UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20429

FORM 10-Q

(Mark One)

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

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

HARLEYSVILLE SAVINGS FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Pennsylvania		23-3028464
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

(Address of principal executive offices)
(Zip Code)

(215) 256-8828

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 þ No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition 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 þ

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

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

Common Stock, $.01 Par Value, 3,650,045 shares outstanding as of February 12, 2010

 

 

HARLEYSVILLE SAVINGS FINANCIAL CORPORATION

Index

		PAGE(S)
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Statements of Financial Condition as of December 31, 2009, and September 30, 2009			1
Unaudited Consolidated Statements of Income for the Three Months Ended December 31, 2009 and 2008			2
Unaudited Consolidated Statements of Comprehensive Income for the Three Months Ended December 31, 2009 and 2008			3
Unaudited Consolidated Statements of Stockholders’ Equity for the Three Months Ended December 31, 2009 and 2008			4
Unaudited Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2009 and 2008			5
Notes to Unaudited Consolidated Financial Statements			6 - 16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			17 - 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk			19 - 20
Item 4. Controls and Procedures			21
Part II OTHER INFORMATION
Item 1. Legal Proceedings			22
Item 1A. Risk Factors			22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			22
Item 3. Defaults upon Senior Securities			22
Item 4. Submission of Matters to a Vote of Security Holders			22
Item 5. Other information			23
Signatures			24
Exhibit 31.1
Exhibit 31.2
Exhibit 32.0

Harleysville Savings Financial Corporation

		December 31,				September 30,
(In thousands, except share data)		2009				2009
Assets
Cash and amounts due from depository institutions		$	2,640			$	3,222
Interest bearing deposits			14,245				6,220
Total cash and cash equivalents			16,885				9,442
Investment securities held to maturity (fair value — December 31, $106,425; September 30, $106,174)			107,145				105,194
Investment securities available-for-sale at fair value			8,182				6,728
Mortgage-backed securities held to maturity (fair value — December 31, $158,967; September 30, $169,210)			153,511				162,430
Mortgage-backed securities available-for-sale at fair value			782				785
Loans receivable (net of allowance for loan losses — December 31, $2,194; September 30, $2,094)			503,720				498,391
Accrued interest receivable			3,741				3,719
Federal Home Loan Bank stock — at cost			16,096				16,096
Foreclosed real estate			—				747
Office properties and equipment, net			11,323				10,486
Prepaid expenses and other assets			18,509				15,989
TOTAL ASSETS		$	839,894			$	830,007
Liabilities and Stockholders’ Equity
Liabilities:
Deposits		$	486,341			$	466,601
Long-term debt			297,141				309,046
Accrued interest payable			1,558				1,606
Advances from borrowers for taxes and insurance			3,406				1,445
Accounts payable and accrued expenses			544				1,170
Total liabilities			788,990				779,868
Commitments and contingencies
Stockholders’ equity:
Preferred Stock: $.01 par value; 12,500,000 shares authorized; none issued			—				—
Common stock: $.01 par value; 25,000,000 shares authorized; 3,921,177 shares issued; outstanding December 31, 2009 3,645,288 shares September 30, 2009 3,627,696 shares			39				39
Additional Paid-in capital			7,999				8,002
Treasury stock, at cost (December 31, 2009, 275,889 shares;			(3,961	)			(4,202	)
September 30, 2009, 293,481 shares)
Retained earnings — partially restricted			46,854				46,329
Accumulated other comprehensive loss			(27	)			(29	)
Total stockholders’ equity			50,904				50,139
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	839,894			$	830,007

See notes to unaudited consolidated financial statements.

Harleysville Savings Financial Corporation

		For the Three Months Ended
		December 31,
(In thousands, except per share data)		2009				2008
INTEREST INCOME:
Interest on mortgage loans		$	5,084			$	5,009
Interest on commercial loans			938				710
Interest on mortgage-backed securities			1,905				2,546
Interest on consumer and other loans			1,137				1,307
Interest on taxable investments			909				818
Interest on tax-exempt investments			282				331
Dividends on investment securities			1				5
Total interest income			10,256				10,726
Interest Expense:
Interest on deposits			2,535				2,971
Interest on borrowings			3,334				3,570
Total interest expense			5,869				6,541
Net Interest Income			4,387				4,185
Provision for loan losses			150				100
Net Interest Income after Provision for Loan Losses			4,237				4,085
Other Income:
Customer service fees			161				178
Income on bank-owned life insurance			122				122
Other income			219				171
Total other income			502				471
Other Expenses:
Salaries and employee benefits			1,669				1,615
Occupancy and equipment			294				310
Deposit insurance premiums			227				18
Data processing			152				137
Other			728				674
Total other expenses			3,070				2,754
Income before Income Taxes			1,669				1,802
Income tax expense			455				426
Net Income		$	1,214			$	1,376
Basic Earnings Per Share		$	0.33			$	0.38
Diluted Earnings Per Share		$	0.33			$	0.38
Dividends Per Share		$	0.19			$	0.18

See notes to unaudited consolidated financial statements.

Harleysville Savings Financial Corporation

		Three Months Ended
		December 31,
(In thousands)		2009				2008
Net Income		$	1,214			$	1,376
Other Comprehensive Income
Unrealized gain (loss) on securities available for sale, net of tax expense (benefit) — 2009, $1; 2008, ($68) and reclassifications			1	(1)			(132	)(1)
Total Comprehensive Income		$	1,215			$	1,244
		2009				2008
(1) Disclosure of reclassification amount, net of tax for the three months ended:
Net unrealized gain (loss) arising during the three months ended		$	2			$	(200	)
Reclassification adjustment for net losses (gains) included in net income			—				—
			2				(200	)
Tax (expense) benefit			(1	)			68
Net unrealized gain on securities available for sale		$	1			$	(132	)

See notes to unaudited consolidated financial statements.

Harleysville Savings Financial Corporation

		Common												Retained				Accumulated
		Stock								Additional				Earnings-				Other								Total
(In thousands, except share and		Shares				Common				Paid-in				Partially				Comprehensive				Treasury				Stockholders’
per share data)		Outstanding				Stock				Capital				Restricted				(Loss) / Income				Stock				Equity
Balance at October 1, 2009			3,627,696			$	39			$	8,002			$	46,329			$	(29	)		$	(4,202	)		$	50,139
Net income															1,214												1,214
Dividends — $.19 per share															(689	)											(689	)
Stock option compensation											35																35
Treasury stock delivered under reinvestment plan			10,509								(5	)											144				139
Employee options exercised			7,083								(33	)											97				64
Change in unrealized holding loss on available-for-sale securities, net of reclassification and tax																			2								2
Balance at December 31, 2009			3,645,288			$	39			$	7,999			$	46,854			$	(27	)		$	(3,961	)		$	50,904

		Common												Retained				Accumulated
		Stock								Additional				Earnings-				Other								Total
(In thousands, except share and		Shares				Common				Paid-in				Partially				Comprehensive				Treasury				Stockholders’
per share data)		Outstanding				Stock				Capital				Restricted				(Loss) / Income				Stock				Equity
Balance at October 1, 2008			3,567,934			$	39			$	7,993			$	44,235			$	(41	)		$	(5,017	)		$	47,209
Net income															1,376												1,376
Dividends — $.18 per share															(642	)											(642	)
Stock option compensation											39																39
Treasury stock delivered under reinvestment plan			11,110								(10	)											152				142
Employee options exercised			1,667								(7	)											22				15
Change in unrealized holding loss on available-for-sale securities, net of reclassification and tax																			(132	)							(132	)
Balance at December 31, 2008			3,580,711			$	39			$	8,015			$	44,969			$	(173	)		$	(4,843	)		$	48,007

See notes to unaudited consolidated financial statements.

Harleysville Savings Financial Corporation

		Three Months Ended
		December 31,
(In thousands)		2009				2008
Operating Activities:
Net Income		$	1,214			$	1,376
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation			124				124
Provision for loan losses			150				100
Loss on sale of foreclosed real estate			159				—
Amortization of deferred loan fees			17				11
Net amortization of premiums and discounts			32				25
Increase in cash surrender value of bank owned life insurance			(122	)			(122	)
Compensation charge on stock options			35				39
Changes in assets and liabilities which provided (used) cash:
Decrease in accounts payable and accrued expenses			(626	)			(1,282	)
(Increase) decrease in prepaid expenses and other assets			(2,398	)			386
Decrease in accrued interest receivable			(22	)			(11	)
Decrease in accrued interest payable			(48	)			(66	)
Net cash (used in) provided by operating activities			(1,485	)			580
Investing Activities:
Purchase of mortgage-backed securities held to maturity			(1,571	)			—
Purchase of investment securities held to maturity			(19,000	)			—
Purchase of investment securities available-for-sale			(1,449	)			(1,418	)
Net purchase of FHLB stock			—				478
Proceeds from maturities of investment securities held to maturity			17,075				1,169
Proceeds from sale of foreclosed real estate			588				—
Principal collected on mortgage-backed securities			10,432				6,737
Principal collected on long-term loans			29,361				26,584
Long-term loans orginated or acquired			(34,858	)			(33,410	)
Purchases of premises and equipment			(961	)			(56	)
Net cash (used in) provided by investing activities			(383	)			84
Financing Activities:
Net increase in demand deposits, NOW accounts and savings accounts			21,790				2,863
Net decrease in certificates of deposit			(2,050	)			(8,213	)
Cash dividends			(549	)			(500	)
Net increase in short-term borrowings			—				8,000
Proceeds from long-term debt			—				4,500
Repayment of long-term debt			(11,905	)			(10,001	)
Treasury stock delivered under employee stock plans			64				15
Net increase in advances from borrowers for taxes and insurance			1,961				2,013
Net cash provided by (used in) financing activities			9,311				(1,323	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			7,443				(659	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR			9,442				9,374
CASH AND CASH EQUIVALENTS AT END OF YEAR		$	16,885			$	8,715
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest (credited and paid)		$	5,917			$	6,607
Income taxes			450				700

See notes to consolidated financial statements.

Harleysville Savings Financial Corporation

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation -The unaudited condensed consolidated financial statements include the accounts of Harleysville Savings Financial Corporation (the “Company”) and its subsidiary. Harleysville Savings Bank (the “Bank”) is the wholly owned subsidiary of the Company. The accompanying consolidated financial statements include the accounts of the Company, the Bank, and the Bank’s wholly owned subsidiaries, HSB Inc, a Delaware corporation which was formed in order to hold certain assets, Freedom Financial LLC that allows the Company to offer non deposit products and HARL LLC that allows the Bank to invest in equity investments. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and therefore do not include information or footnotes necessary for a complete presentation of financial condition, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. However, all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation of the consolidated financial statements have been included. The results of operations for the three months ended December 31, 2009 are not necessarily indicative of the results which may be expected for the entire fiscal year ending September 30, 2010 or any other period. The financial information should be read in conjunction with the Company’s Annual Report on Form 10-K for the period ended September 30, 2009.

Use of Estimates in Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. The most significant of these estimates is the allowance for loan losses, the determination of other-than-temporary impairment on securities and the valuation of deferred tax assets. Actual results could differ from those estimates.

Reclassifications

Certain amounts in the prior period’s financial statements have been reclassified to conform with the current year’s classifications. The reclassifications had no effect on net income.

Subsequent Events

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of December 31, 2009 for items that should potentially be recognized or disclosed in these financial statements. The evaluation was conducted through February 12, 2010, the date these financial statements were issued.

New Accounting Standards

In October 2009, the FASB issued ASU 2009-16, Transfers and Servicing (Topic 860) — Accounting for Transfers of Financial Assets. This Update amends the Codification for the issuance of FASB Statement No. 166, Accounting for Transfers of Financial Assets-an amendment of FASB Statement No. 140. The amendments in this Update improve financial reporting by eliminating the exceptions for qualifying special-purpose entities from the consolidation guidance and the exception that permitted sale accounting for certain mortgage securitizations when a transferor has not surrendered control over the transferred financial assets. In addition, the amendments require enhanced disclosures about the risks that a transferor continues to be exposed to because of its continuing involvement in transferred financial assets. Comparability and consistency in accounting for transferred financial assets will also be improved through clarifications of the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting. This Update is effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009. Early application is not permitted. The Company is continuing to evaluate the impact that the adoption of this new guidance will have on our financial position and results of operations.

In October 2009, the FASB issued ASU 2009-17, Consolidations (Topic 810) — Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. This Update amends the Codification for the issuance of FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R). The amendments in this Update replace the quantitative-based risks and rewards calculation for determining which reporting entity, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which reporting entity has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. An approach that is expected to be primarily qualitative will be more effective for identifying which reporting entity has a controlling financial interest in a variable interest entity. The amendments in this Update also require additional disclosures about a reporting entity’s involvement in variable interest entities, which will enhance the information provided to users of financial statements. This Update is effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009. Early application is not permitted. We do not expect the adoption of this new guidance to have an impact on our financial position or result of operations.

The FASB has issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This ASU requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in Codification Subtopic 820-10. The FASB’s objective is to improve these disclosures and, thus, increase the transparency in financial reporting. Specifically, ASU 2010-06 amends Codification Subtopic 820-10 to now require:

•

A reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and

•

In the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements.

In addition, ASU 2010-06 clarifies the requirements of the following existing disclosures:

•

For purposes of reporting fair value measurement for each class of assets and liabilities, a reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities; and

•

A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements.

ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of this standard to have an impact on our financial position or results of operations.

2. INVESTMENT SECURITIES HELD TO MATURITY

A comparison of amortized cost and approximate fair value of investment securities with gross unrealized gains and losses, by maturities, is as follows:

		December 31, 2009
						Gross				Gross
		Amortized				Unrealized				Unrealized
(In Thousands)		Cost				Gains				Losses				Fair Value
U.S. Government Agencies
Due 1 year or less		$	5,000			$	51			$	—			$	5,051
Due after 1 year through 5 years			8,000				33				—				8,033
Due after 5 years through 10 years			7,997				—				(153	)			7,844
Due after 10 years through 15 years			62,000				55				(1,297	)			60,758
Due after 15 years			2,431				101				—				2,532
Tax Exempt Obligations
Due after 5 years through 10 years			4,227				159				—				4,386
Due after 10 years through 15 years			15,098				552				(30	)			15,620
Due after 15 years			2,392				—				(191	)			2,201
Total Investment Securities		$	107,145			$	951			$	(1,671	)		$	106,425

		September 30, 2009
						Gross				Gross
		Amortized				Unrealized				Unrealized
(In Thousands)		Cost				Gains				Losses				Fair Value
U.S. Government Agencies
Due 1 year or less		$	5,000			$	98			$	—			$	5,098
Due after 1 year through 5 years			8,000				34				—				8,034
Due after 5 years through 10 years			10,996				4				(80	)			10,920
Due after 10 years through 15 years			56,175				299				(278	)			56,196
Due after 15 years			2,431				178				—				2,609
Tax Exempt Obligations
Due after 5 years through 10 years			3,898				170				—				4,068
Due after 10 years through 15 years			16,303				708				(3	)			17,008
Due after 15 years			2,391				—				(150	)			2,241
Total Investment Securities		$	105,194			$	1,491			$	(511	)		$	106,174

A summary of investments with unrealized losses, aggregated by category, at December 31, 2009 is as follows:

		Less than 12 Months								12 Months or Longer								Total				Total
(In Thousands)		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
US Government agencies		$	52,547			$	(1,450	)		$	—			$	—			$	52,547			$	(1,450	)
Tax exempt obligations			984				(19	)			2,985				(202	)			3,969				(221	)
Total		$	53,531			$	(1,469	)		$	2,985			$	(202	)		$	56,516			$	(1,671	)

At December 31, 2009, investment securities in a gross unrealized loss position consisted of 24 securities that at such date had an aggregate depreciation of 2.87% from the Company’s amortized cost basis. Management believes that the estimated fair value of the securities disclosed above is primarily dependent upon the movement in market interest rates. Management evaluated the length of time and the extent to which the fair value has been less than cost; the financial condition and near term prospects of the issuer, including any specific events which may influence the operations of the issuer. The Company has the ability and the intent to hold these securities until maturity and the Company does not believe it will be required to sell such securities prior to the recovery at amortized cost basis. Management does not believe any individual unrealized loss as of December 31, 2009 represents an other-than-temporary impairment.

A summary of investments with unrealized losses, aggregated by category, at September 30, 2009 is as follows:

		Less than 12 Months								12 Months or Longer								Total				Total
(In Thousands)		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
US Government agencies		$	29,637			$	(358	)		$	—			$	—			$	29,637			$	(358	)
Tax exempt obligations			1,000				(3	)			3,036				(150	)			4,036				(153	)
Total		$	30,637			$	(361	)		$	3,036			$	(150	)		$	33,673			$	(511	)

3. INVESTMENT SECURITIES AVAILABLE-FOR-SALE

A comparison of amortized cost and approximate fair value of investment securities with gross unrealized gains and losses, by maturities, is as follows:

		December 31, 2009
						Gross				Gross
		Amortized				Unrealized				Unrealized
(In Thousands)		Cost				Gain				Losses				Fair Value
Equity Securities		$	355			$	45			$	(84	)		$	316
Money Market Mutual Funds			7,866				—				—				7,866
Total Investment Securities		$	8,221			$	45			$	(84	)		$	8,182

		September 30, 2009
						Gross				Gross
		Amortized				Unrealized				Unrealized
(In Thousands)		Cost				Gain				Losses				Fair Value
Equity Securities		$	355			$	48			$	(92	)		$	311
Money Market Mutual Funds			6,417				—				—				6,417
Total Investment Securities		$	6,772			$	48			$	(92	)		$	6,728

A summary of investments with unrealized losses, aggregated by category, at December 31, 2009 is as follows:

		Less than 12 Months								12 Months or Longer								Total				Total
(In Thousands)		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
Equity Securities		$	47			$	(42	)		$	114			$	(42	)		$	161			$	(84	)

As of December 31, 2009 there were three equity securities in an unrealized loss position. Management evaluated the length of time and the extent to which the market value has been less than cost; the financial condition and near term prospects of the issuer, including any specific events which may influence the operations of the issuer such as changes in technology that may impair the earnings potential of the investment or the discontinuance of a segment of the business that may effect the future earnings potential. The Company has the ability and intent to hold these securities until the anticipated recovery of fair value occurs. Management does not believe any individual unrealized loss as of December 31, 2009 represents an other-than-temporary impairment.

A summary of investments with unrealized losses, aggregated by category, at September 30, 2009 is as follows:

		Less than 12 Months								12 Months or Longer								Total				Total
(In Thousands)		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
Equity Securities		$	104			$	(43	)		$	74			$	(49	)		$	178			$	(92	)

4. MORTGAGE-BACKED SECURITIES HELD TO MATURITY

A comparison of amortized cost and approximate fair value of mortgage-backed securities with gross unrealized gains and losses, is as follows:

		December 31, 2009
						Gross				Gross
		Amortized				Unrealized				Unrealized				Approximate
(In Thousands)		Cost				Gains				Losses				Fair Value
Collateralized mortgage obligations		$	10,972			$	50			$	(228	)		$	10,794
FHLMC pass-through certificates			60,734				2,617				—				63,351
FNMA pass-through certificates			80,240				3,040				—				83,280
GNMA pass-through certificates			1,565				—				(23	)			1,542
Total residential mortgage-backed securities		$	153,511			$	5,707			$	(251	)		$	158,967

		September 30, 2009
						Gross				Gross
		Amortized				Unrealized				Unrealized				Approximate
(In Thousands)		Cost				Gains				Losses				Fair Value
Collateralized mortgage obligations		$	11,681			$	54			$	(271	)		$	11,464
FHLMC pass-through certificates			65,005				3,270				—				68,275
FNMA pass-through certificates			85,744				3,728				(1	)			89,471
Total residential mortgage-backed securities		$	162,430			$	7,052			$	(272	)		$	169,210

A summary of securities with unrealized losses, aggregated by category, at December 31, 2009 is as follows:

		Less than 12 Months								12 Months or Longer								Total				Total
(In Thousands)		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
Mortgage-backed securities held to maturity		$	7,654			$	(96	)		$	1,789			$	(155	)		$	9,443			$	(251	)

At December 31, 2009, mortgage-related securities in a gross unrealized loss for less than twelve months consisted of 6 securities that at such date had an aggregate depreciation of 1.28% from the Company’s amortized cost basis. At December 31, 2009, mortgage-related securities in a gross unrealized loss position for twelve months or longer consisted of one security that at such date had an aggregate depreciation of 7.97% from the Company’s amortized cost basis. Management believes that the estimated fair value of the securities disclosed above is primarily dependent upon the movement in market interest rates. Management evaluated the length of time and the extent to which the fair value has been less than cost; the financial condition and near term prospects of the issuer. The Company does not intend to sell, and will not be required to sell any of the securities until maturity. Management does not believe any individual unrealized loss as of December 31, 2009 represents an other-than-temporary impairment.

A summary of securities with unrealized losses, aggregated by category, at September 30, 2009 is as follows:

		Less than 12 Months								12 Months or Longer								Total				Total
(In Thousands)		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
Mortgage-backed securities held to maturity		$	2,264			$	(49	)		$	6,576			$	(223	)		$	8,840			$	(272	)

5. MORTGAGE-BACKED SECURITIES AVAILABLE-FOR-SALE

A comparison of amortized cost and approximate fair value of mortgage-backed securities with gross unrealized gains and losses, is as follows:

		December 31, 2010
						Gross				Gross
		Amortized				Unrealized				Unrealized
(In thousands)		Cost				Gains				Losses				Fair Value
FNMA pass-through certificates		$	785			$	—			$	(3	)		$	782
Total Residential Mortgage-Backed Securities		$	785			$	—			$	(3	)		$	782

		September 30, 2009
						Gross				Gross
		Amortized				Unrealized				Unrealized
(In thousands)		Cost				Gains				Losses				Fair Value
FNMA pass-through certificates		$	785			$	—			$	—			$	785
Total Residential Mortgage-Backed Securities		$	785			$	—			$	—			$	785

6. LOANS RECEIVABLE

Loans receivable consist of the following:

		(In thousands)
		December 31, 2009				September 30, 2009
Residential Mortgages		$	345,471			$	346,202
Construction			5,855				2,912
Home Equity			91,953				92,434
Commercial Mortgages			53,575				48,958
Commercial Business Loans			9,858				10,389
Consumer Non-Real Estate			2,289				2,242
Total			509,001				503,137
Undisbursed portion of loans in process			(2,334	)			(1,873	)
Deferred loan fees			(753	)			(779	)
Allowance for loan losses			(2,194	)			(2,094	)
Loans Receivable — net		$	503,720			$	498,391

The total amount of loans being serviced for the benefit of others was approximately $2,224,000 and $2,550,000 at December 31, 2009 and September 30, 2009, respectively.

The following schedule summarizes the changes in the allowance for loan losses:

		Three Months Ended
		December 31, 2009
		(In thousands)
Balance, beginning of period		$	2,094
Provision for loan losses			150
Recoveries			2
Charge offs			(52	)
Balance, end of period		$	2,194

7. Federal Home Loan Bank Stock

Federal law requires a member institution of the Federal Home Loan Bank (FHLB) to hold stock of its district FHLB according to a predetermined formula. The restricted stock is carried at cost. In December 2008, the FHLB of Pittsburgh notified member banks that it was suspending dividend payments and the repurchase of capital stock.

Management’s determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB.

Management believes no impairment charge is necessary related to the FHLB or restricted stock as of December 31, 2009.

8. DEPOSITS

Deposits are summarized as follows:

		(In thousands)
		December 31, 2009				September 30, 2009
Non-interest bearing checking accounts		$	14,250			$	12,364
NOW accounts			19,991				16,818
Interest bearing checking accounts			31,172				29,282
Money market demand accounts			92,398				77,432
Passbook and club accounts			2,815				2,940
Certificate of deposit accounts			325,715				327,765
Total deposits		$	486,341			$	466,601

The aggregate amount of certificate accounts in denominations of more than $100,000 at December 31, 2009 and September 30, 2009 amounted to approximately $61.7 million and $60.1 million, respectively.

9. COMMITMENTS

At December 31, 2009, the following commitments were outstanding:

		(In thousands)
Letters of credit		$	868
Commitments to originate loans			11,201
Unused portion of home equity lines of credits			49,285
Unused portion of commercial lines of credits			6,694
Undisbursed portion of construction loans in process			2,256
Total		$	70,304

10. EARNINGS PER SHARE

The following shares were used for the computation of earnings per share:

		For the Three Months Ended
		December 31,
		2009				2008
Basic			3,633,347				3,580,630
Diluted			3,646,284				3,592,483

The difference between the number of shares used for computation of basic earnings per share and diluted earnings per share represents the dilutive effect of stock options.

11. LONG-TERM DEBT

Advances consists of the following:

		December 31,								September 30,
		2009								2009
		(In thousands)
						Weighted								Weighted
						Interest								Interest
Maturing Period		Amount				Rate				Amount				Rate
1 to 12 months		$	25,090				4.40	%		$	30,358				4.37	%
13 to 24 months			22,251				4.28	%			16,849				4.34	%
25 to 36 months			44,830				4.56	%			55,793				4.49	%
37 to 48 months			41,154				3.90	%			37,189				4.00	%
49 to 60 months			25,077				4.27	%			29,856				4.07	%
61 to 72 months			18,865				3.82	%			19,031				3.82	%
73 to 84 months			10,000				4.71	%			10,000				4.71	%
85 to 120 months			109,874				4.44	%			109,970				4.42	%
Total		$	297,141				4.32	%		$	309,046				4.31	%

Federal Home Loan Bank (FHLB) advances are collateralized by Federal Home Loan Bank stock and substantially all first mortgage loans. The Company has a line of credit with the FHLB of which $0 out of $75.0 million was used at December 31, 2009 and September 30, 2009, for general purposes, respectively. Included in the table above at December 31, 2009 and September 30, 2009 are convertible advances whereby the FHLB has the option at a predetermined strike rate to convert the fixed interest rate to an adjustable rate tied to London Interbank Offered Rate (“LIBOR”). The Company then has the option to repay these advances if the FHLB converts the interest rate. These advances are included in the periods in which they mature. The Company has a total FHLB borrowing capacity of $415.0 million of which $247.1 was used as of December 31, 2009. In addition, there are three long-term advances from other financial institutions totaling $50 million that are secured by investment and mortgage-backed securities.

12. REGULATORY CAPITAL REQUIREMENTS

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory — and possibly additional discretionary — actions by regulators that, if undertaken, could have a direct material effect on the Companies consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined), and of Tier 1 capital (as defined) to assets (as defined). Management believes, as of December 31, 2009, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2009, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Bank’s actual capital amounts and ratios are also presented in the table. The Company’s capital ratios are not significantly different than the Bank’s ratios disclosed below.

																		To Be Considered Well
																		Capitalized Under
										For Capital								Prompt Corrective
		Actual								Adequacy Purposes								Action Provisions
		Amount				Ratio				Amount				Ratio				Amount				Ratio
		(In thousands)
As of December 31, 2009
Tier 1 Capital (to assets)		$	50,881				6.11	%		$	33,308				4.00	%		$	41,635				5.00	%
Tier 1 Capital (to risk weighted assets)			50,881				11.19	%			18,192				4.00	%			27,289				6.00	%
Total Capital (to risk weighted assets)			53,075				11.67	%			36,385				8.00	%			45,481				10.00	%
As of September 30, 2009
Tier 1 Capital (to assets)		$	50,149				6.06	%		$	33,103				4.00	%		$	41,459				5.00	%
Tier 1 Capital (to risk weighted assets)			50,149				11.26	%			17,809				4.00	%			26,714				6.00	%
Total Capital (to risk weighted assets)			52,242				11.73	%			35,618				8.00	%			44,523				10.00	%