,803	$	—	$	1,146
Home equity lines of credit		48		—		—		48		—		—
Other loans:
Indirect auto		429		42		—		471		—		—
Total	$	1,156	$	669	$	497	$	2,322	$	—	$	1,146
	December 31, 2015
	30–59 Days		60–89 Days		90 Days or More		Total Past Due		90 days or more and accruing		Loans on Non-accrual
Real estate loans:
Residential one-to-four family	$	1,579	$	81	$	411	$	2,071	$	—	$	1,192
Commercial real estate		—		—		—		—		—		2,424
Home equity lines of credit		634		—		—		634		—		—
Other loans:
Indirect auto		551		47		15		613		—		15
Total	$	2,764	$	128	$	426	$	3,318	$	—	$	3,631

Credit Quality Information

The Company utilizes a nine grade internal loan rating system for commercial, commercial real estate and construction loans, and a five grade internal loan rating system for certain residential real estate and home equity lines of credit that are rated if the loans become delinquent.

Loans rated 1, 2, 2.5, 3 and 3.5: Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 4: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 5: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

Loans rated 6: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 7: Loans in this category are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted.

On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial, commercial real estate loans, and construction loans. On an annual basis, the Company engages an independent third party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process.

On a quarterly basis, the Company formally reviews the ratings on all residential real estate and home equity lines of credit if they have become delinquent. Criteria used to determine the rating consists of loan-to-value and days delinquent.

The following tables present the Company’s loans by risk rating at June 30, 2016 (unaudited and in thousands) and December 31, 2015 (in thousands). There were no loans rated as 6 (“doubtful”) or 7 (“loss”) at the dates indicated.

	June 30, 2016
	Loans rated 1-3.5		Loans rated 4		Loans rated 5		Loans not rated (A)		Total
Residential one-to-four family	$	—	$	355	$	1,860	$	831,392	$	833,607
Commercial real estate		450,994		28,840		4,494		—		484,328
Construction		63,034		—		—		—		63,034
Commercial		60,249		—		—		—		60,249
Home equity lines of credit		—		—		799		169,564		170,363
Indirect auto		—		—		—		80,656		80,656
Other consumer		—		—		—		445		445
Total	$	574,277	$	29,195	$	7,153	$	1,082,057	$	1,692,682

	December 31, 2015
	Loans rated 1-3.5		Loans rated 4		Loans rated 5		Loans not rated (A)		Total
Residential one-to-four family	$	—	$	359	$	1,915	$	707,152	$	709,426
Commercial real estate		427,160		15,159		7,072		—		449,391
Construction		56,459		4,263		—		—		60,722
Commercial		53,192		—		—		—		53,192
Home equity lines of credit		—		—		799		159,241		160,040
Indirect auto		—		—		—		103,965		103,965
Consumer		—		—		—		453		453
Total	$	536,811	$	19,781	$	9,786	$	970,811	$	1,537,189

(A) Residential real estate and home equity lines of credit are not formally risk rated by the Company unless the loans become delinquent.

The Company periodically modifies loans to extend the term or make other concessions to help a borrower stay current on their loan and to avoid foreclosure. Any loans that are modified are reviewed by the Company to identify if a TDR has occurred, which is when, for economic or legal reasons related to a borrower’s financial difficulties, the Bank grants a concession to the borrower that it would not otherwise consider. During the three and six months ended June 30, 2016 and June 30, 2015 (unaudited), there were no loans modified and determined to be TDRs. At June 30, 2016 (unaudited), the Company had $7.6 million of troubled debt restructurings related to ten loans.

The following table shows the Company’s total TDRs and other pertinent information as of the dates indicated (in thousands):

	June 30, 2016			December 31, 2015
		(unaudited	)
TDRs on Accrual Status	$	6,850		$	7,007
TDRs on Nonaccrual Status		772			781
Total TDRs	$	7,622		$	7,788
Amount of specific allocation included in the allowance for loan losses associated with TDRs	$	165		$	170
Additional commitments to lend to a borrower who has been a party to a TDR	$	—		$	—

For purposes of this table the Company generally considers a loan to have defaulted when it reaches 90 days past due. The following table shows the loans that have been modified during the past twelve months which have subsequently defaulted during the periods indicated (unaudited and in thousands except for number of contracts):

	For the three months ended June 30,
	2016				2015
	Number		Recorded		Number		Recorded
	of Contracts		Investment		of Contracts		Investment
Real estate loans:
Residential one-to-four family		1	$	497		—	$	—
Total		1	$	497		—	$	—
	For the six months ended June 30,
	2016				2015
	Number		Recorded		Number		Recorded
	of Contracts		Investment		of Contracts		Investment
Real estate loans:
Residential one-to-four family		1	$	497		—	$	—
Total		1	$	497		—	$	—

Foreclosure Proceedings

Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled $497,000 as of June 30, 2016 (unaudited) and $412,000 as of December 31, 2015. We did not have any foreclosed residential real estate property as of June 30, 2016 (unaudited) and as of December 31, 2015.

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TRANSFERS AND SERVICING

6 Months Ended

Jun. 30, 2016

TRANSFERS AND SERVICING

NOTE 5 – TRANSFERS AND SERVICING

Certain residential mortgage loans are periodically sold by the Company to the secondary market. Generally, these loans are sold without recourse or other credit enhancements. The Company sells loans and both releases and retains the servicing rights. For loans sold with the servicing rights retained, we provide the servicing for the loans on a per-loan fee basis. The Company has also periodically sold auto loans to other financial institutions without recourse or other credit enhancements, and the Company generally provides servicing for these loans.

At June 30, 2016 (unaudited) and December 31, 2015, residential loans previously sold and serviced by the Company were $65.8 million and $65.9 million, respectively. At June 30, 2016 (unaudited) and December 31, 2015, indirect auto loans previously sold and serviced by the Company were $41.6 million and $57.8 million, respectively.

On March 16, 2006, seventeen loans with an aggregate principal balance of $10.5 million were sold to another financial institution. The agreement related to this sale contained provisions requiring the Company to repurchase any loan that became 90 days past due during the initial 120 months. The Company would repurchase the past due loan for 100 percent of the unpaid principal plus interest to repurchase date. During the six months ended June 30, 2016, the recourse provision expired and both the loans and recourse obligation were derecognized from the consolidated balance sheet. As of June 30, 2016 (unaudited) and December 31, 2015, the Company’s recorded balance of these loans sold with recourse amounted to $0 and $1.0 million, respectively. The Company did not incur any losses related to these loans.

Mortgage servicing rights (MSR) are initially recorded as an asset and measured at fair value when loans are sold to third parties with servicing rights retained. MSR assets are amortized in proportion to, and over the period of, estimated net servicing revenues. The carrying value of these assets is periodically reviewed for impairment using the lower of amortized cost or fair value methodology. The fair value of the servicing rights is determined by estimating the present value of future net cash flows, taking into consideration market loan prepayment speeds, discount rates, servicing costs and other economic factors. For purposes of measuring impairment, the underlying loans are stratified into relatively homogeneous pools based on predominant risk characteristics which include product type (i.e., fixed or adjustable) and interest rate bands. If the aggregate carrying value of the capitalized mortgage servicing rights for a stratum exceeds its fair value, MSR impairment is recognized in earnings through a valuation allowance for the difference. As the loans are repaid and net servicing revenue is earned, the MSR asset is amortized as an offset to loan servicing income. Servicing revenues are expected to exceed this amortization expense. However, if actual prepayment experience or defaults exceed what was originally anticipated, net servicing revenues may be less than expected and mortgage servicing rights may be impaired. No servicing assets or liabilities related to auto loans were recorded, as the contractual servicing fees are adequate to compensate the Company for its servicing responsibilities.

Changes in mortgage servicing rights, which are included in other assets, were as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
	(unaudited)						(unaudited)
Balance at beginning of period	$	466		$	463		$	479		$	476
Capitalization		29			55			46			77
Amortization		(24	)		(24	)		(45	)		(47	)
Valuation allowance adjustment		(14	)		(19	)		(23	)		(31	)
Balance at end of period	$	457		$	475		$	457		$	475

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SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED FUNDS

6 Months Ended

Jun. 30, 2016

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED FUNDS

NOTE 6 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED FUNDS

The securities sold under agreements to repurchase as of June 30, 2016 (unaudited) and December 31, 2015 are securities sold on a short-term basis by the Company that have been accounted for not as sales but as borrowings. The securities consisted of mortgage-backed securities issued by U.S. government sponsored entities. The securities were held in the Company’s safekeeping account at the Federal Home Loan Bank of Boston under the control of the Company. The securities are pledged to the purchasers of the securities. The purchasers have agreed to sell to the Company identical securities at the maturity of the agreements. The balance of securities sold under agreements to repurchase as of June 30, 2016 (unaudited) and December 31, 2015 was $1.8 million and $3.7 million, respectively.

Other borrowed funds consist of the recourse obligation recorded in connection with the loans sold with recourse discussed in Note 5. The balance of the recourse obligation at June 30, 2016 (unaudited) and December 31, 2015 was $0 and $1.0 million, respectively.

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EMPLOYEE AND DIRECTOR BENEFIT PLANS

6 Months Ended

Jun. 30, 2016

EMPLOYEE AND DIRECTOR BENEFIT PLANS

NOTE 7 – EMPLOYEE AND DIRECTOR BENEFIT PLANS

Belmont Savings Bank Supplemental Executive Retirement Plan

The purpose of the Belmont Savings Bank Supplemental Executive Retirement Plan is to remain competitive with our peers in our compensation arrangements and to help us retain certain executive officers of the Company. At June 30, 2016 (unaudited) and December 31, 2015, there were four participants in the Plan. Participants are fully vested after the completion of between five and ten years of service. The plan is unfunded. The estimated liability at June 30, 2016 (unaudited) and December 31, 2015 relating to this plan was $1.5 million and $1.3 million, respectively.

Other Supplemental Retirement Plans

The Company has supplemental retirement plans for eligible executive officers that provide for a lump sum benefit upon termination of employment at or after age 55 and completing 10 or more years of service (certain reduced benefits are available prior to attaining age 55 or fewer than 10 years of service), subject to certain limitations as set forth in the agreements. The present value of these future payments is being accrued over the service period. The estimated liability at June 30, 2016 (unaudited) and December 31, 2015 relating to these plans was $2.2 million and $2.0 million, respectively.

The Company has a supplemental retirement plan for eligible directors that provides for monthly benefits based upon years of service to the Company, subject to certain limitations as set forth in the agreements. The present value of these future payments is being accrued over the estimated period of service. The estimated liability at June 30, 2016 (unaudited) and December 31, 2015 relating to this plan was $649,000 and $635,000, respectively.

Incentive Compensation Plan

The Incentive Compensation Plan is a discretionary annual cash-based incentive plan that is an integral part of the participant’s total compensation package and supports the continued growth, profitability and risk management of Belmont Savings Bank. Each year participants are awarded for the achievement of certain performance objectives on a company-wide and individual basis. Compensation expense recognized was $523,000 and $555,000 for the three months ended June 30, 2016 and 2015 (unaudited), respectively, and $921,000 and $922,000 for the six months ended June 30, 2016 and 2015 (unaudited), respectively.

Defined Contribution Plan

The Company sponsors a 401(k) plan covering substantially all employees meeting certain eligibility requirements. Under the provisions of the plan, employees are able to contribute up to an annual limit of the lesser of 75% of eligible compensation or the maximum allowed by the Internal Revenue Service. The Company’s contributions for the three months ended June 30, 2016 and 2015 (unaudited) totaled $196,000 and $192,000, respectively, and $430,000 and $429,000 for the six months ended June 30, 2016 and 2015 (unaudited), respectively.

Deferred Compensation Plan

The Company has a compensation deferral plan by which selected employees and directors of the Company are entitled to elect, prior to the beginning of each year, to defer the receipt of an amount of their compensation for the forthcoming year. Each agreement allows for the individual to elect to defer a portion of his or her compensation to an individual deferred compensation account established by Belmont Savings Bank. In April 2013, Belmont Savings Bank created a Rabbi Trust, or grantor trust. The Rabbi Trust is maintained by the Company primarily for purposes of holding deferred compensation for certain directors and employees of the Company. The plan is administered by a third party and permits participants to select from a number of investment options for the investment of their account balances. Each participant is always 100% vested in his or her deferred compensation account balance. As of June 30, 2016 (unaudited) and December 31, 2015, the recorded liability relating to the Rabbi Trust was $2.5 million and $2.5 million, respectively.

Employee Stock Ownership Plan

The Company maintains an Employee Stock Ownership Plan (“ESOP”) to provide eligible employees the opportunity to own Company stock. This plan is a tax-qualified retirement plan for the benefit of all Company employees. Contributions are allocated to eligible participants on the basis of compensation, subject to federal tax law limits.

The Company contributed funds to a subsidiary to enable it to grant a loan to the ESOP for the purchase of 458,643 shares of the Company’s common stock at a price of $10.00 per share. The loan obtained by the ESOP from the Company’s subsidiary to purchase Company common stock is payable annually over 30 years at a rate per annum equal to the Prime Rate (3.5% at June 30, 2016, unaudited). Loan payments are principally funded by cash contributions from the Bank. The loan is secured by the shares purchased, which are held in a suspense account for allocation among participants as the loan is repaid. Cash dividends paid on allocated shares are distributed to participants and cash dividends paid on unallocated shares are used to repay the outstanding debt of the ESOP. Shares used as collateral to secure the loan are released and available for allocation to eligible employees as the principal and interest on the loan is paid. The Company incurred expenses of $87,000 and $84,000 for the three months ended June 30, 2016 and 2015 (unaudited), respectively, and $172,000 and $156,000 for the six months ended June 30, 2016 and 2015 (unaudited), respectively.

Severance Agreements

The Company has entered into employment agreements and change in control agreements with certain executive officers which would provide the executive officers with severance payments based on salary, and the continuation of other benefits, upon a change in control as defined in the agreements.

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PLEDGED ASSETS

6 Months Ended

Jun. 30, 2016

PLEDGED ASSETS

NOTE 8 – PLEDGED ASSETS

The following securities and loans were pledged to secure securities sold under agreements to repurchase, FHLB advances and credit facilities available (in thousands).

June 30, 2016 (unaudited)	Securities held to		Loans		Total pledged
	maturity (at cost)		receivable		assets
Repurchase agreements	$	5,266	$	—	$	5,266
FHLB borrowings		42,870		865,112		907,982
Federal Reserve Bank line of credit		15,720		—		15,720
Total pledged assets	$	63,856	$	865,112	$	928,968
December 31, 2015	Securities held to		Loans		Total pledged
	maturity (at cost)		receivable		assets
Repurchase agreements	$	5,731	$	—	$	5,731
FHLB borrowings		48,105		735,818		783,923
Federal Reserve Bank line of credit		15,700		—		15,700
Total pledged assets	$	69,536	$	735,818	$	805,354

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EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2016

EARNINGS PER SHARE

NOTE 9 – EARNINGS PER SHARE

Basic earnings per share (“EPS”) excludes dilution and is calculated by dividing net income allocated to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted EPS is computed in a manner similar to that of basic EPS except that the weighted-average number of common shares outstanding is increased to include the number of incremental common shares (computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents (such as stock options and unvested restricted stock not meeting the definition of a participating security) were issued during the period.

Earnings per share consisted of the following components for the periods indicated (unaudited and dollars in thousands except per share data):

	Three months ended						Six months ended
	June 30,						June 30,
	2016			2015			2016			2015
Net income	$	2,952		$	1,603		$	5,491		$	2,977
Undistributed earnings attributable to participating securities		(49	)		(40	)		(92	)		(75	)
Net income allocated to common stockholders	$	2,903		$	1,563		$	5,399		$	2,902
Weighted average shares outstanding, basic		8,560,039			8,450,099			8,555,212			8,446,266
Effect of dilutive shares		266,700			230,572			260,623			196,672
Weighted average shares outstanding, assuming dilution		8,826,739			8,680,671			8,815,835			8,642,938
Basic EPS	$	0.34		$	0.19		$	0.63		$	0.34
Effect of dilutive shares		(0.01	)		(0.01	)		(0.02	)		—
Diluted EPS	$	0.33		$	0.18		$	0.61		$	0.34

The following table illustrates average options to purchase shares of common stock that were outstanding but not included in the computation of EPS because they were antidilutive under the treasury stock method (unaudited):

	Three months ended				Six months ended
	June 30,				June 30,
	2016		2015		2016		2015
Stock options		27,500		23,242		18,434		27,324

Unallocated common shares held by the ESOP are shown as a reduction in stockholders’ equity and are not included in the weighted-average number of common shares outstanding for either basic or diluted earnings per share calculations.

On June 22, 2013, the Company’s Board of Directors authorized a program to repurchase, from time-to-time and as market and business conditions warrant, up to 500,000 shares of the Company’s common stock. During the six months ended June 30, 2016 and 2015 (unaudited), the Company did not repurchase any shares under the repurchase program.

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STOCK BASED COMPENSATION

6 Months Ended

Jun. 30, 2016

STOCK BASED COMPENSATION

NOTE 10 – STOCK BASED COMPENSATION

The following table presents the pre-tax expense associated with stock options and restricted stock awards and the related tax benefits recognized (in thousands and unaudited):

	Three months ended				Six months ended
	June 30,				June 30,
	2016		2015		2016		2015
Stock options	$	198	$	198	$	387	$	386
Restricted stock awards		215		216		425		424
Total stock based compensation expense	$	413	$	414	$	812	$	810
Related tax benefits recognized in earnings	$	122	$	119	$	241	$	235

Total compensation cost related to non-vested awards not yet recognized and the weighted average period (in years) over which it is expected to be recognized is as follows (in thousands):

	As of June 30, 2016				As of December 31, 2015
	(unaudited)
			Weighted average period				Weighted average period
	Amount				Amount
Stock options	$	1,200		1.85	$	1,476		2.07
Restricted stock		1,178		1.46		1,562		1.95
Total	$	2,378			$	3,038

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FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2016

FAIR VALUE MEASUREMENTS

NOTE 11 – FAIR VALUE MEASUREMENTS

Determination of Fair Value

The fair value of an asset or liability is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified from one level to another. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various assets and liabilities. In cases where quoted market prices are not available, fair values are based on estimates using present value of cash flows or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

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

Level 1 - Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 - Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 - Level 3 inputs are unobservable inputs for the asset or liability.

For assets and liabilities, fair value is based upon the lowest level of input that is significant to the fair value measurement.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon models that primarily use, as inputs, observable market based parameters. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein. A more detailed description of the valuation methodologies used for assets and liabilities measured at fair value is set forth below. A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value for June 30, 2016 and December 31, 2015. There were no significant transfers between level 1 and level 2 of the fair value hierarchy during the six months ended June 30, 2016 (unaudited) and the year ended December 31, 2015.

Financial Assets and Financial Liabilities: Financial assets and financial liabilities measured at fair value on a recurring basis include the following:

Securities Available for Sale: The Company’s investment in corporate debt securities is generally classified within level 2 of the fair value hierarchy. For these securities, the Company obtains fair value measurements from independent pricing services. The fair value measurements consider observable data that may include reported trades, dealer quotes, market spreads, cash flows, the U.S. treasury yield curve, trading levels, market consensus prepayment speeds, credit information and the instrument’s terms and conditions.

Investments held in the Rabbi Trust: Investments held in the Rabbi Trust consist primarily of exchange-traded mutual funds and were recorded at fair value and included in other assets. The purpose of these investments is to fund certain director and executive non-qualified retirement benefits and deferred compensation. The exchange-traded mutual funds were valued based on quoted prices from the market and are categorized as Level 1.

The following table summarizes financial assets measured at fair value on a recurring basis as of June 30, 2016 and December 31, 2015, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total Fair Value
At June 30, 2016 (unaudited) Securities available-for-sale Corporate debt securities	$	—	$	22,122	$	—	$	22,122
Trading securities Rabbi trust investments		2,530		—		—		2,530
Totals	$	2,530	$	22,122	$	—	$	24,652
							Total
	Level 1		Level 2		Level 3		Fair Value
At December 31, 2015 Securities available-for-sale Corporate debt securities	$	—	$	21,876	$	—	$	21,876
Trading securities Rabbi trust investments		2,460		—		—		2,460
Totals	$	2,460	$	21,876	$	—	$	24,336

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets measured at fair value on a non-recurring basis during the reported periods include certain impaired loans reported at the fair value of the underlying collateral. Fair value was measured using appraised values of collateral and adjusted as necessary by management based on unobservable inputs for specific properties. However, the choice of observable data is subject to significant judgment, and there are often adjustments based on judgment in order to make observable data comparable and to consider the impact of time, the condition of properties, interest rates, and other market factors on current values. Additionally, commercial real estate appraisals frequently involve discounting of projected cash flows, which relies inherently on unobservable data. Therefore, real estate collateral related nonrecurring fair value measurement adjustments have generally been classified as Level 3. Estimates of fair value used for other collateral supporting commercial loans generally are based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3. Financial assets measured at fair value on a non-recurring basis during the reported periods also include loans held-for-sale. Residential mortgage loans held-for-sale are recorded at the lower of cost or fair value and are therefore measured at fair value on a non-recurring basis. The fair values for loans held-for-sale are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality and are included in Level 3.

The following table (in thousands) presents certain impaired loans that were re-measured and reported at fair value through a specific valuation allowance allocation of the allowance for loan losses or charge off based upon the fair value of the underlying collateral and loans held-for-sale at June 30, 2016 (unaudited) and December 31, 2015.

	June 30, 2016
	Level 1		Level 2		Level 3
Impaired loans	$	—	$	—	$	632
Totals	$	—	$	—	$	632
	December 31, 2015
	Level 1		Level 2		Level 3
Impaired loans	$	—	$	—	$	2,886
Loans held-for-sale		—		—		1,245
Totals	$	—	$	—	$	4,131

Non-Financial Assets and Non-Financial Liabilities: The Company has no non-financial assets or non-financial liabilities measured at fair value on a recurring basis. Non-financial assets measured at fair value on a non-recurring basis during the reported periods include certain foreclosed assets which, upon initial recognition, were re-measured and reported at fair value through a charge-off to the allowance for loan losses. Non financial assets also include mortgage servicing right assets that are remeasured and reported at the lower of cost or fair value.

The following table (in thousands) presents the non-financial assets that were re-measured and reported at the lower of cost or fair value at the periods indicated:

	June 30, 2016
	Level 1		Level 2		Level 3
			(unaudited)
Mortgage servicing rights	$	—	$	—	$	457
Totals	$	—	$	—	$	457
	December 31, 2015
	Level 1		Level 2		Level 3
Mortgage servicing rights	$	—	$	—	$	479
Totals	$	—	$	—	$	479

ASC Topic 825, “Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The estimated fair value approximates carrying value for cash and cash equivalents, FHLB stock, accrued interest, bank owned life insurance, securities sold under agreements to repurchase and mortgagors’ escrow accounts. The methodologies for other significant financial assets and financial liabilities are discussed below:

Securities held to maturity-The fair values presented are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments and/or discounted cash flow analyses.

Loans- For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

Deposits- The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for

fixed-rate certificate accounts are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on certificate accounts.

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

Other borrowed funds-This balance represents the balance of loans sold with recourse. Fair values are determined consistent with that of our loans.

Summary of Fair Values of Financial Instruments not Carried at Fair Value

The estimated fair values, and related carrying or notional amounts, of the Company’s financial instruments are as follows (in thousands):

	June 30, 2016
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
					(unaudited)
Financial assets:
Cash and cash equivalents	$	53,843	$	53,843	$	53,843	$	—	$	—
Interest-bearing time deposits with other banks		134		134		—		134		—
Held-to-maturity securities		137,341		139,496		—		139,496		—
Federal Home Loan Bank stock		21,824		21,824		—		21,824		—
Loans, net		1,689,295		1,691,009		—		—		1,691,009
Accrued interest receivable		4,351		4,351		4,351		—		—
Bank-owned life insurance		35,261		35,261		—		35,261		—
Financial liabilities:
Deposits		1,384,625		1,388,306		1,075,018		313,288		—
Federal Home Loan Bank advances		423,250		426,606		—		426,606		—
Securities sold under agreements to repurchase		1,771		1,771		—		1,771		—
Accrued interest payable		1,016		1,016		1,016		—		—
Mortgagors’ escrow accounts		2,553		2,553		—		2,553		—

	December 31, 2015
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	51,261	$	51,261	$	51,261	$	—	$	—
Interest-bearing time deposits with other banks		131		131		—		131		—
Held-to-maturity securities		137,119		136,728		—		136,728		—
Federal Home Loan Bank stock		18,309		18,309		—		18,309		—
Loans, net		1,534,957		1,518,476		—		—		1,518,476
Accrued interest receivable		3,781		3,781		3,781		—		—
Bank-owned life insurance		29,787		29,787		—		29,787		—
Financial liabilities:
Deposits		1,269,519		1,271,278		1,011,084		260,194		—
Federal Home Loan Bank advances		374,000		373,840		—		373,840		—
Securities sold under agreements to repurchase		3,695		3,695		—		3,695		—
Other borrowed funds		1,020		999		—		999		—
Accrued interest payable		993		993		993		—		—
Mortgagors’ escrow accounts		2,414		2,414		—		2,414		—

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OTHER COMPREHENSIVE INCOME (LOSS)

6 Months Ended

Jun. 30, 2016

OTHER COMPREHENSIVE INCOME (LOSS)

NOTE 12 – OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents a reconciliation of the changes in the components of other comprehensive income(loss) for the dates indicated, including the amount of income tax expense (benefit) allocated to each component of other comprehensive income (loss):

	Three months ended June 30, 2016							Three months ended June 30, 2015
	(unaudited and in thousands)							(unaudited and in thousands)
	Pre Tax		Tax			After Tax		Pre Tax			Tax		After Tax
	Amount		Expense			Amount		Amount			Benefit		Amount
Securities available-for-sale:
Change in fair value of securities available-for-sale	$	156	$	(62	)	$	94	$	(154	)	$	61	$	(93	)
Total other comprehensive income (loss)	$	156	$	(62	)	$	94	$	(154	)	$	61	$	(93	)

	Six months ended June 30, 2016							Six months ended June 30, 2015
	(unaudited and in thousands)							(unaudited and in thousands)
	Pre Tax		Tax			After Tax		Pre Tax			Tax		After Tax
	Amount		Expense			Amount		Amount			Benefit		Amount
Securities available-for-sale:
Change in fair value of securities available-for-sale	$	284	$	(114	)	$	170	$	(18	)	$	8	$	(10	)
Total other comprehensive income (loss)	$	284	$	(114	)	$	170	$	(18	)	$	8	$	(10	)

The components of accumulated other comprehensive income (loss), included in stockholders’ equity, are as follows: (in thousands):

	June 30, 2016		December 31, 2015
	(unaudited)
Net unrealized holding gain (loss) on available-for-sale securities, net of tax	$	20	$	(150	)
Unrecognized benefit pertaining to defined benefit plan, net of tax		34		34
Accumulated other comprehensive income (loss)	$	54	$	(116	)

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INVESTMENTS IN SECURITIES (Tables)

6 Months Ended

Jun. 30, 2016

Amortized Cost Basis and Fair Value of Available for Sale and Held-to-Maturity Securities

The amortized cost basis of available-for-sale and held-to-maturity securities and their approximate fair values were as follows at the dates indicated (in thousands):

	June 30, 2016									December 31, 2015
	Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(unaudited)
Available-for-sale securities:
Corporate debt securities	$	22,088	$	49	$	(15	)	$	22,122	$	22,126	$	35	$	(285	)	$	21,876
	$	22,088	$	49	$	(15	)	$	22,122	$	22,126	$	35	$	(285	)	$	21,876
Held-to-maturity securities:
U.S. government sponsored mortgage-backed securities	$	119,713	$	1,488	$	(63	)	$	121,138	$	119,517	$	460	$	(965	)	$	119,012
Corporate debt securities		17,628		730		—			18,358		17,602		141		(27	)		17,716
	$	137,341	$	2,218	$	(63	)	$	139,496	$	137,119	$	601	$	(992	)	$	136,728

Amortized Cost Basis and Estimated Fair Value of Debt Securities by Contractual Maturity

The amortized cost basis and estimated fair value of debt securities by contractual maturity at June 30, 2016 is as follows (in thousands and unaudited). Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2016
	Available-for-Sale				Held-to-Maturity
	Amortized Cost Basis		Fair Value		Amortized Cost Basis		Fair Value
	(unaudited)				(unaudited)
Due within one year	$	—	$	—	$	16	$	16
Due after one year through five years		12,780		12,828		9,110		9,173
Due after five years through ten years		9,308		9,294		51,982		53,249
Due after ten years		—		—		76,233		77,058
	$	22,088	$	22,122	$	137,341	$	139,496

Securities with Gross Unrealized Losses Aggregated by Investment Category and Length of Time

Information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position is as follows (in thousands):

			Less than 12 Months					Over 12 Months
	# of Holdings		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2016 (unaudited):
Available-for-sale
Corporate debt securities		1	$	4,985	$	(15	)	$	—	$	—
Held-to-maturity
U.S. government sponsored mortgage-backed securities		14		5,939		(20	)		7,428		(43	)
Total temporarily impaired securities		15	$	10,924	$	(35	)	$	7,428	$	(43	)
December 31, 2015:
Available-for-sale
Corporate debt securities		4	$	9,745	$	(75	)	$	4,127	$	(210	)
Held-to-maturity
Corporate debt securities		3		4,733		(27	)		—		—
U.S. government sponsored mortgage-backed securities		52		89,366		(822	)		5,430		(143	)
Total temporarily impaired securities		59	$	103,844	$	(924	)	$	9,557	$	(353	)

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LOANS, ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY (Tables)

6 Months Ended

Jun. 30, 2016

Summary of Loans

Loans consisted of the following (dollars in thousands):

	June 30, 2016						December 31, 2015
	Amount			Percent			Amount			Percent
	(unaudited)
Mortgage loans:
Residential one-to-four family	$	833,607			49.26	%	$	709,426			46.15	%
Commercial real estate loans (1)		484,328			28.61			449,391			29.24
Home equity lines of credit		170,363			10.06			160,040			10.41
Construction loans		63,034			3.72			60,722			3.95
Total mortgage loans		1,551,332			91.65			1,379,579			89.75
Commercial loans		60,249			3.56			53,192			3.46
Consumer loans:
Indirect auto loans		80,656			4.76			103,965			6.76
Other consumer loans		445			0.03			453			0.03
		141,350			8.35			157,610			10.25
Total loans		1,692,682			100.00	%		1,537,189			100.00	%
Net deferred loan costs		3,988						4,663
Net unamortized mortgage premiums		5,168						4,345
Allowance for loan losses		(12,543	)					(11,240	)
Total loans, net	$	1,689,295					$	1,534,957

(1) Includes multi-family real estate loans.

Activity in Allowance for Loan Losses by Portfolio Class and Balances of Allowance for Loan Losses and Recorded Investment in Loans by Portfolio Class

The following tables (in thousands) present the activity in the allowance for loan losses by portfolio class for the three and six months ended June 30, 2016 and 2015 (unaudited); and the balances of the allowance for loan losses and recorded investment in loans by portfolio class based on impairment method at June 30, 2016 (unaudited) and December 31, 2015. The recorded investment in loans in any of the following tables does not include accrued and unpaid interest or any deferred loan fees or costs, as amounts are not significant.

	Three Months Ended June 30, 2016
	Beginning balance		Provision (benefit)			Charge-offs			Recoveries		Ending balance
Residential one-to-four family	$	3,980	$	175		$	—		$	—	$	4,155
Commercial real estate		4,868		(58	)		—			—		4,810
Construction		679		185			—			—		864
Commercial		505		193			—			—		698
Home equity lines of credit		1,008		30			—			—		1,038
Indirect auto		554		(36	)		(28	)		2		492
Other consumer		9		4			(4	)		1		10
Unallocated		228		248			—			—		476
Total	$	11,831	$	741		$	(32	)	$	3	$	12,543
	Three Months Ended June 30, 2015
	Beginning balance		Provision (benefit)			Charge-offs			Recoveries		Ending balance
Residential one-to-four family	$	2,579	$	161		$	—		$	—	$	2,740
Commercial real estate		4,035		87			—			—		4,122
Construction		473		112			—			—		585
Commercial		416		(61	)		—			—		355
Home equity lines of credit		740		87			—			—		827
Indirect auto		770		(31	)		(33	)		7		713
Other consumer		13		4			(5	)		—		12
Unallocated		177		6			—			—		183
Total	$	9,203	$	365		$	(38	)	$	7	$	9,537

	Six Months Ended June 30, 2016
	Beginning balance		Provision (benefit)			Charge-offs			Recoveries		Ending balance
Residential one-to-four family	$	3,574	$	581		$	—		$	—	$	4,155
Commercial real estate		4,478		332			—			—		4,810
Construction		801		63			—			—		864
Commercial		613		85			—			—		698
Home equity lines of credit		928		110			—			—		1,038
Indirect auto		623		(100	)		(42	)		11		492
Other consumer		10		6			(8	)		2		10
Unallocated		213		263			—			—		476
Total	$	11,240	$	1,340		$	(50	)	$	13	$	12,543
	Six Months Ended June 30, 2015
	Beginning balance		Provision (benefit)			Charge-offs			Recoveries		Ending balance
Residential one-to-four family	$	2,364	$	376		$	—		$	—	$	2,740
Commercial real estate		4,043		79			—			—		4,122
Construction		228		357			—			—		585
Commercial		458		(103	)		—			—		355
Home equity lines of credit		828		(1	)		—			—		827
Indirect auto		778		(24	)		(59	)		18		713
Other consumer		11		8			(8	)		1		12
Unallocated		171		12			—			—		183
Total	$	8,881	$	704		$	(67	)	$	19	$	9,537

	June 30, 2016
	Individually evaluated for impairment				Collectively evaluated for impairment				Total
	Loan balance		Allowance		Loan balance		Allowance		Loan balance		Allowance
Residential one-to-four family	$	4,272	$	174	$	829,335	$	3,981	$	833,607	$	4,155
Commercial real estate		3,524		2		480,804		4,808		484,328		4,810
Construction		—		—		63,034		864		63,034		864
Commercial		—		—		60,249		698		60,249		698
Home equity lines of credit		200		—		170,163		1,038		170,363		1,038
Indirect auto		—		—		80,656		492		80,656		492
Other consumer		—		—		445		10		445		10
Unallocated		—		—		—		476		—		476
Total	$	7,996	$	176	$	1,684,686	$	12,367	$	1,692,682	$	12,543
	December 31, 2015
	Individually evaluated for impairment				Collectively evaluated for impairment				Total
	Loan balance		Allowance		Loan balance		Allowance		Loan balance		Allowance
Residential one-to-four family	$	4,341	$	260	$	705,085	$	3,314	$	709,426	$	3,574
Commercial real estate		6,083		133		443,308		4,345		449,391		4,478
Construction		—		—		60,722		801		60,722		801
Commercial		—		—		53,192		613		53,192		613
Home equity lines of credit		200		—		159,840		928		160,040		928
Indirect auto		15		—		103,950		623		103,965		623
Other consumer		—		—		453		10		453		10
Unallocated		—		—		—		213		—		213
Total	$	10,639	$	393	$	1,526,550	$	10,847	$	1,537,189	$	11,240

Information about Loans that Meet Definition of Impaired Loan

Information about loans that meet the definition of an impaired loan in ASC 310-10-35 is as follows as of June 30, 2016 (unaudited and in thousands):

	Impaired loans with a related allowance for credit losses
	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Residential one-to-four family	$	1,396	$	1,448	$	174
Commercial real estate		2,972		2,972		2
Totals	$	4,368	$	4,420	$	176
	Impaired loans with no related allowance for credit losses
	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Residential one-to-four family	$	2,876	$	2,918	$	—
Commercial real estate		552		552		—
Home equity lines of credit		200		200		—
Totals	$	3,628	$	3,670	$	—

Information about loans that meet the definition of an impaired loan in ASC 310-10-35 is as follows as of December 31, 2015 (in thousands):

	Impaired loans with a related allowance for credit losses
			Unpaid
	Recorded		Principal		Specific
	Investment		Balance		Allowance
Residential one-to-four family	$	1,450	$	1,476	$	260
Commercial real estate		5,426		5,426		133
Totals	$	6,876	$	6,902	$	393
	Impaired loans with no related allowance for credit losses
	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Residential one-to-four family	$	2,891	$	2,933	$	—
Commercial real estate		657		657		—
Home equity lines of credit		200		200		—
Indirect auto		15		15		—
Totals	$	3,763	$	3,805	$	—

Information regarding Interest Income Recognized on Impaired Loans

The following tables set forth information regarding interest income recognized on impaired loans, by portfolio, for the periods indicated (unaudited and in thousands):

	Three months ended June 30, 2016				Three months ended June 30, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
With an allowance recorded	Investment		Recognized		Investment		Recognized
Residential one-to-four family	$	1,400	$	8	$	1,178	$	8
Commercial real estate		2,977		30		3,035		31
Totals	$	4,377	$	38	$	4,213	$	39
	Three months ended June 30, 2016				Three months ended June 30, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
Without an allowance recorded	Investment		Recognized		Investment		Recognized
Residential one-to-four family	$	2,882	$	19	$	5,032	$	25
Commercial real estate		569		6		772		8
Home equity lines of credit		200		2		294		2
Indirect auto		15		—		—		—
Totals	$	3,666	$	27	$	6,098	$	35

	Six months ended June 30, 2016				Six months ended June 30, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
With an allowance recorded	Investment		Recognized		Investment		Recognized
Residential one-to-four family	$	1,407	$	16	$	1,179	$	17
Commercial real estate		3,783		85		3,043		62
Totals	$	5,190	$	101	$	4,222	$	79
	Six months ended June 30, 2016				Six months ended June 30, 2015
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
Without an allowance recorded	Investment		Recognized		Investment		Recognized
Residential one-to-four family	$	2,886	$	39	$	5,043	$	50
Commercial real estate		596		13		787		16
Home equity lines of credit		200		4		295		4
Indirect auto		19		—		—		—
Totals	$	3,701	$	56	$	6,125	$	70

Summary of Past Due and Non-Accrual Loans

The following is a summary of past due and non-accrual loans (in thousands):

	June 30, 2016 (unaudited)
	30–59 Days		60–89 Days		90 Days or More		Total Past Due		90 days or more and accruing		Loans on Non-accrual
Real estate loans:
Residential one-to-four family	$	679	$	627	$	497	$	1,803	$	—	$	1,146
Home equity lines of credit		48		—		—		48		—		—
Other loans:
Indirect auto		429		42		—		471		—		—
Total	$	1,156	$	669	$	497	$	2,322	$	—	$	1,146
	December 31, 2015
	30–59 Days		60–89 Days		90 Days or More		Total Past Due		90 days or more and accruing		Loans on Non-accrual
Real estate loans:
Residential one-to-four family	$	1,579	$	81	$	411	$	2,071	$	—	$	1,192
Commercial real estate		—		—		—		—		—		2,424
Home equity lines of credit		634		—		—		634		—		—
Other loans:
Indirect auto		551		47		15		613		—		15
Total	$	2,764	$	128	$	426	$	3,318	$	—	$	3,631

Company's Loans by Risk Rating

The following tables present the Company’s loans by risk rating at June 30, 2016 (unaudited and in thousands) and December 31, 2015 (in thousands). There were no loans rated as 6 (“doubtful”) or 7 (“loss”) at the dates indicated.

	June 30, 2016
	Loans rated 1-3.5		Loans rated 4		Loans rated 5		Loans not rated (A)		Total
Residential one-to-four family	$	—	$	355	$	1,860	$	831,392	$	833,607
Commercial real estate		450,994		28,840		4,494		—		484,328
Construction		63,034		—		—		—		63,034
Commercial		60,249		—		—		—		60,249
Home equity lines of credit		—		—		799		169,564		170,363
Indirect auto		—		—		—		80,656		80,656
Other consumer		—		—		—		445		445
Total	$	574,277	$	29,195	$	7,153	$	1,082,057	$	1,692,682

	December 31, 2015
	Loans rated 1-3.5		Loans rated 4		Loans rated 5		Loans not rated (A)		Total
Residential one-to-four family	$	—	$	359	$	1,915	$	707,152	$	709,426
Commercial real estate		427,160		15,159		7,072		—		449,391
Construction		56,459		4,263		—		—		60,722
Commercial		53,192		—		—		—		53,192
Home equity lines of credit		—		—		799		159,241		160,040
Indirect auto		—		—		—		103,965		103,965
Consumer		—		—		—		453		453
Total	$	536,811	$	19,781	$	9,786	$	970,811	$	1,537,189

(A) Residential real estate and home equity lines of credit are not formally risk rated by the Company unless the loans become delinquent.

Trouble Debt Restructuring Accrual Status

The following table shows the Company’s total TDRs and other pertinent information as of the dates indicated (in thousands):

	June 30, 2016			December 31, 2015
		(unaudited	)
TDRs on Accrual Status	$	6,850		$	7,007
TDRs on Nonaccrual Status		772			781
Total TDRs	$	7,622		$	7,788
Amount of specific allocation included in the allowance for loan losses associated with TDRs	$	165		$	170
Additional commitments to lend to a borrower who has been a party to a TDR	$	—		$	—

Modified and subsequently defaulted

Post Modification of Troubled Debt Restructuring Balance

The following table shows the loans that have been modified during the past twelve months which have subsequently defaulted during the periods indicated (unaudited and in thousands except for number of contracts):

	For the three months ended June 30,
	2016				2015
	Number		Recorded		Number		Recorded
	of Contracts		Investment		of Contracts		Investment
Real estate loans:
Residential one-to-four family		1	$	497		—	$	—
Total		1	$	497		—	$	—
	For the six months ended June 30,
	2016				2015
	Number		Recorded		Number		Recorded
	of Contracts		Investment		of Contracts		Investment
Real estate loans:
Residential one-to-four family		1	$	497		—	$	—
Total		1	$	497		—	$	—

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TRANSFERS AND SERVICING (Tables)

6 Months Ended

Jun. 30, 2016

Changes in Mortgage Servicing Rights

Changes in mortgage servicing rights, which are included in other assets, were as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
	(unaudited)						(unaudited)
Balance at beginning of period	$	466		$	463		$	479		$	476
Capitalization		29			55			46			77
Amortization		(24	)		(24	)		(45	)		(47	)
Valuation allowance adjustment		(14	)		(19	)		(23	)		(31	)
Balance at end of period	$	457		$	475		$	457		$	475

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PLEDGED ASSETS (Tables)

6 Months Ended

Jun. 30, 2016

Securities and Loans Pledged to Secure Securities Sold Under Agreements to Repurchase, FHLB Advances and Credit Facilities Available

The following securities and loans were pledged to secure securities sold under agreements to repurchase, FHLB advances and credit facilities available (in thousands).

June 30, 2016 (unaudited)	Securities held to		Loans		Total pledged
	maturity (at cost)		receivable		assets
Repurchase agreements	$	5,266	$	—	$	5,266
FHLB borrowings		42,870		865,112		907,982
Federal Reserve Bank line of credit		15,720		—		15,720
Total pledged assets	$	63,856	$	865,112	$	928,968
December 31, 2015	Securities held to		Loans		Total pledged
	maturity (at cost)		receivable		assets
Repurchase agreements	$	5,731	$	—	$	5,731
FHLB borrowings		48,105		735,818		783,923
Federal Reserve Bank line of credit		15,700		—		15,700
Total pledged assets	$	69,536	$	735,818	$	805,354

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EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2016

Components of Earning Per Share

Earnings per share consisted of the following components for the periods indicated (unaudited and dollars in thousands except per share data):

	Three months ended						Six months ended
	June 30,						June 30,
	2016			2015			2016			2015
Net income	$	2,952		$	1,603		$	5,491		$	2,977
Undistributed earnings attributable to participating securities		(49	)		(40	)		(92	)		(75	)
Net income allocated to common stockholders	$	2,903		$	1,563		$	5,399		$	2,902
Weighted average shares outstanding, basic		8,560,039			8,450,099			8,555,212			8,446,266
Effect of dilutive shares		266,700			230,572			260,623			196,672
Weighted average shares outstanding, assuming dilution		8,826,739			8,680,671			8,815,835			8,642,938
Basic EPS	$	0.34		$	0.19		$	0.63		$	0.34
Effect of dilutive shares		(0.01	)		(0.01	)		(0.02	)		—
Diluted EPS	$	0.33		$	0.18		$	0.61		$	0.34

Options Excluded from Computation of EPS

The following table illustrates average options to purchase shares of common stock that were outstanding but not included in the computation of EPS because they were antidilutive under the treasury stock method (unaudited):

	Three months ended				Six months ended
	June 30,				June 30,
	2016		2015		2016		2015
Stock options		27,500		23,242		18,434		27,324

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STOCK BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2016

Pre-Tax Expense Associated with Stock Option and Restricted Stock Awards and Related Tax Benefits Recognized

The following table presents the pre-tax expense associated with stock options and restricted stock awards and the related tax benefits recognized (in thousands and unaudited):

	Three months ended				Six months ended
	June 30,				June 30,
	2016		2015		2016		2015
Stock options	$	198	$	198	$	387	$	386
Restricted stock awards		215		216		425		424
Total stock based compensation expense	$	413	$	414	$	812	$	810
Related tax benefits recognized in earnings	$	122	$	119	$	241	$	235

Compensation Cost Related to Non-Vested Awards Not Yet Recognized and Weighted Average Recognition Period

Total compensation cost related to non-vested awards not yet recognized and the weighted average period (in years) over which it is expected to be recognized is as follows (in thousands):

	As of June 30, 2016				As of December 31, 2015
	(unaudited)
			Weighted average period				Weighted average period
	Amount				Amount
Stock options	$	1,200		1.85	$	1,476		2.07
Restricted stock		1,178		1.46		1,562		1.95
Total	$	2,378			$	3,038

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FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2016

Summary of Financial Assets Measured at Fair Value on Recurring Basis

The following table summarizes financial assets measured at fair value on a recurring basis as of June 30, 2016 and December 31, 2015, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

	Level 1		Level 2		Level 3		Total Fair Value
At June 30, 2016 (unaudited) Securities available-for-sale Corporate debt securities	$	—	$	22,122	$	—	$	22,122
Trading securities Rabbi trust investments		2,530		—		—		2,530
Totals	$	2,530	$	22,122	$	—	$	24,652
							Total
	Level 1		Level 2		Level 3		Fair Value
At December 31, 2015 Securities available-for-sale Corporate debt securities	$	—	$	21,876	$	—	$	21,876
Trading securities Rabbi trust investments		2,460		—		—		2,460
Totals	$	2,460	$	21,876	$	—	$	24,336

Schedule of Estimated Fair Values and Related Carrying or Notional Amounts of Financial Instruments

The estimated fair values, and related carrying or notional amounts, of the Company’s financial instruments are as follows (in thousands):

	June 30, 2016
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
					(unaudited)
Financial assets:
Cash and cash equivalents	$	53,843	$	53,843	$	53,843	$	—	$	—
Interest-bearing time deposits with other banks		134		134		—		134		—
Held-to-maturity securities		137,341		139,496		—		139,496		—
Federal Home Loan Bank stock		21,824		21,824		—		21,824		—
Loans, net		1,689,295		1,691,009		—		—		1,691,009
Accrued interest receivable		4,351		4,351		4,351		—		—
Bank-owned life insurance		35,261		35,261		—		35,261		—
Financial liabilities:
Deposits		1,384,625		1,388,306		1,075,018		313,288		—
Federal Home Loan Bank advances		423,250		426,606		—		426,606		—
Securities sold under agreements to repurchase		1,771		1,771		—		1,771		—
Accrued interest payable		1,016		1,016		1,016		—		—
Mortgagors’ escrow accounts		2,553		2,553		—		2,553		—

	December 31, 2015
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	51,261	$	51,261	$	51,261	$	—	$	—
Interest-bearing time deposits with other banks		131		131		—		131		—
Held-to-maturity securities		137,119		136,728		—		136,728		—
Federal Home Loan Bank stock		18,309		18,309		—		18,309		—
Loans, net		1,534,957		1,518,476		—		—		1,518,476
Accrued interest receivable		3,781		3,781		3,781		—		—
Bank-owned life insurance		29,787		29,787		—		29,787		—
Financial liabilities:
Deposits		1,269,519		1,271,278		1,011,084		260,194		—
Federal Home Loan Bank advances		374,000		373,840		—		373,840		—
Securities sold under agreements to repurchase		3,695		3,695		—		3,695		—
Other borrowed funds		1,020		999		—		999		—
Accrued interest payable		993		993		993		—		—
Mortgagors’ escrow accounts		2,414		2,414		—		2,414		—

Loans Held for Sale and Impaired Loans

Fair Value of Assets Measured on Nonrecurring Basis

The following table (in thousands) presents certain impaired loans that were re-measured and reported at fair value through a specific valuation allowance allocation of the allowance for loan losses or charge off based upon the fair value of the underlying collateral and loans held-for-sale at June 30, 2016 (unaudited) and December 31, 2015.

	June 30, 2016
	Level 1		Level 2		Level 3
Impaired loans	$	—	$	—	$	632
Totals	$	—	$	—	$	632
	December 31, 2015
	Level 1		Level 2		Level 3
Impaired loans	$	—	$	—	$	2,886
Loans held-for-sale		—		—		1,245
Totals	$	—	$	—	$	4,131

Other Real Estate Owned

Fair Value of Assets Measured on Nonrecurring Basis

The following table (in thousands) presents the non-financial assets that were re-measured and reported at the lower of cost or fair value at the periods indicated:

	June 30, 2016
	Level 1		Level 2		Level 3
			(unaudited)
Mortgage servicing rights	$	—	$	—	$	457
Totals	$	—	$	—	$	457
	December 31, 2015
	Level 1		Level 2		Level 3
Mortgage servicing rights	$	—	$	—	$	479
Totals	$	—	$	—	$	479

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OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

6 Months Ended

Jun. 30, 2016

Schedules of Other Comprehensive Income (Loss)

The following table presents a reconciliation of the changes in the components of other comprehensive income(loss) for the dates indicated, including the amount of income tax expense (benefit) allocated to each component of other comprehensive income (loss):

	Three months ended June 30, 2016							Three months ended June 30, 2015
	(unaudited and in thousands)							(unaudited and in thousands)
	Pre Tax		Tax			After Tax		Pre Tax			Tax		After Tax
	Amount		Expense			Amount		Amount			Benefit		Amount
Securities available-for-sale:
Change in fair value of securities available-for-sale	$	156	$	(62	)	$	94	$	(154	)	$	61	$	(93	)
Total other comprehensive income (loss)	$	156	$	(62	)	$	94	$	(154	)	$	61	$	(93	)

	Six months ended June 30, 2016							Six months ended June 30, 2015
	(unaudited and in thousands)							(unaudited and in thousands)
	Pre Tax		Tax			After Tax		Pre Tax			Tax		After Tax
	Amount		Expense			Amount		Amount			Benefit		Amount
Securities available-for-sale:
Change in fair value of securities available-for-sale	$	284	$	(114	)	$	170	$	(18	)	$	8	$	(10	)
Total other comprehensive income (loss)	$	284	$	(114	)	$	170	$	(18	)	$	8	$	(10	)

Components of Accumulated Other Comprehensive Income (Loss), included in Stockholders' Equity

The components of accumulated other comprehensive income (loss), included in stockholders’ equity, are as follows: (in thousands):

	June 30, 2016		December 31, 2015
	(unaudited)
Net unrealized holding gain (loss) on available-for-sale securities, net of tax	$	20	$	(150	)
Unrecognized benefit pertaining to defined benefit plan, net of tax		34		34
Accumulated other comprehensive income (loss)	$	54	$	(116	)

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Amortized Cost Basis of Available for Sale and Held-to-Maturity Securities (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Amortized Cost Basis	$ 22,088	$ 22,126
Available-for-sale Securities, Gross Unrealized Gains	49	35
Available-for-sale Securities, Gross Unrealized Losses	(15)	(285)
Available-for-sale Securities, Fair Value	22,122	21,876
Held-to-maturity securities, Amortized Cost Basis	137,341	137,119
Held-to-maturity securities, Gross Unrealized Gains	2,218	601
Held-to-maturity securities, Gross Unrealized Losses	(63)	(992)
Held-to-maturity securities, Fair Value	139,496	136,728
Corporate debt securities
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Amortized Cost Basis	22,088	22,126
Available-for-sale Securities, Gross Unrealized Gains	49	35
Available-for-sale Securities, Gross Unrealized Losses	(15)	(285)
Available-for-sale Securities, Fair Value	22,122	21,876
Held-to-maturity securities, Amortized Cost Basis	17,628	17,602
Held-to-maturity securities, Gross Unrealized Gains	730	141
Held-to-maturity securities, Gross Unrealized Losses		(27)
Held-to-maturity securities, Fair Value	18,358	17,716
U.S. government sponsored mortgage-backed securities
Schedule of Available-for-sale Securities [Line Items]
Held-to-maturity securities, Amortized Cost Basis	119,713	119,517
Held-to-maturity securities, Gross Unrealized Gains	1,488	460
Held-to-maturity securities, Gross Unrealized Losses	(63)	(965)
Held-to-maturity securities, Fair Value	$ 121,138	$ 119,012

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Amortized Cost Basis and Estimated Fair Value of Debt Securities by Contractual Maturity (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Due within one year, Available-for-sale Securities, Amortized Cost Basis	$ 0
Due after one year through five years, Available-for-sale Securities, Amortized Cost Basis	12,780
Due after five years through ten years, Available-for-sale Securities, Amortized Cost Basis	9,308
Due after ten years, Available-for-sale Securities, Amortized Cost Basis	0
Available-for-sale Securities, Amortized Cost Basis	22,088	$ 22,126
Due within one year, Available-for-sale Securities, Fair Value	0
Due after one year through five years, Available-for-sale Securities, Fair Value	12,828
Due after five years through ten years, Available-for-sale Securities, Fair Value	9,294
Due after ten years, Available-for-sale Securities, Fair Value	0
Available-for-sale Securities, Fair Value	22,122	21,876
Due within one year, Held-to-Maturity, Amortized Cost Basis	16
Due after one year through five years, Held-to-Maturity, Amortized Cost Basis	9,110
Due after five years through ten years, Held-to-Maturity, Amortized Cost Basis	51,982
Due after ten years, Held-to-Maturity, Amortized Cost Basis	76,233
Held-to-maturity securities, Amortized Cost Basis	137,341	137,119
Due within one year, Held-to-Maturity, Fair Value	16
Due after one year through five years, Held-to-Maturity, Fair Value	9,173
Due after five years through ten years, Held-to-Maturity, Fair Value	53,249
Due after ten years, Held-to-Maturity, Fair Value	77,058
Held-to-Maturity, Fair Value	$ 139,496	$ 136,728

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Investments in Securities - Additional Information (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2016 USD ($) Securities Entity	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) Securities Entity	Jun. 30, 2015 USD ($)	Dec. 31, 2015 USD ($) Investment
Schedule of Available-for-sale Securities [Line Items]
Proceeds from sales of available-for-sale securities	$ 0	$ 0	$ 0	$ 0
Number of debt securities at unrealized losses | Securities	15		15
Securities that had unrealized losses, aggregate depreciation percentage	0.42%		0.42%		1.11%
Number of securities that had unrealized losses	15		15		59
Rabbi Trust
Schedule of Available-for-sale Securities [Line Items]
Trading securities, fair value	$ 2,530,000		$ 2,530,000		$ 2,460,000
Trading securities, unrealized holding gain (loss)	$ 13,000	$ (9,000)	$ 14,000	$ 30,000

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Securities with Gross Unrealized Losses Aggregated by Investment Category and Length of Time (Detail) $ in Thousands	Jun. 30, 2016 USD ($) Securities Entity	Dec. 31, 2015 USD ($) Entity Investment
Schedule Of Available For Sale And Held To Maturity Securities [Line Items]
Number of Holdings | Securities	15
Number of Holdings	15	59
Less than 12 Months, Fair Value	$ 10,924	$ 103,844
Less than 12 Months, Unrealized Losses	(35)	(924)
12 Months or longer, Fair Value	7,428	9,557
12 Months or longer, Unrealized Losses	$ (43)	$ (353)
Corporate debt securities
Schedule Of Available For Sale And Held To Maturity Securities [Line Items]
Number of Holdings | Entity	1	4
Available-for-sale, Less than 12 Months, Fair Value	$ 4,985	$ 9,745
Available-for-sale, Less than 12 Months, Unrealized Losses	$ (15)	(75)
Available-for-sale, 12 Months or longer, Fair Value		4,127
Available-for-sale, 12 Months or longer, Unrealized Losses		$ (210)
Number of Holdings | Entity		3
Held-to-maturity, Less than 12 Months, Fair Value		$ 4,733
Held-to-maturity, Less than 12 Months, Unrealized Losses		$ (27)
U.S. government sponsored mortgage-backed securities
Schedule Of Available For Sale And Held To Maturity Securities [Line Items]
Number of Holdings | Entity	14	52
Held-to-maturity, Less than 12 Months, Fair Value	$ 5,939	$ 89,366
Held-to-maturity, Less than 12 Months, Unrealized Losses	(20)	(822)
Held-to-maturity, 12 Months or longer, Fair Value	7,428	5,430
Held-to-maturity, 12 Months or longer, Unrealized Losses	$ (43)	$ (143)

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Loans Allowance for Loan Losses And Credit Quality - Additional Information (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2016 USD ($) Contract	Jun. 30, 2015 USD ($) Contract	Jun. 30, 2016 USD ($) Contract	Jun. 30, 2015 USD ($) Contract	Mar. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Mar. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Due days of accrual of interest on all loans			90 days
Originate loans with a loan-to-value	80.00%		80.00%
Loans, allowance for loan losses	$ 12,543,000	$ 9,537,000	$ 12,543,000	$ 9,537,000	$ 11,831,000	$ 11,240,000	$ 9,203,000	$ 8,881,000
Troubled debt restructurings	7,622,000		7,622,000			7,788,000
Unallocated
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, allowance for loan losses	$ 476,000	$ 183,000	$ 476,000	$ 183,000	$ 228,000	213,000	$ 177,000	$ 171,000
Financing Receivable Troubled Debt Restructurings
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of financing receivables modified by troubled debt restructurings | Contract	0	0	0	0
Residential one-to-four family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Consumer mortgage loans in the process of foreclosure amount	$ 497,000		$ 497,000			$ 412,000

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Summary of Loans (Detail) - USD ($) $ in Thousands		Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Balance		$ 1,692,682		$ 1,537,189
Net deferred loan costs		3,988		4,663
Net unamortized mortgage premiums		5,168		4,345
Allowance for loan losses		(12,543)	$ (11,831)	(11,240)	$ (9,537)	$ (9,203)	$ (8,881)
Total loans, net		$ 1,689,295		$ 1,534,957
Commercial and consumer gross percent		8.35%		10.25%
Total loans, Percent		100.00%		100.00%
Mortgage Loan Portfolio Segment
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Balance		$ 1,551,332		$ 1,379,579
Mortgage loans on real estate percent		91.65%		89.75%
Mortgage Loan Portfolio Segment | Real Estate Loan | Residential one-to-four family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Balance		$ 833,607		$ 709,426
Mortgage loans on real estate percent		49.26%		46.15%
Allowance for loan losses		$ (4,155)	(3,980)	$ (3,574)	(2,740)	(2,579)	(2,364)
Mortgage Loan Portfolio Segment | Real Estate Loan | Commercial real estate loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Balance	[1]	$ 484,328		$ 449,391
Mortgage loans on real estate percent	[1]	28.61%		29.24%
Allowance for loan losses		$ (4,810)	(4,868)	$ (4,478)	(4,122)	(4,035)	(4,043)
Mortgage Loan Portfolio Segment | Home equity lines of credit
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Balance		$ 170,363		$ 160,040
Mortgage loans on real estate percent		10.06%		10.41%
Allowance for loan losses		$ (1,038)	(1,008)	$ (928)	(827)	(740)	(828)
Mortgage Loan Portfolio Segment | Construction loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Balance		$ 63,034		$ 60,722
Mortgage loans on real estate percent		3.72%		3.95%
Allowance for loan losses		$ (864)	(679)	$ (801)	(585)	(473)	(228)
Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Balance		60,249		53,192
Allowance for loan losses		$ (698)	(505)	$ (613)	(355)	(416)	(458)
Commercial loans, percentage		3.56%		3.46%
Consumer Portfolio Segment | Indirect auto loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Balance		$ 80,656		$ 103,965
consumer loans, percent		4.76%		6.76%
Allowance for loan losses		$ (492)	(554)	$ (623)	(713)	(770)	(778)
Consumer Portfolio Segment | Other Consumer Loan
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Balance		$ 445		$ 453
consumer loans, percent		0.03%		0.03%
Allowance for loan losses		$ (10)	$ (9)	$ (10)	$ (12)	$ (13)	$ (11)
Commercial and Consumer Loan
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Balance		$ 141,350		$ 157,610

[1] Includes multi-family real estate loans.

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Allowance for Loan Losses by Portfolio Class (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 11,831	$ 9,203	$ 11,240	$ 8,881
Provision (benefit)	741	365	1,340	704
Charge-offs	(32)	(38)	(50)	(67)
Recoveries	3	7	13	19
Ending balance	12,543	9,537	12,543	9,537
Mortgage Loan Portfolio Segment | Real Estate Loan | Residential one-to-four family
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	3,980	2,579	3,574	2,364
Provision (benefit)	175	161	581	376
Ending balance	4,155	2,740	4,155	2,740
Mortgage Loan Portfolio Segment | Real Estate Loan | Commercial real estate loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	4,868	4,035	4,478	4,043
Provision (benefit)	(58)	87	332	79
Ending balance	4,810	4,122	4,810	4,122
Mortgage Loan Portfolio Segment | Construction loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	679	473	801	228
Provision (benefit)	185	112	63	357
Ending balance	864	585	864	585
Mortgage Loan Portfolio Segment | Home equity lines of credit
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	1,008	740	928	828
Provision (benefit)	30	87	110	(1)
Ending balance	1,038	827	1,038	827
Commercial Portfolio Segment
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	505	416	613	458
Provision (benefit)	193	(61)	85	(103)
Ending balance	698	355	698	355
Consumer Portfolio Segment | Indirect auto loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	554	770	623	778
Provision (benefit)	(36)	(31)	(100)	(24)
Charge-offs	(28)	(33)	(42)	(59)
Recoveries	2	7	11	18
Ending balance	492	713	492	713
Consumer Portfolio Segment | Other Consumer Loan
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	9	13	10	11
Provision (benefit)	4	4	6	8
Charge-offs	(4)	(5)	(8)	(8)
Recoveries	1		2	1
Ending balance	10	12	10	12
Unallocated
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	228	177	213	171
Provision (benefit)	248	6	263	12
Ending balance	$ 476	$ 183	$ 476	$ 183

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Individually Impaired Loans by Class of Loans (Detail) - USD ($) $ in Thousands		Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment, Loan balance		$ 7,996		$ 10,639
Individually evaluated for impairment, Loan allowance		176		393
Collectively evaluated for impairment, Loan balance		1,684,686		1,526,550
Collectively evaluated for impairment, Loan allowance		12,367		10,847
Total Loan balance		1,692,682		1,537,189
Total Loan, allowance		12,543	$ 11,831	11,240	$ 9,537	$ 9,203	$ 8,881
Mortgage Loan Portfolio Segment
Financing Receivable, Allowance for Credit Losses [Line Items]
Total Loan balance		1,551,332		1,379,579
Mortgage Loan Portfolio Segment | Real Estate Loan | Residential one-to-four family
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment, Loan balance		4,272		4,341
Individually evaluated for impairment, Loan allowance		174		260
Collectively evaluated for impairment, Loan balance		829,335		705,085
Collectively evaluated for impairment, Loan allowance		3,981		3,314
Total Loan balance		833,607		709,426
Total Loan, allowance		4,155	3,980	3,574	2,740	2,579	2,364
Mortgage Loan Portfolio Segment | Real Estate Loan | Commercial real estate loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment, Loan balance		3,524		6,083
Individually evaluated for impairment, Loan allowance		2		133
Collectively evaluated for impairment, Loan balance		480,804		443,308
Collectively evaluated for impairment, Loan allowance		4,808		4,345
Total Loan balance	[1]	484,328		449,391
Total Loan, allowance		4,810	4,868	4,478	4,122	4,035	4,043
Mortgage Loan Portfolio Segment | Construction loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment, Loan balance		63,034		60,722
Collectively evaluated for impairment, Loan allowance		864		801
Total Loan balance		63,034		60,722
Total Loan, allowance		864	679	801	585	473	228
Mortgage Loan Portfolio Segment | Home equity lines of credit
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment, Loan balance		200		200
Collectively evaluated for impairment, Loan balance		170,163		159,840
Collectively evaluated for impairment, Loan allowance		1,038		928
Total Loan balance		170,363		160,040
Total Loan, allowance		1,038	1,008	928	827	740	828
Commercial Portfolio Segment
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment, Loan balance		60,249		53,192
Collectively evaluated for impairment, Loan allowance		698		613
Total Loan balance		60,249		53,192
Total Loan, allowance		698	505	613	355	416	458
Consumer Portfolio Segment | Indirect auto loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment, Loan balance				15
Collectively evaluated for impairment, Loan balance		80,656		103,950
Collectively evaluated for impairment, Loan allowance		492		623
Total Loan balance		80,656		103,965
Total Loan, allowance		492	554	623	713	770	778
Consumer Portfolio Segment | Other Consumer Loan
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment, Loan balance		445		453
Collectively evaluated for impairment, Loan allowance		10		10
Total Loan balance		445		453
Total Loan, allowance		10	9	10	12	13	11
Unallocated
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment, Loan allowance		476		213
Total Loan, allowance		$ 476	$ 228	$ 213	$ 183	$ 177	$ 171

[1] Includes multi-family real estate loans.

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Impaired Loans (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired loans with no related allowance for credit losses, Recorded Investment	$ 3,628		$ 3,628		$ 3,763
Impaired loans with no related allowance for credit losses, Unpaid Principal Balance	3,670		3,670		3,805
Impaired loans with no related allowance for credit losses at, Specific Allowance	0		0
Impaired loans with no related allowance for credit losses, Average recorded Investment	3,666	$ 6,098	3,701	$ 6,125
Impaired loans with no related allowance for credit losses, Interest income recognized	27	35	56	70
Mortgage Loan Portfolio Segment
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired loans with a related allowance for credit losses at, Recorded Investment	4,368		4,368		6,876
Impaired loans with a related allowance for credit losses at, Unpaid Principal Balance	4,420		4,420		6,902
Impaired loans with a related allowance for credit losses at, Specific Allowance	176		176		393
Impaired loans with a related allowance for credit losses, Average recorded Investment	4,377	4,213	5,190	4,222
Impaired loans with a related allowance for credit losses, Income Recognized	38	39	101	79
Mortgage Loan Portfolio Segment | Real Estate Loan | Residential one-to-four family
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired loans with a related allowance for credit losses at, Recorded Investment	1,396		1,396		1,450
Impaired loans with a related allowance for credit losses at, Unpaid Principal Balance	1,448		1,448		1,476
Impaired loans with a related allowance for credit losses at, Specific Allowance	174		174		260
Impaired loans with no related allowance for credit losses, Recorded Investment	2,876		2,876		2,891
Impaired loans with no related allowance for credit losses, Unpaid Principal Balance	2,918		2,918		2,933
Impaired loans with no related allowance for credit losses at, Specific Allowance	0		0
Impaired loans with a related allowance for credit losses, Average recorded Investment	1,400	1,178	1,407	1,179
Impaired loans with a related allowance for credit losses, Income Recognized	8	8	16	17
Impaired loans with no related allowance for credit losses, Average recorded Investment	2,882	5,032	2,886	5,043
Impaired loans with no related allowance for credit losses, Interest income recognized	19	25	39	50
Mortgage Loan Portfolio Segment | Real Estate Loan | Commercial real estate loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired loans with a related allowance for credit losses at, Recorded Investment	2,972		2,972		5,426
Impaired loans with a related allowance for credit losses at, Unpaid Principal Balance	2,972		2,972		5,426
Impaired loans with a related allowance for credit losses at, Specific Allowance	2		2		133
Impaired loans with no related allowance for credit losses, Recorded Investment	552		552		657
Impaired loans with no related allowance for credit losses, Unpaid Principal Balance	552		552		657
Impaired loans with no related allowance for credit losses at, Specific Allowance	0		0
Impaired loans with a related allowance for credit losses, Average recorded Investment	2,977	3,035	3,783	3,043
Impaired loans with a related allowance for credit losses, Income Recognized	30	31	85	62
Impaired loans with no related allowance for credit losses, Average recorded Investment	569	772	596	787
Impaired loans with no related allowance for credit losses, Interest income recognized	6	8	13	16
Mortgage Loan Portfolio Segment | Home equity lines of credit
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired loans with no related allowance for credit losses, Recorded Investment	200		200		200
Impaired loans with no related allowance for credit losses, Unpaid Principal Balance	200		200		200
Impaired loans with no related allowance for credit losses at, Specific Allowance	0		0
Impaired loans with no related allowance for credit losses, Average recorded Investment	200	294	200	295
Impaired loans with no related allowance for credit losses, Interest income recognized	2	$ 2	4	$ 4
Consumer Portfolio Segment | Indirect auto loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Impaired loans with no related allowance for credit losses, Recorded Investment					15
Impaired loans with no related allowance for credit losses, Unpaid Principal Balance					$ 15
Impaired loans with no related allowance for credit losses, Average recorded Investment	$ 15		$ 19

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Past Due and Non-Accrual Loans (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Financing Receivable, Allowance for Credit Losses [Line Items]
Days Past Due	$ 2,322	$ 3,318
90 days or more and accruing	0	0
Loans on Non-accrual	1,146	3,631
Indirect auto loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Days Past Due	471	613
90 days or more and accruing	0	0
Loans on Non-accrual		15
Mortgage Loan Portfolio Segment | Real Estate Loan | Residential one-to-four family
Financing Receivable, Allowance for Credit Losses [Line Items]
Days Past Due	1,803	2,071
90 days or more and accruing	0	0
Loans on Non-accrual	1,146	1,192
Mortgage Loan Portfolio Segment | Real Estate Loan | Commercial real estate loans
Financing Receivable, Allowance for Credit Losses [Line Items]
90 days or more and accruing		0
Loans on Non-accrual		2,424
Mortgage Loan Portfolio Segment | Home equity lines of credit | Commercial real estate loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Days Past Due	48	634
90 days or more and accruing	0	0
30-59 Days
Financing Receivable, Allowance for Credit Losses [Line Items]
Days Past Due	1,156	2,764
30-59 Days | Indirect auto loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Days Past Due	429	551
30-59 Days | Mortgage Loan Portfolio Segment | Real Estate Loan | Residential one-to-four family
Financing Receivable, Allowance for Credit Losses [Line Items]
Days Past Due	679	1,579
30-59 Days | Mortgage Loan Portfolio Segment | Home equity lines of credit | Commercial real estate loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Days Past Due	48	634
60-89 Days
Financing Receivable, Allowance for Credit Losses [Line Items]
Days Past Due	669	128
60-89 Days | Indirect auto loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Days Past Due	42	47
60-89 Days | Mortgage Loan Portfolio Segment | Real Estate Loan | Residential one-to-four family
Financing Receivable, Allowance for Credit Losses [Line Items]
Days Past Due	627	81
Loans 90 Days Or More Past Due
Financing Receivable, Allowance for Credit Losses [Line Items]
Days Past Due	497	426
Loans 90 Days Or More Past Due | Indirect auto loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Days Past Due		15
Loans 90 Days Or More Past Due | Mortgage Loan Portfolio Segment | Real Estate Loan | Residential one-to-four family
Financing Receivable, Allowance for Credit Losses [Line Items]
Days Past Due	$ 497	$ 411

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Loans Classified by Risk Rating (Detail) - USD ($) $ in Thousands		Jun. 30, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		$ 1,692,682	$ 1,537,189
Mortgage Loan Portfolio Segment
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		1,551,332	1,379,579
Mortgage Loan Portfolio Segment | Real Estate Loan | Residential one-to-four family
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		833,607	709,426
Mortgage Loan Portfolio Segment | Real Estate Loan | Commercial real estate loans
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance	[1]	484,328	449,391
Mortgage Loan Portfolio Segment | Construction loans
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		63,034	60,722
Mortgage Loan Portfolio Segment | Home equity lines of credit
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		170,363	160,040
Commercial Portfolio Segment
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		60,249	53,192
Consumer Portfolio Segment | Indirect auto loans
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		80,656	103,965
Consumer Portfolio Segment | Other Consumer Loan
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		445	453
Loans rated 1-3.5
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		574,277	536,811
Loans rated 1-3.5 | Mortgage Loan Portfolio Segment | Real Estate Loan | Commercial real estate loans
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		450,994	427,160
Loans rated 1-3.5 | Mortgage Loan Portfolio Segment | Construction loans
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		63,034	56,459
Loans rated 1-3.5 | Commercial Portfolio Segment
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		60,249	53,192
Loans rated 4
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		29,195	19,781
Loans rated 4 | Mortgage Loan Portfolio Segment | Real Estate Loan | Residential one-to-four family
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		355	359
Loans rated 4 | Mortgage Loan Portfolio Segment | Real Estate Loan | Commercial real estate loans
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		28,840	15,159
Loans rated 4 | Mortgage Loan Portfolio Segment | Construction loans
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance			4,263
Loans rated 5
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		7,153	9,786
Loans rated 5 | Mortgage Loan Portfolio Segment | Real Estate Loan | Residential one-to-four family
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		1,860	1,915
Loans rated 5 | Mortgage Loan Portfolio Segment | Real Estate Loan | Commercial real estate loans
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		4,494	7,072
Loans rated 5 | Mortgage Loan Portfolio Segment | Home equity lines of credit
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance		799	799
Loans not rated
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance	[2]	1,082,057	970,811
Loans not rated | Mortgage Loan Portfolio Segment | Real Estate Loan | Residential one-to-four family
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance	[2]	831,392	707,152
Loans not rated | Mortgage Loan Portfolio Segment | Home equity lines of credit
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance	[2]	169,564	159,241
Loans not rated | Consumer Portfolio Segment | Indirect auto loans
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance	[2]	80,656	103,965
Loans not rated | Consumer Portfolio Segment | Other Consumer Loan
Financing Receivable, Recorded Investment [Line Items]
Total Loans Balance	[2]	$ 445	$ 453

[1] Includes multi-family real estate loans.

[2] Residential real estate and home equity lines of credit are not formally risk rated by the Company unless the loans become delinquent.

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Troubled Debt Restructuring Accrual Status (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment [Line Items]
Total TDRs	$ 7,622	$ 7,788
Amount of specific allocation included in the allowance for loan losses associated with TDRs	165	170
Additional commitments to lend to a borrower who has been a party to a TDR	0	0
Accrual Loans
Financing Receivable, Recorded Investment [Line Items]
Total TDRs	6,850	7,007
Non Accrual Loans
Financing Receivable, Recorded Investment [Line Items]
Total TDRs	$ 772	$ 781

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Summary of Loans Modified and Subsequently Defaulted (Detail) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2016 USD ($) Contract	Jun. 30, 2016 USD ($) Contract
Financing Receivable, Modifications [Line Items]
Number of Contracts | Contract	1	1
Recorded Investment | $	$ 497	$ 497
Residential one-to-four family
Financing Receivable, Modifications [Line Items]
Number of Contracts | Contract	1	1
Recorded Investment | $	$ 497	$ 497

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Transfers and Servicing - Additional Information (Detail) $ in Millions		6 Months Ended
	Mar. 16, 2006 USD ($) Loan	Jun. 30, 2016 USD ($)	Dec. 31, 2015 USD ($)
Securitization or Asset-backed Financing Arrangement, Financial Asset for which Transfer is Accounted as Sale [Line Items]
Principal balance of loans sold to another financial institution	$ 10.5
Number of loans sold to another financial institution | Loan	17
Total principal balance of loans		$ 0.0	$ 1.0
Initial period for repurchase of loan		120 months
Repurchase Agreement		Loan that became 90 days past due
Indirect auto loans
Securitization or Asset-backed Financing Arrangement, Financial Asset for which Transfer is Accounted as Sale [Line Items]
Loans previously sold and serviced		$ 41.6	57.8
Residential Mortgage
Securitization or Asset-backed Financing Arrangement, Financial Asset for which Transfer is Accounted as Sale [Line Items]
Loans previously sold and serviced		65.8	65.9
Transferred Loans
Securitization or Asset-backed Financing Arrangement, Financial Asset for which Transfer is Accounted as Sale [Line Items]
Total principal balance of loans		$ 0.0	$ 1.0

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Changes in Mortgage Servicing Rights (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Servicing Asset at Amortized Cost [Line Items]
Balance at beginning of period	$ 466	$ 463	$ 479	$ 476
Capitalization	29	55	46	77
Amortization	(24)	(24)	(45)	(47)
Valuation allowance adjustment	(14)	(19)	(23)	(31)
Balance at end of period	$ 457	$ 475	$ 457	$ 475

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Securities Sold Under Agreements to Repurchase and Other Borrowed Funds - Additional Information (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Servicing Asset at Amortized Cost [Line Items]
Balance of securities sold under agreements to repurchase	$ 1,771	$ 3,695
Total principal balance of loans	$ 0	$ 1,000

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Employee and Director Benefit Plans - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2011	Dec. 31, 2015
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Estimated liability	$ 2,200,000		$ 2,200,000			$ 2,000,000
Compensation expense recognized	523,000	$ 555,000	$ 921,000	$ 922,000
Percentage of eligible compensation of employee			75.00%
Contributions by the Company	$ 196,000	192,000	$ 430,000	429,000
Percentage of deferred compensation vested			100.00%
ESOP, purchase shares					458,643
Common stock price per share			$ 10.00
Loan obtained by the ESOP, payable annually over			30 years
Loan Obtained By ESOP Rate Per Annum Equal To Prime Rate	3.50%		3.50%
ESOP expense	$ 87,000	$ 84,000	$ 172,000	$ 156,000
Deferred Compensation Plan | Rabbi Trust
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Recorded liability	2,500,000		2,500,000			2,500,000
Executive Officers
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Estimated liability	1,500,000		$ 1,500,000			1,300,000
Benefit upon termination of employment at or after age			55 years
Reduced benefits available prior to attaining age			55 years
Executive Officers | Minimum
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fully vested participants, years of service to complete			5 years
Number of years of service to complete			10 years
Executive Officers | Maximum
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Fully vested participants, years of service to complete			10 years
Number of years of service to complete			10 years
Directors
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Estimated liability	$ 649,000		$ 649,000			$ 635,000

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Securities and Loans Pledged to Secure Securities Sold Under Agreements to Repurchase, FHLB Advances and Credit Facilities Available (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Financial Instruments Owned and Pledged as Collateral [Line Items]
Securities held-to- maturity (at cost)	$ 63,856	$ 69,536
Loans receivable	865,112	735,818
Total pledged assets	928,968	805,354
Repurchase agreements
Financial Instruments Owned and Pledged as Collateral [Line Items]
Securities held-to- maturity (at cost)	5,266	5,731
Total pledged assets	5,266	5,731
FHLB borrowings
Financial Instruments Owned and Pledged as Collateral [Line Items]
Securities held-to- maturity (at cost)	42,870	48,105
Loans receivable	865,112	735,818
Total pledged assets	907,982	783,923
Federal Reserve Bank LOC
Financial Instruments Owned and Pledged as Collateral [Line Items]
Securities held-to- maturity (at cost)	15,720	15,700
Total pledged assets	$ 15,720	$ 15,700

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Earning Per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Computation of Earnings Per Share [Line Items]
Net income	$ 2,952	$ 1,603	$ 5,491	$ 2,977
Undistributed earnings attributable to participating securities	(49)	(40)	(92)	(75)
Net income allocated to common stockholders	$ 2,903	$ 1,563	$ 5,399	$ 2,902
Weighted average shares outstanding, basic	8,560,039	8,450,099	8,555,212	8,446,266
Effect of dilutive shares	266,700	230,572	260,623	196,672
Weighted average shares outstanding, assuming dilution	8,826,739	8,680,671	8,815,835	8,642,938
Basic EPS	$ 0.34	$ 0.19	$ 0.63	$ 0.34
Effect of dilutive shares	(0.01)	(0.01)	(0.02)
Diluted EPS	$ 0.33	$ 0.18	$ 0.61	$ 0.34

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Options Outstanding Excluded From Computation of Earnings Per Share (Detail) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options	27,500	23,242	18,434	27,324

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Earnings Per Share - Additional information (Detail)	Jun. 22, 2013 shares
Maximum
Computation of Earnings Per Share [Line Items]
Share repurchase program, shares authorized to be repurchased	500,000

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Pre-Tax Expense Associated with Stock Option and Restricted Stock Awards and Related Tax Benefits Recognized (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options	$ 198	$ 198	$ 387	$ 386
Restricted stock awards	215	216	425	424
Total stock based compensation expense	413	414	812	810
Related tax benefits recognized in earnings	$ 122	$ 119	$ 241	$ 235

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Compensation Cost Related to Non-Vested Awards not Yet Recognized and Weighted Average Recognition Period (Detail) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total	$ 2,378	$ 3,038
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options, amount	$ 1,200	$ 1,476
Compensation cost not yet recognized, period for recognition	1 year 10 months 6 days	2 years 26 days
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock, amount	$ 1,178	$ 1,562
Compensation cost not yet recognized, period for recognition	1 year 5 months 16 days	1 year 11 months 12 days

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Summary of Financial Assets Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Totals	$ 24,652	$ 24,336
Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	22,122	21,876
Rabbi Trust
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	2,530	2,460
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Totals	2,530	2,460
Level 1 | Rabbi Trust
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	2,530	2,460
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Totals	22,122	21,876
Level 2 | Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	$ 22,122	$ 21,876

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Loans Remeasured and Reported at Fair Value (Detail) - Fair Value, Measurements, Nonrecurring - Level 3 - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	$ 632	$ 2,886
Loans held-for-sale		1,245
Totals	$ 632	$ 4,131

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Assets Remeasured and Reported at Lower of Cost or Fair Value (Detail) - Level 3 - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis	$ 457	$ 479
Mortgage Servicing Rights
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis	$ 457	$ 479

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Fair Values of Assets and Liabilities (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2015	Dec. 31, 2014
ASSETS
Cash and cash equivalents	$ 53,843	$ 51,261	$ 47,504	$ 51,767
Interest-bearing time deposits with other banks	134	131
Held-to-maturity securities	137,341	137,119
Federal Home Loan Bank stock	21,824	18,309
Loans, net	1,689,295	1,534,957
Accrued interest receivable	4,351	3,781
Bank-owned life insurance	35,261	29,787
Liabilities
Deposits	1,384,625	1,269,519
Federal Home Loan Bank advances	423,250	374,000
Securities sold under agreements to repurchase	1,771	3,695
Other borrowed funds		1,020
Accrued interest payable	1,016	993
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Cash and cash equivalents	53,843	51,261
Interest-bearing time deposits with other banks	134	131
Held-to-maturity securities	139,496	136,728
Federal Home Loan Bank stock	21,824	18,309
Loans, net	1,691,009	1,518,476
Accrued interest receivable	4,351	3,781
Bank-owned life insurance	35,261	29,787
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Deposits	1,388,306	1,271,278
Federal Home Loan Bank advances	426,606	373,840
Securities sold under agreements to repurchase	1,771	3,695
Other borrowed funds		999
Accrued interest payable	1,016	993
Mortgagors' escrow accounts	2,553	2,414
Carrying Amount
ASSETS
Cash and cash equivalents	53,843	51,261
Interest-bearing time deposits with other banks	134	131
Held-to-maturity securities	137,341	137,119
Federal Home Loan Bank stock	21,824	18,309
Loans, net	1,689,295	1,534,957
Accrued interest receivable	4,351	3,781
Bank-owned life insurance	35,261	29,787
Liabilities
Deposits	1,384,625	1,269,519
Federal Home Loan Bank advances	423,250	374,000
Securities sold under agreements to repurchase	1,771	3,695
Other borrowed funds		1,020
Accrued interest payable	1,016	993
Mortgagors' escrow accounts	2,553	2,414
Level 1
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Cash and cash equivalents	53,843	51,261
Accrued interest receivable	4,351	3,781
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Deposits	1,075,018	1,011,084
Accrued interest payable	1,016	993
Level 2
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Interest-bearing time deposits with other banks	134	131
Held-to-maturity securities	139,496	136,728
Federal Home Loan Bank stock	21,824	18,309
Bank-owned life insurance	35,261	29,787
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Deposits	313,288	260,194
Federal Home Loan Bank advances	426,606	373,840
Securities sold under agreements to repurchase	1,771	3,695
Other borrowed funds		999
Mortgagors' escrow accounts	2,553	2,414
Level 3
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Loans, net	$ 1,691,009	$ 1,518,476

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Other Comprehensive Income (Loss) (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Schedule of Other Comprehensive Income (Loss) [Line Items]
Change in fair value of securities available for sale, Pre-Tax Amount	$ 156	$ (154)	$ 284	$ (18)
Total other comprehensive income (loss) , Pre-Tax Amount	156	(154)	284	(18)
Change in fair value of securities available for sale, Tax (Expense) Benefit	(62)	61	(114)	8
Total other comprehensive income (loss), Tax (Expense) Benefit	(62)	61	(114)	8
Change in fair value of securities available for sale, After Tax Amount	94	(93)	170	(10)
Total other comprehensive income (loss) ,After Tax Amount	$ 94	$ (93)	$ 170	$ (10)

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Components of Accumulated Other Comprehensive Income (Loss) included in Stockholders' Equity (Detail) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Accumulated Other Comprehensive Income (Loss) [Line Items]
Net unrealized holding gain (loss) on available-for-sale securities, net of tax	$ 20	$ (150)
Unrecognized benefit pertaining to defined benefit plan, net of tax	34	34
Accumulated other comprehensive income (loss)	$ 54	$ (116)