10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 2014
- or -
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission file number:  1-35163

TF FINANCIAL CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Pennsylvania	74-2705050
(State or Other Jurisdiction of Incorporation	(I.R.S. Employer Identification No.)
or Organization)

3 Penns Trail, Newtown, Pennsylvania	18940
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (215) 579-4000

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 xNOo

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). YESxNOo

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: August 14, 2014

Class	Outstanding
$.10 par value common stock	3,155,762 shares

CONTENTS

PART I-CONSOLIDATED FINANCIAL INFORMATION
Item 1.		Consolidated Financial Statements (Unaudited)	3
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)	36
Item 3.		Quantitative and Qualitative Disclosures about Market Risk	45
Item 4.		Controls and Procedures	45
PART II-OTHER INFORMATION
Item 1.		Legal Proceedings	46
Item 1A.		Risk Factors	46
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.		Defaults Upon Senior Securities	46
Item 4.		Mine Safety Disclosures	46
Item 5.		Other Information	46
Item 6.		Exhibits	46
Signatures
Exhibits
31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of CFO pursuant of Section 302 of the Sarbanes-Oxley Act of 2002
32.	Certification pursuant of Section 906 of the Sarbanes-Oxley Act of 2002

The following Exhibits are being furnished as part of this report:

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Definition Linkbase Document

2

TF FINANCIAL CORPORATION AND SUBSIDIARIES

PART I-CONSOLIDATED FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	At
	June 30, 2014			December 31, 2013
	(in thousands)
ASSETS
Cash and cash equivalents	$	48,291		$	45,310
Investment securities
Available for sale		129,686			124,012
Held to maturity (fair value of $1,515 and $1,680 as of      June 30, 2014 and December 31, 2013, respectively)		1,340			1,490
Loans receivable, net		610,097			614,168
Loans receivable, held for sale		129			349
Federal Home Loan Bank ("FHLB") stock — at cost		3,544			3,370
Accrued interest receivable		2,523			2,520
Premises and equipment, net		8,351			8,616
Goodwill		4,324			4,324
Core deposit intangible		453			503
Bank owned life insurance		18,851			18,586
Other assets		11,977			12,441
TOTAL ASSETS	$	839,566		$	835,689
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits	$	685,988		$	683,902
Advances from the FHLB		47,120			49,605
Advances from borrowers for taxes and insurance		3,284			3,228
Accrued interest payable		725			671
Other liabilities		4,274			3,408
Total liabilities		741,391			740,814
Stockholders’ equity
Preferred stock, no par value; 2,000,000 shares authorized at      June 30, 2014 and December 31, 2013, none issued		—			—
Common stock, $0.10 par value; 10,000,000 shares authorized,      5,290,000 shares issued, 3,151,562 and 3,149,239 shares      outstanding at June 30, 2014 and December 31, 2013,      respectively, net of shares in treasury of 2,138,438 and      2,140,761, respectively.		529			529
Additional paid-in capital		56,546			56,197
Unearned ESOP shares		(784	)		(846	)
Treasury stock — at cost		(44,454	)		(44,502	)
Retained earnings		85,907			84,675
Accumulated other comprehensive income (loss)		431			(1,178	)
Total stockholders’ equity		98,175			94,875
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	839,566		$	835,689

The accompanying notes are an integral part of these statements

3

TF FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	For the three months ended June 30,				For the six months ended June 30,
	2014		2013		2014		2013
	(in thousands, except share and per share data)
Interest income
Loans, including fees	$	6,636	$	5,963	$	13,313	$	12,029
Investment securities
Fully taxable		550		355		1,051		724
Exempt from federal taxes		410		412		828		830
Interest-bearing deposits and other		4		14		7		18
TOTAL INTEREST INCOME		7,600		6,744		15,199		13,601
Interest expense
Deposits		774		712		1,540		1,443
Borrowings		187		226		380		474
TOTAL INTEREST EXPENSE		961		938		1,920		1,917
NET INTEREST INCOME		6,639		5,806		13,279		11,684
Provision for loan losses		100		400		100		839
NET INTEREST INCOME AFTER PROVISION      FOR LOAN LOSSES		6,539		5,406		13,179		10,845
Noninterest income
Service fees, charges and other operating income		552		650		1,068		1,177
Bank owned life insurance		134		137		265		280
Bank owned life insurance death benefit proceeds		—		934		—		934
Gain on sale of loans		101		226		175		531
Gain on sale of investment securities		16		—		17		—
Gain on disposition of premises and equipment		—		—		—		420
TOTAL NONINTEREST INCOME		803		1,947		1,525		3,342
Noninterest expense
Compensation and benefits		3,206		2,842		6,589		5,659
Occupancy and equipment		829		709		1,736		1,406
Federal deposit insurance premiums		125		132		259		242
Professional fees		278		230		583		518
Merger-related costs		1,068		295		1,068		615
Marketing and advertising		76		132		220		171
Foreclosed real estate expense		35		235		48		459
Core deposit intangible amortization		25		—		50		—
Other operating		615		557		1,194		1,092
TOTAL NONINTEREST EXPENSE		6,257		5,132		11,747		10,162
INCOME BEFORE INCOME TAXES		1,085		2,221		2,957		4,025
Income tax expense		500		421		991		1,002
NET INCOME	$	585	$	1,800	$	1,966	$	3,023
Earnings per share—basic	$	0.19	$	0.66	$	0.64	$	1.10
Earnings per share—diluted	$	0.19	$	0.66	$	0.63	$	1.10
Dividends paid per share	$	0.12	$	0.05	$	0.24	$	0.10
Weighted average shares outstanding:
Basic		3,066		2,743		3,064		2,741
Diluted		3,115		2,743		3,098		2,741

The accompanying notes are an integral part of these statements

4

TF FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	For the three months ended June 30,						For the six months ended June 30,
	2014			2013			2014			2013
	(in thousands)
Net income	$	585		$	1,800		$	1,966		$	3,023
Other comprehensive income (loss):
Investment securities available for sale:
Unrealized holding gains (losses)		1,099			(2,845	)		2,330			(4,118	)
Tax effect		(374	)		967			(793	)		1,400
Reclassification adjustment for gains realized in net income		(16	)		—			(17	)		—
Tax effect		6			—			6			—
Net of tax amount		715			(1,878	)		1,526			(2,718	)
Pension plan benefit adjustment:
Related to actuarial losses and prior service cost		61			66			123			132
Tax effect		(20	)		(22	)		(40	)		(45	)
Net of tax amount		41			44			83			87
Total other comprehensive income (loss)		756			(1,834	)		1,609			(2,631	)
Comprehensive income (loss)	$	1,341		$	(34	)	$	3,575		$	392

The accompanying notes are an integral part of these statements

5

TF FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the six months ended June 30,
	2014			2013
	(in thousands)
OPERATING ACTIVITIES
Net income	$	1,966		$	3,023
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and impairment adjustment of mortgage loan servicing rights		117			(77	)
Premiums and discounts on investment securities, net		149			144
Premiums and discounts on mortgage-backed securities, net		195			208
Accretion of premiums on certificates of deposit		(111	)		—
Deferred loan origination costs, net		96			105
Provision for loan losses		100			839
Amortization of core deposit intangible		50			—
Depreciation of premises and equipment		337			334
Increase in value of bank owned life insurance		(265	)		(280	)
Income from life insurance death benefit		—			(934	)
Stock-based compensation		450			380
Proceeds from sale of loans originated for sale		10,890			21,088
Origination of loans held for sale		(10,618	)		(21,580	)
Loss on foreclosed real estate		11			375
Gain on:
Sale of loans		(175	)		(531	)
Sale of investment securities		(17	)		—
Disposition of premises and equipment		—			(420	)
(Increase) decrease in:
Accrued interest receivable		(3	)		38
Other assets		703			(93	)
Increase in:
Accrued interest payable		54			71
Other liabilities		39			157
NET CASH PROVIDED BY OPERATING ACTIVITIES		3,968			2,847
INVESTING ACTIVITIES
Loan originations		(33,512	)		(56,636	)
Loan principal payments		36,825			59,116
Proceeds from sale of foreclosed real estate		441			987
Proceeds from disposition of premises and equipment		—			417
Proceeds from maturities of investment securities available for sale		4,795			2,545
Proceeds from sale of investment securities available for sale		6,728			—
Proceeds from bank owned life insurance		—			2,183
Principal repayments on mortgage-backed securities held to maturity		149			294
Principal repayments on mortgage-backed securities available for sale		4,740			10,889
Purchase of investment securities available for sale		(4,584	)		(10,902	)
Purchase of mortgage-backed securities available for sale		(15,366	)		(1,867	)
Purchase of premises and equipment		(72	)		(767	)
Redemption of FHLB stock		56			1,585
Purchase of FHLB stock		(230	)		—
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES		(30	)		7,844

6

TF FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the six months ended June 30,
	2014			2013
	(in thousands)
FINANCING ACTIVITIES
Net increase in customer deposits		2,197			11,097
Net decrease in short-term FHLB borrowings		(2,485	)		(8,122	)
Net increase in advances from borrowers for taxes and insurance		56			415
Exercise of stock options		8			13
Tax benefit arising from exercise of stock options		1			1
Common stock dividends paid		(734	)		(274	)
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES		(957	)		3,130
NET INCREASE IN CASH AND CASH EQUIVALENTS		2,981			13,821
Cash and cash equivalents at beginning of period		45,310			31,137
Cash and cash equivalents at end of period	$	48,291		$	44,958
Supplemental disclosure of cash flow information
Cash paid for:
Interest on deposits and borrowings	$	1,916		$	1,846
Income taxes	$	750		$	575
Noncash transactions:
Capitalization of mortgage servicing rights	$	123		$	220
Transfers from loans to foreclosed real estate	$	562		$	257

The accompanying notes are an integral part of these statements

7

TF FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — PRINCIPLES OF CONSOLIDATION

The consolidated financial statements as of June 30, 2014 (unaudited) and December 31, 2013 and for the three and six-month periods ended June 30, 2014 and 2013 (unaudited) include the accounts of TF Financial Corporation (the “Company”) and its wholly owned subsidiaries: 3rd Fed Bank (the “Bank”) and Penns Trail Development Corporation. The accompanying consolidated balance sheet at December 31, 2013, has been derived from the audited consolidated balance sheet but does not include all of the information and notes required by accounting principles generally accepted in the United States of America (“US GAAP”) for complete financial statements. The Company’s business is conducted principally through the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.

NOTE 2 — BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements were prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all of the disclosures or footnotes required by US GAAP. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for fair presentation of the consolidated financial statements have been included. The results of operations for the period ended June 30, 2014 are not necessarily indicative of the results which may be expected for the entire fiscal year or any other period. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

NOTE 3 — RECENT ACCOUNTING PRONOUNCEMENTS

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures.  The amendments in this update change the accounting for repurchase-to-maturity transactions to secured borrowing accounting.  For repurchase financing arrangements, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty, which will result in secured borrowing accounting for the repurchase agreement.  The amendments also require enhanced disclosures.  The accounting changes in this update are effective for the first interim or annual period beginning after December 15, 2014.  An entity is required to present changes in accounting for transactions outstanding on the effective date as a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. Earlier application is prohibited.  The disclosure for certain transactions accounted for as a sale is required to be presented for interim and annual periods beginning after December 15, 2014, and the disclosure for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and for interim periods beginning after March 15, 2015. The disclosures are not required to be presented for comparative periods before the effective date. This update is not expected to have a significant impact on the Company’s financial statements.

In June 2014, the FASB issued ASU 2014-12, Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments when the Terms of an Award Provide that a Performance Target Could Be Achieved After the Requisite Service Period.  The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The amendments in this update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. Entities may apply the amendments in this update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. This update is not expected to have a significant impact on the Company’s financial statements.

NOTE 4 — CONTINGENCIES

The Company, from time to time, is a party to routine litigation that arises in the normal course of business. In the opinion of management, the resolution of this litigation, if any, would not have a material adverse effect on the Company’s consolidated financial position or results of operations.

8

NOTE 5 — ACQUISITION OF ROEBLING FINANCIAL CORP, INC.

On July 2, 2013, the Company closed on a merger transaction pursuant to which the Company acquired Roebling Financial Corp, Inc. (“Roebling”), the parent company of Roebling Bank, in a stock and cash transaction. 

Under the terms of the merger agreement, the Company acquired all of the outstanding shares of Roebling for a total purchase price of approximately $14.9 million.  As a result of the acquisition, the Company issued 306,873 common shares to former shareholders of Roebling.  Roebling was merged with and into the Company, and Roebling Bank was merged with and into the Bank.

The acquired assets and assumed liabilities were measured at estimated fair values. Management made certain estimates and exercised judgment in accounting for the acquisition. The following condensed statement reflects the values assigned to Roebling’s net assets as of the acquisition date:

	At July 2, 2013
	(in thousands)
Total purchase price				$	14,926
Net assets acquired:
Cash	$	4,081
Investment securities		37,339
Loans receivable		102,026
Premises and equipment		2,154
Core deposit intangible		553
Other assets		2,531
Time deposits		(49,061	)
Deposits other than time deposits		(78,689	)
Other liabilities		(4,888	)
					16,046
Purchase gain on acquisition				$	1,120

9

NOTE 6 — EARNINGS PER SHARE

The following tables illustrate the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations (dollars in thousands, except share and per share data):

	For the three months ended June 30, 2014
	Income (numerator)		Weighted average shares (denominator)		Per share Amount
Basic earnings per share
Income available to common stockholders	$	585		3,066,399	$	0.19
Effect of dilutive securities
Stock options and grants		—		49,037		—
Diluted earnings per share
Income available to common stockholders plus effect of dilutive securities	$	585		3,115,436	$	0.19

	For the six months ended June 30, 2014
	Income (numerator)		Weighted average shares (denominator)		Per share Amount
Basic earnings per share
Income available to common stockholders	$	1,966		3,064,107	$	0.64
Effect of dilutive securities
Stock options and grants		—		34,036		(0.01	)
Diluted earnings per share
Income available to common stockholders plus effect of dilutive securities	$	1,966		3,098,143	$	0.63

There were no options outstanding during the three and six months ended June 30, 2014 to purchase shares of common stock excluded in the computation of diluted earnings per share as the options’ exercise prices were less than the average market price of the common shares.

10

	For the three months ended June 30, 2013
	Income (numerator)		Weighted average shares (denominator)		Per share Amount
Basic earnings per share
Income available to common stockholders	$	1,800		2,743,427	$	0.66
Effect of dilutive securities
Stock options and grants		—		—		—
Diluted earnings per share
Income available to common stockholders plus effect of dilutive securities	$	1,800		2,743,427	$	0.66

	For the six months ended June 30, 2013
	Income (numerator)		Weighted average shares (denominator)		Per share Amount
Basic earnings per share
Income available to common stockholders	$	3,023		2,740,915	$	1.10
Effect of dilutive securities
Stock options and grants		—		—		—
Diluted earnings per share
Income available to common stockholders plus effect of dilutive securities	$	3,023		2,740,915	$	1.10

There were 30,388 options to purchase shares of common stock at a price range of $25.71 to $32.51 per share which were outstanding during the three and six months ended June 30, 2013 that were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares.

11

NOTE 7 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The activity in accumulated other comprehensive income (loss) for the three months ended June 30, 2014 and 2013 is as follows:

	Accumulated Other Comprehensive Income (Loss) (1), (2)
	Unrealized gains (losses) on securities available for sale			Defined  benefit pension plan			Total
	(in thousands)
Balance at March 31, 2014	$	987		$	(1,312	)	$	(325	)
Other comprehensive income before      reclassifications		725			—			725
Amounts reclassified from accumulated other      comprehensive income (loss)		(10	)		41			31
Period change		715			41			756
Balance at June 30, 2014	$	1,702		$	(1,271	)	$	431
Balance at March 31, 2013	$	2,965		$	(2,792	)	$	173
Other comprehensive loss before      reclassifications		(1,878	)		—			(1,878	)
Amounts reclassified from accumulated other      comprehensive income		—			44			44
Period change		(1,878	)		44			(1,834	)
Balance at June 30, 2013	$	1,087		$	(2,748	)	$	(1,661	)

(1	)	All amounts are net of tax. Related income tax expense or benefit is calculated using a Federal income tax rate of 34%.
(2	)	Amounts in parentheses indicate debits.

12

	Amount reclassified from accumulated other comprehensive income For the three months ended June 30, (1)						Affected line item in the consolidated statements of net income
	2014			2013
	(in thousands)
Investment securities available for sale
Net securities gains reclassified into      earnings	$	16		$	—		Gain on sale of investment  securities
Related income tax expense		(6	)		—		Income tax expense
Net effect on accumulated other      income for the period		10			—		Net of tax
Defined benefit pension plan (2)
Amortization of net actuarial loss	$	(61	)	$	(66	)	Compensation and benefits
Related income tax expense		20			22		Income tax expense
Net effect on accumulated other      comprehensive income for the      period		(41	)		(44	)	Net of tax
Total reclassification for the period	$	(31	)	$	(44	)	Net income

(1	)	Amounts in parentheses indicate debits.
(2	)	Included in the computation of net periodic pension cost. See Note 12 – Employee Benefit Plans for additional detail.

13

The activity in accumulated other comprehensive income (loss) for the six months ended June 30, 2014 and 2013 is as follows:

	Accumulated Other Comprehensive Income (Loss) (1), (2)
	Unrealized gains (losses) on securities available for sale			Defined benefit pension plan			Total
	(in thousands)
Balance at December 31, 2013	$	176		$	(1,354	)	$	(1,178	)
Other comprehensive income before      reclassifications		1,537			—			1,537
Amounts reclassified from accumulated other      comprehensive income (loss)		(11	)		83			72
Period change		1,526			83			1,609
Balance at June 30, 2014	$	1,702		$	(1,271	)	$	431
Balance at December 31, 2012	$	3,805		$	(2,835	)	$	970
Other comprehensive loss before      reclassifications		(2,718	)		—			(2,718	)
Amounts reclassified from accumulated other      comprehensive income		—			87			87
Period change		(2,718	)		87			(2,631	)
Balance at June 30, 2013	$	1,087		$	(2,748	)	$	(1,661	)

(1	)	All amounts are net of tax. Related income tax expense or benefit is calculated using a Federal income tax rate of 34%.
(2	)	Amounts in parentheses indicate debits.

	Amount reclassified from accumulated other comprehensive income For the six months ended June 30, (1)						Affected line item in the consolidated statements of net income
	2014			2013
	(in thousands)
Investment securities available for sale
Net securities gains reclassified into      earnings	$	17		$	—		Gain on sale of investment  securities
Related income tax expense		(6	)		—		Income tax expense
Net effect on accumulated other      income for the period		11			—		Net of tax
Defined benefit pension plan (2)
Amortization of net actuarial loss           and prior service cost	$	(123	)	$	(132	)	Compensation and benefits
Related income tax expense		40			45		Income tax expense
Net effect on accumulated other      comprehensive income for the      period		(83	)		(87	)	Net of tax
Total reclassification for the period	$	(72	)	$	(87	)	Net income

(1	)	Amounts in parentheses indicate debits.
(2	)	Included in the computation of net periodic pension cost. See Note 12 – Employee Benefit Plans for additional detail.

14

NOTE 8 — INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, and fair value of the Company’s investment securities are summarized as follows:

	At June 30, 2014
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	(in thousands)
Available for sale
U.S. Government and federal agencies	$	11,884	$	45	$	(168	)	$	11,761
State and political subdivisions		59,775		2,179		(304	)		61,650
Residential mortgage-backed securities      issued by quasi-governmental agencies		55,448		966		(139	)		56,275
Total investment securities available for sale		127,107		3,190		(611	)		129,686
Held to maturity
Residential mortgage-backed securities issued by      quasi-governmental agencies		1,340		176		(1	)		1,515
Total investment securities	$	128,447	$	3,366	$	(612	)	$	131,201

	At December 31, 2013
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
	(in thousands)
Available for sale
U.S. Government and federal agencies	$	18,572	$	4	$	(513	)	$	18,063
State and political subdivisions		60,159		1,526		(1,016	)		60,669
Residential mortgage-backed securities      issued by quasi-governmental agencies		45,015		540		(275	)		45,280
Total investment securities available for sale		123,746		2,070		(1,804	)		124,012
Held to maturity
Residential mortgage-backed securities issued by      quasi-governmental agencies		1,490		191		(1	)		1,680
Total investment securities	$	125,236	$	2,261	$	(1,805	)	$	125,692

Gross realized gains were $22,000 from the sale proceeds of investment securities available for sale of $3.8 million for the three months ended June 30, 2014. Gross realized losses were $6,000 from the sale proceeds of investment securities available for sale of $948,000 for the three months ended June 30, 2014.

Gross realized gains were $27,000 from the sale proceeds of investment securities available for sale of $4.8 million for the six months ended June 30, 2014. Gross realized losses were $10,000 from the sale proceeds of investment securities available for sale of $1.9 million for the six months ended June 30, 2014.

There were no sales of investment securities during the three or six months ended June 30, 2013.

15

The amortized cost and fair value of investment and mortgage-backed securities, by contractual maturity, are shown below. 

	At June 30, 2014
	Available for sale				Held to maturity
	Amortized cost		Fair value		Amortized cost		Fair value
	(in thousands)
Investment securities
Due in one year or less	$	400	$	401	$	—	$	—
Due after one year through five years		18,541		18,818		—		—
Due after five years through ten years		31,733		32,241		—		—
Due after ten years		20,985		21,951		—		—
		71,659		73,411		—		—
Mortgage-backed securities		55,448		56,275		1,340		1,515
Total investment and mortgage-backed securities	$	127,107	$	129,686	$	1,340	$	1,515

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at June 30, 2014:

			Less than					12 months
	Number		12 months					or longer					Total
Description of Securities	of Securities		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(dollars in thousands)
U.S. Government and federal agencies		3	$	949	$	(5	)	$	6,837	$	(163	)	$	7,786	$	(168	)
State and political subdivisions		16		4,176		(37	)		8,726		(267	)		12,902		(304	)
Residential mortgage-backed      securities issued by quasi-      governmental agencies		39		9,543		(140	)		—		—			9,543		(140	)
Total temporarily impaired      securities		58	$	14,668	$	(182	)	$	15,563	$	(430	)	$	30,231	$	(612	)

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at December 31, 2013:

			Less than					12 months
	Number		12 months					or longer				Total
	of		Fair		Unrealized			Fair		Unrealized		Fair		Unrealized
Description of Securities	Securities		Value		Loss			Value		Loss		Value		Loss
	(dollars in thousands)
U.S. Government and federal agencies		13	$	17,028	$	(513	)	$	—	$	—	$	17,028	$	(513	)
State and political subdivisions		24		19,646		(1,016	)		—		—		19,646		(1,016	)
Residential mortgage-backed      securities issued by quasi-      governmental agencies		65		24,508		(276	)		—		—		24,508		(276	)
Total temporarily impaired      securities		102	$	61,182	$	(1,805	)	$	—	$	—	$	61,182	$	(1,805	)

16

On a quarterly basis, temporarily impaired securities are evaluated to determine whether such impairment is an other-than-temporary impairment (“OTTI”). The Company has performed this evaluation and has determined that the unrealized losses at

June 30, 2014 and December 31, 2013, respectively, are not considered other-than-temporary but are the result of changes in interest rates, and are therefore reflected in other comprehensive income (loss).

NOTE 9 — LOANS RECEIVABLE

Loans receivable are summarized as follows:

	At
	June 30, 2014			December 31, 2013
	(in thousands)
Held for investment:
Residential
Residential mortgages	$	355,658		$	371,961
Commercial
Real estate-commercial		131,157			129,345
Real estate-residential		23,697			20,005
Real estate-multi-family		18,936			16,623
Construction loans		8,998			8,773
Commercial and industrial loans		8,965			6,849
Total commercial loans		191,753			181,595
Consumer
Home equity and second mortgage		63,961			64,202
Other consumer		1,532			1,697
Total consumer loans		65,493			65,899
Total loans		612,904			619,455
Net deferred loan origination costs and unamortized premiums		1,341			1,288
Less allowance for loan losses		(4,148	)		(6,575	)
Total loans receivable	$	610,097		$	614,168
Held for sale:
Residential
Residential mortgages	$	129		$	349

17

The following tables present by credit quality indicators the composition of the commercial loan portfolio:

	At June 30, 2014
			Special
	Pass		mention		Substandard		Doubtful		Total
	(in thousands)
Real estate-commercial	$	119,552	$	2,930	$	8,675	$	—	$	131,157
Real estate-residential		21,238		861		1,598		—		23,697
Real estate-multi-family		15,457		—		3,479		—		18,936
Construction loans		8,765		—		233		—		8,998
Commercial and industrial loans		8,936		29		—		—		8,965
Total	$	173,948	$	3,820	$	13,985	$	—	$	191,753

	At December 31, 2013
			Special
	Pass		mention		Substandard		Doubtful		Total
	(in thousands)
Real estate-commercial	$	113,260	$	7,142	$	8,943	$	—	$	129,345
Real estate-residential		17,182		487		2,336		—		20,005
Real estate-multi-family		13,114		—		3,509		—		16,623
Construction loans		5,596		—		3,177		—		8,773
Commercial and industrial loans		6,817		32		—		—		6,849
Total	$	155,969	$	7,661	$	17,965	$	—	$	181,595

In order to assess and monitor the credit risk associated with commercial loans, the Company employs a risk rating methodology whereby each commercial loan is initially assigned a risk grade. At least annually, all risk ratings are reviewed in light of information received such as tax returns, rent rolls, cash flow statements, appraisals, and any other information which may affect the then-current risk rating, which is adjusted upward or downward as needed. At the end of each quarter the risk ratings are summarized and become a component of the evaluation of the allowance for loan losses. The Company’s risk rating definitions mirror those promulgated by banking regulators and are as follows:

Pass: A good quality loan characterized by satisfactory liquidity; reasonable debt capacity and coverage; acceptable management in all critical positions and normal operating results for its peer group. The Company has grades 1 through 6 within the Pass category which reflect the increasing amount of attention paid to the individual loan because of, among other things, trends in debt service coverage, management weaknesses, or collateral values.

Special mention: A loan that has potential weaknesses that deserves management’s close attention. Although the loan is currently protected, if left uncorrected, potential weaknesses may result in the deterioration of the loan’s repayment prospects or in the borrower’s future credit position. Potential weaknesses include: weakening financial condition; an unrealistic repayment program; inadequate sources of funds; lack of adequate collateral; credit information; or documentation. There is currently the capacity to meet interest and principal payments, but further adverse business, financial, or economic conditions may impair the borrower’s capacity or willingness to pay interest and repay principal.

Substandard: A loan that is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. Although no loss of principal or interest is presently apparent, there is the distinct possibility that a partial loss of interest and/or principal will be sustained if the deficiencies are not corrected. There is a current identifiable vulnerability to default and the dependence upon favorable business, financial, or economic conditions to meet timely payment of interest and repayment of principal.

Doubtful: A loan which has all the weaknesses inherent in a substandard asset with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors which may work to strengthen the asset, classification as an estimated loss is deferred until a more exact status is determined. Pending factors include: proposed merger, acquisition, liquidation, capital injection, perfecting liens on additional collateral, and refinancing plans.

18

Loss: Loans which are considered uncollectible and have been charged off. The Company has charged-off all loans classified as loss.

Loans classified as special mention, substandard or doubtful are evaluated for potential impairment. All impaired loans are placed on nonaccrual status and are classified as substandard or doubtful.

The following tables present by credit quality indicator the composition of the residential mortgage and consumer loan portfolios:

	At June 30, 2014
	Performing		Nonperforming		Total
	(in thousands)
Residential mortgages	$	354,502	$	1,156	$	355,658
Home equity and second mortgage		63,836		125		63,961
Other consumer		1,532		—		1,532
Total	$	419,870	$	1,281	$	421,151

	At December 31, 2013
	Performing		Nonperforming		Total
	(in thousands)
Residential mortgages	$	368,967	$	2,994	$	371,961
Home equity and second mortgage		63,902		300		64,202
Other consumer		1,697		—		1,697
Total	$	434,566	$	3,294	$	437,860

In order to assess and monitor the credit risk associated with residential mortgage loans and consumer loans which include second mortgage loans and home equity secured lines of credit, the Company relies upon the payment status of the loan. Residential mortgage and other consumer loans 90 days or more past due are placed on nonaccrual status, classified as nonperforming, and evaluated for impairment.

19

The following table presents by class nonperforming loans including impaired loans and loan balances 90 days or more past due, for which the accrual of interest has been discontinued:

	At
	June 30, 2014		December 31, 2013
	(in thousands)
Residential
Residential mortgages	$	1,156	$	2,994
Commercial
Real estate-commercial		1,769		774
Real estate-residential		690		896
Real estate-multi-family		191		191
Construction loans		233		3,177
Consumer
Home equity and second mortgage		125		300
Total nonperforming loans	$	4,164	$	8,332

20

The following tables present  loans individually evaluated for impairment by class:

	At June 30, 2014
	Recorded investment		Unpaid principal balance		Related allowance		Average recorded investment		Interest income recognized
	(in thousands)
With an allowance recorded:
Residential
Residential mortgages	$	1,124	$	1,124	$	281	$	1,129	$	—
Commercial
Real estate-commercial		132		132		64		44		—
Real estate-residential		496		496		200		569
Construction loans		233		233		21		1,215		—
		1,985		1,985		566		2,957		—
With no allowance recorded:
Residential
Residential mortgages	$	22	$	33		—	$	409	$	—
Commercial
Real estate-commercial		1,637		1,639		—		1,103		—
Real estate-residential		194		321		—		184		—
Real estate-multi-family		191		372		—		191		—
Consumer
Home equity and second mortgage		15		16		—		39		—
		2,059		2,381		—		1,926		—
Total	$	4,044	$	4,366	$	566	$	4,883	$	—

	At December 31, 2013
	Recorded investment		Unpaid principal balance		Related allowance		Average recorded investment		Interest income recognized
	(in thousands)
With an allowance recorded:
Residential
Residential mortgages	$	1,135	$	1,135	$	128	$	1,620	$	—
Commercial
Real estate-commercial		—		—		—		109		—
Real estate-residential		712		712		77		211		—
Construction loans		3,177		3,375		2,021		3,701		—
		5,024		5,222		2,226		5,641		—
With no allowance recorded:
Residential
Residential mortgages		1,184		1,184		—		241		—
Commercial
Real estate-commercial		774		774		—		607		—
Real estate-residential		184		321		—		108		—
Real estate-multi-family		191		372		—		77		—
Consumer
Home equity and second mortgage		47		81		—		7		—
		2,380		2,732		—		1,040		—
Total	$	7,404	$	7,954	$	2,226	$	6,681	$	—

21

The following tables present by class the contractual aging of delinquent loans :

	At June 30, 2014
	Current		30-59 Days past due		60-89 Days  past due		Loans past due 90 days  or more		Total past due		Total loans		Recorded investment over 90 days  and accruing interest
	(in thousands)
Residential
Residential mortgages	$	353,227	$	1,275	$	—	$	1,156	$	2,431	$	355,658	$	—
Commercial
Real estate-commercial		128,815		572		400		1,370		2,342		131,157		—
Real estate-residential		23,018		—		—		679		679		23,697		—
Real estate-multi-family		18,745		—		—		191		191		18,936		—
Construction loans		8,765		—		—		233		233		8,998		—
Commercial and industrial loans		8,957		—		8		—		8		8,965		—
Consumer
Home equity and second mortgage		63,799		37		—		125		162		63,961		—
Other consumer		1,532		—		—		—		—		1,532		—
Total	$	606,858	$	1,884	$	408	$	3,754	$	6,046	$	612,904	$	—

	At December 31, 2013
	Current		30-59 Days past due		60-89 Days past due		Loans  past due 90 days or more		Total past due		Total loans		Recorded investment over 90 days and accruing interest
	(in thousands)
Residential
Residential mortgages	$	369,271	$	111	$	—	$	2,579	$	2,690	$	371,961	$	—
Commercial
Real estate-commercial		127,786		785		—		774		1,559		129,345		—
Real estate-residential		18,589		180		340		896		1,416		20,005		—
Real estate-multi-family		16,432		—		—		191		191		16,623		—
Construction loans		5,596		—		—		3,177		3,177		8,773		—
Commercial and industrial loans		6,849		—		—		—		—		6,849		—
Consumer
Home equity and second mortgage		63,543		355		4		300		659		64,202		—
Other consumer		1,686		7		4		—		11		1,697		—
Total	$	609,752	$	1,438	$	348	$	7,917	$	9,703	$	619,455	$	—

22

Activity in the allowance for loan losses for the three and six months ended June 30, 2014 is summarized as follows:

	Balance April 1, 2014		Provision			Charge-offs			Recoveries		Balance June 30, 2014
	(in thousands)
Residential
Residential mortgages	$	1,614	$	(31	)	$	—		$	—	$	1,583
Commercial
Real estate-commercial		950		103			—			—		1,053
Real estate-residential		412		(45	)		—			—		367
Real estate-multi-family		137		(21	)		—			—		116
Construction loans		355		104			—			—		459
Commercial and industrial loans		101		(46	)		—			3		58
Consumer
Home equity and second mortgage		227		18			(19	)		—		226
Other consumer		34		(7	)		(4	)		6		29
Unallocated		232		25			—			—		257
Total	$	4,062	$	100		$	(23	)	$	9	$	4,148

	Balance January 1, 2014		Provision			Charge-offs			Recoveries		Balance June 30, 2014
	(in thousands)
Residential
Residential mortgages	$	1,722	$	29		$	(169	)	$	1	$	1,583
Commercial
Real estate-commercial		1,220		(167	)		—			—		1,053
Real estate-residential		437		37			(107	)		—		367
Real estate-multi-family		136		(20	)		—			—		116
Construction loans		2,208		430			(2,179	)		—		459
Commercial and industrial loans		97		(43	)		—			4		58
Consumer
Home equity and second mortgage		214		78			(66	)		—		226
Other consumer		50		(10	)		(18	)		7		29
Unallocated		491		(234	)		—			—		257
Total	$	6,575	$	100		$	(2,539	)	$	12	$	4,148

23

Activity in the allowance for loan losses for the three and six months ended June 30, 2013 is summarized as follows:

	Balance April 1, 2013		Provision			Charge-offs			Recoveries		Balance June 30, 2013
	(in thousands)
Residential
Residential mortgages	$	1,800	$	77		$	(109	)	$	12	$	1,780
Commercial
Real estate-commercial		1,311		(74	)		—			—		1,237
Real estate-residential		601		(241	)		—			—		360
Real estate-multi-family		237		(65	)		—			—		172
Construction loans		1,894		484			(39	)		3		2,342
Commercial and industrial loans		125		(55	)		—			1		71
Consumer
Home equity and second mortgage		211		(1	)		—			—		210
Other consumer		11		27			(16	)		2		24
Unallocated		472		248			—			—		720
Total	$	6,662	$	400		$	(164	)	$	18	$	6,916

	Balance January 1, 2013		Provision			Charge-offs			Recoveries		Balance June 30, 2013
	(in thousands)
Residential
Residential mortgages	$	1,849	$	126		$	(207	)	$	12	$	1,780
Commercial
Real estate-commercial		1,754		(82	)		(435	)		—		1,237
Real estate-residential		608		(189	)		(59	)		—		360
Real estate-multi-family		245		(73	)		—			—		172
Construction loans		1,697		781			(150	)		14		2,342
Commercial and industrial loans		119		(52	)		—			4		71
Consumer
Home equity and second mortgage		251		(34	)		(15	)		8		210
Other consumer		11		30			(19	)		2		24
Unallocated		388		332			—			—		720
Total	$	6,922	$	839		$	(885	)	$	40	$	6,916

Despite the above allocation, the allowance for credit losses is general in nature and is available to absorb losses from any portfolio segment.

Loans receivable include certain loans that have been modified as Troubled Debt Restructurings (“TDRs”), where economic concessions have been granted to borrowers experiencing financial difficulties. The objective for granting the concessions is to maximize the recovery of the investment in the loan and may include reductions in the interest rate, payment extensions, forgiveness

24

of interest or principal, forbearance or other actions. TDRs are classified as nonperforming at the time of restructuring and typically return to performing status after considering the borrower’s positive repayment performance for a reasonable period of time, usually six months.

Loans modified in a TDR are evaluated individually for impairment based on the present value of expected cash flows or the fair value of the underlying collateral less selling costs for collateral dependent loans. If the value of the modified loan is less than the recorded investment in the loan, impairment is recognized through an increase by an additional provision to the allowance for loan losses. In periods subsequent to modification, TDRs are evaluated for possible additional impairment.

There were no new loan modifications deemed TDRs during the three and six months ended June 30, 2014 and 2013.

The following table presents loans classified as TDRs that subsequently defaulted:

	For the three months ended June 30, 2014				For the six months ended  June 30, 2014
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Residential	(in thousands)				(in thousands)
Residential mortgage		1	$	787		1	$	787
Total		1	$	787		1	$	787

No loans previously classified as TDRs defaulted during the six months ended June 30, 2013.

In 2013, the Company acquired loans for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable that all contractually required payments would not be collected. The following table presents information regarding the outstanding principal balance and related carrying amount:

	At June 30, 2014		At December 31, 2013
	(in thousands)
Outstanding principal balance	$                                        742	$	808
Carrying amount	412		444

The table below presents changes in the amortizable yield for purchased credit-impaired loans as follows for six months ended June 30, 2014:

	At June 30, 2014
	(in thousands)
Balance at beginning of period	$	154
Acquisition of impaired loans		—
Accretion		(12	)
Balance at end of period	$	142

There was no accretion during the three months ended June 30, 2014.

An impairment reserve of $64,000 has been assigned to acquired loans with or without specific evidence of deterioration in credit quality at June 30, 2014. There was no allowance for loan losses recorded for acquired loans with or without specific evidence of deterioration in credit quality at December 31, 2013.

25

The following tables present by class the ending balance of the allowance for loan losses and ending loan balance based on impairment method as of June 30, 2014. Acquired loans were recorded at fair value on their purchase date without a carryover of the related allowance for loan losses.

	Evaluated for impairment
Allowance for loan losses	Loans acquired without credit deterioration		Loans acquired with credit deterioration		Individually		Collectively		Total
	(in thousands)
Residential
Residential mortgages	$	—	$	—	$	281	$	1,302	$	1,583
Commercial
Real estate-commercial		64		—		—		989		1,053
Real estate-residential		—		—		200		167		367
Real estate-multi-family		—		—		—		116		116
Construction loans		—		—		21		438		459
Commercial and industrial loans		—		—		—		58		58
Consumer
Home equity and second mortgage		—		—		—		226		226
Other consumer		—		—		—		29		29
Unallocated		—		—		—		257		257
Total	$	64	$	—	$	502	$	3,582	$	4,148

	Evaluated for impairment
Loans receivable	Loans acquired without credit deterioration		Loans acquired with credit deterioration		Individually		Collectively		Total
	(in thousands)
Residential
Residential mortgages	$	46,448	$	22	$	1,124	$	308,064	$	355,658
Commercial
Real estate-commercial		11,774		—		1,771		117,612		131,157
Real estate-residential		4,781		184		496		18,236		23,697
Real estate-multi-family		1,070		191		—		17,675		18,936
Construction loans		—		—		233		8,765		8,998
Commercial and industrial loans		239		—		—		8,726		8,965
Consumer
Home equity and second mortgage		22,661		15		—		41,285		63,961
Other consumer		107		—		—		1,425		1,532
Total	$	87,080	$	412	$	3,624	$	521,788	$	612,904

26

The following tables present by class the ending balance of the allowance for loan losses and ending loan balance based on impairment method as of December 31, 2013. Acquired loans were recorded at fair value on their purchase date without a carryover of the related allowance for loan losses.

	Evaluated for impairment
Allowance for loan losses	Loans acquired  without credit deterioration		Loans acquired with credit deterioration		Individually		Collectively		Total
	(in thousands)
Residential
Residential mortgages	$	—	$	—	$	128	$	1,594	$	1,722
Commercial
Real estate-commercial		—		—		—		1,220		1,220
Real estate-residential		—		—		77		360		437
Real estate-multi-family		—		—		—		136		136
Construction loans		—		—		2,021		187		2,208
Commercial and industrial loans		—		—		—		97		97
Consumer
Home equity and second mortgage		—		—		—		214		214
Other consumer		—		—		—		50		50
Unallocated		—		—		—		491		491
Total	$	—	$	—	$	2,226	$	4,349	$	6,575

	Evaluated for impairment
Loans receivable	Loans acquired without credit deterioration		Loans acquired with credit deterioration		Individually		Collectively		Total
	(in thousands)
Residential
Residential mortgages	$	50,985	$	22	$	2,297	$	318,657	$	371,961
Commercial
Real estate-commercial		12,787		—		774		115,784		129,345
Real estate-residential		4,913		184		712		14,196		20,005
Real estate-multi-family		1,116		191		—		15,316		16,623
Construction loans		—		—		3,177		5,596		8,773
Commercial and industrial loans		279		—		—		6,570		6,849
Consumer
Home equity and second mortgage		24,806		47		—		39,349		64,202
Other consumer		126		—		—		1,571		1,697
Total	$	95,012	$	444	$	6,960	$	517,039	$	619,455

27

NOTE 10 — FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

The following tables present information about the Company’s financial instruments measured at fair value as of June 30, 2014 and December 31, 2013. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement hierarchy has been established for inputs in valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Determination of the appropriate level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement for the instrument or security.

The fair value hierarchy levels are summarized below:

· Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

· Level 2 inputs are inputs that are observable for the asset or liability, either directly or indirectly.

· Level 3 inputs are unobservable and contain assumptions of the party assessing the fair value of the asset or liability.

 Assets measured at fair value on a recurring basis segregated by fair value hierarchy level are summarized below:

							Balance as of
	Fair value hierarchy levels						June 30,
	Level 1		Level 2		Level 3		2014
	(in thousands)
Assets
Investment securities available for sale
U.S. Government and federal agencies	$	—	$	11,761	$	—	$	11,761
State and political subdivisions		—		61,650		—		61,650
Residential mortgage-backed securities issued by quasi-      governmental agencies		—		56,275		—		56,275
Total investment securities available for sale	$	—	$	129,686	$	—	$	129,686
Loans receivable, held for sale	$	—	$	129	$	—	$	129

							Balance as of
	Fair value hierarchy levels						December 31,
	Level 1		Level 2		Level 3		2013
	(in thousands)
Assets
Investment securities available for sale
U.S. Government and federal agencies	$	—	$	18,063	$	—	$	18,063
State and political subdivisions		—		60,669		—		60,669
Residential mortgage-backed securities issued by quasi-      governmental agencies		—		45,280		—		45,280
Total investment securities available for sale	$	—	$	124,012	$	—	$	124,012
Loans receivable, held for sale	$	—	$	349	$	—	$	349

28

Investment securities available for sale and mortgage-backed securities available for sale are valued primarily by a third party pricing agent. U.S. Government and federal agency securities are primarily priced through a multi-dimensional relational model, a Level 2 hierarchy, which incorporates dealer quotes and other market information including, defined sector breakdown, benchmark yields, base spread, yield to maturity and corporate actions. State and political subdivision securities are valued within the Level 2 hierarchy using inputs with a series of matrices that reflect benchmark yields, ratings updates, and spread adjustments. Mortgage-backed securities include Government National Mortgage Association (“GNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”) and Federal National Mortgage Association (“FNMA”) certificates which are valued under a Level 2 hierarchy using a matrix correlation to benchmark yields, spread analysis, and prepayment speeds.

 Values for loans held for sale utilize active pricing quotes which exist in the secondary market and are therefore deemed a Level 2 hierarchy.

Assets measured at fair value on a nonrecurring basis segregated by fair value hierarchy level at June 30, 2014 are summarized below:

							Balance as of
	Fair value hierarchy levels						June 30,
	Level 1		Level 2		Level 3		2014
	(in thousands)
Impaired loans	$	—	$	—	$	3,478	$	3,478
Real estate acquired through foreclosure		—		—		5,711		5,711
Mortgage servicing rights		—		1,472		—		1,472

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Bank has utilized Level 3 inputs to determine fair value at June 30, 2014:

					Range of
					inputs
Description	Fair value estimate		Valuation technique	Unobservable Input	(weighted average)
Impaired loans	$	3,478	Appraisal of collateral (1)	Discount rate to reflect current market conditions and ultimate recoverability		5%-15%(14.00%)
Real estate acquired through foreclosure		5,711	Appraisal of collateral (1)	Discount rate to reflect current market conditions and liquidation expenses		5%-20% (16.90%)

(1 ) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

29

Assets measured at fair value on a nonrecurring basis segregated by fair value hierarchy level at December 31, 2013 are summarized below:

							Balance as of
	Fair value hierarchy levels						December 31,
	Level 1		Level 2		Level 3		2013
	(in thousands)
Impaired loans	$	—	$	—	$	5,178	$	5,178
Real estate acquired through foreclosure		—		—		5,601		5,601
Mortgage servicing rights		—		1,472		—		1,472

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Bank has utilized Level 3 inputs to determine fair value at December 31, 2013:

					Range of
					inputs
Description	Fair value estimate		Valuation technique	Unobservable Input	(weighted average)
Impaired loans	$	5,178	Appraisal of collateral (1)	Discount rate to reflect current market conditions and ultimate recoverability		5%-15% (6.59%)
Real estate acquired through foreclosure		5,601	Appraisal of collateral (1)	Discount rate to reflect current market conditions and liquidation expenses		5%-20% (17.47%)

(1 ) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

The fair value of impaired loans is generally determined through independent appraisals of the underlying collateral, which generally include Level 3 inputs that are not identifiable. Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. Impaired loans are evaluated and valued while the loan is identified as impaired, at the lower of the recorded investment in the loan or fair value. The range and weighted average of liquidation expenses are presented as a percent of the appraised value.

Real estate acquired through foreclosure is initially valued at the lower of the recorded investment in the loan or fair value at foreclosure and subsequently adjusted for further decreases in market value, less costs to sell, if necessary. Fair value is determined by using the value of the real estate acquired through foreclosure based on appraisals prepared by qualified independent licensed appraisers contracted by the Company to perform the assessment and is therefore classified as a Level 3 hierarchy. 

The Company retains a qualified valuation service to calculate the amortized cost and to determine the fair value of the mortgage servicing rights. The valuation service utilizes discounted cash flow analyses adjusted for prepayment speeds, market discount rates and conditions existing in the secondary servicing market. Hence, the fair value of mortgage servicing rights is deemed a Level 2 hierarchy. The amortized cost basis of the Company’s mortgage servicing rights was $1.5 million at June 30, 2014 and December 31, 2013. The fair value of the mortgage servicing rights was $1.5 million at June 30, 2014 and December 31, 2013 and was included in other assets in the consolidated balance sheets.

In addition to financial instruments recorded at fair value in the Company’s financial statements, disclosure of the estimated fair value of all of an entity’s assets and liabilities considered to be financial instruments is also required. For the Bank, as for most financial institutions, the majority of its assets and liabilities are considered financial instruments. However, many such instruments lack an available trading market as characterized by a willing buyer and willing seller engaging in an exchange transaction. Also, it is the Company’s general practice and intent to hold its financial instruments to maturity or available for sale and to not engage in trading or significant sales activities. For fair value disclosure purposes, the Company substantially utilized the established fair value measurement hierarchy.

30

Changes in the assumptions or methodologies used to estimate fair values may materially affect the estimated amounts. In addition, there may not be reasonable comparability between entities due to the wide range of permitted assumptions and methodologies in the absence of active markets. This lack of uniformity gives rise to a high degree of subjectivity in estimating financial instrument fair values.

Fair values have been estimated using data which management considered the best available, as generally provided by estimation methodologies deemed suitable for the pertinent category of financial instrument. The recorded carrying amounts and fair values segregated by fair value hierarchy level at June 30, 2014 and December 31, 2013 are summarized below:

	At June 30, 2014
	Carrying		Fair		Fair value hierarchy levels
	value		value		Level 1		Level 2		Level 3
Assets	(in thousands)
Cash and cash equivalents	$	48,291	$	48,291	$	48,291	$	—	$	—
Investment securities		73,411		73,411		—		73,411		—
Mortgage-backed securities		57,615		57,790		—		57,790		—
Loans receivable, net		610,226		620,094		—		129		619,965
Liabilities
Deposits with stated maturities	$	181,875	$	183,453	$	—	$	—	$	183,453
Deposits with no stated maturities		504,113		504,113		504,113		—		—
Borrowings with stated maturities		47,120		46,678		—		—		46,678

	At December 31, 2013
	Carrying		Fair		Fair value hierarchy levels
	value		value		Level 1		Level 2		Level 3
Assets	(in thousands)
Cash and cash equivalents	$	45,310	$	45,310	$	45,310	$	—	$	—
Investment securities		78,732		78,732		—		78,732		—
Mortgage-backed securities		46,770		46,960		—		46,960		—
Loans receivable, net		614,517		614,246		—		349		613,897
Liabilities
Deposits with stated maturities	$	190,492	$	193,258	$	—	$	—	$	193,258
Deposits with no stated maturities		493,410		493,410		493,410		—		—
Borrowings with stated maturities		49,605		48,426		—		—		48,426

The fair value of cash and cash equivalents equals the carrying amount. The fair value of investment and mortgage-backed securities is described and presented under fair value measurement guidelines as discussed earlier.

The fair value of loans receivable has been estimated using the present value of cash flows, discounted at the approximate current market rates, and giving consideration to estimated prepayment risk but not adjusted for credit risk. Loans receivable also include loans receivable held for sale.

31

The fair value of deposits and borrowings with stated maturities has been estimated using the present value of cash flows, discounted at rates approximating current market rates for similar liabilities. Fair value of deposits and borrowings with floating interest rates is generally presumed to approximate the recorded carrying amounts.

The fair value of deposits with no stated maturities is generally presumed to approximate the carrying amount (the amount payable on demand). The fair value of deposits with floating interest rates is generally presumed to approximate the recorded carrying amounts.

The Bank’s remaining assets and liabilities are not considered financial instruments. No disclosure of the relationship value of the Bank’s depositors or customers is required.

 NOTE 11 — STOCK-BASED COMPENSATION

The Company has stock benefit plans that allow the Company to grant options and restricted stock to employees and directors. The awards, which have a term of up to 10 years when issued, vest over a two to five year period. The exercise price of each award equals the market price of the Company’s stock on the date of the grant. The fair value of each option grant during the six months ended June 30, 2014 and 2013 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

[Missing Graphic Reference]

	For the six months ended June 30,
Weighted average assumptions	2014			2013
Dividend yield		1.61	%		0.83	%
Expected volatility		15.85	%		17.24	%
Risk-free interest rate		0.56	%		0.67	%
Fair value of options granted during the period	$	3.90		$	3.13
Expected lives in years		5			5

At June 30, 2014, there was $447,000 of total unrecognized compensation cost, net of estimated forfeitures, related to non-vested awards under the Company’s stock option plan. That cost is expected to be recognized over a weighted average period of 16.6 months. Option activity under the Company’s stock option plan as of June 30, 2014 was as follows:

	At June 30, 2014
	Number of shares			Weighted average exercise price per share		Weighted average remaining contractual term (in years)		Aggregate intrinsic value ($000)
Outstanding at January 1, 2014		254,144		$	23.71		2.81	$	1,562
Options granted		71,500			30.03		—		—
Options exercised		(400	)		19.67		—		—
Options forfeited		—			—		—		—
Options expired		—			—		—		—
Outstanding at June 30, 2014		325,244		$	25.10		2.81	$	5,750
Options exercisable at June 30, 2014		149,494		$	23.27		2.13	$	2,916

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the second quarter and the exercise price, multiplied by the number of in-the-money options).

32

The aggregate intrinsic value and cash receipts of options exercised are as follows:

	At June 30,
	2014		2013
	(in thousands)
Options Exercised
Aggregate intrinsic value of options exercised	$	4	$	3
Cash receipts from options exercised		8		13

The Company issues stock of the Company as payment for director fees as permitted by the 2011 Director Stock Compensation Plan. The cost associated with these grants is included as a component of stock-based compensation. The following tables provide information regarding the Company’s stock-based compensation expense:

	For the three months ended June 30,
	2014		2013
	(in thousands)
Stock-based compensation expense
Director fees	$	28	$	36
Stock option expense		95		84
Employee Stock Ownership Plan ("ESOP") expense		95		82
Total stock-based compensation expense	$	218	$	202

The Bank reports ESOP expense in an amount equal to the fair value of shares released from the ESOP to employees less dividends received on the allocated shares in the plan used for debt service. Dividends on allocated shares used to reduce ESOP expense totaled $17,000 and $9,000 for the three months ended June 30, 2014 and 2013, respectively. Stock-based compensation expense related to stock options resulted in a tax benefit of $31,000 and $26,000 for the three months ended June 30, 2014 and 2013, respectively.

	For the six months ended June 30,
	2014		2013
	(in thousands)
Stock-based compensation expense
Director fees	$	56	$	70
Stock option expense		184		143
Employee Stock Ownership Plan ("ESOP") expense		176		163
Total stock-based compensation expense	$	416	$	376

The Bank reports ESOP expense in an amount equal to the fair value of shares released from the ESOP to employees less dividends received on the allocated shares in the plan used for debt service. Dividends on allocated shares used to reduce ESOP expense totaled $34,000 and $17,000 for the six months ended June 30, 2014 and 2013, respectively. Stock-based compensation expense related to stock options resulted in a tax benefit of $55,000 and $44,000 for the six months ended June 30, 2014 and 2013, respectively.

33

NOTE 12 — EMPLOYEE BENEFIT PLANS

Net periodic defined benefit pension cost included the following:

	For the three months ended June 30,
	2014			2013
	(in thousands)
Components of net periodic benefit cost
Service cost	$	205		$	206
Interest cost		128			89
Expected return on plan assets		(209	)		(182	)
Recognized net actuarial loss		61			66
Net periodic benefit cost	$	185		$	179

	For the six months ended June 30,
		2014			2013
	(in thousands)
Components of net periodic benefit cost
Service cost	$	410		$	411
Interest cost		256			177
Expected return on plan assets		(418	)		(363	)
Amortization of prior service cost		2			1
Recognized net actuarial loss		121			131
Net periodic benefit cost	$	371		$	357

There were no employer contributions for the six months ended June 30, 2014.

In February 2014, the 3rd Fed Defined Benefit Plan (‘the Plan”) was amended to modify the benefit calculation under the Plan by increasing the career average benefit multiplier from 1.5% to 2.0% for all current and future active participants effective as of January 1, 2014. The net periodic benefit cost disclosed above reflects the effects of this amendment. Furthermore, the impact on the funded status of the plan by the amendment is measured and disclosed in year-end financial statements by an adjustment to accumulated other comprehensive income (“AOCI”). Refer to Note 14-Subsequent Events which provides additional information regarding the status of the Plan.

NOTE 13 — PENDING MERGER

On June 3, 2014, National Penn Bancshares, Inc. (“National Penn”), the parent company of National Penn Bank, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with the Company pursuant to which the Company will merge with and into National Penn (the “Merger”). As part of the transaction, the Bank will also merge with and into National Penn Bank.

Pursuant to the terms of the Merger Agreement, upon completion of the Merger, each outstanding share of the Company‘s common stock will be converted into the right to receive $42.00 per share or 4.22 shares of the National Penn’s common stock, at the election of the Company’s shareholders, subject to proration. The aggregate cash consideration to be paid pursuant to the Merger Agreement must not exceed 40% of the total merger consideration and the aggregate stock consideration must not exceed 60% of the total merger consideration. Cash will be paid in lieu of fractional shares.

Subject to the satisfaction or waiver of all the conditions precedent to the Merger including receipt of approval from the Company’s shareholders and all required regulatory approvals, the Merger is expected to close during the fourth quarter of 2014. If the Merger is not consummated under certain circumstances generally involving a third party proposal, the Company has agreed to pay National Penn a termination fee of $4.0 million.

34

NOTE 14 — SUBSEQUENT EVENTS

Subsequent to June 30, 2014 and pursuant to the requirements contained in the Merger Agreement referred to in Note 13, the Company’s board of directors adopted resolutions which provided to freeze the status of the Plan effective October 15, 2014 (“the freeze date”). Accordingly, no additional participants will enter the Plan after October 15, 2014; no additional years of credited service for benefit accrual purposes will be earned after the freeze date under the Plan; and compensation earned by participants after the freeze date will not be taken into account under the Plan.

A curtailment charge of $2.1 million is estimated to increase the net periodic benefit cost by an increase to AOCI which will serve to eliminate prior service costs and certain losses recognized in AOCI. In addition, for purposes of determining the projected benefit obligation, AOCI is estimated to increase by a pre-tax adjustment of $1.1 million related to the reduction of the projected benefit obligation. The Company will recognize the appropriate effects of the curtailment charge and the reduced benefit obligations in accumulated other comprehensive income net of tax during the third quarter of 2014.

35

TF FINANCIAL CORPORATION AND SUBSIDIARIES

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company may from time to time make written or oral “forward-looking statements”, including statements contained in the Company’s filings with the Securities and Exchange Commission (including this Quarterly Report on Form 10-Q and the exhibits hereto), in its reports to stockholders and in other communications by the Company, which are made in good faith by the Company pursuant to the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve risks and uncertainties, such as statements of the Company’s plans, objectives, expectations, estimates and intentions that are subject to change based on various important factors (some of which are beyond the Company’s control). The following factors, among others, could cause the Company’s financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the impact of complying with the terms of the Merger Agreement during the pendency of the Merger; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System, inflation, interest rate, market and monetary fluctuations; the timely development of and acceptance of new products and services of the Company and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services; the willingness of users to substitute competitors’ products and services for the Company’s products and services; the success of the Company in gaining regulatory approval of its products and services, when required; the impact of changes in financial services’ laws and regulations (including laws concerning taxes, banking, securities and insurance); technological changes, acquisitions; changes in consumer spending and saving habits; and the success of the Company at managing the risks involved in the foregoing.

The Company cautions that the foregoing list of important factors is not exclusive. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

Financial Condition

The Company’s total assets at June 30, 2014 and December 31, 2013 were $839.6 million and $835.7 million, respectively, representing an increase of $3.9 million during the six-month period. Investment securities increased by $5.5 million due to security purchases of $20.0 million and an increase in the fair value of available for sale securities of $2.3 million, which were offset by principal repayments, maturities and sales totaling $16.4 million and net premium amortization of $344,000. Loans receivable, net decreased by $4.1 million during the first six months of 2014. Principal repayments of $36.8 million on loans were partially offset by originations of consumer and single-family residential mortgage loans totaling $13.2 million and originations of commercial loans totaling $20.3 million. The Company increased the allowance for loan losses by $100,000 and also transferred $562,000 from loans to real estate acquired through foreclosure. Loans receivable held for sale decreased to $129,000 at June 30, 2014 as originations of loans for sale in the secondary market totaled $10.6 million during the first six months of 2014 and proceeds from loan sales totaled $10.9 million during this period.

Total liabilities increased by $577,000 during the first six months of 2014. Deposit balances increased $2.1 million during the period with interest-bearing checking and money market increasing by $14.6 million. Noninterest-bearing checking and savings accounts decreased by $3.9 million and retail certificates of deposit (“CDs”) decreased $8.6 million during the first six months of 2014.  Advances from the FHLB decreased by $2.5 million, the result of scheduled amortization and maturities.

Total consolidated stockholders’ equity of the Company was $98.2 million or 11.7% of total assets at June 30, 2014.

36

Asset Quality

Nonperforming assets include real estate owned, which is carried at estimated fair value less costs to sell and nonperforming loans. Nonperforming loans include loan balances 90 days or more past due and impaired loans for which the accrual of interest has been discontinued. The following table sets forth information regarding the Company’s nonperforming assets:

	At
Nonperforming Assets	June 30, 2013			December 31, 2013			June 30, 2013
	(Dollars in thousands)
Loans receivable, net:
Residential
Residential mortgages	$	1,156		$	2,994		$	1,931
Commercial
Real estate-commercial		1,769			774			552
Real estate-residential		690			896			392
Real estate-multi-family		191			191			—
Construction loans		233			3,177			2,944
Commercial and industrial loans		—			—			9
Consumer
Home equity and second mortgage		125			300			143
Other consumer		—			—			2
Total nonperforming loans		4,164			8,332			5,973
Real estate owned		5,711			5,601			6,177
Total nonperforming assets	$	9,875		$	13,933		$	12,150
Total loans 90 days or more past due as to interest or      principal and accruing interest	$	—		$	—		$	—
Ratio of nonperforming loans to gross loans		0.68	%		1.34	%		1.30	%
Ratio of nonperforming loans to total assets		0.50	%		1.00	%		0.84	%
Ratio of total nonperforming assets to total assets		1.18	%		1.67	%		1.70	%

Foreclosed property at June 30, 2014 consisted of four parcels of real estate with a combined carrying value of $5.7 million. During the first half of 2014, the Bank foreclosed on four mortgage loans secured by seven residential properties having estimated fair value of $562,000. Also, the Bank sold seven properties acquired through foreclosure with a carrying value of $452,000. All foreclosed properties are listed or are in the process of being listed with real estate agents for sale in a timely manner. Foreclosed real estate is included in other assets in the Consolidated Balance Sheets.

Allowance for Loan Losses

The Bank provides valuation allowances for estimated losses from uncollectible loans. The allowance is increased by provisions charged to expense and reduced by net charge-offs. On a quarterly basis, the Company prepares an allowance for loan losses (ALLL) analysis. In the analysis, the loan portfolio is segmented into groups of homogeneous loans that share similar risk characteristics: commercial loans secured by nonresidential or non-owner occupied residential real estate, construction, commercial and industrial loans, single-family residential loans and consumer loans which are predominately real estate secured by junior liens and home equity lines of credit. Each segment is assigned reserve factors based on quantitative and qualitative measurements. In addition, the Bank reviews its internally-classified loans, its loans classified for regulatory purposes, delinquent loans, and other relevant information in order to isolate loans for further scrutiny as potentially impaired loans.

Quantitative factors include an actual expected loss factor based on historical loss experience over a relevant look-back period. Quantitative factors also include the Bank’s actual risk ratings for the commercial loan segments as determined in accordance with loan review and loan grading policies and procedures, and additional factors as determined by management to be representative of additional risk due to the loan’s geographic location, type, and other attributes. These quantitative factors are adjusted if necessary, up or down, based on actual experience and an evaluation of the qualitative factors.

Qualitative factors are based upon: (1) changes in lending policies and procedures, including but not limited to changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses; (2) changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments; (3) changes in the nature and volume of the portfolio and in the terms of loans; (4) changes in the experience, ability, and depth of lending management and other relevant staff; (5) changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely

37

classified or graded loans; (6) changes in the quality of the loan review system; (7) changes in the value of underlying collateral for collateral dependent loans; (8) the existence and effect of any concentration of credit, and changes in the level of such concentrations; and (9) the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing loan portfolio.

Potentially impaired loans selected for individual evaluation are reviewed in accordance with US GAAP which governs the accounting for impaired assets, as well as regulatory guidance regarding treatment of troubled, collateral-dependent loans. Each potentially impaired loan is evaluated using all available information such as recent appraisals, whether the loan is currently on accrual or nonaccrual status, discounted cash flow analyses, guarantor financial strength, the value of additional collateral, and the loan’s and borrower’s past performance to determine whether in management’s best judgment it is probable that the Bank will be unable to collect all contractual interest and principal in accordance with the loan’s terms. Loans deemed not to be impaired are assigned a reserve factor based upon the segment from which they were selected.

Loans deemed impaired are evaluated to determine the estimated fair value of the collateral, and a portion of the ALLL will be allocated to the deficiency. Troubled collateral-dependent real estate secured loans are valued using the appraised value of the collateral, and a portion of the ALLL will be allocated to these loans based on the difference between the loan amount and the appraised value. If such amounts are judged by management to be permanent, they will be charged-off. In addition, if foreclosure is

probable, a portion of the ALLL will be allocated to the estimated additional costs to acquire and the estimated costs to sell. Upon completion of the foreclosure process, these amounts will be charged-off.

The ALLL needed as a result of the foregoing evaluation is compared with the unadjusted amount, and an adjustment is made by means of a provision to the allowance for loan losses. Recognizing the inherently imprecise nature of the loss estimates and the large number of assumptions needed in order to perform the analysis, the required reserve may be less than the actual level of reserves at the end of any evaluation period, and thus there may be an unallocated portion of the ALLL. Management adjusts the unallocated portion to an amount which management considers reasonable under the circumstances.

38

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2014 AND 2012

Net Income. The Company recorded net income of $585,000, or $0.19 per diluted share, for the three months ended June 30, 2014 as compared to net income of $1.8 million, or $0.66 per diluted share, for the three months ended June 30, 2013.

Average Balance Sheet

The following table sets forth information (dollars in thousands) relating to the Company’s average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated. Yields and costs are computed by dividing income or expense by the average daily balance of interest-earning assets or interest-bearing liabilities, respectively, for the three-month periods indicated.

	Three Months Ended June 30,
	2014								2013
	Average balance		Interest			Average yld/cost			Average  balance		Interest			Average yld/cost
ASSETS
Interest-earning assets:
Loans receivable(1)	$	610,880	$	6,636			4.36	%	$	524,728	$	5,963			4.56	%
Mortgage-backed securities		56,004		348			2.49	%		37,523		246			2.63	%
Investment securities(2)		77,745		798			4.12	%		68,211		713			4.19	%
Other interest-earning assets(3)		45,432		4			0.04	%		39,111		14			1.14	%
Total interest-earning assets		790,061		7,786			3.95	%		669,573		6,936			4.15	%
Noninterest-earning assets		50,412								45,938
Total assets	$	840,473							$	715,511
LIABILITIES AND  STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Deposits	$	687,805	$	774			0.45	%	$	570,271	$	712			0.50	%
Borrowings from the FHLB		47,627		187			1.57	%		53,303		226			1.70	%
Total interest-bearing liabilities		735,432		961			0.52	%		623,574		938			0.60	%
Noninterest-bearing liabilities		7,149								7,508
Total liabilities		742,581								631,082
Stockholders’ equity		97,892								84,429
Total liabilities and stockholders’ equity	$	840,473							$	715,511
Net interest income-tax equivalent basis				6,825								5,998
Interest rate spread(4)-tax equivalent basis							3.43	%							3.55	%
Net yield on interest-earning assets(5)-tax  equivalent basis							3.46	%							3.59	%
Ratio of average interest-earning assets to  average interest-bearing liabilities							107.46	%							106.33	%
Less: tax-equivalent interest adjustments				(186	)							(192	)
Net interest income			$	6,639							$	5,806
Interest rate spread(4)							3.33	%							3.44	%
Net yield on interest-earning assets(5)							3.37	%							3.48	%

(1	)	Nonperforming loans have been included in the appropriate average loan balance category, but interest on nonperforming loans has not been included for purposes of determining interest income.
(2	)	Tax equivalent adjustments to interest on investment securities were $186,000 and $192,000 for the quarters ended June 30, 2014 and 2013, respectively. Tax equivalent interest income is based upon a marginal effective tax rate of 34%.
(3	)	Includes interest-bearing deposits in other banks.
(4	)	Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(5	)	Net yield on interest-earning assets represents net interest income as a percentage of average interest-earning assets.

39

Rate/Volume Analysis

The following table presents, for the periods indicated, the change in interest income and interest expense (dollars in thousands) attributed to (i) changes in volume (changes in the weighted average balance of the total interest earning asset and interest-bearing liability portfolios multiplied by the prior year rate), and (ii) changes in rate (changes in rate multiplied by prior year volume). Changes attributable to the combined impact of volume and rate have been allocated proportionately based on the absolute value of changes due to volume and changes due to rate.

	For the three months ended June 30,
	2014 vs 2013 Increase (decrease) due to
	Volume			Rate			Net
Interest income:
Loans receivable, net	$	2,193		$	(1,520	)	$	673
Mortgage-backed securities		185			(83	)		102
Investment securities (1)		167			(82	)		85
Other interest-earning assets		13			(23	)		(10	)
Total interest-earning assets		2,558			(1,708	)		850
Interest expense:
Deposits		422			(360	)		62
Borrowings from the FHLB		(23	)		(16	)		(39	)
Total interest-bearing liabilities		399			(376	)		23
Net change in net interest income	$	2,159		$	(1,332	)	$	827

(1 ) Tax equivalent adjustments to interest on investment securities were $186,000 and $192,000 for the quarters ended June 30, 2014 and 2013, respectively. Tax equivalent interest income is based upon a marginal effective tax rate of 34%.

Total Interest Income Total interest income, on a taxable equivalent basis, increased by $850,000, or 12.3%, to $7.8 million for the quarter ended June 30, 2014 compared with the second quarter of 2013. Interest income from loans receivable increased by $673,000, the result of an $86.2 million increase in the average balance of loans outstanding offset by the effect of a decrease in the average yield on loans of 20 basis points. The merger with Roebling resulted in the increase in the average balance of loans outstanding whereas the decrease in the yield was caused by the combined effects of a large number of higher rate loans being prepaid, and new loans added to the portfolio with lower yields than the existing portfolio loans that had been repaid. Interest income from investment and mortgage-backed securities was higher in the quarter ended June 30, 2014 in comparison to the same period of 2013 mainly because of the securities acquired from Roebling. Offsetting the increase in the average balance was the effect of lower yields on the agency securities acquired from Roebling.

Total Interest Expense. Total interest expense increased by $23,000 to $961,000 during the three-month period ended June 30, 2014 as compared with the same period in 2013. Interest expense on deposits increased $62,000 as a result of a $117.5 million increase in the average balance of deposits partially offset by a decrease in the average interest rate paid on the Bank’s deposits of 5 basis points. The average outstanding balance of deposits increased $117.5 million during the second quarter of 2014 as compared to the same period in 2013 mainly as a result of the Roebling acquisition while the decrease in the average rate paid was due to the maturity of certificates of deposit with higher interest rates than current market rates offered on the products into which the maturing CDs were renewed or reinvested, and a favorable change in the deposit mix and pricing. Interest expense associated with borrowings from the FHLB decreased $39,000 in the second quarter of 2014 compared to the same quarter of 2013. The Bank decreased its average outstanding borrowings by $5.7 million which resulted in a decrease in the cost of borrowed funds of 13 basis points.

Noninterest Income. Total noninterest income was $803,000 for the second quarter of 2014 compared with $1.9 million for the same period in 2013. The decrease was mainly the result of income from the benefits paid on the bank owned life insurance policies totaling $934,000 during the second quarter of 2013 due to the death of two insured individuals. Service fees, charges and other operating income include income from fair value adjustments to mortgage servicing rights that was $202,000 higher in 2013 as compared to the same period in 2014. Additionally, gain on sale of loans in the secondary market decreased by $125,000 when comparing the second quarter of 2014 and the same period in 2013 due to a decrease in residential loan activity throughout the Company’s markets. Offsetting this decrease was the gain on security sales totaling $16,000 while there were no such sales in 2013.

40

Noninterest Expense. Total noninterest expense increased by $1.1 million to $6.3 million for the three months ended June 30, 2014 compared to the same period in 2013. Merger-related costs attributable to the announced acquisition of the Company by National Penn totaled $1.1 million during the second quarter of 2014 while merger-related costs attributable to the Company’s acquisition of Roebling totaled $295,000 during the second quarter of 2013.  Employee compensation increased by $364,000 in the second quarter of 2014, mainly the result of employee costs associated with staffing the five additional branches acquired from Roebling. In addition, the hiring of additional commercial lenders during the three months ended June 30, 2014 contributed to the increase. Occupancy costs increased $120,000 in 2014, largely the result of operating and maintaining the five additional branch offices acquired from Roebling. Foreclosed real estate expense decreased $200,000 in second quarter of 2014 mainly due to a decrease in the holding costs of real estate acquired through foreclosure, resulting from the disposition of such properties during the intervening period.

Income Tax Expense. The Company’s effective tax rate was 46.1% for the quarter ended June 30, 2014 compared to 19.0% for the quarter ended June 30, 2013. These effective tax rates differ from the Company’s marginal tax rate of 34% largely due to tax-exempt income associated with the Company’s investments in tax-exempt municipal bonds and bank owned life insurance, and the treatment of certain merger-related costs as non-deductible.

.

41

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2012

Net Income. The Company recorded net income of $2.0 million, or $0.63 per diluted share, for the six months ended June 30, 2014 as compared to net income of $3.0 million, or $1.10 per diluted share, for the six months ended June 30, 2013.

Average Balance Sheet

The following table sets forth information (dollars in thousands) relating to the Company’s average balance sheet and reflects the average yield on assets and average cost of liabilities for the periods indicated. Yields and costs are computed by dividing income or expense by the average daily balance of interest-earning assets or interest-bearing liabilities, respectively, for the six-month periods indicated.

	Six Months Ended June 30,
	2014								2013
	Average balance		Interest			Average yld/cost			Average  balance		Interest			Average yld/cost
ASSETS
Interest-earning assets:
Loans receivable(1)	$	610,736	$	13,313			4.40	%	$	525,000	$	12,029			4.62	%
Mortgage-backed securities		52,116		657			2.54	%		39,744		519			2.63	%
Investment securities(2)		78,897		1,599			4.09	%		66,680		1,421			4.30	%
Other interest-earning assets(3)		46,045		7			0.03	%		34,022		18			0.11	%
Total interest-earning assets		787,794		15,576			3.99	%		665,446		13,987			4.24	%
Noninterest-earning assets		50,437								46,252
Total assets	$	838,231							$	711,698
LIABILITIES AND  STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Deposits	$	686,361	$	1,540			0.45	%	$	565,536	$	1,443			0.51	%
Borrowings from the FHLB		48,246		380			1.59	%		54,701		474			1.75	%
Total interest-bearing liabilities		734,607		1,920			0.53	%		620,237		1,917			0.62	%
Noninterest-bearing liabilities		6,734								7,363
Total liabilities		741,341								627,600
Stockholders’ equity		96,890								84,098
Total liabilities and stockholders’ equity	$	838,231							$	711,698
Net interest income—tax equivalent basis				13,656								12,070
Interest rate spread(4)—tax equivalent basis							3.46	%							3.62	%
Net yield on interest-earning assets(5)—tax  equivalent basis							3.50	%							3.66	%
Ratio of average interest-earning assets to  average interest-bearing liabilities							107.25	%							107.29	%
Less: tax-equivalent interest adjustments				(377	)							(386	)
Net interest income			$	13,279							$	11,684
Interest rate spread(4)							3.36	%							3.50	%
Net yield on interest-earning assets(5)							3.40	%							3.54	%

(1	)	Nonperforming loans have been included in the appropriate average loan balance category, but interest on nonperforming loans has not been included for purposes of determining interest income.
(2	)	Tax equivalent adjustments to interest on investment securities were $377,000 and $386,000 for the six months ended June 30, 2014 and 2013, respectively. Tax equivalent interest income is based upon a marginal effective tax rate of 34%.
(3	)	Includes interest-bearing deposits in other banks.
(4	)	Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(5	)	Net yield on interest-earning assets represents net interest income as a percentage of average interest-earning assets.

42

Rate/Volume Analysis

The following table presents, for the periods indicated, the change in interest income and interest expense (dollars in thousands) attributed to (i) changes in volume (changes in the weighted average balance of the total interest earning asset and interest bearing liability portfolios multiplied by the prior year rate), and (ii) changes in rate (changes in rate multiplied by prior year volume). Changes attributable to the combined impact of volume and rate have been allocated proportionately based on the absolute value of changes due to volume and changes due to rate.

	For the six months ended June 30,
	2014 vs 2013 Increase (decrease) due to
	Volume			Rate			Net
Interest income:
Loans receivable, net	$	2,807		$	(1,523	)	$	1,284
Mortgage-backed securities		189			(51	)		138
Investment securities (1)		362			(184	)		178
Other interest-earning assets		14			(25	)		(11	)
Total interest-earning assets		3,372			(1,783	)		1,589
Interest expense:
Deposits		510			(413	)		97
Borrowings from the FHLB		(53	)		(41	)		(94	)
Total interest-bearing liabilities		457			(454	)		3
Net change in net interest income	$	2,915		$	(1,329	)	$	1,586

(1 ) Tax equivalent adjustments to interest on investment securities were $377,000 and $386,000 for the six months ended June 30, 2014 and 2013, respectively. Tax equivalent interest income is based upon a marginal effective tax rate of 34%.

Total Interest Income. Total interest income, on a taxable equivalent basis, increased by $1.6 million, or 11.4%, to $15.6 million for the six months ended June 30, 2014 compared with the same period of 2013. Interest income from loans receivable increased by $1.3 million, the result of an $85.7 million increase in the average balance of loans outstanding offset by the effect of a decrease in the average yield on loans of 22 basis points. The merger with Roebling resulted in the increase in the average balance of loans outstanding whereas the decrease in the yield was caused by the combined effects of a large number of higher rate loans being prepaid, and new loans added to the portfolio with lower yields than the existing portfolio loans that had been repaid. Interest income from investment and mortgage-backed securities was higher for the six months ended June 30, 2014 in comparison to the same period of 2013 mainly because of the securities acquired from Roebling. Offsetting the increase in the average balance was the effect of lower yields on the agency securities acquired from Roebling.

Total Interest Expense. Total interest expense increased by $3,000 to $1.9 million during the six-month period ended June 30, 2014 as compared with the same period in 2013. Interest expense on deposits increased $97,000 as the average outstanding balance of deposits increased $120.8 million during the first six months of 2014 as compared to the same period in 2013 mainly as a result of the Roebling acquisition. The average interest rate paid on the Bank’s deposits was 6 basis points lower in the first six months of 2014 as compared to the corresponding period in 2013 due to the maturity of certificates of deposit with higher interest rates than current market rates offered on the products into which the maturing CDs were renewed or reinvested, and a favorable change in the deposit mix and pricing. Interest expense associated with borrowings from the FHLB decreased $94,000 in the first half of 2014 compared to the same period of 2013. The Bank decreased its average outstanding borrowings by $6.5 million which resulted in a decrease in the cost of borrowed funds of 16 basis points.

Noninterest Income. Total noninterest income was $1.5 million for the first six months of 2014 compared with $3.3 million for the same period in 2013. The decrease was mainly the result of income from the benefits paid on the bank owned life insurance policies totaling $934,000 during the second quarter of 2013 due to the death of two insured individuals. In addition, gain related to an eminent domain matter affecting a parcel of Company property totaled $417,000 in 2013, whereas there was no such gain in 2014. Gain on sale of loans in the secondary market decreased by $356,000 when comparing the first six months of 2014 and the same period in 2013 due to a decrease in residential loan activity throughout the Company’s markets. Additionally, fair value adjustments to mortgage servicing rights were $229,000 higher in the first half of 2013 as compared to the same period in 2014. Offsetting this decrease was the gain on security sales totaling $17,000 during the six months ended June 30, 2014 while there were no such sales in the first half of 2013.

43

Noninterest Expense. Total noninterest expense increased by $1.6 million to $11.7 million for the six months ended June 30, 2014 compared to the same period in 2013. Employee compensation increased by $930,000 in the first six months of 2014, mainly the result of employee costs associated with staffing the five additional branches acquired from Roebling. In addition, the hiring of additional commercial lenders during 2014 contributed to the increase. Occupancy costs increased $330,000 in 2014, largely the result of operating and maintaining the five additional branch offices acquired from Roebling. Additionally, there was an increase of $85,000 in costs incurred related to snow removal during the first half of 2014 over the same period in 2013. Merger-related costs attributable to the announced acquisition of the Company by National Penn Bank totaled $1.1 million during the six months ended June 30, 2014 while merger-related costs attributable to the Company’s acquisition of Roebling totaled $615,000 during the same period of 2013. Foreclosed real estate expense decreased $411,000 in six months ended June 30, 2014 mainly due to a decrease in the holding costs of real estate acquired through foreclosure, resulting from the disposition of such properties during the intervening period.

Income Tax Expense. The Company’s effective tax rate was 33.5% for the six months ended June 30, 2014 compared to 24.9% for the six months ended June 30, 2013. These effective tax rates are lower than the Company’s marginal tax rate of 34% largely due to the tax-exempt income associated with the Company’s investments in tax-exempt municipal bonds and bank owned life insurance offset by certain merger-related costs treated as non-deductible.

.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

The Bank’s liquidity is a measure of its ability to fund loans, and pay withdrawals of deposits, and other cash outflows in an efficient, cost-effective manner. The Bank’s short-term sources of liquidity include maturities, repayment and sales of assets, excess cash and cash equivalents, new deposits, brokered deposits, other borrowings, and new borrowings from the Federal Home Loan Bank and the Federal Reserve Bank. There has been no material adverse change during the six-month period ended June 30, 2014 in the ability of the Bank and its subsidiaries to fund their operations.

At June 30, 2014, the Bank had commitments outstanding under letters of credit of $1.6 million, commitments to originate loans of $32.9 million, and commitments to fund undisbursed balances of closed loans and unused lines of credit of $68.0 million. At June 30, 2014, the Bank had $2.9 million in outstanding commitments to sell loans. There has been no material change during the six months ended June 30, 2014 in any of the Bank’s other contractual obligations or commitments to make future payments.

The Company’s primary sources of liquidity are dividends from the Bank, principal and interest payments received from a loan made to the Bank’s ESOP, and tax benefits arising from the use of the Company’s tax deductions by other members of its consolidated group pursuant to a tax sharing agreement. The Company is dependent upon these sources and cash on hand which totaled approximately $2.3 million at June 30, 2014 in order to fund its operations and pay the dividend to its shareholders. There has been no material adverse change in the ability of the Company to fund its operations during the six-month period ended June 30, 2014.

Capital Requirements

The Bank was in compliance with all of its capital requirements as of June 30, 2014.

CRITICAL ACCOUNTING POLICIES

Certain critical accounting policies of the Company require the use of significant judgment and accounting estimates in the preparation of the consolidated financial statements and related data of the Company. These accounting estimates require management to make assumptions about matters that are highly uncertain at the time the accounting estimate is made. Management believes that the most critical accounting policy requiring the use of accounting estimates and judgment is the determination of the allowance for loan losses. If the financial position of a significant number of debtors or the value of the collateral securing the loans should deteriorate more than the Company has estimated, the present allowance for loan losses may be insufficient and additional provisions for loan losses may be required. The allowance for loan losses was approximately $4.1 million at June 30, 2014.

44

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on their evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)), the Company’s principal executive officer and principal financial officer have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q such disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports it files and submits pursuant to the rules and forms of the SEC is accumulated and communicated to the Company’s management including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Controls over Financial Reporting

During the quarter under report, there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

45

TF FINANCIAL CORPORATION AND SUBSIDIARIES

PART II-OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS
	Neither the Company nor its subsidiaries are involved in any pending legal proceedings, other than routine legal matters occurring in the ordinary course of business that in the aggregate involve amounts which are believed by management to be immaterial to the consolidated financial condition or results of operations of the Company.
ITEM 1A.	RISK FACTORS
	As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this item.
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
	None.
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES
	Not applicable.
ITEM 4.	MINE SAFETY DISCLOSURES Not applicable
ITEM 5.	OTHER INFORMATION
	None.
ITEM 6.	EXHIBITS
	(a)	Exhibits
		31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
		31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
		32.	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
		101.INS	XBRL Instance Document
		101.SCH	XBRL Taxonomy Extension Schema Document
		101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
		101.LAB	XBRL Taxonomy Extension Label Linkbase Document
		101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
		101.DEF	XBRL Taxonomy Definition Linkbase Document

46

TF FINANCIAL CORPORATION

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.

Date:	August 14, 2014	/s/ Kent C. Lufkin
		Kent C. Lufkin
		President and CEO
		(Principal Executive Officer)
Date:	August 14, 2014	/s/ Dennis R. Stewart
		Dennis R. Stewart
		Executive Vice President and Chief Financial Officer
		(Principal Financial & Accounting Officer)

47

EX-31.1

Return to 10Q

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kent C. Lufkin, President and Chief Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TF Financial Corporation (Registrant);

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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 we 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 quarterly report is being prepared;

b) designed such internal control over financial reporting, or caused such internal controls 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 (the Registrant’s fourth fiscal quarter in the case of an annual report) 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 to the audit committee of the Registrant’s board of directors (or persons performing the equivalent function):

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 14, 2014	/s/ KENT C. LUFKIN
		Kent C. Lufkin
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.1

Return to 10Q

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dennis R. Stewart, Executive Vice President and Chief Financial Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of TF Financial Corporation (Registrant);

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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 we 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 quarterly report is being prepared;

b) designed such internal control over financial reporting, or caused such internal controls 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 (the Registrant’s fourth fiscal quarter in the case of an annual report) 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 to the audit committee of the Registrant’s board of directors (or persons performing the equivalent function):

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 14, 2014	/s/ DENNIS R. STEWART
		Dennis R. Stewart
		Executive Vice President and Chief Financial Officer
		(Principal Financial & Accounting Officer)

EX-32

Return to 10Q

Exhibit 32.0

CERTIFICATION PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (the “Report”) of TF Financial Corporation (the “Company”) as filed with the Securities and Exchange Commission, we, Kent C. Lufkin, President and Chief Executive Officer, and Dennis R. Stewart, Executive Vice President and Chief Financial Officer, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)           The Report fully complies with the requirements of Section 13(a) 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.

/s/ KENT C. LUFKIN	/s/ DENNIS R. STEWART
Kent C. Lufkin	Dennis R. Stewart
President and Chief Executive Officer	Executive Vice President and Chief Financial Officer
August 14, 2014	August 14, 2014

XML

LOANS RECEIVABLE, Loans Classified as TDRs Segregation by Class (Details) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2014 Contract	Jun. 30, 2014 Contract	Dec. 31, 2013
Troubled Debt Restructuring Segregated by Class [Abstract]
Financing Receivable Subsequent Default Number Of Contracts	1	1
Financing Receivable Subsequent Default Recorded Investment	$ 787,000	$ 787,000
Loans acquired and accounted for in accordance with ASC 310-30 [Abstract]
Outstanding balance	742,000	742,000	808,000
Carrying amount	412,000	412,000	444,000
Changes in the amortizable yield for purchased credit-impaired loans [Abstract]
Balance at beginning of period		154,000
Acquisition of impaired loans		0
Accretion		(12,000)
Balance at end of period	142,000	142,000
Impairment reserve amount	64,000	64,000	0
Residential mortgages [Member]
Troubled Debt Restructuring Segregated by Class [Abstract]
Financing Receivable Subsequent Default Number Of Contracts	1	1
Financing Receivable Subsequent Default Recorded Investment	787,000	787,000
Loans acquired and accounted for in accordance with ASC 310-30 [Abstract]
Carrying amount	$ 22,000	$ 22,000	$ 22,000

XML

PENDING MERGER (Details) (USD $) In Millions, except Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
PENDING MERGER [Abstract]
Common stock shares converted (in dollars per share)	$ 42
Common stock shares converted (in share)	4.22
Maximum percentage of cash consideration (in hundredths)	40.00%
Termination fee	$ 4.0

XML

INVESTMENT SECURITIES (Details) (USD $)	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2014 Security	Jun. 30, 2014 Security	Dec. 31, 2013 Security
Investment securities available for sale [Abstract]
Available for sale, Amortized cost	$ 127,107,000	$ 127,107,000	$ 123,746,000
Available-for-sale, Gross unrealized gains	3,190,000	3,190,000	2,070,000
Available-for-sale, Gross unrealized losses	(611,000)	(611,000)	(1,804,000)
Available for sale, Fair Value	129,686,000	129,686,000	124,012,000
Held to maturity [Abstract]
Total investment and mortgage-backed securities held to maturity, amortized cost	1,340,000	1,340,000	1,490,000
Held-to-maturity, fair value	1,515,000	1,515,000
Total Investment Securities [Abstract]
Total investment securities, amortized cost	128,447,000	128,447,000	125,236,000
Total investment securities, gross unrealized gains	3,366,000	3,366,000	2,261,000
Total investment securities, gross unrealized losses	(612,000)	(612,000)	(1,805,000)
Total investment securities, fair value	131,201,000	131,201,000	125,692,000
Gross realized gains	22,000	27,000
Amount of available for sale securities sold for gain	3,800,000	4,800,000
Gross realized losses	6,000	10,000
Amount of available for sale securities sold for loss	948,000	1,900,000
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Available-for-sale securities, due in one year or less, amortized cost	400,000	400,000
Available-for-sale securities, due after one year through five years, amortized cost	18,541,000	18,541,000
Available-for-sale securities, due after five years through ten years, amortized cost	31,733,000	31,733,000
Available-for-sale securities, due after ten years, amortized cost	20,985,000	20,985,000
Total available for sale, amortized cost basis	71,659,000	71,659,000
Mortgage-back securities, available for sale, amortized cost	55,448,000	55,448,000
Total investment and mortgage-backed securities, available for sale, amortized cost	127,107,000	127,107,000
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Available-for-sale securities, due in one year or less, fair value	401,000	401,000
Available-for-sale securities, due after one year through five years, fair value	18,818,000	18,818,000
Available-for-sale securities, due after five years through ten years, fair value	32,241,000	32,241,000
Available-for-sale securities, due after ten years, fair value	21,951,000	21,951,000
Total available for sale, fair value	73,411,000	73,411,000
Mortgage-backed securities available for sale, fair value	56,275,000	56,275,000
Total investment and mortgage-back securities, available for sale, fair value	129,686,000	129,686,000
Held-to-maturity Securities, Debt Maturities, Net Carrying Amount [Abstract]
Held-to-maturity, due in one year or less, amortized cost	0	0
Held-to-maturity, due after one year through five years, amortized cost	0	0
Held-to-maturity, due after five years through ten years, amortized cost	0	0
Held-to-maturity, due after ten years, amortized cost	0	0
Total held to maturity, amortized cost	0	0
Mortgage-backed securities held to maturity, amortized cost	1,340,000	1,340,000
Total investment and mortgage-backed securities held to maturity, amortized cost	1,340,000	1,340,000	1,490,000
Held-to-maturity Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Held-to-maturity, due in one year or less, fair value	0	0
Held-to-maturity, due after one year through five years, fair value	0	0
Held-to-maturity, due after five years through ten years, fair value	0	0
Held-to-maturity, due after ten years, fair value	0	0
Total held-to-maturity, fair value	0	0
Mortgage-backed securities held to maturity, fair value	1,515,000	1,515,000	1,680,000
Total investment and mortgage-backed securities held to maturity, fair value	1,515,000	1,515,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities	58	58	102
Continuous unrealized loss position, less than 12 months, fair value	14,668,000	14,668,000	61,182,000
Continuous unrealized loss position, less than 12 months, unrealized loss		(182,000)	(1,805,000)
Continuous unrealized loss position, 12 months or longer, fair value	15,563,000	15,563,000	0
Continuous unrealized loss position, 12 months or longer, unrealized loss		(430,000)	0
Total continuous unrealized loss position, fair value	30,231,000	30,231,000	61,182,000
Total continuous unrealized loss position, unrealized loss		(612,000)	(1,805,000)
US Government and federal agencies [Member]
Investment securities available for sale [Abstract]
Available for sale, Amortized cost	11,884,000	11,884,000	18,572,000
Available-for-sale, Gross unrealized gains	45,000	45,000	4,000
Available-for-sale, Gross unrealized losses	(168,000)	(168,000)	(513,000)
Available for sale, Fair Value	11,761,000	11,761,000	18,063,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities	3	3	13
Continuous unrealized loss position, less than 12 months, fair value	949,000	949,000	17,028,000
Continuous unrealized loss position, less than 12 months, unrealized loss		(5,000)	(513,000)
Continuous unrealized loss position, 12 months or longer, fair value	6,837,000	6,837,000	0
Continuous unrealized loss position, 12 months or longer, unrealized loss		(163,000)	0
Total continuous unrealized loss position, fair value	7,786,000	7,786,000	17,028,000
Total continuous unrealized loss position, unrealized loss		(168,000)	(513,000)
State and political subdivisions [Member]
Investment securities available for sale [Abstract]
Available for sale, Amortized cost	59,775,000	59,775,000	60,159,000
Available-for-sale, Gross unrealized gains	2,179,000	2,179,000	1,526,000
Available-for-sale, Gross unrealized losses	(304,000)	(304,000)	(1,016,000)
Available for sale, Fair Value	61,650,000	61,650,000	60,669,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities	16	16	24
Continuous unrealized loss position, less than 12 months, fair value	4,176,000	4,176,000	19,646,000
Continuous unrealized loss position, less than 12 months, unrealized loss		(37,000)	(1,016,000)
Continuous unrealized loss position, 12 months or longer, fair value	8,726,000	8,726,000	0
Continuous unrealized loss position, 12 months or longer, unrealized loss		(267,000)	0
Total continuous unrealized loss position, fair value	12,902,000	12,902,000	19,646,000
Total continuous unrealized loss position, unrealized loss		(304,000)	(1,016,000)
Residential mortgage-backed securities issued by Quasi-governmental agencies [Member]
Investment securities available for sale [Abstract]
Available for sale, Amortized cost	55,448,000	55,448,000	45,015,000
Available-for-sale, Gross unrealized gains	966,000	966,000	540,000
Available-for-sale, Gross unrealized losses	(139,000)	(139,000)	(275,000)
Available for sale, Fair Value	56,275,000	56,275,000	45,280,000
Held to maturity [Abstract]
Total investment and mortgage-backed securities held to maturity, amortized cost	1,340,000	1,340,000	1,490,000
Held-to-maturity, gross unrecognized gains	176,000	176,000	191,000
Held-to-maturity, gross unrecognized losses	(1,000)	(1,000)	(1,000)
Held-to-maturity, fair value	1,515,000	1,515,000	1,680,000
Held-to-maturity Securities, Debt Maturities, Net Carrying Amount [Abstract]
Total investment and mortgage-backed securities held to maturity, amortized cost	1,340,000	1,340,000	1,490,000
Held-to-maturity Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Total investment and mortgage-backed securities held to maturity, fair value	1,515,000	1,515,000	1,680,000
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Number of securities	39	39	65
Continuous unrealized loss position, less than 12 months, fair value	9,543,000	9,543,000	24,508,000
Continuous unrealized loss position, less than 12 months, unrealized loss		(140,000)	(276,000)
Continuous unrealized loss position, 12 months or longer, fair value	0	0	0
Continuous unrealized loss position, 12 months or longer, unrealized loss		0	0
Total continuous unrealized loss position, fair value	9,543,000	9,543,000	24,508,000
Total continuous unrealized loss position, unrealized loss		$ (140,000)	$ (276,000)

XML

LOANS RECEIVABLE (Tables)

6 Months Ended

Jun. 30, 2014

LOANS RECEIVABLE [Abstract]

Loans Receivable

 

Loans receivable are summarized as follows:

	At
	June 30, 2014			December 31, 2013
	(in thousands)
Held for investment:
Residential
Residential mortgages	$	355,658		$	371,961
Commercial
Real estate-commercial		131,157			129,345
Real estate-residential		23,697			20,005
Real estate-multi-family		18,936			16,623
Construction loans		8,998			8,773
Commercial and industrial loans		8,965			6,849
Total commercial loans		191,753			181,595
Consumer
Home equity and second mortgage		63,961			64,202
Other consumer		1,532			1,697
Total consumer loans		65,493			65,899
Total loans		612,904			619,455
Net deferred loan origination costs and unamortized premiums		1,341			1,288
Less allowance for loan losses		(4,148	)		(6,575	)
Total loans receivable	$	610,097		$	614,168
Held for sale:
Residential
Residential mortgages	$	129		$	349

Loans Receivable Credit Quality Indicators

 

The following tables present by credit quality indicators the composition of the commercial loan portfolio:

	At June 30, 2014
	Pass		Specialmention		Substandard		Doubtful		Total
	(in thousands)
Real estate-commercial	$	119,552	$	2,930	$	8,675	$	-	$	131,157
Real estate-residential		21,238		861		1,598		-		23,697
Real estate-multi-family		15,457		-		3,479		-		18,936
Construction loans		8,765		-		233		-		8,998
Commercial and industrial loans		8,936		29		-		-		8,965
Total	$	173,948	$	3,820	$	13,985	$	-	$	191,753

	At December 31, 2013
	Pass		Specialmention		Substandard		Doubtful		Total
	(in thousands)
Real estate-commercial	$	113,260	$	7,142	$	8,943	$	-	$	129,345
Real estate-residential		17,182		487		2,336		-		20,005
Real estate-multi-family		13,114		-		3,509		-		16,623
Construction loans		5,596		-		3,177		-		8,773
Commercial and industrial loans		6,817		32		-		-		6,849
Total	$	155,969	$	7,661	$	17,965	$	-	$	181,595

Mortgage and Consumer Credit Exposure

 

The following tables present by credit quality indicator the composition of the residential mortgage and consumer loan portfolios:

	At June 30, 2014
	Performing		Nonperforming		Total
	(in thousands)
Residential mortgages	$	354,502	$	1,156	$	355,658
Home equity and second mortgage		63,836		125		63,961
Other consumer		1,532		-		1,532
Total	$	419,870	$	1,281	$	421,151

	At December 31, 2013
	Performing		Nonperforming		Total
	(in thousands)
Residential mortgages	$	368,967	$	2,994	$	371,961
Home equity and second mortgage		63,902		300		64,202
Other consumer		1,697		-		1,697
Total	$	434,566	$	3,294	$	437,860

Financing Receivables, Non Accrual Status

 

The following table presents by class nonperforming loans including impaired loans and loan balances 90 days or more past due for which the accrual of interest has been discontinued:

	At
	June 30, 2014		December 31, 2013
	(in thousands)
Residential
Residential mortgages	$	1,156	$	2,994
Commercial
Real estate-commercial		1,769		774
Real estate-residential		690		896
Real estate-multi-family		191		191
Construction loans		233		3,177
Consumer
Home equity and second mortgage		125		300
Total nonperforming loans	$	4,164	$	8,332

Loans Individually Evaluated for Impairment by Class

 

The following tables present  loans individually evaluated for impairment by class:

	At June 30, 2014
	Recorded investment		Unpaid principal balance		Related allowance		Average recorded investment		Interest income recognized
	(in thousands)
With an allowance recorded:
Residential
Residential mortgages	$	1,124	$	1,124	$	281	$	1,129	$	-
Commercial
Real estate-commercial		132		132		64		44		-
Real estate-residential		496		496		200		569
Construction loans		233		233		21		1,215		-
		1,985		1,985		566		2,957		-
With no allowance recorded:
Residential
Residential mortgages	$	22	$	33		-	$	409	$	-
Commercial
Real estate-commercial		1,637		1,639		-		1,103		-
Real estate-residential		194		321		-		184		-
Real estate-multi-family		191		372		-		191		-
Consumer
Home equity and second mortgage		15		16		-		39		-
		2,059		2,381		-		1,926		-
Total	$	4,044	$	4,366	$	566	$	4,883	$	-

	At December 31, 2013
	Recorded investment		Unpaid principal balance		Related allowance		Average recorded investment		Interest income recognized
	(in thousands)
With an allowance recorded:
Residential
Residential mortgages	$	1,135	$	1,135	$	128	$	1,620	$	-
Commercial
Real estate-commercial		-		-		-		109		-
Real estate-residential		712		712		77		211		-
Construction loans		3,177		3,375		2,021		3,701		-
		5,024		5,222		2,226		5,641		-
With no allowance recorded:
Residential
Residential mortgages		1,184		1,184		-		241		-
Commercial
Real estate-commercial		774		774		-		607		-
Real estate-residential		184		321		-		108		-
Real estate-multi-family		191		372		-		77		-
Consumer
Home equity and second mortgage		47		81		-		7		-
		2,380		2,732		-		1,040		-
Total	$	7,404	$	7,954	$	2,226	$	6,681	$	-

Loans Receivable Aging

 

The following tables present by class the contractual aging of delinquent loans :

	At June 30, 2014
	Current		30-59 Days past due		60-89 Days past due		Loans past due 90 days or more		Total past due		Total loans		Recorded investment over 90 days and accruing interest
	(in thousands)
Residential
Residential mortgages	$	353,227	$	1,275	$	-	$	1,156	$	2,431	$	355,658	$	-
Commercial
Real estate-commercial		128,815		572		400		1,370		2,342		131,157		-
Real estate-residential		23,018		-		-		679		679		23,697		-
Real estate-multi-family		18,745		-		-		191		191		18,936		-
Construction loans		8,765		-		-		233		233		8,998		-
Commercial and industrial loans		8,957		-		8		-		8		8,965		-
Consumer
Home equity and second mortgage		63,799		37		-		125		162		63,961		-
Other consumer		1,532		-		-		-		-		1,532		-
Total	$	606,858	$	1,884	$	408	$	3,754	$	6,046	$	612,904	$	-

	At December 31, 2013
	Current		30-59 Days past due		60-89 Days past due		Loans past due 90 days or more		Total past due		Total loans		Recorded investment over 90 days and accruing interest
	(in thousands)
Residential
Residential mortgages	$	369,271	$	111	$	-	$	2,579	$	2,690	$	371,961	$	-
Commercial
Real estate-commercial		127,786		785		-		774		1,559		129,345		-
Real estate-residential		18,589		180		340		896		1,416		20,005		-
Real estate-multi-family		16,432		-		-		191		191		16,623		-
Construction loans		5,596		-		-		3,177		3,177		8,773		-
Commercial and industrial loans		6,849		-		-		-		-		6,849		-
Consumer
Home equity and second mortgage		63,543		355		4		300		659		64,202		-
Other consumer		1,686		7		4		-		11		1,697		-
Total	$	609,752	$	1,438	$	348	$	7,917	$	9,703	$	619,455	$	-

Allowance for Credit Losses on Loans Receivable

 

Activity in the allowance for loan losses for the three and six months ended June 30, 2014 is summarized as follows:

	Balance April 1, 2014		Provision			Charge-offs			Recoveries		BalanceJune 30,2014
	(in thousands)
Residential
Residential mortgages	$	1,614	$	(31	)	$	-		$	-	$	1,583
Commercial
Real estate-commercial		950		103			-			-		1,053
Real estate-residential		412		(45	)		-			-		367
Real estate-multi-family		137		(21	)		-			-		116
Construction loans		355		104			-			-		459
Commercial and industrial loans		101		(46	)		-			3		58
Consumer
Home equity and second mortgage		227		18			(19	)		-		226
Other consumer		34		(7	)		(4	)		6		29
Unallocated		232		25			-			-		257
Total	$	4,062	$	100		$	(23	)	$	9	$	4,148

	Balance January 1, 2014		Provision			Charge-offs			Recoveries		BalanceJune 30,2014
	(in thousands)
Residential
Residential mortgages	$	1,722	$	29		$	(169	)	$	1	$	1,583
Commercial
Real estate-commercial		1,220		(167	)		-			-		1,053
Real estate-residential		437		37			(107	)		-		367
Real estate-multi-family		136		(20	)		-			-		116
Construction loans		2,208		430			(2,179	)		-		459
Commercial and industrial loans		97		(43	)		-			4		58
Consumer
Home equity and second mortgage		214		78			(66	)		-		226
Other consumer		50		(10	)		(18	)		7		29
Unallocated		491		(234	)		-			-		257
Total	$	6,575	$	100		$	(2,539	)	$	12	$	4,148

Activity in the allowance for loan losses for the three and six months ended June 30, 2013 is summarized as follows:

	Balance April 1, 2013		Provision			Charge-offs			Recoveries		BalanceJune 30,2013
	(in thousands)
Residential
Residential mortgages	$	1,800	$	77		$	(109	)	$	12	$	1,780
Commercial
Real estate-commercial		1,311		(74	)		-			-		1,237
Real estate-residential		601		(241	)		-			-		360
Real estate-multi-family		237		(65	)		-			-		172
Construction loans		1,894		484			(39	)		3		2,342
Commercial and industrial loans		125		(55	)		-			1		71
Consumer
Home equity and second mortgage		211		(1	)		-			-		210
Other consumer		11		27			(16	)		2		24
Unallocated		472		248			-			-		720
Total	$	6,662	$	400		$	(164	)	$	18	$	6,916

	Balance January 1, 2013		Provision			Charge-offs			Recoveries		BalanceJune 30,2013
	(in thousands)
Residential
Residential mortgages	$	1,849	$	126		$	(207	)	$	12	$	1,780
Commercial
Real estate-commercial		1,754		(82	)		(435	)		-		1,237
Real estate-residential		608		(189	)		(59	)		-		360
Real estate-multi-family		245		(73	)		-			-		172
Construction loans		1,697		781			(150	)		14		2,342
Commercial and industrial loans		119		(52	)		-			4		71
Consumer
Home equity and second mortgage		251		(34	)		(15	)		8		210
Other consumer		11		30			(19	)		2		24
Unallocated		388		332			-			-		720
Total	$	6,922	$	839		$	(885	)	$	40	$	6,916

Troubled debt restructurings on financing receivables

The following table presents loans classified as TDRs that subsequently defaulted:

	For the three months endedJune 30, 2014				For the six months endedJune 30, 2014
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Residential	(in thousands)				(in thousands)
Residential mortgage		1	$	787		1	$	787
Total		1	$	787		1	$	787

Information regarding loans acquired and accounted for in accordance with ASC 310-30

 

In 2013, the Company acquired loans for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable that all contractually required payments would not be collected. The following table presents information regarding the outstanding principal balance and related carrying amount:

	At June 30, 2014		At December 31, 2013
	(in thousands)
Outstanding principal balance	$	742	$	808
Carrying amount		412		444

Changes in the amortizable yield for purchased credit-impaired loans

 

The table below presents changes in the amortizable yield for purchased credit-impaired loans as follows for six months ended June 30, 2014:

	At June 30, 2014
	(in thousands)
Balance at beginning of period	$	154
Acquisition of impaired loans		-
Accretion		(12	)
Balance at end of period	$	142

Impairment Method for Allowance for Loan Losses and Loan Balance

 

The following tables present by class the ending balance of the allowance for loan losses and ending loan balance based on impairment method as of June 30, 2014. Acquired loans were recorded at fair value on their purchase date without a carryover of the related allowance for loan losses.

	Evaluated for impairment
Allowance for loan losses	Loans acquired without credit deterioration		Loans acquired with credit deterioration		Individually		Collectively		Total
	(in thousands)
Residential
Residential mortgages	$	-	$	-	$	281	$	1,302	$	1,583
Commercial
Real estate-commercial		64		-		-		989		1,053
Real estate-residential		-		-		200		167		367
Real estate-multi-family		-		-		-		116		116
Construction loans		-		-		21		438		459
Commercial and industrial loans		-		-		-		58		58
Consumer
Home equity and second mortgage		-		-		-		226		226
Other consumer		-		-		-		29		29
Unallocated		-		-		-		257		257
Total	$	64	$	-	$	502	$	3,582	$	4,148

	Evaluated for impairment
Loans receivable	Loans acquired without credit deterioration		Loans acquired with credit deterioration		Individually		Collectively		Total
	(in thousands)
Residential
Residential mortgages	$	46,448	$	22	$	1,124	$	308,064	$	355,658
Commercial
Real estate-commercial		11,774		-		1,771		117,612		131,157
Real estate-residential		4,781		184		496		18,236		23,697
Real estate-multi-family		1,070		191		-		17,675		18,936
Construction loans		-		-		233		8,765		8,998
Commercial and industrial loans		239		-		-		8,726		8,965
Consumer
Home equity and second mortgage		22,661		15		-		41,285		63,961
Other consumer		107		-		-		1,425		1,532
Total	$	87,080	$	412	$	3,624	$	521,788	$	612,904

The following tables present by class the ending balance of the allowance for loan losses and ending loan balance based on impairment method as of December 31, 2013. Acquired loans were recorded at fair value on their purchase date without a carryover of the related allowance for loan losses.

	Evaluated for impairment
Allowance for loan losses	Loans acquired without credit deterioration		Loans acquired with credit deterioration		Individually		Collectively		Total
	(in thousands)
Residential
Residential mortgages	$	-	$	-	$	128	$	1,594	$	1,722
Commercial
Real estate-commercial		-		-		-		1,220		1,220
Real estate-residential		-		-		77		360		437
Real estate-multi-family		-		-		-		136		136
Construction loans		-		-		2,021		187		2,208
Commercial and industrial loans		-		-		-		97		97
Consumer
Home equity and second mortgage		-		-		-		214		214
Other consumer		-		-		-		50		50
Unallocated		-		-		-		491		491
Total	$	-	$	-	$	2,226	$	4,349	$	6,575

	Evaluated for impairment
Loans receivable	Loans acquired without credit deterioration		Loans acquired with credit deterioration		Individually		Collectively		Total
	(in thousands)
Residential
Residential mortgages	$	50,985	$	22	$	2,297	$	318,657	$	371,961
Commercial
Real estate-commercial		12,787		-		774		115,784		129,345
Real estate-residential		4,913		184		712		14,196		20,005
Real estate-multi-family		1,116		191		-		15,316		16,623
Construction loans		-		-		3,177		5,596		8,773
Commercial and industrial loans		279		-		-		6,570		6,849
Consumer
Home equity and second mortgage		24,806		47		-		39,349		64,202
Other consumer		126		-		-		1,571		1,697
Total	$	95,012	$	444	$	6,960	$	517,039	$	619,455

XML

FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS, Part II (Details) (USD $)	6 Months Ended		12 Months Ended
	Jun. 30, 2014		Dec. 31, 2013
Fair Value, Assets Measured on Nonrecurring Basis [Abstract]
Mortgage servicing rights, amortized cost basis	$ 1,500,000		$ 1,500,000
Mortgage servicing rights, fair value	1,500,000		1,500,000
Nonrecurring [Member]
Fair Value, Assets Measured on Nonrecurring Basis [Abstract]
Impaired loans	3,478,000		5,178,000
Real estate acquired through foreclosure	5,711,000		5,601,000
Mortgage servicing rights	1,472,000		1,472,000
Nonrecurring [Member] | Level 1 [Member]
Fair Value, Assets Measured on Nonrecurring Basis [Abstract]
Impaired loans	0		0
Real estate acquired through foreclosure	0		0
Mortgage servicing rights	0		0
Nonrecurring [Member] | Level 2 [Member]
Fair Value, Assets Measured on Nonrecurring Basis [Abstract]
Impaired loans	0		0
Real estate acquired through foreclosure	0		0
Mortgage servicing rights	1,472,000		1,472,000
Nonrecurring [Member] | Level 3 [Member]
Fair Value, Assets Measured on Nonrecurring Basis [Abstract]
Impaired loans	3,478,000		5,178,000
Real estate acquired through foreclosure	5,711,000		5,601,000
Mortgage servicing rights	$ 0		$ 0
Nonrecurring [Member] | Minimum [Member]
Fair Value, Assets Measured on Nonrecurring Basis [Abstract]
Impaired loans, range of inputs (in hundredths)	5.00%	[1]	5.00%	[1]
Real estate acquired through foreclosure, range of inputs (in hundredths)	5.00%	[1]	5.00%	[1]
Nonrecurring [Member] | Maximum [Member]
Fair Value, Assets Measured on Nonrecurring Basis [Abstract]
Impaired loans, range of inputs (in hundredths)	15.00%	[1]	15.00%	[1]
Real estate acquired through foreclosure, range of inputs (in hundredths)	20.00%	[1]	20.00%	[1]
Nonrecurring [Member] | Weighted Average [Member]
Fair Value, Assets Measured on Nonrecurring Basis [Abstract]
Impaired loans, range of inputs (in hundredths)	14.00%	[1]	6.59%	[1]
Real estate acquired through foreclosure, range of inputs (in hundredths)	16.90%	[1]	17.47%	[1]

[1] Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

XML

LOANS RECEIVABLE, Contractual Aging of Delinquent Loans (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Loans Receivable, Aging [Abstract]
Loans receivable, Current	$ 606,858	$ 609,752
Loans receivable, 30 to 59 days past due	1,884	1,438
Loans receivable, 60 to 89 days past due	408	348
Loans receivable, Loans past due 90 days or more	3,754	7,917
Loans receivable, Total past due	6,046	9,703
Total loans	612,904	619,455
Recorded investment over 90 days and accruing interest	0	0
Residential mortgages [Member]
Loans Receivable, Aging [Abstract]
Loans receivable, Current	353,227	369,271
Loans receivable, 30 to 59 days past due	1,275	111
Loans receivable, 60 to 89 days past due	0	0
Loans receivable, Loans past due 90 days or more	1,156	2,579
Loans receivable, Total past due	2,431	2,690
Total loans	355,658	371,961
Recorded investment over 90 days and accruing interest	0	0
Real estate-commercial [Member]
Loans Receivable, Aging [Abstract]
Loans receivable, Current	128,815	127,786
Loans receivable, 30 to 59 days past due	572	785
Loans receivable, 60 to 89 days past due	400	0
Loans receivable, Loans past due 90 days or more	1,370	774
Loans receivable, Total past due	2,342	1,559
Total loans	131,157	129,345
Recorded investment over 90 days and accruing interest	0	0
Real estate-residential [Member]
Loans Receivable, Aging [Abstract]
Loans receivable, Current	23,018	18,589
Loans receivable, 30 to 59 days past due	0	180
Loans receivable, 60 to 89 days past due	0	340
Loans receivable, Loans past due 90 days or more	679	896
Loans receivable, Total past due	679	1,416
Total loans	23,697	20,005
Recorded investment over 90 days and accruing interest	0	0
Real estate-multi-family [Member]
Loans Receivable, Aging [Abstract]
Loans receivable, Current	18,745	16,432
Loans receivable, 30 to 59 days past due	0	0
Loans receivable, 60 to 89 days past due	0	0
Loans receivable, Loans past due 90 days or more	191	191
Loans receivable, Total past due	191	191
Total loans	18,936	16,623
Recorded investment over 90 days and accruing interest	0	0
Construction loans [Member]
Loans Receivable, Aging [Abstract]
Loans receivable, Current	8,765	5,596
Loans receivable, 30 to 59 days past due	0	0
Loans receivable, 60 to 89 days past due	0	0
Loans receivable, Loans past due 90 days or more	233	3,177
Loans receivable, Total past due	233	3,177
Total loans	8,998	8,773
Recorded investment over 90 days and accruing interest	0	0
Commercial and industrial loans [Member]
Loans Receivable, Aging [Abstract]
Loans receivable, Current	8,957	6,849
Loans receivable, 30 to 59 days past due	0	0
Loans receivable, 60 to 89 days past due	8	0
Loans receivable, Loans past due 90 days or more	0	0
Loans receivable, Total past due	8	0
Total loans	8,965	6,849
Recorded investment over 90 days and accruing interest	0	0
Home equity and second mortgage [Member]
Loans Receivable, Aging [Abstract]
Loans receivable, Current	63,799	63,543
Loans receivable, 30 to 59 days past due	37	355
Loans receivable, 60 to 89 days past due	0	4
Loans receivable, Loans past due 90 days or more	125	300
Loans receivable, Total past due	162	659
Total loans	63,961	64,202
Recorded investment over 90 days and accruing interest	0	0
Other consumer [Member]
Loans Receivable, Aging [Abstract]
Loans receivable, Current	1,532	1,686
Loans receivable, 30 to 59 days past due	0	7
Loans receivable, 60 to 89 days past due	0	4
Loans receivable, Loans past due 90 days or more	0	0
Loans receivable, Total past due	0	11
Total loans	1,532	1,697
Recorded investment over 90 days and accruing interest	$ 0	$ 0

XML

SUBSEQUENT EVENTS (Details) (Subsequent Event [Member], USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Subsequent Event [Member]
Subsequent Event [Line Items]
Curtailment charge	$ 2.1
Pre-tax adjustment related to reduction of projected benefit obligation	$ 1.1

XML

RECENT ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Jun. 30, 2014

RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

 

NOTE 3 — RECENT ACCOUNTING PRONOUNCEMENTS

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures.  The amendments in this update change the accounting for repurchase-to-maturity transactions to secured borrowing accounting.  For repurchase financing arrangements, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty, which will result in secured borrowing accounting for the repurchase agreement.  The amendments also require enhanced disclosures.  The accounting changes in this update are effective for the first interim or annual period beginning after December 15, 2014.  An entity is required to present changes in accounting for transactions outstanding on the effective date as a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. Earlier application is prohibited.  The disclosure for certain transactions accounted for as a sale is required to be presented for interim and annual periods beginning after December 15, 2014, and the disclosure for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and for interim periods beginning after March 15, 2015. The disclosures are not required to be presented for comparative periods before the effective date. This update is not expected to have a significant impact on the Company’s financial statements.

In June 2014, the FASB issued ASU 2014-12, Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments when the Terms of an Award Provide that a Performance Target Could Be Achieved After the Requisite Service Period.  The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The amendments in this update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. Entities may apply the amendments in this update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost.This update is not expected to have a significant impact on the Company’s financial statements.

XML

FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS, Part III (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Assets [Abstract]
Mortgage-backed securities	$ 1,515	$ 1,680
Liabilities [Abstract]
Borrowings with stated maturities	47,120	49,605
Carrying Value [Member]
Assets [Abstract]
Cash and cash equivalents	48,291	45,310
Investment securities	73,411	78,732
Mortgage-backed securities	57,615	46,770
Loans receivable, net	610,226	614,517
Liabilities [Abstract]
Deposits with stated maturities	181,875	190,492
Deposits with no stated maturities	504,113	493,410
Borrowings with stated maturities	47,120	49,605
Fair Value [Member]
Assets [Abstract]
Cash and cash equivalents	48,291	45,310
Investment securities	73,411	78,732
Mortgage-backed securities	57,790	46,960
Loans receivable, net	620,094	614,246
Liabilities [Abstract]
Deposits with stated maturities	183,453	193,258
Deposits with no stated maturities	504,113	493,410
Borrowings with stated maturities	46,678	48,426
Level 1 [Member]
Assets [Abstract]
Cash and cash equivalents	48,291	45,310
Investment securities	0	0
Mortgage-backed securities	0	0
Loans receivable, net	0	0
Liabilities [Abstract]
Deposits with stated maturities	0	0
Deposits with no stated maturities	504,113	493,410
Borrowings with stated maturities	0	0
Level 2 [Member]
Assets [Abstract]
Cash and cash equivalents	0	0
Investment securities	73,411	78,732
Mortgage-backed securities	57,790	46,960
Loans receivable, net	129	349
Liabilities [Abstract]
Deposits with stated maturities	0	0
Deposits with no stated maturities	0	0
Borrowings with stated maturities	0	0
Level 3 [Member]
Assets [Abstract]
Cash and cash equivalents	0	0
Investment securities	0	0
Mortgage-backed securities	0	0
Loans receivable, net	619,965	613,897
Liabilities [Abstract]
Deposits with stated maturities	183,453	193,258
Deposits with no stated maturities	0	0
Borrowings with stated maturities	$ 46,678	$ 48,426

XML

ACQUISITION OF ROEBLING FINANCIAL CORP, INC. (Details) (Roebling Financial Corp, Inc. [Member], USD $) In Thousands, except Share data, unless otherwise specified	0 Months Ended
	Jul. 02, 2013	Jul. 02, 2013
Roebling Financial Corp, Inc. [Member]
Purchase Price Consideration in Common Stock [Abstract]
TF Financial Corporation shares issued (in shares)	306,873
Net assets as of the acquisition date [Abstract]
Total purchase price		$ 14,926
Net assets acquired [Abstract]
Cash		4,081
Investment securities		37,339
Loans receivable		102,026
Premises and equipment		2,154
Core deposit intangible		553
Other assets		2,531
Time deposits		(49,061)
Deposits other than time deposits		(78,689)
Other liabilities		(4,888)
Total net assets acquired		16,046
Purchase gain on acquisition	$ 1,120

XML

EMPLOYEE BENEFIT PLANS (Tables)

6 Months Ended

Jun. 30, 2014

EMPLOYEE BENEFIT PLANS [Abstract]

Costs of Retirement Plans

Net periodic defined benefit pension cost included the following:

	For the three months ended June 30,
	2014			2013
	(in thousands)
Components of net periodic benefit cost
Service cost	$	205		$	206
Interest cost		128			89
Expected return on plan assets		(209	)		(182	)
Recognized net actuarial loss		61			66
Net periodic benefit cost	$	185		$	179

	For the six months ended June 30,
		2014			2013
	(in thousands)
Components of net periodic benefit cost
Service cost	$	410		$	411
Interest cost		256			177
Expected return on plan assets		(418	)		(363	)
Amortization of prior service cost		2			1
Recognized net actuarial loss		121			131
Net periodic benefit cost	$	371		$	357

XML

STOCK-BASED COMPENSATION (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Weighted average assumptions [Abstract]
Dividend yield (in hundredths)			1.61%	0.83%
Expected volatility (in hundredths)			15.85%	17.24%
Risk-free interest rate (in hundredths)			0.56%	0.67%
Fair value of options granted during the period (in dollars per share)			$ 3.90	$ 3.13
Expected lives in years			5 years	5 years
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Term of stock benefit plans			P10Y
Total unrecognized compensation cost, net of estimated forfeitures, related to non-vested awards	$ 447,000		$ 447,000
Period for recognition of unrecognized compensation			16 months 18 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Options outstanding, beginning of period (in shares)			254,144
Options granted (in shares)			71,500
Options exercised (in shares)			(400)
Options forfeited (in shares)			0
Options expired (in shares)			0
Options outstanding, end of period (in shares)	325,244		325,244		254,144
Options exercisable (in shares)	149,494		149,494
Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Weighted average exercise price per share, beginning of period (in dollars per share)			$ 23.71
Options granted, weighted average exercise price per share (in dollars per share)			$ 30.03
Options exercised, weighted average exercise price per share (in dollars per share)			$ 19.67
Options forfeited, weighted average exercise price per share (in dollars per share)			$ 0
Options expired, weighted average exercise price per share (in dollars per share)			$ 0
Weighted average exercise price per share, end of period (in dollars per share)	$ 25.10		$ 25.10		$ 23.71
Options exercisable, weighted average exercise price per share, end of period (in dollars per share)	$ 23.27		$ 23.27
Weighted average remaining contractual term [Abstract]
Options outstanding, weighted average remaining contractual term, beginning of period			2 years 9 months 22 days		2 years 9 months 22 days
Options granted, weighted average remaining contractual term			0 years
Options outstanding, weighted average remaining contractual term, end of period			2 years 9 months 22 days		2 years 9 months 22 days
Options exercisable, weighted average remaining contractual term, end of period			2 years 1 month 17 days
Aggregate intrinsic value of [Abstract]
Options outstanding, beginning of period	5,750,000		5,750,000		1,562,000
Options outstanding, end of period	5,750,000		5,750,000		1,562,000
Options exercisable	2,916,000		2,916,000
Options Exercised [Abstract]
Aggregate intrinsic value of options exercised			4,000	3,000
Cash receipts from options exercised			8,000	13,000
Stock-based compensation expense [Abstract]
Total stock-based compensation expense	218,000	202,000	416,000	376,000
Dividends paid to ESOP	17,000	9,000	34,000	17,000
Tax benefit arising from stock option compensation expense	31,000	26,000	55,000	44,000
Directors fees [Member]
Stock-based compensation expense [Abstract]
Total stock-based compensation expense	28,000	36,000	56,000	70,000
Stock option expense [Member]
Stock-based compensation expense [Abstract]
Total stock-based compensation expense	95,000	84,000	184,000	143,000
Employee Stock Ownership Plan ("ESOP") expense [Member]
Stock-based compensation expense [Abstract]
Total stock-based compensation expense	$ 95,000	$ 82,000	$ 176,000	$ 163,000
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			2 years
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			5 years

XML

EARNINGS PER SHARE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Basic earnings per share [Abstract]
Income available to common stockholders, Income	$ 585	$ 1,800	$ 1,966	$ 3,023
Income available to common stockholders, Weighted average shares (in shares)	3,066,399	2,743,427	3,064,107	2,740,915
Income available to common stockholders, Per share (in dollars per share)	$ 0.19	$ 0.66	$ 0.64	$ 1.10
Effect of dilutive securities [Abstract]
Stock options and grants, Income	0	0
Stock options and grants, Weighted average shares (in shares)	49,037	0	34,036	0
Stock options and grants, Per share (in dollars per share)	$ 0	$ 0	$ (0.01)	$ 0
Diluted earning per share [Abstract]
NET INCOME	$ 585	$ 1,800	$ 1,966	$ 3,023
Income available to common stockholders plus effect of dilutive securities, Weighted average shares (in shares)	3,115,436	2,743,427	3,098,143	2,740,915
Income available to common stockholders plus effect of dilutive securities, Per share (in dollars per share)	$ 0.19	$ 0.66	$ 0.63	$ 1.10
Antidilutive Securities Excluded from Computation of Diluted Earnings per Share [Abstract]
Antidilutive securities excluded from computation of earnings per share (in shares)		30,388		30,388
Exercise price, lower limit (in dollars per share)		$ 25.71		$ 25.71
Exercise price, upper limit (in dollars per share)		$ 32.51		$ 32.51

XML

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Accumulated Other Comprehensive Income Loss [Line Items]
Accumulated Other Comprehensive (Loss) Income, Beginning balance	$ (325)		$ 173	[1],[2]	$ (1,178)		$ 970	[1],[2]
Other comprehensive income before reclassifications	725	[1],[2]	(1,878)	[1],[2]	1,537	[1],[2]	(2,718)	[1],[2]
Amounts reclassified from accumulated other comprehensive income (loss)	31	[1],[2]	44	[1],[2]	72	[1],[2]	87	[1],[2]
Period change	756		(1,834)		1,609		(2,631)
Accumulated Other Comprehensive (Loss) Income, Ending balance	431		(1,661)	[1],[2]	431		(1,661)	[1],[2]
Federal income tax rate (in hundredths)	34.00%		34.00%		34.00%		34.00%
Unrealized Gains (Losses) on Securities Available for Sale [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Accumulated Other Comprehensive (Loss) Income, Beginning balance	987	[1],[2]	2,965	[1],[2]	176	[1],[2]	3,805	[1],[2]
Other comprehensive income before reclassifications	725	[1],[2]	(1,878)	[1],[2]	1,537	[1],[2]	(2,718)	[1],[2]
Amounts reclassified from accumulated other comprehensive income (loss)	(10)	[1],[2]	0	[1],[2]	(11)	[1],[2]	0	[1],[2]
Period change	715	[1],[2]	(1,878)	[1],[2]	1,526	[1],[2]	(2,718)	[1],[2]
Accumulated Other Comprehensive (Loss) Income, Ending balance	1,702	[1],[2]	1,087	[1],[2]	1,702	[1],[2]	1,087	[1],[2]
Defined Benefit Pension Plan [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Accumulated Other Comprehensive (Loss) Income, Beginning balance	(1,312)	[1],[2]	(2,792)	[1],[2]	(1,354)	[1],[2]	(2,835)	[1],[2]
Other comprehensive income before reclassifications	0	[1],[2]	0	[1],[2]	0	[1],[2]	0	[1],[2]
Amounts reclassified from accumulated other comprehensive income (loss)	41	[1],[2]	44	[1],[2]	83	[1],[2]	87	[1],[2]
Period change	41	[1],[2]	44	[1],[2]	83	[1],[2]	87	[1],[2]
Accumulated Other Comprehensive (Loss) Income, Ending balance	$ (1,271)	[1],[2]	$ (2,748)	[1],[2]	$ (1,271)	[1],[2]	$ (2,748)	[1],[2]

[1] All amounts are net of tax. Related income tax expense or benefit is calculated using a Federal income tax rate of 34%

[2] Amounts in parenthesis indicate debits.

XML

BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2014

BASIS OF PRESENTATION [Abstract]

BASIS OF PRESENTATION

 

NOTE 2 — BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements were prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all of the disclosures or footnotes required by US GAAP. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for fair presentation of the consolidated financial statements have been included. The results of operations for the period ended June 30, 2014 are not necessarily indicative of the results which may be expected for the entire fiscal year or any other period. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

XML

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME, RECLASSIFICATION OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Gain on sale of investment securities	$ 16		$ 0		$ 17		$ 0
Compensation and benefits	3,206		2,842		6,589		5,659
Income tax expense	500		421		991		1,002
Net income	585		1,800		1,966		3,023
Reclassification Out Of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Net income	(31)	[1],[2]	(44)	[1],[2]	(72)	[1],[2]	(87)	[1],[2]
Unrealized Gains (Losses) on Securities Available for Sale [Member] | Reclassification Out Of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Gain on sale of investment securities	16	[1]	0	[1]	17	[1]	0	[1]
Income tax expense	(6)	[1]	0	[1]	(6)	[1]	0	[1]
Net income	10	[1]	0	[1]	11	[1]	0	[1]
Defined Benefit Pension Plan [Member] | Reclassification Out Of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income [Line Items]
Compensation and benefits	(61)	[1],[2]	(66)	[1],[2]	(123)	[1],[2]	(132)	[1],[2]
Income tax expense	20	[1],[2]	22	[1],[2]	40	[1],[2]	45	[1],[2]
Net income	$ (41)	[1],[2]	$ (44)	[1],[2]	$ (83)	[1],[2]	$ (87)	[1],[2]

[1] Amounts in parenthesis indicate debits.

[2] Included in the computation of net periodic pension cost. See Note 12 – Employee Benefit Plans for additional detail.

XML

LOANS RECEIVABLE, Allowance for Loan Losses, Ending Loan Balances by Portfolio and by Class based on Impairment Method (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Allowance for loan losses [Abstract]
Loans receivable, allowance for credit losses, acquired without credit deterioration	$ 64	$ 0
Loans receivable, allowance for credit losses, acquired with credit deterioration	0	0
Loans receivable, allowance for credit losses, individually evaluated for impairment	502	2,226
Loans receivable, allowance for credit losses, collectively evaluated for impairment	3,582	4,349
Loans receivable, allowance for credit losses, evaluated for impairment	4,148	6,575
Loans receivable [Abstract]
Loans receivable, acquired without credit deterioration	87,080	95,012
Loans receivable, acquired with credit deterioration	412	444
Loans receivable, individually evaluated for impairment	3,624	6,960
Loans receivable, collectively evaluated for impairment	521,788	517,039
Loans receivable, evaluated for impairment	612,904	619,455
Residential mortgages [Member]
Allowance for loan losses [Abstract]
Loans receivable, allowance for credit losses, acquired without credit deterioration	0	0
Loans receivable, allowance for credit losses, acquired with credit deterioration	0	0
Loans receivable, allowance for credit losses, individually evaluated for impairment	281	128
Loans receivable, allowance for credit losses, collectively evaluated for impairment	1,302	1,594
Loans receivable, allowance for credit losses, evaluated for impairment	1,583	1,722
Loans receivable [Abstract]
Loans receivable, acquired without credit deterioration	46,448	50,985
Loans receivable, acquired with credit deterioration	22	22
Loans receivable, individually evaluated for impairment	1,124	2,297
Loans receivable, collectively evaluated for impairment	308,064	318,657
Loans receivable, evaluated for impairment	355,658	371,961
Real estate-commercial [Member]
Allowance for loan losses [Abstract]
Loans receivable, allowance for credit losses, acquired without credit deterioration	64	0
Loans receivable, allowance for credit losses, acquired with credit deterioration	0	0
Loans receivable, allowance for credit losses, individually evaluated for impairment	0	0
Loans receivable, allowance for credit losses, collectively evaluated for impairment	989	1,220
Loans receivable, allowance for credit losses, evaluated for impairment	1,053	1,220
Loans receivable [Abstract]
Loans receivable, acquired without credit deterioration	11,774	12,787
Loans receivable, acquired with credit deterioration	0	0
Loans receivable, individually evaluated for impairment	1,771	774
Loans receivable, collectively evaluated for impairment	117,612	115,784
Loans receivable, evaluated for impairment	131,157	129,345
Real estate-residential [Member]
Allowance for loan losses [Abstract]
Loans receivable, allowance for credit losses, acquired without credit deterioration	0	0
Loans receivable, allowance for credit losses, acquired with credit deterioration	0	0
Loans receivable, allowance for credit losses, individually evaluated for impairment	200	77
Loans receivable, allowance for credit losses, collectively evaluated for impairment	167	360
Loans receivable, allowance for credit losses, evaluated for impairment	367	437
Loans receivable [Abstract]
Loans receivable, acquired without credit deterioration	4,781	4,913
Loans receivable, acquired with credit deterioration	184	184
Loans receivable, individually evaluated for impairment	496	712
Loans receivable, collectively evaluated for impairment	18,236	14,196
Loans receivable, evaluated for impairment	23,697	20,005
Real estate-multi-family [Member]
Allowance for loan losses [Abstract]
Loans receivable, allowance for credit losses, acquired without credit deterioration	0	0
Loans receivable, allowance for credit losses, acquired with credit deterioration	0	0
Loans receivable, allowance for credit losses, individually evaluated for impairment	0	0
Loans receivable, allowance for credit losses, collectively evaluated for impairment	116	136
Loans receivable, allowance for credit losses, evaluated for impairment	116	136
Loans receivable [Abstract]
Loans receivable, acquired without credit deterioration	1,070	1,116
Loans receivable, acquired with credit deterioration	191	191
Loans receivable, individually evaluated for impairment	0	0
Loans receivable, collectively evaluated for impairment	17,675	15,316
Loans receivable, evaluated for impairment	18,936	16,623
Construction loans [Member]
Allowance for loan losses [Abstract]
Loans receivable, allowance for credit losses, acquired without credit deterioration	0	0
Loans receivable, allowance for credit losses, acquired with credit deterioration	0	0
Loans receivable, allowance for credit losses, individually evaluated for impairment	21	2,021
Loans receivable, allowance for credit losses, collectively evaluated for impairment	438	187
Loans receivable, allowance for credit losses, evaluated for impairment	459	2,208
Loans receivable [Abstract]
Loans receivable, acquired without credit deterioration	0	0
Loans receivable, acquired with credit deterioration	0	0
Loans receivable, individually evaluated for impairment	233	3,177
Loans receivable, collectively evaluated for impairment	8,765	5,596
Loans receivable, evaluated for impairment	8,998	8,773
Commercial and industrial loans [Member]
Allowance for loan losses [Abstract]
Loans receivable, allowance for credit losses, acquired without credit deterioration	0	0
Loans receivable, allowance for credit losses, acquired with credit deterioration	0	0
Loans receivable, allowance for credit losses, individually evaluated for impairment	0	0
Loans receivable, allowance for credit losses, collectively evaluated for impairment	58	97
Loans receivable, allowance for credit losses, evaluated for impairment	58	97
Loans receivable [Abstract]
Loans receivable, acquired without credit deterioration	239	279
Loans receivable, acquired with credit deterioration	0	0
Loans receivable, individually evaluated for impairment	0	0
Loans receivable, collectively evaluated for impairment	8,726	6,570
Loans receivable, evaluated for impairment	8,965	6,849
Home equity and second mortgage [Member]
Allowance for loan losses [Abstract]
Loans receivable, allowance for credit losses, acquired without credit deterioration	0	0
Loans receivable, allowance for credit losses, acquired with credit deterioration	0	0
Loans receivable, allowance for credit losses, individually evaluated for impairment	0	0
Loans receivable, allowance for credit losses, collectively evaluated for impairment	226	214
Loans receivable, allowance for credit losses, evaluated for impairment	226	214
Loans receivable [Abstract]
Loans receivable, acquired without credit deterioration	22,661	24,806
Loans receivable, acquired with credit deterioration	15	47
Loans receivable, individually evaluated for impairment	0	0
Loans receivable, collectively evaluated for impairment	41,285	39,349
Loans receivable, evaluated for impairment	63,961	64,202
Other consumer [Member]
Allowance for loan losses [Abstract]
Loans receivable, allowance for credit losses, acquired without credit deterioration	0	0
Loans receivable, allowance for credit losses, acquired with credit deterioration	0	0
Loans receivable, allowance for credit losses, individually evaluated for impairment	0	0
Loans receivable, allowance for credit losses, collectively evaluated for impairment	29	50
Loans receivable, allowance for credit losses, evaluated for impairment	29	50
Loans receivable [Abstract]
Loans receivable, acquired without credit deterioration	107	126
Loans receivable, acquired with credit deterioration	0	0
Loans receivable, individually evaluated for impairment	0	0
Loans receivable, collectively evaluated for impairment	1,425	1,571
Loans receivable, evaluated for impairment	1,532	1,697
Unallocated [Member]
Allowance for loan losses [Abstract]
Loans receivable, allowance for credit losses, acquired without credit deterioration	0	0
Loans receivable, allowance for credit losses, acquired with credit deterioration	0	0
Loans receivable, allowance for credit losses, individually evaluated for impairment	0	0
Loans receivable, allowance for credit losses, collectively evaluated for impairment	257	491
Loans receivable, allowance for credit losses, evaluated for impairment	$ 257	$ 491

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
ASSETS
Cash and cash equivalents	$ 48,291	$ 45,310
Investment securities
Available for sale	129,686	124,012
Held to maturity (fair value of $1,515 and $1,680 as of June 30, 2014 and December 31, 2013, respectively)	1,340	1,490
Loans receivable, net	610,097	614,168
Loans receivable, held for sale	129	349
Federal Home Loan Bank ("FHLB") stock - at cost	3,544	3,370
Accrued interest receivable	2,523	2,520
Premises and equipment, net	8,351	8,616
Goodwill	4,324	4,324
Core deposit intangible	453	503
Bank owned life insurance	18,851	18,586
Other assets	11,977	12,441
TOTAL ASSETS	839,566	835,689
Liabilities
Deposits	685,988	683,902
Advances from the FHLB	47,120	49,605
Advances from borrowers for taxes and insurance	3,284	3,228
Accrued interest payable	725	671
Other liabilities	4,274	3,408
Total liabilities	741,391	740,814
Stockholders' equity
Preferred stock, no par value; 2,000,000 shares authorized at June 30, 2014 and December 31, 2013, none issued	0	0
Common stock, $0.10 par value; 10,000,000 shares authorized, 5,290,000 shares issued, 3,151,562 and 3,149,239 shares outstanding at June 30, 2014 and December 31, 2013, respectively, net of shares in treasury of 2,138,438 and 2,140,761, respectively.	529	529
Additional paid-in capital	56,546	56,197
Unearned ESOP shares	(784)	(846)
Treasury stock - at cost	(44,454)	(44,502)
Retained earnings	85,907	84,675
Accumulated other comprehensive income (loss)	431	(1,178)
Total stockholders' equity	98,175	94,875
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 839,566	$ 835,689

XML

EMPLOYEE BENEFIT PLANS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Components of net periodic benefit cost [Abstract]
Service cost	$ 205	$ 206	$ 410	$ 411
Interest cost	128	89	256	177
Expected return on plan assets	(209)	(182)	(418)	(363)
Amortization of prior service cost			2	1
Recognized net actuarial loss	61	66	121	131
Net periodic benefit cost	$ 185	$ 179	$ 371	$ 357
Average benefit multiplier (in hundredths)			2.00%		1.50%

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
OPERATING ACTIVITIES
Net income	$ 1,966	$ 3,023
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and impairment adjustment of mortgage loan servicing rights	117	(77)
Premiums and discounts on investment securities, net	149	144
Premiums and discounts on mortgage-backed securities, net	195	208
Accretion of premiums on certificates of deposits	(111)	0
Deferred loan origination costs, net	96	105
Provision for loan losses	100	839
Amortization of core deposit intangible	50	0
Depreciation of premises and equipment	337	334
Increase in value of bank owned life insurance	(265)	(280)
Income from life insurance death benefit	0	(934)
Stock-based compensation	450	380
Proceeds from sale of loans originated for sale	10,890	21,088
Origination of loans held for sale	(10,618)	(21,580)
Loss on foreclosed real estate	11	375
Gain on :
Sale of loans	(175)	(531)
Sale of investment securities	(17)	0
Disposition of premises and equipment	0	(420)
(Increase) decrease in:
Accrued interest receivable	(3)	38
Other assets	703	(93)
Increase in:
Accrued interest payable	54	71
Other liabilities	39	157
NET CASH PROVIDED BY OPERATING ACTIVITIES	3,968	2,847
INVESTING ACTIVITIES
Loan originations	(33,512)	(56,636)
Loan principal payments	36,825	59,116
Proceeds from sale of foreclosed real estate	441	987
Proceeds from disposition of premises and equipment	0	417
Proceeds from maturities of investment securities available for sale	4,795	2,545
Proceeds from sale of investment securities available for sale	6,728	0
Proceeds from bank owned life insurance	0	2,183
Principal repayments on mortgage-backed securities held to maturity	149	294
Principal repayments on mortgage-backed securities available for sale	4,740	10,889
Purchase of investment securities available for sale	(4,584)	(10,902)
Purchase of mortgage-backed securities available for sale	(15,366)	(1,867)
Purchase of premises and equipment	(72)	(767)
Redemption of FHLB stock	56	1,585
Purchase of FHLB stock	(230)	0
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES	(30)	7,844
FINANCING ACTIVITIES
Net increase in customer deposits	2,197	11,097
Net decrease in short-term FHLB borrowings	(2,485)	(8,122)
Net increase in advances from borrowers for taxes and insurance	56	415
Exercise of stock options	8	13
Tax benefit arising from exercise of stock options	1	1
Common stock dividends paid	(734)	(274)
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES	(957)	3,130
NET INCREASE IN CASH AND CASH EQUIVALENTS	2,981	13,821
Cash and cash equivalents at beginning of period	45,310	31,137
Cash and cash equivalents at end of period	48,291	44,958
Cash paid for:
Interest on deposits and borrowings	1,916	1,846
Income taxes	750	575
Noncash transactions:
Capitalization of mortgage servicing rights	123	220
Transfers from loans to foreclosed real estate	$ 562	$ 257

XML

LOANS RECEIVABLE, Composition of Loans by Credit Quality Indicators (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 612,904	$ 619,455
Number of days residential mortgages and consumer loans are placed on non accrual status	90 days
Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	173,948	155,969
Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	3,820	7,661
Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	13,985	17,965
Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	0	0
Residential Mortgages [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	355,658	371,961
Residential Mortgages [Member] | Performing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	354,502	368,967
Residential Mortgages [Member] | Nonperforming [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	1,156	2,994
Real estate-commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	131,157	129,345
Real estate-commercial [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	119,552	113,260
Real estate-commercial [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	2,930	7,142
Real estate-commercial [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	8,675	8,943
Real estate-commercial [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	0	0
Real estate-residential [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	23,697	20,005
Real estate-residential [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	21,238	17,182
Real estate-residential [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	861	487
Real estate-residential [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	1,598	2,336
Real estate-residential [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	0	0
Real estate-multi-family [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	18,936	16,623
Real estate-multi-family [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	15,457	13,114
Real estate-multi-family [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	0	0
Real estate-multi-family [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	3,479	3,509
Real estate-multi-family [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	0	0
Construction loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	8,998	8,773
Construction loans [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	8,765	5,596
Construction loans [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	0	0
Construction loans [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	233	3,177
Construction loans [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	0	0
Commercial and Industrial Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	8,965	6,849
Commercial and Industrial Loans [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	8,936	6,817
Commercial and Industrial Loans [Member] | Special Mention [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	29	32
Commercial and Industrial Loans [Member] | Substandard [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	0	0
Commercial and Industrial Loans [Member] | Doubtful [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	0	0
Total commercial loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	191,753	181,595
Home equity and second mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	63,961	64,202
Home equity and second mortgage [Member] | Performing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	63,836	63,902
Home equity and second mortgage [Member] | Nonperforming [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	125	300
Other consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	1,532	1,697
Other consumer [Member] | Performing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	1,532	1,697
Other consumer [Member] | Nonperforming [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	0	0
Total residential and consumer Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	421,151	437,860
Total residential and consumer Loans [Member] | Performing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	419,870	434,566
Total residential and consumer Loans [Member] | Nonperforming [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 1,281	$ 3,294

XML

EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2014

EARNINGS PER SHARE [Abstract]

Reconciliation of Numerators and Denominators of the Basic and Diluted Earnings per Share Computations

 

The following tables illustrate the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations (dollars in thousands, except share and per share data):

	For the three months ended June 30, 2014
	Income (numerator)		Weighted average shares (denominator)		Per share Amount
Basic earnings per share
Income available to common stockholders	$	585		3,066,399	$	0.19
Effect of dilutive securities
Stock options and grants		-		49,037		-
Diluted earnings per share
Income available to common stockholders plus effect of dilutive securities	$	585		3,115,436	$	0.19

	For the six months ended June 30, 2014
	Income (numerator)		Weighted average shares (denominator)		Per share Amount
Basic earnings per share
Income available to common stockholders	$	1,966		3,064,107	$	0.64
Effect of dilutive securities
Stock options and grants		-		34,036		(0.01	)
Diluted earnings per share
Income available to common stockholders plus effect of dilutive securities	$	1,966		3,098,143	$	0.63

	For the three months ended June 30, 2013
	Income (numerator)		Weighted average shares (denominator)		Per share Amount
Basic earnings per share
Income available to common stockholders	$	1,800		2,743,427	$	0.66
Effect of dilutive securities
Stock options and grants		-		-		-
Diluted earnings per share
Income available to common stockholders plus effect of dilutive securities	$	1,800		2,743,427	$	0.66

	For the six months ended June 30, 2013
	Income (numerator)		Weighted average shares (denominator)		Per share Amount
Basic earnings per share
Income available to common stockholders	$	3,023		2,740,915	$	1.10
Effect of dilutive securities
Stock options and grants		-		-		-
Diluted earnings per share
Income available to common stockholders plus effect of dilutive securities	$	3,023		2,740,915	$	1.10

XML

LOANS RECEIVABLE, Loans Individually Evaluated for Impairment by Class (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Loans Individually Evaluated for Impairment by Class [Abstract]
Loans individually evaluated for impairment, with related allowance, recorded investment	$ 1,985	$ 5,024
Loans individually evaluated for impairment, with no related allowance, recorded investment	2,059	2,380
Loans individually evaluated for impairment, recorded investment, total	4,044	7,404
Loans individually evaluated for impairment, with related allowance, unpaid principal balance	1,985	5,222
Loans individually evaluated for impairment, with no related allowance, unpaid principal balance	2,381	2,732
Impaired Financing Receivable, Unpaid Principal Balance, Total	4,366	7,954
Impaired Financing Receivable, Related Allowance	566	2,226
Impaired Financing Receivable, related allowance unrecorded	0	0
Loans individually evaluated for impairment related allowance	566	2,226
Loans individually evaluated for impairment, with related allowance, average recorded investment	2,957	5,641
Loans individually evaluated for impairment, with no related allowance, average recorded investment	1,926	1,040
Loans individually evaluated for impairment, average recorded investment	4,883	6,681
Loans individually evaluated for impairment, with related allowance, interest income recognized	0	0
Loans individually evaluated for impairment, with no related allowance, interest income recognized	0	0
Loans individually evaluated for impairment, interest income recognized	0	0
Nonperforming [Member]
Non-performing loans [Abstract]
Non-performing loans	4,164	8,332
Residential mortgages [Member]
Loans Individually Evaluated for Impairment by Class [Abstract]
Loans individually evaluated for impairment, with related allowance, recorded investment	1,124	1,135
Loans individually evaluated for impairment, with no related allowance, recorded investment	22	1,184
Loans individually evaluated for impairment, with related allowance, unpaid principal balance	1,124	1,135
Loans individually evaluated for impairment, with no related allowance, unpaid principal balance	33	1,184
Impaired Financing Receivable, Related Allowance	281	128
Impaired Financing Receivable, related allowance unrecorded	0	0
Loans individually evaluated for impairment, with related allowance, average recorded investment	1,129	1,620
Loans individually evaluated for impairment, with no related allowance, average recorded investment	409	241
Loans individually evaluated for impairment, with related allowance, interest income recognized	0	0
Loans individually evaluated for impairment, with no related allowance, interest income recognized	0	0
Residential mortgages [Member] | Nonperforming [Member]
Non-performing loans [Abstract]
Non-performing loans	1,156	2,994
Real estate-commercial [Member]
Loans Individually Evaluated for Impairment by Class [Abstract]
Loans individually evaluated for impairment, with related allowance, recorded investment	132	0
Loans individually evaluated for impairment, with no related allowance, recorded investment	1,637	774
Loans individually evaluated for impairment, with related allowance, unpaid principal balance	132	0
Loans individually evaluated for impairment, with no related allowance, unpaid principal balance	1,639	774
Impaired Financing Receivable, Related Allowance	64	0
Impaired Financing Receivable, related allowance unrecorded	0	0
Loans individually evaluated for impairment, with related allowance, average recorded investment	44	109
Loans individually evaluated for impairment, with no related allowance, average recorded investment	1,103	607
Loans individually evaluated for impairment, with related allowance, interest income recognized	0	0
Loans individually evaluated for impairment, with no related allowance, interest income recognized	0	0
Real estate-commercial [Member] | Nonperforming [Member]
Non-performing loans [Abstract]
Non-performing loans	1,769	774
Real estate-residential [Member]
Loans Individually Evaluated for Impairment by Class [Abstract]
Loans individually evaluated for impairment, with related allowance, recorded investment	496	712
Loans individually evaluated for impairment, with no related allowance, recorded investment	194	184
Loans individually evaluated for impairment, with related allowance, unpaid principal balance	496	712
Loans individually evaluated for impairment, with no related allowance, unpaid principal balance	321	321
Impaired Financing Receivable, Related Allowance	200	77
Impaired Financing Receivable, related allowance unrecorded	0	0
Loans individually evaluated for impairment, with related allowance, average recorded investment	569	211
Loans individually evaluated for impairment, with no related allowance, average recorded investment	184	108
Loans individually evaluated for impairment, with no related allowance, interest income recognized	0
Real estate-residential [Member] | Nonperforming [Member]
Non-performing loans [Abstract]
Non-performing loans	690	896
Real estate-multi-family [Member]
Loans Individually Evaluated for Impairment by Class [Abstract]
Loans individually evaluated for impairment, with no related allowance, recorded investment	191	191
Loans individually evaluated for impairment, with no related allowance, unpaid principal balance	372	372
Impaired Financing Receivable, related allowance unrecorded	0	0
Loans individually evaluated for impairment, with no related allowance, average recorded investment	191	77
Loans individually evaluated for impairment, with no related allowance, interest income recognized	0	0
Real estate-multi-family [Member] | Nonperforming [Member]
Non-performing loans [Abstract]
Non-performing loans	191	191
Construction loans [Member]
Loans Individually Evaluated for Impairment by Class [Abstract]
Loans individually evaluated for impairment, with related allowance, recorded investment	233	3,177
Loans individually evaluated for impairment, with related allowance, unpaid principal balance	233	3,375
Impaired Financing Receivable, Related Allowance	21	2,021
Loans individually evaluated for impairment, with related allowance, average recorded investment	1,215	3,701
Loans individually evaluated for impairment, with related allowance, interest income recognized	0	0
Loans individually evaluated for impairment, with no related allowance, interest income recognized		0
Construction loans [Member] | Nonperforming [Member]
Non-performing loans [Abstract]
Non-performing loans	233	3,177
Home equity and second mortgage [Member]
Loans Individually Evaluated for Impairment by Class [Abstract]
Loans individually evaluated for impairment, with no related allowance, recorded investment	15	47
Loans individually evaluated for impairment, with no related allowance, unpaid principal balance	16	81
Impaired Financing Receivable, related allowance unrecorded	0	0
Loans individually evaluated for impairment, with no related allowance, average recorded investment	39	7
Loans individually evaluated for impairment, with no related allowance, interest income recognized	0	0
Home equity and second mortgage [Member] | Nonperforming [Member]
Non-performing loans [Abstract]
Non-performing loans	$ 125	$ 300

XML

INVESTMENT SECURITIES (Tables)

6 Months Ended

Jun. 30, 2014

INVESTMENT SECURITIES [Abstract]

Amortized Cost, Gross Unrealized Gains and Losses and Fair Value of Investment Securities

 

The amortized cost, gross unrealized gains and losses, and fair value of the Company’s investment securities are summarized as follows:

	At June 30, 2014
	Amortizedcost		Gross unrealized gains		Gross unrealized losses			Fairvalue
	(in thousands)
Available for sale
U.S. Government and federal agencies	$	11,884	$	45	$	(168	)	$	11,761
State and political subdivisions		59,775		2,179		(304	)		61,650
Residential mortgage-backed securities issued by quasi-governmental agencies		55,448		966		(139	)		56,275
Total investment securities available for sale		127,107		3,190		(611	)		129,686
Held to maturity
Residential mortgage-backed securities issued by quasi-governmental agencies		1,340		176		(1	)		1,515
Total investment securities	$	128,447	$	3,366	$	(612	)	$	131,201

	At December 31, 2013
	Amortizedcost		Gross unrealized gains		Gross unrealized losses			Fairvalue
	(in thousands)
Available for sale
U.S. Government and federal agencies	$	18,572	$	4	$	(513	)	$	18,063
State and political subdivisions		60,159		1,526		(1,016	)		60,669
Residential mortgage-backed securities issued by quasi-governmental agencies		45,015		540		(275	)		45,280
Total investment securities available for sale		123,746		2,070		(1,804	)		124,012
Held to maturity
Residential mortgage-backed securities issued by quasi-governmental agencies		1,490		191		(1	)		1,680
Total investment securities	$	125,236	$	2,261	$	(1,805	)	$	125,692

Investment Securities Maturities

 

The amortized cost and fair value of investment and mortgage-backed securities, by contractual maturity, are shown below. 

	At June 30, 2014
	Available for sale				Held to maturity
	Amortized cost		Fair value		Amortized cost		Fair value
	(in thousands)
Investment securities
Due in one year or less	$	400	$	401	$	-	$	-
Due after one year through five years		18,541		18,818		-		-
Due after five years through ten years		31,733		32,241		-		-
Due after ten years		20,985		21,951		-		-
		71,659		73,411		-		-
Mortgage-backed securities		55,448		56,275		1,340		1,515
Total investment and mortgage-backed securities	$	127,107	$	129,686	$	1,340	$	1,515

Length of Time Securities Have Been in Continuous Unrealized Loss Position

 

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at June 30, 2014:

	Number		Less than 12 months					12 months or longer					Total
Description of Securities	of Securities		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(dollars in thousands)
U.S. Government and federal agencies		3	$	949	$	(5	)	$	6,837	$	(163	)	$	7,786	$	(168	)
State and political subdivisions		16		4,176		(37	)		8,726		(267	)		12,902		(304	)
Residential mortgage-backed securities issued by quasi- governmental agencies		39		9,543		(140	)		-		-			9,543		(140	)
Total temporarily impaired securities		58	$	14,668	$	(182	)	$	15,563	$	(430	)	$	30,231	$	(612	)

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at December 31, 2013:

			Less than					12 months
	Number		12 months					or longer				Total
Description of Securities	of Securities		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(dollars in thousands)
U.S. Government and federal agencies		13	$	17,028	$	(513	)	$	-	$	-	$	17,028	$	(513	)
State and political subdivisions		24		19,646		(1,016	)		-		-		19,646		(1,016	)
Residential mortgage-backed securities issued by quasi- governmental agencies		65		24,508		(276	)		-		-		24,508		(276	)
Total temporarily impaired securities		102	$	61,182	$	(1,805	)	$	-	$	-	$	61,182	$	(1,805	)

XML

PRINCIPLES OF CONSOLIDATION

6 Months Ended

Jun. 30, 2014

PRINCIPLES OF CONSOLIDATION [Abstract]

PRINCIPLES OF CONSOLIDATION

 

NOTE 1 — PRINCIPLES OF CONSOLIDATION

The consolidated financial statements as of June 30, 2014 (unaudited) and December 31, 2013 and for the three and six-month periods ended June 30, 2014 and 2013 (unaudited) include the accounts of TF Financial Corporation (the “Company”) and its wholly owned subsidiaries: 3rd Fed Bank (the “Bank”) and Penns Trail Development Corporation. The accompanying consolidated balance sheet at December 31, 2013, has been derived from the audited consolidated balance sheet but does not include all of the information and notes required by accounting principles generally accepted in the United States of America (“US GAAP”) for complete financial statements. The Company’s business is conducted principally through the Bank. All significant intercompany accounts and transactions have been eliminated in consolidation.

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Investment securities
Mortgage-backed securities held to maturity, fair value	$ 1,515	$ 1,680
Stockholders' equity
Preferred stock, par value (in dollars per share)	$ 0	$ 0
Preferred stock, authorized (in shares)	2,000,000	2,000,000
Preferred stock, issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, authorized (in shares)	10,000,000	10,000,000
Common stock, issued (in shares)	5,290,000	5,290,000
Common stock, outstanding (in shares)	3,151,562	3,149,239
Common stock, in treasury (in shares)	2,138,438	2,140,761

XML

STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2014

STOCK-BASED COMPENSATION [Abstract]

STOCK-BASED COMPENSATION

 

NOTE 11 — STOCK-BASED COMPENSATION

The Company has stock benefit plans that allow the Company to grant options and restricted stock to employees and directors. The awards, which have a term of up to 10 years when issued, vest over a two to five year period. The exercise price of each award equals the market price of the Company’s stock on the date of the grant. The fair value of each option grant during the six months ended June 30, 2014 and 2013 was estimated on the date of grant using the Black‑Scholes option‑pricing model with the following weighted average assumptions:

	For the six months endedJune 30,
Weighted average assumptions	2014			2013
Dividend yield		1.61	%		0.83	%
Expected volatility		15.85	%		17.24	%
Risk-free interest rate		0.56	%		0.67	%
Fair value of options granted during the period	$	3.90		$	3.13
Expected lives in years		5			5

At June 30, 2014, there was $447,000 of total unrecognized compensation cost, net of estimated forfeitures, related to non-vested awards under the Company’s stock option plan. That cost is expected to be recognized over a weighted average period of 16.6 months. Option activity under the Company’s stock option plan as of June 30, 2014 was as follows:

	At June 30, 2014
	Number of shares			Weighted average exercise price per share		Weighted average remaining contractual term (in years)		Aggregate intrinsic value ($000)
Outstanding at January 1, 2014		254,144		$	23.71		2.81	$	1,562
Options granted		71,500			30.03		-		-
Options exercised		(400	)		19.67		-		-
Options forfeited		-			-		-		-
Options expired		-			-		-		-
Outstanding at June 30, 2014		325,244		$	25.10		2.81	$	5,750
Options exercisable at June 30, 2014		149,494		$	23.27		2.13	$	2,916

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the second quarter and the exercise price, multiplied by the number of in-the-money options).

The aggregate intrinsic value and cash receipts of options exercised are as follows:

	At June 30,
	2014		2013
	(in thousands)
Options Exercised
Aggregate intrinsic value of options exercised	$	4	$	3
Cash receipts from options exercised		8		13

The Company issues stock of the Company as payment for director fees as permitted by the 2011 Director Stock Compensation Plan. The cost associated with these grants is included as a component of stock-based compensation. The following tables provide information regarding the Company’s stock-based compensation expense:

	For the three months endedJune 30,
	2014		2013
	(in thousands)
Stock-based compensation expense
Director fees	$	28	$	36
Stock option expense		95		84
Employee Stock Ownership Plan ("ESOP") expense		95		82
Total stock-based compensation expense	$	218	$	202

The Bank reports ESOP expense in an amount equal to the fair value of shares released from the ESOP to employees less dividends received on the allocated shares in the plan used for debt service. Dividends on allocated shares used to reduce ESOP expense totaled $17,000 and $9,000 for the three months ended June 30, 2014 and 2013, respectively. Stock-based compensation expense related to stock options resulted in a tax benefit of $31,000 and $26,000 for the three months ended June 30, 2014 and 2013, respectively.

	For the six months endedJune 30,
	2014		2013
	(in thousands)
Stock-based compensation expense
Director fees	$	56	$	70
Stock option expense		184		143
Employee Stock Ownership Plan ("ESOP") expense		176		163
Total stock-based compensation expense	$	416	$	376

The Bank reports ESOP expense in an amount equal to the fair value of shares released from the ESOP to employees less dividends received on the allocated shares in the plan used for debt service. Dividends on allocated shares used to reduce ESOP expense totaled $34,000 and $17,000 for the six months ended June 30, 2014 and 2013, respectively. Stock-based compensation expense related to stock options resulted in a tax benefit of $55,000 and $44,000 for the six months ended June 30, 2014 and 2013, respectively.

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 14, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	TF FINANCIAL CORP
Entity Central Index Key	0000921051
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		3,155,762
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2014

XML

EMPLOYEE BENEFIT PLANS

6 Months Ended

Jun. 30, 2014

EMPLOYEE BENEFIT PLANS [Abstract]

EMPLOYEE BENEFIT PLANS

NOTE 12 — EMPLOYEE BENEFIT PLANS

Net periodic defined benefit pension cost included the following:

	For the three months ended June 30,
	2014			2013
	(in thousands)
Components of net periodic benefit cost
Service cost	$	205		$	206
Interest cost		128			89
Expected return on plan assets		(209	)		(182	)
Recognized net actuarial loss		61			66
Net periodic benefit cost	$	185		$	179

	For the six months ended June 30,
		2014			2013
	(in thousands)
Components of net periodic benefit cost
Service cost	$	410		$	411
Interest cost		256			177
Expected return on plan assets		(418	)		(363	)
Amortization of prior service cost		2			1
Recognized net actuarial loss		121			131
Net periodic benefit cost	$	371		$	357

There were no employer contributions for the six months ended June 30, 2014.

In February 2014, the 3rd Fed Defined Benefit Plan (‘the Plan”) was amended to modify the benefit calculation under the Plan by increasing the career average benefit multiplier from 1.5% to 2.0% for all current and future active participants effective as of January 1, 2014. The net periodic benefit cost disclosed above reflects the effects of this amendment. Furthermore, the impact on the funded status of the plan by the amendment is measured and disclosed in year-end financial statements by an adjustment to accumulated other comprehensive income (“AOCI”). Refer to Note 14-Subsequent Events which provides additional information regarding the status of the Plan.

XML

CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Interest income
Loans, including fees	$ 6,636	$ 5,963	$ 13,313	$ 12,029
Investment securities
Fully taxable	550	355	1,051	724
Exempt from federal taxes	410	412	828	830
Interest-bearing deposits and other	4	14	7	18
TOTAL INTEREST INCOME	7,600	6,744	15,199	13,601
Interest expense
Deposits	774	712	1,540	1,443
Borrowings	187	226	380	474
TOTAL INTEREST EXPENSE	961	938	1,920	1,917
NET INTEREST INCOME	6,639	5,806	13,279	11,684
Provision for loan losses	100	400	100	839
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	6,539	5,406	13,179	10,845
Noninterest income
Service fees, charges and other operating income	552	650	1,068	1,177
Bank owned life insurance	134	137	265	280
Bank owned life insurance death benefit proceeds	0	934	0	934
Gain on sale of loans	101	226	175	531
Gain on sale of investment securities	16	0	17	0
Gain on disposition of premises and equipment	0	0	0	420
TOTAL NONINTEREST INCOME	803	1,947	1,525	3,342
Noninterest expense
Compensation and benefits	3,206	2,842	6,589	5,659
Occupancy and equipment	829	709	1,736	1,406
Federal deposit insurance premiums	125	132	259	242
Professional fees	278	230	1,068	615
Merger-related costs	1,068	295	583	518
Marketing and advertising	76	132	220	171
Foreclosed real estate expense	35	235	48	459
Core deposit intangible amortization	25	0	50	0
Other operating	615	557	1,194	1,092
TOTAL NONINTEREST EXPENSE	6,257	5,132	11,747	10,162
INCOME BEFORE INCOME TAXES	1,085	2,221	2,957	4,025
Income tax expense	500	421	991	1,002
NET INCOME	$ 585	$ 1,800	$ 1,966	$ 3,023
Earnings per share-basic (in dollars per share)	$ 0.19	$ 0.66	$ 0.64	$ 1.10
Earnings per share-diluted (in dollars per share)	$ 0.19	$ 0.66	$ 0.63	$ 1.10
Dividends paid per share	$ 0.12	$ 0.05	$ 0.24	$ 0.10
Weighted average shares outstanding:
Basic (in shares)	3,066,399	2,743,427	3,064,107	2,740,915
Diluted (in shares)	3,115,436	2,743,427	3,098,143	2,740,915

XML

EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2014

EARNINGS PER SHARE [Abstract]

EARNINGS PER SHARE

 

NOTE 6 — EARNINGS PER SHARE

The following tables illustrate the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations (dollars in thousands, except share and per share data):

	For the three months ended June 30, 2014
	Income (numerator)		Weighted average shares (denominator)		Per share Amount
Basic earnings per share
Income available to common stockholders	$	585		3,066,399	$	0.19
Effect of dilutive securities
Stock options and grants		-		49,037		-
Diluted earnings per share
Income available to common stockholders plus effect of dilutive securities	$	585		3,115,436	$	0.19

	For the six months ended June 30, 2014
	Income (numerator)		Weighted average shares (denominator)		Per share Amount
Basic earnings per share
Income available to common stockholders	$	1,966		3,064,107	$	0.64
Effect of dilutive securities
Stock options and grants		-		34,036		(0.01	)
Diluted earnings per share
Income available to common stockholders plus effect of dilutive securities	$	1,966		3,098,143	$	0.63

	For the three months ended June 30, 2013
	Income (numerator)		Weighted average shares (denominator)		Per share Amount
Basic earnings per share
Income available to common stockholders	$	1,800		2,743,427	$	0.66
Effect of dilutive securities
Stock options and grants		-		-		-
Diluted earnings per share
Income available to common stockholders plus effect of dilutive securities	$	1,800		2,743,427	$	0.66

	For the six months ended June 30, 2013
	Income (numerator)		Weighted average shares (denominator)		Per share Amount
Basic earnings per share
Income available to common stockholders	$	3,023		2,740,915	$	1.10
Effect of dilutive securities
Stock options and grants		-		-		-
Diluted earnings per share
Income available to common stockholders plus effect of dilutive securities	$	3,023		2,740,915	$	1.10

There were 30,388 options to purchase shares of common stock at a price range of $25.71 to $32.51 per share which were outstanding during the three and six months ended June 30, 2013 that were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares.

XML

ACQUISITION OF ROEBLING FINANCIAL CORP, INC.

6 Months Ended

Jun. 30, 2014

ACQUISITION OF ROEBLING FINANCIAL CORP, INC. [Abstract]

ACQUISITION OF ROEBLING FINANCIAL CORP, INC.

 

NOTE 5 — ACQUISITION OF ROEBLING FINANCIAL CORP, INC.

On July 2, 2013, the Company closed on a merger transaction pursuant to which the Company acquired Roebling Financial Corp, Inc. (“Roebling”), the parent company of Roebling Bank, in a stock and cash transaction. 

Under the terms of the merger agreement, the Company acquired all of the outstanding shares of Roebling for a total purchase price of approximately $14.9 million.  As a result of the acquisition, the Company issued 306,873 common shares to former shareholders of Roebling.  Roebling was merged with and into the Company, and Roebling Bank was merged with and into the Bank.

The acquired assets and assumed liabilities were measured at estimated fair values. Management made certain estimates and exercised judgment in accounting for the acquisition. The following condensed statement reflects the values assigned to Roebling’s net assets as of the acquisition date:

	At July 2, 2013
	(in thousands)
Total purchase price				$	14,926
Net assets acquired:
Cash	$	4,081
Investment securities		37,339
Loans receivable		102,026
Premises and equipment		2,154
Core deposit intangible		553
Other assets		2,531
Time deposits		(49,061	)
Deposits other than time deposits		(78,689	)
Other liabilities		(4,888	)
					16,046
Purchase gain on acquisition				$	1,120

XML

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

6 Months Ended

Jun. 30, 2014

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) [Abstract]

Activity in accumulated other comprehensive income

 

The activity in accumulated other comprehensive income (loss) for the three months ended June 30, 2014 and 2013 is as follows:

	Accumulated Other Comprehensive Income (Loss) (1), (2)
	Unrealized gains (losses) on securities available for sale			Defined benefit pension plan			Total
	(in thousands)
Balance at March 31, 2014	$	987		$	(1,312	)	$	(325	)
Other comprehensive income before reclassifications		725			-			725
Amounts reclassified from accumulated other comprehensive income (loss)		(10	)		41			31
Period change		715			41			756
Balance at June 30, 2014	$	1,702		$	(1,271	)	$	431
Balance at March 31, 2013	$	2,965		$	(2,792	)	$	173
Other comprehensive loss before reclassifications		(1,878	)		-			(1,878	)
Amounts reclassified from accumulated other comprehensive income		-			44			44
Period change		(1,878	)		44			(1,834	)
Balance at June 30, 2013	$	1,087		$	(2,748	)	$	(1,661	)

(1) All amounts are net of tax. Related income tax expense or benefit is calculated using a Federal income tax rate of 34%.

(2) Amounts in parentheses indicate debits.

 

The activity in accumulated other comprehensive income (loss) for the six months ended June 30, 2014 and 2013 is as follows:

	Accumulated Other Comprehensive Income (Loss) (1), (2)
	Unrealized gains (losses) on securities available for sale			Defined benefit pension plan			Total
	(in thousands)
Balance at December 31, 2013	$	176		$	(1,354	)	$	(1,178	)
Other comprehensive income before reclassifications		1,537			-			1,537
Amounts reclassified from accumulated other comprehensive income (loss)		(11	)		83			72
Period change		1,526			83			1,609
Balance at June 30, 2014	$	1,702		$	(1,271	)	$	431
Balance at December 31, 2012	$	3,805		$	(2,835	)	$	970
Other comprehensive loss before reclassifications		(2,718	)		-			(2,718	)
Amounts reclassified from accumulated other comprehensive income		-			87			87
Period change		(2,718	)		87			(2,631	)
Balance at June 30, 2013	$	1,087		$	(2,748	)	$	(1,661	)

(1) All amounts are net of tax. Related income tax expense or benefit is calculated using a Federal income tax rate of 34%.

(2) Amounts in parentheses indicate debits.

Reclassification out of accumulated other comprehensive income

 

	Amount reclassified from accumulated other comprehensive incomeFor the three months ended June 30, (1)						Affected line item in the consolidated statements of net income
		2014			2013
		(in thousands)
Investment securities available for sale
Net securities gains reclassified into earnings		$	16		$	-		Gain on sale of investment securities
Related income tax expense			(6	)		-		Income tax expense
Net effect on accumulated other income for the period			10			-		Net of tax
Defined benefit pension plan (2)
Amortization of net actuarial loss		$	(61	)	$	(66	)	Compensation and benefits
Related income tax expense			20			22		Income tax expense
Net effect on accumulated other comprehensive income for the period			(41	)		(44	)	Net of tax
Total reclassification for the period		$	(31	)	$	(44	)	Net income

(1) Amounts in parentheses indicate debits.

(2) Included in the computation of net periodic pension cost. See Note 12 – Employee Benefit Plans for additional detail.

Amount reclassified from accumulated other comprehensive incomeFor the six months ended June 30, (1)					Affected line item in the consolidated statements of net income
	2014			2013
	(in thousands)
Investment securities available for sale
Net securities gains reclassified into earnings	$	17		$	-		Gain on sale of investment securities
Related income tax expense		(6	)		-		Income tax expense
Net effect on accumulated other  income for the period		11			-		Net of tax
Defined benefit pension plan (2)
Amortization of net actuarial loss and prior service cost	$	(123	)	$	(132	)	Compensation and benefits
Related income tax expense		40			45		Income tax expense
Net effect on accumulated other comprehensive income for the period		(83	)		(87	)	Net of tax
Total reclassification for the period	$	(72	)	$	(87	)	Net income

(1) Amounts in parentheses indicate debits.

(2) Included in the computation of net periodic pension cost. See Note 12 – Employee Benefit Plans for additional detail.

XML

PENDING MERGER

6 Months Ended

Jun. 30, 2014

PENDING MERGER [Abstract]

PENDING MERGER

NOTE 13 — PENDING MERGER

On June 3, 2014, National Penn Bancshares, Inc. (“National Penn”), the parent company of National Penn Bank, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with the Company pursuant to which the Company will merge with and into National Penn (the “Merger”). As part of the transaction, the Bank will also merge with and into National Penn Bank.

Pursuant to the terms of the Merger Agreement, upon completion of the Merger, each outstanding share of the Company‘s common stock will be converted into the right to receive $42.00 per share or 4.22 shares of the National Penn’s common stock, at the election of the Company’s shareholders, subject to proration. The aggregate cash consideration to be paid pursuant to the Merger Agreement must not exceed 40% of the total merger consideration and the aggregate stock consideration must not exceed 60% of the total merger consideration. Cash will be paid in lieu of fractional shares.

Subject to the satisfaction or waiver of all the conditions precedent to the Merger including receipt of approval from the Company's shareholders and all required regulatory approvals, the Merger is expected to close during the fourth quarter of 2014. If the Merger is not consummated under certain circumstances generally involving a third party proposal, the Company has agreed to pay National Penn a termination fee of $4.0 million.

XML

LOANS RECEIVABLE

6 Months Ended

Jun. 30, 2014

LOANS RECEIVABLE [Abstract]

LOANS RECEIVABLE

 

NOTE 9 — LOANS RECEIVABLE

Loans receivable are summarized as follows:

	At
	June 30, 2014			December 31, 2013
	(in thousands)
Held for investment:
Residential
Residential mortgages	$	355,658		$	371,961
Commercial
Real estate-commercial		131,157			129,345
Real estate-residential		23,697			20,005
Real estate-multi-family		18,936			16,623
Construction loans		8,998			8,773
Commercial and industrial loans		8,965			6,849
Total commercial loans		191,753			181,595
Consumer
Home equity and second mortgage		63,961			64,202
Other consumer		1,532			1,697
Total consumer loans		65,493			65,899
Total loans		612,904			619,455
Net deferred loan origination costs and unamortized premiums		1,341			1,288
Less allowance for loan losses		(4,148	)		(6,575	)
Total loans receivable	$	610,097		$	614,168
Held for sale:
Residential
Residential mortgages	$	129		$	349

The following tables present by credit quality indicators the composition of the commercial loan portfolio:

	At June 30, 2014
	Pass		Specialmention		Substandard		Doubtful		Total
	(in thousands)
Real estate-commercial	$	119,552	$	2,930	$	8,675	$	-	$	131,157
Real estate-residential		21,238		861		1,598		-		23,697
Real estate-multi-family		15,457		-		3,479		-		18,936
Construction loans		8,765		-		233		-		8,998
Commercial and industrial loans		8,936		29		-		-		8,965
Total	$	173,948	$	3,820	$	13,985	$	-	$	191,753

	At December 31, 2013
	Pass		Specialmention		Substandard		Doubtful		Total
	(in thousands)
Real estate-commercial	$	113,260	$	7,142	$	8,943	$	-	$	129,345
Real estate-residential		17,182		487		2,336		-		20,005
Real estate-multi-family		13,114		-		3,509		-		16,623
Construction loans		5,596		-		3,177		-		8,773
Commercial and industrial loans		6,817		32		-		-		6,849
Total	$	155,969	$	7,661	$	17,965	$	-	$	181,595

In order to assess and monitor the credit risk associated with commercial loans, the Company employs a risk rating methodology whereby each commercial loan is initially assigned a risk grade. At least annually, all risk ratings are reviewed in light of information received such as tax returns, rent rolls, cash flow statements, appraisals, and any other information which may affect the then-current risk rating, which is adjusted upward or downward as needed. At the end of each quarter the risk ratings are summarized and become a component of the evaluation of the allowance for loan losses. The Company’s risk rating definitions mirror those promulgated by banking regulators and are as follows:

Pass: A good quality loan characterized by satisfactory liquidity; reasonable debt capacity and coverage; acceptable management in all critical positions and normal operating results for its peer group. The Company has grades 1 through 6 within the Pass category which reflect the increasing amount of attention paid to the individual loan because of, among other things, trends in debt service coverage, management weaknesses, or collateral values.

Special mention: A loan that has potential weaknesses that deserves management’s close attention. Although the loan is currently protected, if left uncorrected, potential weaknesses may result in the deterioration of the loan’s repayment prospects or in the borrower’s future credit position. Potential weaknesses include: weakening financial condition; an unrealistic repayment program; inadequate sources of funds; lack of adequate collateral; credit information; or documentation. There is currently the capacity to meet interest and principal payments, but further adverse business, financial, or economic conditions may impair the borrower’s capacity or willingness to pay interest and repay principal.

Substandard: A loan that is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. Although no loss of principal or interest is presently apparent, there is the distinct possibility that a partial loss of interest and/or principal will be sustained if the deficiencies are not corrected. There is a current identifiable vulnerability to default

and the dependence upon favorable business, financial, or economic conditions to meet timely payment of interest and repayment of principal.

Doubtful: A loan which has all the weaknesses inherent in a substandard asset with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors which may work to strengthen the asset, classification as an estimated loss is deferred until a more exact status is determined. Pending factors include: proposed merger, acquisition, liquidation, capital injection, perfecting liens on additional collateral, and refinancing plans.

Loss: Loans which are considered uncollectible and have been charged off. The Company has charged-off all loans classified as loss.

Loans classified as special mention, substandard or doubtful are evaluated for potential impairment. All impaired loans are placed on nonaccrual status and are classified as substandard or doubtful.

The following tables present by credit quality indicator the composition of the residential mortgage and consumer loan portfolios:

	At June 30, 2014
	Performing		Nonperforming		Total
	(in thousands)
Residential mortgages	$	354,502	$	1,156	$	355,658
Home equity and second mortgage		63,836		125		63,961
Other consumer		1,532		-		1,532
Total	$	419,870	$	1,281	$	421,151

	At December 31, 2013
	Performing		Nonperforming		Total
	(in thousands)
Residential mortgages	$	368,967	$	2,994	$	371,961
Home equity and second mortgage		63,902		300		64,202
Other consumer		1,697		-		1,697
Total	$	434,566	$	3,294	$	437,860

In order to assess and monitor the credit risk associated with residential mortgage loans and consumer loans which include second mortgage loans and home equity secured lines of credit, the Company relies upon the payment status of the loan. Residential mortgage and other consumer loans 90 days or more past due are placed on nonaccrual status, classified as nonperforming, and evaluated for impairment.

The following table presents by class nonperforming loans including impaired loans and loan balances 90 days or more past due for which the accrual of interest has been discontinued:

	At
	June 30, 2014		December 31, 2013
	(in thousands)
Residential
Residential mortgages	$	1,156	$	2,994
Commercial
Real estate-commercial		1,769		774
Real estate-residential		690		896
Real estate-multi-family		191		191
Construction loans		233		3,177
Consumer
Home equity and second mortgage		125		300
Total nonperforming loans	$	4,164	$	8,332

The following tables present  loans individually evaluated for impairment by class:

	At June 30, 2014
	Recorded investment		Unpaid principal balance		Related allowance		Average recorded investment		Interest income recognized
	(in thousands)
With an allowance recorded:
Residential
Residential mortgages	$	1,124	$	1,124	$	281	$	1,129	$	-
Commercial
Real estate-commercial		132		132		64		44		-
Real estate-residential		496		496		200		569
Construction loans		233		233		21		1,215		-
		1,985		1,985		566		2,957		-
With no allowance recorded:
Residential
Residential mortgages	$	22	$	33		-	$	409	$	-
Commercial
Real estate-commercial		1,637		1,639		-		1,103		-
Real estate-residential		194		321		-		184		-
Real estate-multi-family		191		372		-		191		-
Consumer
Home equity and second mortgage		15		16		-		39		-
		2,059		2,381		-		1,926		-
Total	$	4,044	$	4,366	$	566	$	4,883	$	-

	At December 31, 2013
	Recorded investment		Unpaid principal balance		Related allowance		Average recorded investment		Interest income recognized
	(in thousands)
With an allowance recorded:
Residential
Residential mortgages	$	1,135	$	1,135	$	128	$	1,620	$	-
Commercial
Real estate-commercial		-		-		-		109		-
Real estate-residential		712		712		77		211		-
Construction loans		3,177		3,375		2,021		3,701		-
		5,024		5,222		2,226		5,641		-
With no allowance recorded:
Residential
Residential mortgages		1,184		1,184		-		241		-
Commercial
Real estate-commercial		774		774		-		607		-
Real estate-residential		184		321		-		108		-
Real estate-multi-family		191		372		-		77		-
Consumer
Home equity and second mortgage		47		81		-		7		-
		2,380		2,732		-		1,040		-
Total	$	7,404	$	7,954	$	2,226	$	6,681	$	-

The following tables present by class the contractual aging of delinquent loans :

	At June 30, 2014
	Current		30-59 Days past due		60-89 Days past due		Loans past due 90 days or more		Total past due		Total loans		Recorded investment over 90 days and accruing interest
	(in thousands)
Residential
Residential mortgages	$	353,227	$	1,275	$	-	$	1,156	$	2,431	$	355,658	$	-
Commercial
Real estate-commercial		128,815		572		400		1,370		2,342		131,157		-
Real estate-residential		23,018		-		-		679		679		23,697		-
Real estate-multi-family		18,745		-		-		191		191		18,936		-
Construction loans		8,765		-		-		233		233		8,998		-
Commercial and industrial loans		8,957		-		8		-		8		8,965		-
Consumer
Home equity and second mortgage		63,799		37		-		125		162		63,961		-
Other consumer		1,532		-		-		-		-		1,532		-
Total	$	606,858	$	1,884	$	408	$	3,754	$	6,046	$	612,904	$	-

	At December 31, 2013
	Current		30-59 Days past due		60-89 Days past due		Loans past due 90 days or more		Total past due		Total loans		Recorded investment over 90 days and accruing interest
	(in thousands)
Residential
Residential mortgages	$	369,271	$	111	$	-	$	2,579	$	2,690	$	371,961	$	-
Commercial
Real estate-commercial		127,786		785		-		774		1,559		129,345		-
Real estate-residential		18,589		180		340		896		1,416		20,005		-
Real estate-multi-family		16,432		-		-		191		191		16,623		-
Construction loans		5,596		-		-		3,177		3,177		8,773		-
Commercial and industrial loans		6,849		-		-		-		-		6,849		-
Consumer
Home equity and second mortgage		63,543		355		4		300		659		64,202		-
Other consumer		1,686		7		4		-		11		1,697		-
Total	$	609,752	$	1,438	$	348	$	7,917	$	9,703	$	619,455	$	-

Activity in the allowance for loan losses for the three and six months ended June 30, 2014 is summarized as follows:

	Balance April 1, 2014		Provision			Charge-offs			Recoveries		BalanceJune 30,2014
	(in thousands)
Residential
Residential mortgages	$	1,614	$	(31	)	$	-		$	-	$	1,583
Commercial
Real estate-commercial		950		103			-			-		1,053
Real estate-residential		412		(45	)		-			-		367
Real estate-multi-family		137		(21	)		-			-		116
Construction loans		355		104			-			-		459
Commercial and industrial loans		101		(46	)		-			3		58
Consumer
Home equity and second mortgage		227		18			(19	)		-		226
Other consumer		34		(7	)		(4	)		6		29
Unallocated		232		25			-			-		257
Total	$	4,062	$	100		$	(23	)	$	9	$	4,148

	Balance January 1, 2014		Provision			Charge-offs			Recoveries		BalanceJune 30,2014
	(in thousands)
Residential
Residential mortgages	$	1,722	$	29		$	(169	)	$	1	$	1,583
Commercial
Real estate-commercial		1,220		(167	)		-			-		1,053
Real estate-residential		437		37			(107	)		-		367
Real estate-multi-family		136		(20	)		-			-		116
Construction loans		2,208		430			(2,179	)		-		459
Commercial and industrial loans		97		(43	)		-			4		58
Consumer
Home equity and second mortgage		214		78			(66	)		-		226
Other consumer		50		(10	)		(18	)		7		29
Unallocated		491		(234	)		-			-		257
Total	$	6,575	$	100		$	(2,539	)	$	12	$	4,148

Activity in the allowance for loan losses for the three and six months ended June 30, 2013 is summarized as follows:

	Balance April 1, 2013		Provision			Charge-offs			Recoveries		BalanceJune 30,2013
	(in thousands)
Residential
Residential mortgages	$	1,800	$	77		$	(109	)	$	12	$	1,780
Commercial
Real estate-commercial		1,311		(74	)		-			-		1,237
Real estate-residential		601		(241	)		-			-		360
Real estate-multi-family		237		(65	)		-			-		172
Construction loans		1,894		484			(39	)		3		2,342
Commercial and industrial loans		125		(55	)		-			1		71
Consumer
Home equity and second mortgage		211		(1	)		-			-		210
Other consumer		11		27			(16	)		2		24
Unallocated		472		248			-			-		720
Total	$	6,662	$	400		$	(164	)	$	18	$	6,916

	Balance January 1, 2013		Provision			Charge-offs			Recoveries		BalanceJune 30,2013
	(in thousands)
Residential
Residential mortgages	$	1,849	$	126		$	(207	)	$	12	$	1,780
Commercial
Real estate-commercial		1,754		(82	)		(435	)		-		1,237
Real estate-residential		608		(189	)		(59	)		-		360
Real estate-multi-family		245		(73	)		-			-		172
Construction loans		1,697		781			(150	)		14		2,342
Commercial and industrial loans		119		(52	)		-			4		71
Consumer
Home equity and second mortgage		251		(34	)		(15	)		8		210
Other consumer		11		30			(19	)		2		24
Unallocated		388		332			-			-		720
Total	$	6,922	$	839		$	(885	)	$	40	$	6,916

Despite the above allocation, the allowance for credit losses is general in nature and is available to absorb losses from any portfolio segment.

Loans receivable include certain loans that have been modified as Troubled Debt Restructurings (“TDRs”), where economic concessions have been granted to borrowers experiencing financial difficulties. The objective for granting the concessions is to maximize the recovery of the investment in the loan and may include reductions in the interest rate, payment extensions, forgiveness of interest or principal, forbearance or other actions. TDRs are classified as nonperforming at the time of restructuring and typically return to performing status after considering the borrower’s positive repayment performance for a reasonable period of time, usually six months.

Loans modified in a TDR are evaluated individually for impairment based on the present value of expected cash flows or the fair value of the underlying collateral less selling costs for collateral dependent loans. If the value of the modified loan is less than the recorded investment in the loan, impairment is recognized through an increase by an additional provision to the allowance for loan losses. In periods subsequent to modification, TDRs are evaluated for possible additional impairment.

There were no new loan modifications deemed TDRs during the three and six months ended June 30, 2014 and 2013.

The following table presents loans classified as TDRs that subsequently defaulted:

	For the three months endedJune 30, 2014				For the six months endedJune 30, 2014
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Residential	(in thousands)				(in thousands)
Residential mortgage		1	$	787		1	$	787
Total		1	$	787		1	$	787

No loans previously classified as TDRs defaulted during the six months ended June 30, 2013.

In 2013, the Company acquired loans for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable that all contractually required payments would not be collected. The following table presents information regarding the outstanding principal balance and related carrying amount:

	At June 30, 2014		At December 31, 2013
	(in thousands)
Outstanding principal balance	$	742	$	808
Carrying amount		412		444

The table below presents changes in the amortizable yield for purchased credit-impaired loans as follows for six months ended June 30, 2014:

	At June 30, 2014
	(in thousands)
Balance at beginning of period	$	154
Acquisition of impaired loans		-
Accretion		(12	)
Balance at end of period	$	142

There was no accretion during the three months ended June 30, 2014.

An impairment reserve of $64,000 has been assigned to acquired loans with or without specific evidence of deterioration in credit quality at June 30, 2014. There was no allowance for loan losses recorded for acquired loans with or without specific evidence of deterioration in credit quality at December 31, 2013.

The following tables present by class the ending balance of the allowance for loan losses and ending loan balance based on impairment method as of June 30, 2014. Acquired loans were recorded at fair value on their purchase date without a carryover of the related allowance for loan losses.

	Evaluated for impairment
Allowance for loan losses	Loans acquired without credit deterioration		Loans acquired with credit deterioration		Individually		Collectively		Total
	(in thousands)
Residential
Residential mortgages	$	-	$	-	$	281	$	1,302	$	1,583
Commercial
Real estate-commercial		64		-		-		989		1,053
Real estate-residential		-		-		200		167		367
Real estate-multi-family		-		-		-		116		116
Construction loans		-		-		21		438		459
Commercial and industrial loans		-		-		-		58		58
Consumer
Home equity and second mortgage		-		-		-		226		226
Other consumer		-		-		-		29		29
Unallocated		-		-		-		257		257
Total	$	64	$	-	$	502	$	3,582	$	4,148

	Evaluated for impairment
Loans receivable	Loans acquired without credit deterioration		Loans acquired with credit deterioration		Individually		Collectively		Total
	(in thousands)
Residential
Residential mortgages	$	46,448	$	22	$	1,124	$	308,064	$	355,658
Commercial
Real estate-commercial		11,774		-		1,771		117,612		131,157
Real estate-residential		4,781		184		496		18,236		23,697
Real estate-multi-family		1,070		191		-		17,675		18,936
Construction loans		-		-		233		8,765		8,998
Commercial and industrial loans		239		-		-		8,726		8,965
Consumer
Home equity and second mortgage		22,661		15		-		41,285		63,961
Other consumer		107		-		-		1,425		1,532
Total	$	87,080	$	412	$	3,624	$	521,788	$	612,904

The following tables present by class the ending balance of the allowance for loan losses and ending loan balance based on impairment method as of December 31, 2013. Acquired loans were recorded at fair value on their purchase date without a carryover of the related allowance for loan losses.

	Evaluated for impairment
Allowance for loan losses	Loans acquired without credit deterioration		Loans acquired with credit deterioration		Individually		Collectively		Total
	(in thousands)
Residential
Residential mortgages	$	-	$	-	$	128	$	1,594	$	1,722
Commercial
Real estate-commercial		-		-		-		1,220		1,220
Real estate-residential		-		-		77		360		437
Real estate-multi-family		-		-		-		136		136
Construction loans		-		-		2,021		187		2,208
Commercial and industrial loans		-		-		-		97		97
Consumer
Home equity and second mortgage		-		-		-		214		214
Other consumer		-		-		-		50		50
Unallocated		-		-		-		491		491
Total	$	-	$	-	$	2,226	$	4,349	$	6,575

	Evaluated for impairment
Loans receivable	Loans acquired without credit deterioration		Loans acquired with credit deterioration		Individually		Collectively		Total
	(in thousands)
Residential
Residential mortgages	$	50,985	$	22	$	2,297	$	318,657	$	371,961
Commercial
Real estate-commercial		12,787		-		774		115,784		129,345
Real estate-residential		4,913		184		712		14,196		20,005
Real estate-multi-family		1,116		191		-		15,316		16,623
Construction loans		-		-		3,177		5,596		8,773
Commercial and industrial loans		279		-		-		6,570		6,849
Consumer
Home equity and second mortgage		24,806		47		-		39,349		64,202
Other consumer		126		-		-		1,571		1,697
Total	$	95,012	$	444	$	6,960	$	517,039	$	619,455

XML

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

6 Months Ended

Jun. 30, 2014

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) [Abstract]

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

 

NOTE 7 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The activity in accumulated other comprehensive income (loss) for the three months ended June 30, 2014 and 2013 is as follows:

	Accumulated Other Comprehensive Income (Loss) (1), (2)
	Unrealized gains (losses) on securities available for sale			Defined benefit pension plan			Total
	(in thousands)
Balance at March 31, 2014	$	987		$	(1,312	)	$	(325	)
Other comprehensive income before reclassifications		725			-			725
Amounts reclassified from accumulated other comprehensive income (loss)		(10	)		41			31
Period change		715			41			756
Balance at June 30, 2014	$	1,702		$	(1,271	)	$	431
Balance at March 31, 2013	$	2,965		$	(2,792	)	$	173
Other comprehensive loss before reclassifications		(1,878	)		-			(1,878	)
Amounts reclassified from accumulated other comprehensive income		-			44			44
Period change		(1,878	)		44			(1,834	)
Balance at June 30, 2013	$	1,087		$	(2,748	)	$	(1,661	)

(1) All amounts are net of tax. Related income tax expense or benefit is calculated using a Federal income tax rate of 34%.

(2) Amounts in parentheses indicate debits.

	Amount reclassified from accumulated other comprehensive incomeFor the three months ended June 30, (1)						Affected line item in the consolidated statements of net income
	2014			2013
	(in thousands)
Investment securities available for sale
Net securities gains reclassified into earnings	$	16		$	-		Gain on sale of investment securities
Related income tax expense		(6	)		-		Income tax expense
Net effect on accumulated other income for the period		10			-		Net of tax
Defined benefit pension plan (2)
Amortization of net actuarial loss	$	(61	)	$	(66	)	Compensation and benefits
Related income tax expense		20			22		Income tax expense
Net effect on accumulated other comprehensive income for the period		(41	)		(44	)	Net of tax
Total reclassification for the period	$	(31	)	$	(44	)	Net income

(1) Amounts in parentheses indicate debits.

(2) Included in the computation of net periodic pension cost. See Note 12 – Employee Benefit Plans for additional detail.

The activity in accumulated other comprehensive income (loss) for the six months ended June 30, 2014 and 2013 is as follows:

	Accumulated Other Comprehensive Income (Loss) (1), (2)
	Unrealized gains (losses) on securities available for sale			Defined benefit pension plan			Total
	(in thousands)
Balance at December 31, 2013	$	176		$	(1,354	)	$	(1,178	)
Other comprehensive income before reclassifications		1,537			-			1,537
Amounts reclassified from accumulated other comprehensive income (loss)		(11	)		83			72
Period change		1,526			83			1,609
Balance at June 30, 2014	$	1,702		$	(1,271	)	$	431
Balance at December 31, 2012	$	3,805		$	(2,835	)	$	970
Other comprehensive loss before reclassifications		(2,718	)		-			(2,718	)
Amounts reclassified from accumulated other comprehensive income		-			87			87
Period change		(2,718	)		87			(2,631	)
Balance at June 30, 2013	$	1,087		$	(2,748	)	$	(1,661	)

(1) All amounts are net of tax. Related income tax expense or benefit is calculated using a Federal income tax rate of 34%.

(2) Amounts in parentheses indicate debits.

	Amount reclassified from accumulated other comprehensive incomeFor the six months ended June 30, (1)						Affected line item in the consolidated statements of net income
	2014			2013
	(in thousands)
Investment securities available for sale
Net securities gains reclassified into earnings	$	17		$	-		Gain on sale of investment securities
Related income tax expense		(6	)		-		Income tax expense
Net effect on accumulated other  income for the period		11			-		Net of tax
Defined benefit pension plan (2)
Amortization of net actuarial loss and prior service cost	$	(123	)	$	(132	)	Compensation and benefits
Related income tax expense		40			45		Income tax expense
Net effect on accumulated other comprehensive income for the period		(83	)		(87	)	Net of tax
Total reclassification for the period	$	(72	)	$	(87	)	Net income

(1) Amounts in parentheses indicate debits.

(2) Included in the computation of net periodic pension cost. See Note 12 – Employee Benefit Plans for additional detail.

XML

INVESTMENT SECURITIES

6 Months Ended

Jun. 30, 2014

INVESTMENT SECURITIES [Abstract]

INVESTMENT SECURITIES

 

NOTE 8 — INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, and fair value of the Company’s investment securities are summarized as follows:

	At June 30, 2014
	Amortizedcost		Gross unrealized gains		Gross unrealized losses			Fairvalue
	(in thousands)
Available for sale
U.S. Government and federal agencies	$	11,884	$	45	$	(168	)	$	11,761
State and political subdivisions		59,775		2,179		(304	)		61,650
Residential mortgage-backed securities issued by quasi-governmental agencies		55,448		966		(139	)		56,275
Total investment securities available for sale		127,107		3,190		(611	)		129,686
Held to maturity
Residential mortgage-backed securities issued by quasi-governmental agencies		1,340		176		(1	)		1,515
Total investment securities	$	128,447	$	3,366	$	(612	)	$	131,201

	At December 31, 2013
	Amortizedcost		Gross unrealized gains		Gross unrealized losses			Fairvalue
	(in thousands)
Available for sale
U.S. Government and federal agencies	$	18,572	$	4	$	(513	)	$	18,063
State and political subdivisions		60,159		1,526		(1,016	)		60,669
Residential mortgage-backed securities issued by quasi-governmental agencies		45,015		540		(275	)		45,280
Total investment securities available for sale		123,746		2,070		(1,804	)		124,012
Held to maturity
Residential mortgage-backed securities issued by quasi-governmental agencies		1,490		191		(1	)		1,680
Total investment securities	$	125,236	$	2,261	$	(1,805	)	$	125,692

Gross realized gains were $22,000 from the sale proceeds of investment securities available for sale of $3.8 million for the three months ended June 30, 2014. Gross realized losses were $6,000 from the sale proceeds of investment securities available for sale of $948,000 for the three months ended June 30, 2014.

Gross realized gains were $27,000 from the sale proceeds of investment securities available for sale of $4.8 million for the six months ended June 30, 2014. Gross realized losses were $10,000 from the sale proceeds of investment securities available for sale of $1.9 million for the six months ended June 30, 2014.

There were no sales of investment securities during the three or six months ended June 30, 2013.

The amortized cost and fair value of investment and mortgage-backed securities, by contractual maturity, are shown below. 

	At June 30, 2014
	Available for sale				Held to maturity
	Amortized cost		Fair value		Amortized cost		Fair value
	(in thousands)
Investment securities
Due in one year or less	$	400	$	401	$	-	$	-
Due after one year through five years		18,541		18,818		-		-
Due after five years through ten years		31,733		32,241		-		-
Due after ten years		20,985		21,951		-		-
		71,659		73,411		-		-
Mortgage-backed securities		55,448		56,275		1,340		1,515
Total investment and mortgage-backed securities	$	127,107	$	129,686	$	1,340	$	1,515

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at June 30, 2014:

	Number		Less than 12 months					12 months or longer					Total
Description of Securities	of Securities		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(dollars in thousands)
U.S. Government and federal agencies		3	$	949	$	(5	)	$	6,837	$	(163	)	$	7,786	$	(168	)
State and political subdivisions		16		4,176		(37	)		8,726		(267	)		12,902		(304	)
Residential mortgage-backed securities issued by quasi- governmental agencies		39		9,543		(140	)		-		-			9,543		(140	)
Total temporarily impaired securities		58	$	14,668	$	(182	)	$	15,563	$	(430	)	$	30,231	$	(612	)

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at December 31, 2013:

			Less than					12 months
	Number		12 months					or longer				Total
Description of Securities	of Securities		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(dollars in thousands)
U.S. Government and federal agencies		13	$	17,028	$	(513	)	$	-	$	-	$	17,028	$	(513	)
State and political subdivisions		24		19,646		(1,016	)		-		-		19,646		(1,016	)
Residential mortgage-backed securities issued by quasi- governmental agencies		65		24,508		(276	)		-		-		24,508		(276	)
Total temporarily impaired securities		102	$	61,182	$	(1,805	)	$	-	$	-	$	61,182	$	(1,805	)

On a quarterly basis, temporarily impaired securities are evaluated to determine whether such impairment is an other-than-temporary impairment (“OTTI”). The Company has performed this evaluation and has determined that the unrealized losses at June 30, 2014 and December 31, 2013, respectively, are not considered other-than-temporary but are the result of changes in interest rates, and are therefore reflected in other comprehensive income (loss).

XML

FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2014

FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 10 — FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

The following tables present information about the Company’s financial instruments measured at fair value as of June 30, 2014 and December 31, 2013. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement hierarchy has been established for inputs in valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Determination of the appropriate level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement for the instrument or security.

The fair value hierarchy levels are summarized below:

· Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

· Level 2 inputs are inputs that are observable for the asset or liability, either directly or indirectly.

· Level 3 inputs are unobservable and contain assumptions of the party assessing the fair value of the asset or liability.

 Assets measured at fair value on a recurring basis segregated by fair value hierarchy level are summarized below:

							Balance as of
	Fair value hierarchy levels						June 30,
	Level 1		Level 2		Level 3		2014
	(in thousands)
Assets
Investment securities available for sale
U.S. Government and federal agencies	$	-	$	11,761	$	-	$	11,761
State and political subdivisions		-		61,650		-		61,650
Residential mortgage-backed securities issued by quasi- governmental agencies		-		56,275		-		56,275
Total investment securities available for sale	$	-	$	129,686	$	-	$	129,686
Loans receivable, held for sale	$	-	$	129	$	-	$	129

							Balance as of
	Fair value hierarchy levels						December 31,
	Level 1		Level 2		Level 3		2013
	(in thousands)
Assets
Investment securities available for sale
U.S. Government and federal agencies	$	-	$	18,063	$	-	$	18,063
State and political subdivisions		-		60,669		-		60,669
Residential mortgage-backed securities issued by quasi- governmental agencies		-		45,280		-		45,280
Total investment securities available for sale	$	-	$	124,012	$	-	$	124,012
Loans receivable, held for sale	$	-	$	349	$	-	$	349

Investment securities available for sale and mortgage-backed securities available for sale are valued primarily by a third party pricing agent. U.S. Government and federal agency securities are primarily priced through a multi-dimensional relational model, a Level 2 hierarchy, which incorporates dealer quotes and other market information including, defined sector breakdown, benchmark yields, base spread, yield to maturity and corporate actions. State and political subdivision securities are valued within the Level 2 hierarchy using inputs with a series of matrices that reflect benchmark yields, ratings updates, and spread adjustments. Mortgage-backed securities include Government National Mortgage Association (“GNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”) and Federal National Mortgage Association (“FNMA”) certificates which are valued under a Level 2 hierarchy using a matrix correlation to benchmark yields, spread analysis, and prepayment speeds.

 Values for loans held for sale utilize active pricing quotes which exist in the secondary market and are therefore deemed a Level 2 hierarchy.

Assets measured at fair value on a nonrecurring basis segregated by fair value hierarchy level at June 30, 2014 are summarized below:

							Balance as of
	Fair value hierarchy levels						June 30,
	Level 1		Level 2		Level 3		2014
	(in thousands)
Impaired loans	$	-	$	-	$	3,478	$	3,478
Real estate acquired through foreclosure		-		-		5,711		5,711
Mortgage servicing rights		-		1,472		-		1,472

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Bank has utilized Level 3 inputs to determine fair value at June 30, 2014:

					Range of
					inputs
Description	Fair value estimate		Valuationtechnique	UnobservableInput	(weighted average)
Impaired loans	$	3,478	Appraisal of collateral (1)	Discount rate to reflect current market conditions and ultimate recoverability		5%-15%(14.00	%)
Real estate acquired through foreclosure		5,711	Appraisal of collateral (1)	Discount rate to reflect current market conditions and liquidation expenses		5%-20%(16.90	%)

(1) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

Assets measured at fair value on a nonrecurring basis segregated by fair value hierarchy level at December 31, 2013 are summarized below:

							Balance as of
	Fair value hierarchy levels						December 31,
	Level 1		Level 2		Level 3		2013
	(in thousands)
Impaired loans	$	-	$	-	$	5,178	$	5,178
Real estate acquired through foreclosure		-		-		5,601		5,601
Mortgage servicing rights		-		1,472		-		1,472

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Bank has utilized Level 3 inputs to determine fair value at December 31, 2013:

					Range of
					inputs
Description	Fair value estimate		Valuationtechnique	UnobservableInput	(weighted average)
Impaired loans	$	5,178	Appraisal of collateral (1)	Discount rate to reflect current market conditions and ultimate recoverability		5%-15%(6.59	%)
Real estate acquired through foreclosure		5,601	Appraisal of collateral (1)	Discount rate to reflect current market conditions and liquidation expenses		5%-20%(17.47	%)

(1) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

The fair value of impaired loans is generally determined through independent appraisals of the underlying collateral, which generally include Level 3 inputs that are not identifiable. Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. Impaired loans are evaluated and valued while the loan is identified as impaired, at the lower of the recorded investment in the loan or fair value. The range and weighted average of liquidation expenses are presented as a percent of the appraised value.

Real estate acquired through foreclosure is initially valued at the lower of the recorded investment in the loan or fair value at foreclosure and subsequently adjusted for further decreases in market value, less costs to sell, if necessary. Fair value is determined by using the value of the real estate acquired through foreclosure based on appraisals prepared by qualified independent licensed appraisers contracted by the Company to perform the assessment and is therefore classified as a Level 3 hierarchy. 

The Company retains a qualified valuation service to calculate the amortized cost and to determine the fair value of the mortgage servicing rights. The valuation service utilizes discounted cash flow analyses adjusted for prepayment speeds, market discount rates and conditions existing in the secondary servicing market. Hence, the fair value of mortgage servicing rights is deemed a Level 2 hierarchy. The amortized cost basis of the Company’s mortgage servicing rights was $1.5 million at June 30, 2014 and December 31, 2013. The fair value of the mortgage servicing rights was $1.5 million at June 30, 2014 and December 31, 2013 and was included in other assets in the consolidated balance sheets.

In addition to financial instruments recorded at fair value in the Company’s financial statements, disclosure of the estimated fair value of all of an entity’s assets and liabilities considered to be financial instruments is also required. For the Bank, as for most financial institutions, the majority of its assets and liabilities are considered financial instruments. However, many such instruments lack an available trading market as characterized by a willing buyer and willing seller engaging in an exchange transaction. Also, it is the Company’s general practice and intent to hold its financial instruments to maturity or available for sale and to not engage in trading or significant sales activities. For fair value disclosure purposes, the Company substantially utilized the established fair value measurement hierarchy.

Changes in the assumptions or methodologies used to estimate fair values may materially affect the estimated amounts. In addition, there may not be reasonable comparability between entities due to the wide range of permitted assumptions and methodologies in the absence of active markets. This lack of uniformity gives rise to a high degree of subjectivity in estimating financial instrument fair values.

Fair values have been estimated using data which management considered the best available, as generally provided by estimation methodologies deemed suitable for the pertinent category of financial instrument. The recorded carrying amounts and fair values segregated by fair value hierarchy level at June 30, 2014 and December 31, 2013 are summarized below:

	At June 30, 2014
	Carrying		Fair		Fair value hierarchy levels
	value		value		Level 1		Level 2		Level 3
Assets	(in thousands)
Cash and cash equivalents	$	48,291	$	48,291	$	48,291	$	-	$	-
Investment securities		73,411		73,411		-		73,411		-
Mortgage-backed securities		57,615		57,790		-		57,790		-
Loans receivable, net		610,226		620,094		-		129		619,965
Liabilities
Deposits with stated maturities	$	181,875	$	183,453	$	-	$	-	$	183,453
Deposits with no stated maturities		504,113		504,113		504,113		-		—
Borrowings with stated maturities		47,120		46,678		-		-		46,678

	At December 31, 2013
	Carrying		Fair		Fair value hierarchy levels
	value		value		Level 1		Level 2		Level 3
Assets	(in thousands)
Cash and cash equivalents	$	45,310	$	45,310	$	45,310	$	-	$	-
Investment securities		78,732		78,732		-		78,732		-
Mortgage-backed securities		46,770		46,960		-		46,960		-
Loans receivable, net		614,517		614,246		-		349		613,897
Liabilities
Deposits with stated maturities	$	190,492	$	193,258	$	-	$	-	$	193,258
Deposits with no stated maturities		493,410		493,410		493,410		-		—
Borrowings with stated maturities		49,605		48,426		-		-		48,426

The fair value of cash and cash equivalents equals the carrying amount. The fair value of investment and mortgage-backed securities is described and presented under fair value measurement guidelines as discussed earlier.

The fair value of loans receivable has been estimated using the present value of cash flows, discounted at the approximate current market rates, and giving consideration to estimated prepayment risk but not adjusted for credit risk. Loans receivable also include loans receivable held for sale.

The fair value of deposits and borrowings with stated maturities has been estimated using the present value of cash flows, discounted at rates approximating current market rates for similar liabilities. Fair value of deposits and borrowings with floating interest rates is generally presumed to approximate the recorded carrying amounts.

The fair value of deposits with no stated maturities is generally presumed to approximate the carrying amount (the amount payable on demand). The fair value of deposits with floating interest rates is generally presumed to approximate the recorded carrying amounts.

The Bank’s remaining assets and liabilities are not considered financial instruments. No disclosure of the relationship value of the Bank’s depositors or customers is required.

XML

LOANS RECEIVABLE, Loan Receivable Summary (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Held for investment [Abstract]
Total loans	$ 612,904	$ 619,455
Net deferred loans origination cost and unamortized premiums and discounts	1,341	1,288
Less allowance for loan losses	(4,148)	(6,575)
Total loans receivable	610,097	614,168
Residential mortgages [Member]
Held for investment [Abstract]
Total loans	355,658	371,961
Held for sale [Abstract]
Loans Held-for-sale, Mortgages	129	349
Real estate-commercial [Member]
Held for investment [Abstract]
Total loans	131,157	129,345
Real estate-residential [Member]
Held for investment [Abstract]
Total loans	23,697	20,005
Real estate-multi-family [Member]
Held for investment [Abstract]
Total loans	18,936	16,623
Construction loans [Member]
Held for investment [Abstract]
Total loans	8,998	8,773
Commercial and industrial loans [Member]
Held for investment [Abstract]
Total loans	8,965	6,849
Total commercial loans [Member]
Held for investment [Abstract]
Total loans	191,753	181,595
Home equity and second mortgage [Member]
Held for investment [Abstract]
Total loans	63,961	64,202
Other consumer [Member]
Held for investment [Abstract]
Total loans	1,532	1,697
Total consumer loans [Member]
Held for investment [Abstract]
Total loans	$ 65,493	$ 65,899

XML

ACQUISITION OF ROEBLING FINANCIAL CORP, INC. (Tables)

6 Months Ended

Jun. 30, 2014

ACQUISITION OF ROEBLING FINANCIAL CORP, INC. [Abstract]

Net assets as of the acquisition date

 

The acquired assets and assumed liabilities were measured at estimated fair values. Management made certain estimates and exercised judgment in accounting for the acquisition. The following condensed statement reflects the values assigned to Roebling’s net assets as of the acquisition date:

	At July 2, 2013
	(in thousands)
Total purchase price				$	14,926
Net assets acquired:
Cash	$	4,081
Investment securities		37,339
Loans receivable		102,026
Premises and equipment		2,154
Core deposit intangible		553
Other assets		2,531
Time deposits		(49,061	)
Deposits other than time deposits		(78,689	)
Other liabilities		(4,888	)
					16,046
Purchase gain on acquisition				$	1,120

XML

FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2014

FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]

Assets Measured at Fair Value on a Recurring Basis

 

 Assets measured at fair value on a recurring basis segregated by fair value hierarchy level are summarized below:

							Balance as of
	Fair value hierarchy levels						June 30,
	Level 1		Level 2		Level 3		2014
	(in thousands)
Assets
Investment securities available for sale
U.S. Government and federal agencies	$	-	$	11,761	$	-	$	11,761
State and political subdivisions		-		61,650		-		61,650
Residential mortgage-backed securities issued by quasi- governmental agencies		-		56,275		-		56,275
Total investment securities available for sale	$	-	$	129,686	$	-	$	129,686
Loans receivable, held for sale	$	-	$	129	$	-	$	129

							Balance as of
	Fair value hierarchy levels						December 31,
	Level 1		Level 2		Level 3		2013
	(in thousands)
Assets
Investment securities available for sale
U.S. Government and federal agencies	$	-	$	18,063	$	-	$	18,063
State and political subdivisions		-		60,669		-		60,669
Residential mortgage-backed securities issued by quasi- governmental agencies		-		45,280		-		45,280
Total investment securities available for sale	$	-	$	124,012	$	-	$	124,012
Loans receivable, held for sale	$	-	$	349	$	-	$	349

Assets Measured at Fair Value on a Nonrecurring Basis

 

Assets measured at fair value on a nonrecurring basis segregated by fair value hierarchy level at June 30, 2014 are summarized below:

							Balance as of
	Fair value hierarchy levels						June 30,
	Level 1		Level 2		Level 3		2014
	(in thousands)
Impaired loans	$	-	$	-	$	3,478	$	3,478
Real estate acquired through foreclosure		-		-		5,711		5,711
Mortgage servicing rights		-		1,472		-		1,472

 

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Bank has utilized Level 3 inputs to determine fair value at June 30, 2014:

					Range of
					inputs
Description	Fair value estimate		Valuationtechnique	UnobservableInput	(weighted average)
Impaired loans	$	3,478	Appraisal of collateral (1)	Discount rate to reflect current market conditions and ultimate recoverability		5%-15%(14.00	%)
Real estate acquired through foreclosure		5,711	Appraisal of collateral (1)	Discount rate to reflect current market conditions and liquidation expenses		5%-20%(16.90	%)

(1) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

Assets measured at fair value on a nonrecurring basis segregated by fair value hierarchy level at December 31, 2013 are summarized below:

							Balance as of
	Fair value hierarchy levels						December 31,
	Level 1		Level 2		Level 3		2013
	(in thousands)
Impaired loans	$	-	$	-	$	5,178	$	5,178
Real estate acquired through foreclosure		-		-		5,601		5,601
Mortgage servicing rights		-		1,472		-		1,472

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Bank has utilized Level 3 inputs to determine fair value at December 31, 2013:

					Range of
					inputs
Description	Fair value estimate		Valuationtechnique	UnobservableInput	(weighted average)
Impaired loans	$	5,178	Appraisal of collateral (1)	Discount rate to reflect current market conditions and ultimate recoverability		5%-15%(6.59	%)
Real estate acquired through foreclosure		5,601	Appraisal of collateral (1)	Discount rate to reflect current market conditions and liquidation expenses		5%-20%(17.47	%)

(1) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

Carrying Amounts and Fair Values

 

Fair values have been estimated using data which management considered the best available, as generally provided by estimation methodologies deemed suitable for the pertinent category of financial instrument. The recorded carrying amounts and fair values segregated by fair value hierarchy level at June 30, 2014 and December 31, 2013 are summarized below:

	At June 30, 2014
	Carrying		Fair		Fair value hierarchy levels
	value		value		Level 1		Level 2		Level 3
Assets	(in thousands)
Cash and cash equivalents	$	48,291	$	48,291	$	48,291	$	-	$	-
Investment securities		73,411		73,411		-		73,411		-
Mortgage-backed securities		57,615		57,790		-		57,790		-
Loans receivable, net		610,226		620,094		-		129		619,965
Liabilities
Deposits with stated maturities	$	181,875	$	183,453	$	-	$	-	$	183,453
Deposits with no stated maturities		504,113		504,113		504,113		-		—
Borrowings with stated maturities		47,120		46,678		-		-		46,678

	At December 31, 2013
	Carrying		Fair		Fair value hierarchy levels
	value		value		Level 1		Level 2		Level 3
Assets	(in thousands)
Cash and cash equivalents	$	45,310	$	45,310	$	45,310	$	-	$	-
Investment securities		78,732		78,732		-		78,732		-
Mortgage-backed securities		46,770		46,960		-		46,960		-
Loans receivable, net		614,517		614,246		-		349		613,897
Liabilities
Deposits with stated maturities	$	190,492	$	193,258	$	-	$	-	$	193,258
Deposits with no stated maturities		493,410		493,410		493,410		-		—
Borrowings with stated maturities		49,605		48,426		-		-		48,426

XML

FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Investment securities available for sale [Abstract]
Total investment securities available for sale	$ 129,686	$ 124,012
Recurring [Member]
Investment securities available for sale [Abstract]
U.S. Government and federal agencies	11,761	18,063
State and political subdivisions	61,650	60,669
Residential mortgage-backed securities issued by quasi- governmental agencies	56,275	45,280
Total investment securities available for sale	129,686	124,012
Loans receivable, held for sale	129	349
Level 1 [Member] | Recurring [Member]
Investment securities available for sale [Abstract]
U.S. Government and federal agencies	0	0
State and political subdivisions	0	0
Residential mortgage-backed securities issued by quasi- governmental agencies	0	0
Total investment securities available for sale	0	0
Loans receivable, held for sale	0	0
Level 2 [Member] | Recurring [Member]
Investment securities available for sale [Abstract]
U.S. Government and federal agencies	11,761	18,063
State and political subdivisions	61,650	60,669
Residential mortgage-backed securities issued by quasi- governmental agencies	56,275	45,280
Total investment securities available for sale	129,686	124,012
Loans receivable, held for sale	129	349
Level 3 [Member] | Recurring [Member]
Investment securities available for sale [Abstract]
U.S. Government and federal agencies	0	0
State and political subdivisions	0	0
Residential mortgage-backed securities issued by quasi- governmental agencies	0	0
Total investment securities available for sale	0	0
Loans receivable, held for sale	$ 0	$ 0

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) [Abstract]
Net income	$ 585	$ 1,800	$ 1,966	$ 3,023
Investment securities available for sale:
Unrealized holding gains (losses)	1,099	(2,845)	2,330	(4,118)
Tax effect	(374)	967	(793)	1,400
Reclassification adjustment for gains realized in net income	(16)	0	(17)	0
Tax effect	6	0	6	0
Net of tax amount	715	(1,878)	1,526	(2,718)
Pension plan benefit adjustment:
Related to actuarial losses and prior service cost	61	66	123	132
Tax effect	(20)	(22)	(40)	(45)
Net of tax amount	41	44	83	87
Total other comprehensive income (loss)	756	(1,834)	1,609	(2,631)
Comprehensive income (loss)	$ 1,341	$ (34)	$ 3,575	$ 392

XML

CONTINGENCIES

6 Months Ended

Jun. 30, 2014

CONTINGENCIES [Abstract]

CONTINGENCIES

 

NOTE 4 — CONTINGENCIES

The Company, from time to time, is a party to routine litigation that arises in the normal course of business. In the opinion of management, the resolution of this litigation, if any, would not have a material adverse effect on the Company’s consolidated financial position or results of operations.

XML

STOCK-BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2014

STOCK-BASED COMPENSATION [Abstract]

Estimated on the date of grant using the Black Scholes option pricing model with the following weighted average assumptions

 

The Company has stock benefit plans that allow the Company to grant options and restricted stock to employees and directors. The awards, which have a term of up to 10 years when issued, vest over a two to five year period. The exercise price of each award equals the market price of the Company’s stock on the date of the grant. The fair value of each option grant during the six months ended June 30, 2014 and 2013 was estimated on the date of grant using the Black‑Scholes option‑pricing model with the following weighted average assumptions:

	For the six months endedJune 30,
Weighted average assumptions	2014			2013
Dividend yield		1.61	%		0.83	%
Expected volatility		15.85	%		17.24	%
Risk-free interest rate		0.56	%		0.67	%
Fair value of options granted during the period	$	3.90		$	3.13
Expected lives in years		5			5

Option Activity

At June 30, 2014, there was $447,000 of total unrecognized compensation cost, net of estimated forfeitures, related to non-vested awards under the Company’s stock option plan. That cost is expected to be recognized over a weighted average period of 16.6 months. Option activity under the Company’s stock option plan as of June 30, 2014 was as follows:

	At June 30, 2014
	Number of shares			Weighted average exercise price per share		Weighted average remaining contractual term (in years)		Aggregate intrinsic value ($000)
Outstanding at January 1, 2014		254,144		$	23.71		2.81	$	1,562
Options granted		71,500			30.03		-		-
Options exercised		(400	)		19.67		-		-
Options forfeited		-			-		-		-
Options expired		-			-		-		-
Outstanding at June 30, 2014		325,244		$	25.10		2.81	$	5,750
Options exercisable at June 30, 2014		149,494		$	23.27		2.13	$	2,916

Aggregate intrinsic value and cash receipts of options exercised

The aggregate intrinsic value and cash receipts of options exercised are as follows:

	At June 30,
	2014		2013
	(in thousands)
Options Exercised
Aggregate intrinsic value of options exercised	$	4	$	3
Cash receipts from options exercised		8		13

Summary of Stock-based Compensation Expense

 

The Company issues stock of the Company as payment for director fees as permitted by the 2011 Director Stock Compensation Plan. The cost associated with these grants is included as a component of stock-based compensation. The following tables provide information regarding the Company’s stock-based compensation expense:

	For the three months endedJune 30,
	2014		2013
	(in thousands)
Stock-based compensation expense
Director fees	$	28	$	36
Stock option expense		95		84
Employee Stock Ownership Plan ("ESOP") expense		95		82
Total stock-based compensation expense	$	218	$	202

The Bank reports ESOP expense in an amount equal to the fair value of shares released from the ESOP to employees less dividends received on the allocated shares in the plan used for debt service. Dividends on allocated shares used to reduce ESOP expense totaled $17,000 and $9,000 for the three months ended June 30, 2014 and 2013, respectively. Stock-based compensation expense related to stock options resulted in a tax benefit of $31,000 and $26,000 for the three months ended June 30, 2014 and 2013, respectively.

	For the six months endedJune 30,
	2014		2013
	(in thousands)
Stock-based compensation expense
Director fees	$	56	$	70
Stock option expense		184		143
Employee Stock Ownership Plan ("ESOP") expense		176		163
Total stock-based compensation expense	$	416	$	376

XML

LOANS RECEIVABLE (Details), Activity in the Allowance for Loan Losses (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of period	$ 4,062	$ 6,662	$ 6,575	$ 6,922
Provision	100	400	100	839
Charge-offs	(23)	(164)	(2,539)	(885)
Recoveries	9	18	12	40
Balance, end of period	4,148	6,916	4,148	6,916
Amount of time the borrower's repayment performance returns to performing status			6 months
Residential mortgages [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of period	1,614	1,800	1,722	1,849
Provision	(31)	77	29	126
Charge-offs	0	(109)	(169)	(207)
Recoveries	0	12	1	12
Balance, end of period	1,583	1,780	1,583	1,780
Real estate-commercial [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of period	950	1,311	1,220	1,754
Provision	103	(74)	(167)	(82)
Charge-offs	0	0	0	(435)
Recoveries	0	0	0	0
Balance, end of period	1,053	1,237	1,053	1,237
Real estate-residential [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of period	412	601	437	608
Provision	(45)	(241)	37	(189)
Charge-offs	0	0	(107)	(59)
Recoveries	0	0	0	0
Balance, end of period	367	360	367	360
Real estate-multi-family [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of period	137	237	136	245
Provision	(21)	(65)	(20)	(73)
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Balance, end of period	116	172	116	172
Construction loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of period	355	1,894	2,208	1,697
Provision	104	484	430	781
Charge-offs	0	(39)	(2,179)	(150)
Recoveries	0	3	0	14
Balance, end of period	459	2,342	459	2,342
Commercial and industrial loans [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of period	101	125	97	119
Provision	(46)	(55)	(43)	(52)
Charge-offs	0	0	0	0
Recoveries	3	1	4	4
Balance, end of period	58	71	58	71
Home equity and second mortgage [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of period	227	211	214	251
Provision	18	(1)	78	(34)
Charge-offs	(19)	0	(66)	(15)
Recoveries	0	0	0	8
Balance, end of period	226	210	226	210
Other consumer [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of period	34	11	50	11
Provision	(7)	27	(10)	30
Charge-offs	(4)	(16)	(18)	(19)
Recoveries	6	2	7	2
Balance, end of period	29	24	29	24
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of period	232	472	491	388
Provision	25	248	(234)	332
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Balance, end of period	$ 257	$ 720	$ 257	$ 720

XML

SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2014

SUBSEQUENT EVENTS [Abstract]

SUBSEQUENT EVENTS [Text Block]

NOTE 14 — SUBSEQUENT EVENTS

Subsequent to June 30, 2014 and pursuant to the requirements contained in the Merger Agreement referred to in Note 13, the Company’s board of directors adopted resolutions which provided to freeze the status of the Plan effective October 15, 2014 (“the freeze date”). Accordingly, no additional participants will enter the Plan after October 15, 2014; no additional years of credited service for benefit accrual purposes will be earned after the freeze date under the Plan; and compensation earned by participants after the freeze date will not be taken into account under the Plan.

A curtailment charge of $2.1 million is estimated to increase the net periodic benefit cost by an increase to AOCI which will serve to eliminate prior service costs and certain losses recognized in AOCI. In addition, for purposes of determining the projected benefit obligation, AOCI is estimated to increase by a pre-tax adjustment of $1.1 million related to the reduction of the projected benefit obligation. The Company will recognize the appropriate effects of the curtailment charge and the reduced benefit obligations in accumulated other comprehensive income net of tax during the third quarter of 2014.