10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2012

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      0-50970

PSB Holdings, Inc.

(Exact name of registrant as specified in its charter)

United States	42-1597948
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

40 Main Street, Putnam, Connecticut  06260

(Address of principal executive offices)

(Zip Code) 

(860) 928-6501

(Issuer’s telephone number)

N/A 

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x YES o NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x YES o NO

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

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 of the Exchange Act)

o YES x NO

As of October 31, 2012, there were 6,528,863 shares of the registrant’s common stock outstanding.

PSB Holdings, Inc.

Table of Contents

Part I.	FINANCIAL INFORMATION	Page No.
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets at September 30, 2012 and June 30, 2012	1
	Condensed Consolidated Statements of Income for the Three Months Ended September 30, 2012 and 2011	2
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended September 30, 2012 and 2011	3
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended September 30, 2012 and 2011	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2012 and 2011	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	41
SIGNATURES		42

Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited)

PSB Holdings, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

	September 30,			June 30,
	2012			2012
	(in thousands except share data)
ASSETS
Cash and due from depository institutions	$	3,635		$	5,228
Interest-bearing demand deposits with other banks		693			6,185
Total cash and cash equivalents		4,328			11,413
Securities available-for-sale, at fair value		45,522			47,213
Securities held-to-maturity (fair value of $119,600 as of September 30, 2012 and $108,336 as of June 30, 2012)		116,033			105,195
Federal Home Loan Bank stock, at cost		7,536			7,536
Loans held-for-sale		2,030			776
Loans		248,680			251,485
Less: Allowance for loan losses		(3,027	)		(2,913	)
Net loans		245,653			248,572
Premises and equipment		4,450			4,526
Accrued interest receivable		1,250			1,158
Other real estate owned		1,865			1,683
Goodwill		6,912			6,912
Other intangible assets		179			202
Bank-owned life insurance		8,631			8,759
Due from broker		-			2,000
Deferred tax asset		3,363			3,890
Other assets		2,383			2,508
Total assets	$	450,135		$	452,343
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Deposits
Noninterest-bearing	$	42,434		$	43,785
Interest-bearing		294,740			298,553
Total deposits		337,174			342,338
Mortgagors’ escrow accounts		1,002			2,034
Federal Home Loan Bank advances		53,500			53,500
Securities sold under agreements to repurchase		6,222			3,653
Other liabilities		2,564			2,683
Total liabilities		400,462			404,208
Stockholders’ Equity
Preferred stock, $0.10 par value, 1,000,000 shares authorized, no shares issued and outstanding		-			-
Common stock, $0.10 par value, 12,000,000 shares authorized, 6,943,125 shares issued, 6,528,863 shares outstanding at September 30, 2012 and June 30, 2012		694			694
Additional paid-in capital		30,602			30,602
Retained earnings		24,115			23,630
Accumulated other comprehensive income (loss)		8			(1,013	)
Unearned ESOP shares		(1,533	)		(1,565	)
Treasury stock, at cost (414,262 shares at September 30, 2012 and June 30, 2012)		(4,213	)		(4,213	)
Total stockholders’ equity		49,673			48,135
Total liabilities and stockholders’ equity	$	450,135		$	452,343

1

PSB Holdings, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

	Three Months Ended
	September 30,
	2012			2011
	(in thousands, except per share data)
Interest and dividend income:
Interest on loans	$	3,054		$	3,374
Interest and dividends on investments		1,035			1,292
Total interest and dividend income		4,089			4,666
Interest expense:
Deposits and escrow		839			1,082
Borrowed funds		469			824
Total interest expense		1,308			1,906
Net interest and dividend income		2,781			2,760
Provision for loan losses		250			391
Net interest and dividend income after provision for loan losses		2,531			2,369
Non-interest income:
Total other-than-temporary impairment losses on debt securities		(282	)		(2,039	)
Portion of losses recognized in other comprehensive loss/income		193			1,241
Net impairment losses recognized in earnings		(89	)		(798	)
Fees for services		438			518
Mortgage banking activities		39			8
Net commissions from brokerage service		35			46
Income from bank-owned life insurance		258			75
Gain on sales of available-for-sale securities, net		-			235
Income from legal settlement		-			1,452
Other income		30			30
Total non-interest income		711			1,566
Non-interest expense:
Compensation and benefits		1,436			1,515
Occupancy and equipment		315			306
Data processing		164			259
LAN/WAN network expense		35			30
Advertising and marketing		35			61
OCC assessment		46			46
FDIC deposit insurance		145			138
Other real estate owned		40			47
Write-down of other real estate owned		48			15
Other non-interest expense		396			428
Total non-interest expense		2,660			2,845
Income before income tax expense		582			1,090
Income tax expense		79			285
NET INCOME	$	503		$	805
Earnings per common share
Basic	$	0.08		$	0.13
Diluted	$	0.08		$	0.13

2

PSB Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

The components of comprehensive income (loss) and related tax effects are as follows:

	Three Months Ended
	September 30,
	2012			2011
	(in thousands)
Net Income	$	503		$	805
Other comprehensive income
Net unrealized holding gains (losses) on available-for-sale securities		1,651			(2,475	)
Reclassification adjustment for losses realized in income on available-for-sale securities		89			563
Non credit portion of other-than-temporary losses on available-for-sale securities		(193	)		(1,241	)
Other comprehensive income (loss) before tax		1,547			(3,153	)
Income tax (expense) benefit related to other comprehensive income		(526	)		1,072
Other comprehensive income (loss) net of tax		1,021			(2,081	)
Total comprehensive income (loss)	$	1,524		$	(1,276	)

3

PSB Holdings, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months Ended September 30, 2012 and 2011

(Unaudited)

	Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Unearned ESOP Shares			Unearned Stock Awards			Treasury Stock			Total Stockholders’ Equity
(dollars in thousands)
Balances at June 30, 2011	$	694	$	30,594	$	22,648		$	(1,267	)	$	(1,693	)	$	(16	)	$	(4,213	)	$	46,747
Net income		-		-		805			-			-			-			-			805
Net change in unrealized holding losses on available-for-sale securities, net of reclassification adjustments and tax effects		-		-		-			(2,081	)		-			-			-			(2,081	)
Stock-based compensation		-		3		-			-			-			-			-			3
Balances at September 30, 2011	$	694	$	30,597	$	23,453		$	(3,348	)	$	(1,693	)	$	(16	)	$	(4,213	)	$	45,474
Balances at June 30, 2012	$	694	$	30,602	$	23,630		$	(1,013	)	$	(1,565	)	$	-		$	(4,213	)	$	48,135
Net income		-		-		503			-			-			-			-			503
Net change in unrealized holding losses on available-for-sale securities, net of reclassification adjustments and tax effects		-		-		-			1,021			-			-			-			1,021
ESOP shares committed to be released (3,195 shares)		-				(18	)		-			32			-			-			14
Balances at September 30, 2012	$	694	$	30,602	$	24,115		$	8		$	(1,533	)	$	-		$	(4,213	)	$	49,673

4

PSB Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	For the Three Months
	Ended September 30,
	2012			2011
	(in thousands)
Cash flows from operating activities
Net income	$	503		$	805
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of securities, net		329			361
Gain on sales of available-for-sale securities, net		-			(235	)
Impairment losses on securities		89			798
Net (increase) decrease in loans held-for-sale		(1,254	)		873
Accretion of deferred loan fees, net		(18	)		(6	)
Provision for loan losses		250			391
Write-down of other real estate owned		48			15
Depreciation and amortization		115			108
Amortization of core deposit intangible		23			31
Increase in accrued interest receivable and other assets		(130	)		(254	)
Increase in cash surrender value of bank-owned life insurance		(82	)		(75	)
Bank-owned life insurance death benefit income		(176	)		-
Decrease in other liabilities		(119	)		(136	)
Deferred tax expense		141			1,344
Amortization of ESOP expense		14			16
Stock-based compensation		-			7
Net cash provided by operating activities		(267	)		4,043
Cash flows from investing activities
Proceeds from sales, calls, pay downs and maturities of available-for-sale securities		3,140			3,102
Purchase of held-to-maturity securities		(19,708	)		(16,189	)
Proceeds from calls, pay downs and maturities of held-to-maturity securities		10,551			12,918
Loan repayments net of originations		2,412			627
Purchase of bank owned life insurance		-			(2,000	)
Recoveries of loans previously charged off		45			8
Proceeds from the surrender of bank owned life insurance policy		386			-
Capital expenditures - premises and equipment		(17	)		(34	)
Net cash used in investing activities		(3,191	)		(1,568	)
Cash flows from financing activities
Net decrease in deposit accounts		(5,164	)		(2,525	)
Net decrease in mortgagors’ escrow accounts		(1,032	)		(832	)
Proceeds from Federal Home Loan Bank advances		43,866			2,000
Repayments of Federal Home Loans Bank advances		(43,866	)		(2,000	)
Net increase in securities sold under agreements to repurchase		2,569			2,404
Net cash used in financing activities		(3,627	)		(953	)
(Decrease) increase in cash and cash equivalents		(7,085	)		1,522
Cash and cash equivalents at beginning of year		11,413			8,273
Cash and cash equivalents at end of period	$	4,328		$	9,795
Supplemental disclosures
Cash paid during the period for:
Interest	$	1,297		$	1,905
Income taxes refunded		(62	)		(458	)
Loans transferred to other real estate owned		230			1,418
Decrease in due from broker		2,000			-

5

PSB Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 – Organization

PSB Holdings, Inc. (Company) is a federally chartered holding company formed on May 27, 2003 for the purpose of acquiring all of the common stock of Putnam Bank (Bank) concurrent with the Bank’s reorganization from a mutual savings institution to the mutual holding company form of organization.  No shares were offered to the public as part of this reorganization.

On October 4, 2004, the Company issued 6,943,125 shares of common stock, 3,729,846 shares (53.7%) of which were issued to Putnam Bancorp, MHC and 3,089,691 shares (44.5%) of which were sold to eligible depositors of the Bank and others at $10.00 per share. In addition, the Company issued 123,588 shares (1.8%) to a charitable foundation established by the Bank.

NOTE  2 – Basis of Presentation

The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and the instructions to Form 10-Q, and accordingly do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary, consisting of only normal recurring accruals and the elimination of all significant intercompany accounts, to present fairly the financial position, results of operations and cash flows of the Company for the periods presented.  The interim results of operations are not necessarily indicative of the operating results to be expected for future periods, including the year ending June 30, 2013.  These financial statements should be read in conjunction with the 2012 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on September 28, 2012.

NOTE 3 – Recent Accounting Pronouncements

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220), Presentation of Comprehensive Income.  This ASU amends the disclosure requirements for the presentation of comprehensive income. The amended guidance eliminates the option to present components of other comprehensive income (OCI) as part of the statement of changes in stockholders’ equity. Under the amended guidance, all changes in OCI are to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive financial statements. The changes are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  In December 2011, the FASB issued ASU 2011-12 to defer changes that relate to the presentation of reclassification adjustments but the other requirements of ASU 2011-05 remain in effect. This amendment became effective for the Company on July 1, 2012 and did not have a significant impact on the Company’s condensed consolidated financial results as the amendments relate only to changes in financial statement presentation.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other (Topic 350), Testing Goodwill for Impairment.  This ASU is intended to reduce the complexity and cost of performing an evaluation of impairment of goodwill.  Under the new guidance,  an entity will have the option of first assessing qualitative factors (events and circumstances) to determine whether it is more likely than not (meaning a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount.  If, after considering all relevant events and circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test will be unnecessary.  The amendments will be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. This amendment became effective for the Company on July 1, 2012 and did not have a significant impact on the Company’s condensed consolidated financial statements.

6

Critical Accounting Policies

Critical accounting policies are those that involve significant judgments and assumptions by management that have, or could have, a material impact on our income or the carrying value of our assets.  Our critical accounting policies are those related to our loans, allowance for loan losses, income taxes, goodwill and the impairment of securities.

Loans.  The Company’s loan portfolio includes residential real estate, commercial real estate, construction, commercial and consumer/other segments. Residential real estate loans include classes for one-to four-family owner occupied, second mortgages and equity lines of credit.  Consumer/other loans include personal loans.  Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance.  Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

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

Allowance for Loan Losses.  The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings.  Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed.

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

General component

The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: residential real estate, commercial real estate, construction, commercial and consumer/other.  Management uses a rolling average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment.  This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; trends in volume and terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; experience/ability/depth of lending management and staff; loan rating migration and national and local economic trends and conditions.

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

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

Commercial real estate - Loans in this segment are primarily income-producing properties throughout New England.  The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on the credit quality in this segment.  Management obtains rent rolls annually and continually monitors the cash flows of these loans.

7

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

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

Consumer/other loans - Loans in this segment are generally unsecured and repayment is dependent on the credit quality of the individual borrower.

Specific component

The specific component relates to loans that are classified as impaired.  Impairment is measured on a loan by loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent or foreclosure is probable.  An allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan.  Large groups of smaller balance homogeneous loans are collectively evaluated for impairment.  Accordingly, the Company does not separately identify individual consumer and residential real estate loans for impairment disclosures, unless such loans are subject to a troubled debt restructuring (“TDR”) agreement.

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

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

Unallocated component

An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses.  The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general reserves in the portfolio.

Goodwill.  The Company’s goodwill was recorded as a result of business acquisitions and combinations.  The Company’s goodwill (the amount paid in excess of fair value of acquired net assets) is reviewed at least annually to ensure that there have been no events or circumstances resulting in an impairment of the recorded amount of excess purchase price.  Adverse changes in the economic environment, operations of acquired business units, or other factors could result in a decline in projected fair values.  If the estimated fair value is less than the carrying amount, a loss would be recognized to reduce the carrying amount to implied fair value.

8

Other-Than-Temporary Impairment of Securities.  Management periodically reviews all investment securities with significant declines in fair value for potential other-than-temporary impairment pursuant to the guidance provided by ASC 320-10 “Investments-Debt and Equity Securities”.  The guidance addresses the determination as to when an investment is considered impaired, whether the impairment is other-than-temporary, and the measurement of an impairment loss.  It also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments.  Management evaluates the Company’s investment portfolio on an ongoing basis and recorded $89,000 and $798,000 of other-than-temporary impairment charges through income during the three months ended September 30, 2012 and 2011, respectively.

Income Taxes.  The Company recognizes income taxes under the asset and liability method.  Under this method, deferred tax assets and liabilities are established for the temporary differences between the accounting basis and the tax basis of the Company’s assets and liabilities at enacted rates expected to be in effect when the amounts related to such temporary differences are realized or settled.

Management has discussed the development and selection of these critical accounting policies with the Audit Committee.

9

NOTE 4 – Earnings Per Share (EPS)

As presented below, basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period.  Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. For purposes of computing diluted EPS, the treasury stock method is used.

The following information was used in the computation of EPS on both a basic and diluted basis for the three months ended September 30, 2012 and 2011:

	Three Months Ended		Three Months Ended
	September 30, 2012		September 30, 2011
Net income	$	503,000	$	805,000
Average basic common shares		6,372,349		6,359,570
Dilutive effect of stock options (1)		-		-
Average diluted common shares		6,372,349		6,359,570
Basic EPS:	$	0.08	$	0.13
Diluted EPS:	$	0.08	$	0.13

(1)      Options to purchase 222,921 shares for the three months ended September 30, 2012 and 2011 were outstanding but not included in the computation of earnings per share because they were anti-dilutive.

10

NOTE 5 – Investment Securities

The carrying value and estimated market values of investment securities by maturity are as follows:

	Amortized		Gross Unrealized					Fair
	Cost Basis		Gain		(Loss)			Value
	(in thousands)
September 30, 2012
Available-for-sale:
Debt securities:
U.S. government and government-sponsored securities:
Due in one year or less	$	407	$	4	$	-		$	411
Corporate bonds and other securities:
After ten years		5,998		-		(1,511	)		4,487
U.S. Government sponsored and guaranteed mortgage-backed securities:
Due in one year or less		85		3		-			88
From one through five years		1,242		78		-			1,320
From five through ten years		1,176		57		-			1,233
After ten years		17,535		1,129		(12	)		18,652
		20,038		1,267		(12	)		21,293
Non-agency mortgage-backed securities:
After ten years		9,066		293		(646	)		8,713
Total debt securities		35,509		1,564		(2,169	)		34,904
Equity securities:
Auction rate preferred stock		10,000		618		-			10,618
Total available-for-sale securities	$	45,509	$	2,182	$	(2,169	)	$	45,522
Held-to-maturity:
U.S. government and government-sponsored securities:
From one through five years	$	3,996	$	34	$	-		$	4,030
From five through ten years		3,187		173		(1	)		3,359
		7,183		207		(1	)		7,389
U.S. Government sponsored and guaranteed mortgage-backed securities:
From five through ten years		6,248		234		-			6,482
After ten years		102,602		3,287		(160	)		105,729
		108,850		3,521		(160	)		112,211
Total held-to-maturity securities	$	116,033	$	3,728	$	(161	)	$	119,600

11

	Amortized		Gross Unrealized					Fair
	Cost Basis		Gain		(Loss)			Value
	(in thousands)
June 30, 2012:
Available-for-sale:
Debt securities:
U.S. government and government-sponsored securities:
From one through five years	$	450	$	9	$	-		$	459
Corporate bonds and other securities:
After ten years		5,998		-		(1,344	)		4,654
U.S. Government sponsored and guaranteed mortgage-backed securities:
Due in one year or less		1		-		-			1
From one through five years		416		24		-			440
From five through ten years		2,564		140		-			2,704
After ten years		19,717		1,265		(14	)		20,968
		22,698		1,429		(14	)		24,113
Non-agency mortgage-backed securities:
After ten years		9,601		-		(1,250	)		8,351
Total debt securities		38,747		1,438		(2,608	)		37,577
Equity securities:
Auction rate preferred stock		10,000		11		(375	)		9,636
Total available-for-sale securities	$	48,747	$	1,449	$	(2,983	)	$	47,213
Held-to-maturity:
U.S. government and government-sponsored securities:
From one through five years	$	5,996	$	34	$	-		$	6,030
From five through ten years		3,196		149		(7	)		3,338
		9,192		183		(7	)		9,368
U.S. Government sponsored and guaranteed mortgage-backed securities:
From five through ten years		6,767		192		-			6,959
After ten years		89,236		2,783		(10	)		92,009
		96,003		2,975		(10	)		98,968
Total held-to-maturity securities	$	105,195	$	3,158	$	(17	)	$	108,336

There were no realized gains or losses on sales of available-for-sale securities for the three months ended September 30, 2012.  There were gross gains of $235,000 and no gross losses realized on sales of available-for-sale securities for the three months ended September 30, 2011  Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.  There were other-than-temporary impairment charges on available-for-sale securities of $89,000 and $798,000 during the three months ended September 30, 2012 and 2011, respectively.  The write-downs of securities included total other-than-temporary impairment losses of $282,000 and $2.0 million, net of $193,000 and $1.2 million recognized in other comprehensive income/loss for the three months ended September 30, 2012 and 2011, respectively, before taxes.  See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Overview.”

12

The following is a summary of the estimated fair value and related unrealized losses segregated by category and length of time that individual securities have been in a continuous unrealized loss position at:

September 30, 2012:	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	Value		Losses		Value		Losses		Value		Losses
Available-for-sale:
Debt securities:
Corporate bonds and other securities	$	-	$	-	$	4,487	$	1,511	$	4,487	$	1,511
U.S. Government sponsored and guaranteed
mortgage-backed securities		1,750		12		-		-		1,750		12
Total temporarily impaired available-for-sale		1,750		12		4,487		1,511		6,237		1,523
Held-to-maturity:
U.S. Government and government-sponsored securities		2,252		1		-		-		2,252		1
U.S. Government sponsored and guaranteed
mortgage-backed securities		17,144		160		-		-		17,144		160
Total temporarily impaired held-to-maturity		19,396		161		-		-		19,396		161
Other-than-temporarily impaired debt securities (1):
Non-agency mortgage-backed securities		-		-		3,700		646		3,700		646
Total temporarily-impaired and other-than-temporarily impaired securities	$	21,146	$	173	$	8,187	$	2,157	$	29,333	$	2,330
June 30, 2012:	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	Value		Losses		Value		Losses		Value		Losses
Available-for-sale:
Debt securities:
Corporate bonds and other obligations	$	-	$	-	$	4,654	$	1,344	$	4,654	$	1,344
U.S. Government sponsored and guaranteed mortgage-backed securities		1,826		14		-		-		1,826		14
Equity securities		7,625		375		-		-		7,625		375
Total temporarily impaired available-for-sale		9,451		389		4,654		1,344		14,105		1,733
Held-to-maturity:
U.S. Government and government-sponsored securities		2,257		7		-		-		2,257		7
U.S. Government sponsored and guaranteed mortgage-backed securities		10,141		10		-		-		10,141		10
Total temporarily impaired held-to-maturity		12,398		17		-		-		12,398		17
Other-than-temporarily impaired debt securities (1):
Non-agency mortgage-backed securities		1,767		21		6,512		1,229		8,279		1,250
Total temporarily-impaired and other-than-temporarily impaired securities	$	23,616	$	427	$	11,166	$	2,573	$	34,782	$	3,000

(1)  Includes other-than-temporary impaired available-for-sale debt securities in which a portion of the other-than-temporary impairment loss remains in accumulated other comprehensive income (loss).

13

Management evaluates securities for other-than-temporary impairment (OTTI) at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.

At September 30, 2012 and June 30, 2012, there were 23 and 27 individual investment securities, respectively, with declines in fair value below the amortized cost basis of the security.  Management has the intent and ability to hold these securities until cost recovery occurs and considers these declines to be temporary.

The unrealized losses on the Company’s investment in U.S. Government-sponsored agency bonds and U.S. government guaranteed and government-sponsored residential mortgage-backed securities were primarily caused by interest rate fluctuations.  These investments are guaranteed or sponsored by the U.S. government or an agency thereof.  Accordingly, it is expected that the securities would not be settled at a price less than the par value of the investment.  Because the decline in market value is attributable to changes in interest rates and not to credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2012.

The Company’s unrealized losses on investments in corporate bonds and other securities relate to investments in companies within the financial services sector.  The unrealized losses are primarily caused by (a) interest rate fluctuations, (b) recent decreases in profitability and near-term profit forecasts by industry analysts and (c) recent downgrades by industry analysts.  The contractual terms of these investments do not permit the companies to settle the security at a price less than the par value of investment.  While the companies’ credit ratings have decreased, the Company currently does not believe it is probable that it will be unable to collect all amounts due according to the contractual terms of the investments.  Therefore, it is expected that the bonds would not be settled at a price less than the par value of the investment.  Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity.

For the quarter ended September 30, 2012, securities with other-than-temporary impairment losses related to credit loss that were recognized in earnings consisted of non-agency mortgage-backed securities.  For these debt securities, the Company estimated the portion of loss attributable to credit loss using a discounted cash flow model.  Significant inputs included the estimated cash flows of the underlying loans based on key assumptions, such as default rate, loss severity and prepayment rate.  Assumptions can vary widely from security to security, and are influenced by such factors as loan interest rate, geographical location of the borrower, borrower characteristics and collateral type.  The present value of the expected cash flows was compared to the Company’s amortized cost basis to determine the credit-related impairment loss.  Based on the expected cash flows derived from the model, the Company expects to recover the remaining unrealized losses on these securities and the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2012.

The following table represents a roll-forward of the amount of credit losses on debt securities for which a portion of an other-than-temporary impairment was recognized in other comprehensive income (loss) (in thousands):

Balance as of June 30, 2011	$	13,307
Credit losses on securities for which other-than-temporary impairment
was not previously recorded		-
Additional credit losses on securities for which an other-than-temporary
impairment charge was previously recorded		1,964
Reductions for securities sold during the period		-
Balance as of June 30, 2012		15,271
Credit losses on securities for which other-than-temporary impairment
was not previously recorded		-
Additional credit losses on securities for which an other-than-temporary
impairment charge was previously recorded		89
Reductions for securities sold during the period		-
Balance as of September 30, 2012	$	15,360

14

           Auction-rate trust preferred securities. At September 30, 2012, our auction-rate trust preferred securities (ARP) portfolio totaled $10.6 million, all of which were classified as available-for-sale.   Auction-rate trust preferred securities are a floating rate preferred stock, on which the dividend rate generally resets every 90 days based on an auction process to reflect the yield demand for the instruments by potential purchasers.  At September 30, 2012, our investments in auction-rate trust preferred securities consisted of investments in three corporate issuers.  These securities were originally purchased by the Company because they represented highly liquid, tax-preferred investments secured, in most cases, by preferred stock issued by high quality, investment grade companies (generally other financial institutions) (“collateral preferred shares”).  The ARP shares, or certificates, purchased by the Company are Class A certificates, which, among other rights, entitle the holder to priority claim on dividends paid into the Trust holding the preferred shares.

In most cases, the trusts which issued the ARP certificates own various callable preferred shares of stock by a single entity.  In addition to the call dates for redemption established by the collateral preferred shares, each trust has a maturity date upon which the trust itself will terminate.  The value of the remaining collateral preferred shares is not guaranteed, and may be more or less than the stated par value of the collateral preferred shares, and is dependent on the market value of those collateral preferred shares on the date of the trust’s maturity.

The certificates issued by the trusts traded in an active, open auction market, with each individual trust establishing the frequency of its auctions, typically every 90 days (the “reset date”).  The results of an auction would be the exchange of certificates, at par, between participants entering or exiting the market, and resetting of the yield to be earned by holders of the Class A certificates as well as the holders of other classes of trust certificates.

Beginning in February 2008, auctions for these securities began to fail when investors declined to bid on the securities.  Five of the largest investment banks that made a market in these securities (Merrill Lynch, Citigroup, UBS, AIG and Morgan Stanley) declined to act as bidders of last resort, as they had in the past.  The auction failures did not result in the loss of any principal value to the certificate holders, but prevented many sellers from exiting, or redeeming, their certificates at the reset date.  These unsuccessful sellers were required to continue to hold the certificates until the next scheduled reset date.  To compensate these unsuccessful sellers, the failed auctions triggered a penalty-rate feature which provided that owners of the Class A certificates were entitled to a higher portion of the dividends, and thus a higher yield, on the Class A certificates.

During this time, the Company attempted to divest itself of the ARPs, but was prevented from doing so due to the continued failure of the auction market.  The Company continued to carry its investments at par value, despite the increased liquidity risk, because the credit strength of the issuers of the collateral preferred shares remained high, and the yield remained above-market.

The turmoil in the financial markets caused the value of the underlying collateral preferred shares to decline. These declines in value are not considered other-than-temporary.

The Company had difficulty identifying market prices of comparable instruments for ARPs due to the inactive market.  As a result, during the quarter ended June 30, 2009, the Company modified its methodology for determining the fair value of the ARPs classified as Level 3, and used the quoted market values of the underlying collateral preferred shares, adjusted for the higher yield earned by the Company through the Class A certificates compared with the nominal rate available to a direct owner of the collateral preferred shares.

The Company adopted the guidance in ASC 820-10, “Fair Value Measurements and Disclosures,” in the second quarter of 2009.  The Company concluded that the market value of the underlying collateral preferred shares did not represent orderly transactions and adopted the use of a discounted cash flow model to determine if there was any other-than-temporary impairment of its investments in the ARPs.  The resulting discounted cash flow for each ARP classified as Level 3 showed no impairment in the fair value of the securities.

The Company has the ability and intent to hold these securities for the time necessary to collect the expected cash flows.

15

The chart below includes information as of September 30, 2012 on the various issuers of Auction Rate Preferred securities owned by the Company:

Issuer	Goldman Sachs	Merrill Lynch	Bank of America
Par amount	$3,000,000	$5,000,000	$2,000,000
Book Value	$3,000,000	$5,000,000	$2,000,000
Purchase Date	12-12-07	09-04-07	11-20-07
Maturity Date	08-23-26	05-28-27	08-17-47
Next Reset Date	11-21-12	11-27-12	11-16-12
Reset Frequency	Quarterly	Quarterly	Quarterly
Failed Auction	Yes	Yes	Yes
Receiving Default Rates	Yes	Yes	Yes
Current Rate	4.70%	4.66%	4.57%
Dividends Current:	Yes	Yes	Yes

NOTE 6 – Loans

The following table sets forth the composition of our loan portfolio at September 30, 2012 and June 30, 2012:

	September 30,			June 30,
	2012			2012
	(in thousands)
Mortgage Loans:
Residential (1)	$	199,783		$	200,148
Commercial real estate		44,708			45,032
Residential construction		2,007			3,044
Commercial		2,970			3,459
Consumer and other		955			898
Total loans		250,423			252,581
Unadvanced construction loans		(2,257	)		(1,559	)
		248,166			251,022
Net deferred loan costs		514			463
Allowance for loan losses		(3,027	)		(2,913	)
Loans, net	$	245,653		$	248,572

(1)          Residential mortgage loans include one- to four-family mortgage loans, second mortgage loans, and home equity lines of credit.

16

Credit Quality Information

The Company utilizes a nine grade internal loan rating system as follows:

Loans rated 1 -5:  Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 6:  Loans in this category are considered “special mention.”  These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 7:  Loans in this category are considered “substandard.”  Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged.  There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

Loans rated 8:  Loans in this category are considered “doubtful.”  Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 9:  Loans in this category are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted.

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

The following table presents the Company’s loan segments by internally assigned grades at September 30, 2012:

	Residential		Commercial		Residential				Consumer
September 30, 2012	Real Estate		Real Estate		Construction		Commercial		and other		Total
(in thousands)
Grade:
Pass	$	195,825	$	31,028	$	1,175	$	2,476	$	955	$	231,459
Special Mention		336		1,887		-		494		-		2,717
Substandard		3,250		9,536		429		-		-		13,215
Doubtful		372		403		-		-		-		775
Loss		-		-		-		-		-		-
Total	$	199,783	$	42,854	$	1,604	$	2,970	$	955	$	248,166
	Residential		Commercial		Residential				Consumer
June 30, 2012	Real Estate		Real Estate		Construction		Commercial		and other		Total
(in thousands)
Grade:
Pass	$	195,825	$	32,032	$	1,875	$	2,834	$	898	$	233,464
Special Mention		338		1,719		-		625		-		2,682
Substandard		3,605		9,998		424		-		-		14,027
Doubtful		380		469		-		-		-		849
Loss		-		-		-		-		-		-
Total	$	200,148	$	44,218	$	2,299	$	3,459	$	898	$	251,022

17

The following table represents modifications that were deemed to be troubled debt restructures for the three months ended September 30, 2011.  There were no modifications that were deemed to be troubled debt restructures for the three months ended September 30, 2012.

			Pre-Modifcation		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
(Dollars in thousands)
Real Estate:
Commercial		1	$	80	$	113

The modification on the commercial loan provided a reduced rate for five years plus the capitalization of real estate taxes.  A tax escrow account has also been established.  Management performs a discounted cash flow calculation to determine the amount of impaired reserve required on each of the troubled debt restructures.  Any reserve required is recorded through the provision for loan losses.

The following is a summary of troubled debt restructurings that have subsequently defaulted within one year of modification during the periods indicated:

	Three months ended				Three months ended
	September 30, 2012				September 30, 2011
	Number of		Recorded		Number of		Recorded
	Contracts		Investment		Contracts		Investment
(Dollars in thousands)
Real Estate:
Residential		1	$	190		1	$	190
Commercial		1		222		1		226
Total		2	$	412		2	$	416

The defaults on the commercial and residential troubled debt restructures were the result of the borrower’s delinquent loan payments during the period.  The Company evaluates the levels/trends in delinquencies and non-accruals as part of the qualitative factors within the allowance for loan loss framework.

18

NOTE 7 – Non-performing Assets, Past Due and Impaired Loans

The table below sets forth the amounts and categories of non-performing assets at the dates indicated:

	At September 30,			At June 30,
	2012			2012
	(Dollars in thousands)
Non-accrual loans:
Residential	$	3,622		$	3,985
Commercial real estate		3,601			3,975
Residential construction		429			424
Total non-accrual loans		7,652			8,384
Accruing loans past due 90 days or more:
Residential		422			-
Total		422			-
Total non-performing loans		8,074			8,384
Other real estate owned		1,865			1,683
Total non-performing assets	$	9,939		$	10,067
Total non-performing loans to total loans		3.25	%		3.33	%
Total non-performing assets to total assets		2.21	%		2.23	%

The balance in non-performing loans is a direct correlation to the deteriorating real estate climate.  Management is focused on working with borrowers and guarantors to resolve these trends by restructuring or liquidating assets when prudent. Many of our commercial relationships are secured by development loans, in particular condominiums which have experienced a significant reduction in demand. The Bank reviews the strength of the guarantors; requires face to face discussions and offers restructuring suggestions that provide the borrowers with short term relief and exit strategies. Overall, we expect to see improvement as solutions are identified and executed. The Bank obtains a current appraisal on all real estate secured loans that are 180 days or more past due if the appraisal on file is older than one year. If the determination is made that there is the potential for collateral shortfall, an allocated reserve will be assigned to the loan for the expected deficiency. It is the policy of the Bank to charge off or write down loans or other assets when, in the opinion of the Credit Committee and Loan Review, the ultimate amount recoverable is less than the book value, or the collection of the amount is expected to be unduly prolonged.  The level of non-performing assets is expected to fluctuate in response to changing economic and market conditions, and the relative sizes of the respective loan portfolios, along with management’s degree of success in resolving problem assets. Management takes a proactive approach with respect to the identification and resolution of problem loans.

19

The following table sets forth information regarding past due loans at September 30, 2012 and June 30, 2012:

					90 days
	30–59 Days		60–89 Days		or greater		Total
At September 30, 2012	Past Due		Past Due		Past Due		Past Due
(in thousands)
Real Estate:
Residential	$	30	$	524	$	1,359	$	1,913
Commercial		-		2,071		1,965		4,036
Residential Construction		-		-		429		429
Commercial		-		465		-		465
Consumer		-		2		-		2
Total	$	30	$	3,062	$	3,753	$	6,845
At June 30, 2012
(in thousands)
Real Estate:
Residential	$	363	$	162	$	940	$	1,465
Commercial		159		-		1,573		1,732
Residential Construction		-		-		424		424
Total	$	522	$	162	$	2,937	$	3,621

20

The following is a summary of information pertaining to impaired loans at September 30, 2012 and June 30, 2012.

	At September 30, 2012						At June 30, 2012
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
Impaired loans without a valuation allowance:	(in thousands)
Real Estate:
Residential	$	1,392	$	1,392	$	-	$	1,415	$	1,415	$	-
Commercial		2,999		3,085		-		6,668		6,754		-
Residential construction		429		429		-		424		424		-
Consumer and other		22		22		-		27		27		-
Total impaired with no specific reserves		4,842		4,928		-		8,534		8,620		-
Impaired loans with a valuation allowance:
Real Estate:
Residential		3,413		3,508		167		3,431		3,527		185
Commercial		2,008		2,498		38		3,402		3,768		190
Total impaired with a specific reserve		5,421		6,006		205		6,833		7,295		375
Total Impaired Loans:
Real Estate:
Residential		4,805		4,900		167		4,846		4,942		185
Commercial		5,007		5,583		38		10,070		10,522		190
Residential construction		429		429		-		424		424		-
Consumer and other		22		22		-		27		27		-
Total impaired loans	$	10,263	$	10,934	$	205	$	15,367	$	15,915	$	375

21

The following is a summary of additional information pertaining to impaired loans:

	Three months ended						Three months ended
	September 30, 2012						September 30, 2011
	Average		Interest		Interest Income		Average		Interest		Interest Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		on Cash Basis		Investment		Recognized		on Cash Basis
(in thousands)
Real Estate:
Residential	$	4,826		31	$	17	$	2,308	$	17	$	6
Commercial		7,306		62		14		7,280		63		21
Residential Construction		426		-		-		-		-		-
Commercial		-		-		-		-		4		4
Consumer and other		22		-		-		56		1		-
Total impaired loans	$	12,580	$	93	$	31	$	9,644	$	85	$	31

NOTE 8 – Allowance for Loan Losses

An analysis of the allowance for loan losses for the three months ended September 30, 2012 and 2011 is as follows:
Three months ended
September 30, 2012	Residential			Commercial			Residential						Consumer
	Real Estate			Real Estate			Construction			Commercial			and other			Unallocated			Total
Allowance for loan losses:	(in thousands)
Beginning balance	$	1,485		$	1,347		$	20		$	17		$	37		$	7		$	2,913
Charge-offs		(41	)		(123	)		-			-			(17	)		-			(181	)
Recoveries		37			-			-			1			7			-			45
Provision		55			5			(1	)		14			9			168			250
Ending Balance	$	1,536		$	1,229		$	19		$	32		$	36		$	175		$	3,027
Three months ended
September 30, 2011	Residential			Commercial			Residential						Consumer
	Real Estate			Real Estate			Construction			Commercial			and other			Unallocated			Total
Allowance for loan losses:	(in thousands)
Beginning balance	$	1,520		$	1,286		$	28		$	140		$	11		$	87		$	3,072
Charge-offs		(67	)		(476	)		-			-			(16	)		-			(559	)
Recoveries		2			-			-			2			4			-			8
Provision		78			431			(7	)		(56	)		11			(66	)		391
Ending Balance	$	1,533		$	1,241		$	21		$	86		$	10		$	21		$	2,912

22

Further information pertaining to the allowance for loan losses at September 30, 2012 and June 30, 2012 is as follows:
At September 30, 2012	Residential		Commercial		Residential
	Real Estate		Real Estate		Construction		Commercial		Consumer		Unallocated		Total
(in thousands)
Ending balance: Amount of allowance for loan losses for impaired loans	$	167	$	38	$	-	$	-	$	-	$	-	$	205
Ending balance: Amount of allowance for loan losses for non-impaired loans	$	1,369	$	1,191	$	19	$	32	$	36	$	175	$	2,822
Loans: Ending balance	$	199,783	$	42,854	$	1,604	$	2,970	$	955	$	-	$	248,166
Ending balance: Impaired loans	$	4,805	$	5,007	$	429	$	-	$	22	$	-	$	10,263
Ending balance: Non-impaired loans	$	194,978	$	37,847	$	1,175	$	2,970	$	933	$	-	$	237,903
At June 30, 2012	Residential		Commercial		Residential
	Real Estate		Real Estate		Construction		Commercial		Consumer		Unallocated		Total
(in thousands)
Ending balance: Amount of allowance for loan losses for impaired loans	$	185	$	190	$	-	$	-	$	-	$	-	$	375
Ending balance: Amount of allowance for loan losses for non-impaired loans	$	1,300	$	1,157	$	20	$	17	$	37	$	7	$	2,538
Loans: Ending balance	$	200,148	$	44,218	$	2,299	$	3,459	$	898	$	-	$	251,022
Ending balance: Impaired loans	$	4,846	$	10,070	$	424	$	-	$	27	$	-	$	15,367
Ending balance: Non-impaired loans	$	195,302	$	34,148	$	1,875	$	3,459	$	871	$	-	$	235,655

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NOTE 9 – Accumulated Other Comprehensive Income (Loss)

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income.  Although certain changes in assets and liabilities are reported as a separate component of the equity section of the statement of condition, such items are components of accumulated other comprehensive income.

The components of accumulated other comprehensive income (loss) and related tax effects are as follows:

	September 30,		June 30,
	2012		2012
	(in thousands)
Net unrealized gain on securities available-for-sale	$	13	$	(1,534	)
Tax effect		5		(521	)
Accumulated other comprehensive income (loss)	$	8	$	(1,013	)

NOTE 10 – FAIR VALUE MEASUREMENTS

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

Level 1 – Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange.  Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 – Valuations for assets and liabilities traded in less active dealer or broker markets.  Valuations are obtained from third party pricing services for identical or comparable assets or liabilities.

Level 3 – Valuations for assets and liabilities that are derived from other methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions.  Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets and liabilities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.  These valuation methodologies were applied to all of the Company’s assets and liabilities carried at fair value for September 30, 2012.

The Company’s investment and mortgage-backed securities and other debt securities available-for-sale are generally classified within Level 2 of the fair value hierarchy.  For these securities, we obtain fair value measurements from independent pricing services.  The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U. S. treasury yield curve, trading levels, market consensus prepayment speeds, credit information and the instrument’s terms and conditions.

Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence.  In the absence of such evidence, management’s best estimate is used.  Subsequent to inception, management only changes Level 3 inputs and assumptions when corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalization and other transactions across the capital structure, offerings in the equity or debt markets, and changes in financial ratios or cash flows.

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The Company’s impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral.  Collateral values are estimated using Level 3 inputs based upon appraisals of similar properties obtained from a third party.

The Company did not have any significant transfers of assets or liabilities between Levels 1 and 2 of the fair value hierarchy during the three months ended September 30, 2012.

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The following summarizes assets measured at fair value on a recurring basis at September 30, 2012 and June 30, 2012:

			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
At September 30, 2012	Total Fair		Identical Assets		Inputs		Inputs
(in thousands)	Value		Level 1		Level 2		Level 3
Securities available-for-sale:
U.S. government and government-sponsored securities	$	411	$	-	$	411	$	-
Corporate bonds and other securities		4,487		-		4,487		-
U.S. Government agency sponsored and guaranteed mortgage-backed securities		21,293		-		21,293		-
Non-agency mortgage-backed securities		8,713		-		8,713		-
Equity securities		10,618		-		-		10,618
Total	$	45,522	$	-	$	34,904	$	10,618
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
At June 30, 2012	Total Fair		Identical Assets		Inputs		Inputs
(in thousands)	Value		Level 1		Level 2		Level 3
Securities available-for-sale:
U.S. government and government-sponsored securities	$	459	$	-	$	459	$	-
Corporate bonds and other securities		4,654		-		4,654		-
U.S. Government agency sponsored and guaranteed mortgage-backed securities		24,113		-		24,113		-
Non-agency mortgage-backed securities		8,351		-		8,351		-
Equity securities		9,636		-		-		9,636
Total	$	47,213	$	-	$	37,577	$	9,636
The table below represents the changes in level 3 assets measured at fair value for the three months ended September 30, 2012.
(in thousands)
Beginning balance, June 30, 2012			$	9,636
Unrealized gains included in other comprehensive loss				982
Ending balance, September 30, 2012			$	10,618

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The following summarizes assets measured at fair value on a non-recurring basis and the adjustments to the carrying value at and for the three months ended September 30, 2012 and 2011.

			Quoted Prices in		Significant		Significant		Total Losses
			Active Markets for		Other Observable		Unobservable		for the three
At September 30, 2012	Total Fair		Identical Assets		Inputs		Inputs		months ended
(in thousands)	Value		Level 1		Level 2		Level 3		September 30, 2012
Other real estate owned		290	$	-	$	-		290		(48	)
			Quoted Prices in		Significant		Significant		Total Losses
			Active Markets for		Other Observable		Unobservable		for the three
At September 30, 2011	Total Fair		Identical Assets		Inputs		Inputs		months ended
(in thousands)	Value		Level 1		Level 2		Level 3		September 30, 2011
Impaired loans	$	4,760	$	-	$	-	$	4,760	$	(784	)
Other real estate owned		127		-		-		127		(15	)
Totals	$	4,887	$	-	$	-	$	4,887	$	(799	)

The amount of loans represents the carrying value of impaired loans net of related write-downs and valuation allowances for which adjustments are based on the estimated fair value of the underlying collateral. The other real estate owned amount represents the carrying value for which adjustments are also based on the estimated fair value of the property.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because a market may not readily exist for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

There were no liabilities measured at fair value on a recurring or non-recurring basis at September 30, 2012 and 2011 or June 30, 2012.

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The following methods and assumptions were used by the Company in estimating fair values of its financial instruments:

Cash and Cash Equivalents.  The carrying amounts of cash and cash equivalents approximate fair values based on the short-term nature of the assets.

Investment Securities and FHLBB Stock.  The fair value of securities held-to-maturity and available-for-sale is estimated based on quoted market prices, where available.  If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.  Ownership of Federal Home Loan Bank of Boston (“FHLBB”) stock is restricted to member banks; therefore, the stock is not traded.  The estimated fair value of FHLBB stock is equal to its carrying value, which represents the price at which the FHLBB is obligated to redeem its stock.

Loans.  For valuation purposes, the loan portfolio was segregated into its significant categories, which are residential, commercial real estate, residential construction, commercial and consumer and other loans. These categories were further segregated, where appropriate, into components based on significant financial characteristics such as type of interest rate (fixed or adjustable). Fair values were estimated for each component using assumptions developed by management and a valuation model provided by a third party specialist.

The fair values of residential, commercial real estate, residential construction, commercial and consumer and other loans were estimated by discounting the anticipated cash flows from the respective portfolios. Estimates of the timing and amount of these cash flows considered factors such as future loan prepayments. The discount rates reflected current market rates for loans with similar terms to borrowers of similar credit quality. The fair value of home equity lines of credit was based on the outstanding loan balances.  Fair values for non-performing loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

            Loans held for sale: Loans held for sale are accounted for at the lower of cost or market and the fair value of loans held for sale based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted as required for changes in loan characteristics.

Deposits and Mortgagors’ Escrow.  The fair value of deposits with no stated maturity and mortgagors’  escrow account, such as demand deposits, NOW, regular savings, and money market deposit accounts, is equal to the amount payable on demand.  The fair value estimates do not include the benefit that results from the generally lower cost of funding provided by the deposit liabilities compared to the cost of borrowing funds in the market.  The fair value estimate of time deposits is based on the discounted value of contractual cash flows.  The discount rate is estimated using the rates currently offered for deposits having similar remaining maturities.

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

Securities Sold Under Agreements to Repurchase.  The Company enters into overnight repurchase agreements with its customers. Since these agreements are short-term instruments, the fair value of these agreements approximates their recorded balance. The Company also secures term repurchase agreements through other financial institutions. The fair value of these agreements are determined by discounting the anticipated future cash payments using rates currently available to the Bank for debt with similar terms and remaining maturities.

Off-Balance Sheet Instruments.  The fair value of off-balance-sheet mortgage lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing.  In the case of the commitments discussed in Note 13, the fair value equals the carrying amounts which are not significant.

Summary of Fair Values of Financial Instruments.  The estimated fair values, and related carrying  amounts, of the Company’s financial instruments are as follows. Certain financial instruments and all nonfinancial instruments are exempt from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein do not represent the underlying fair value of the Company.

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The following table presents the carrying amount and estimated fair values of the Company’s financial instruments, all of which are held or issued for purposes other than trading, as of September 30, 2012 and June 30, 2012:

	September 30,
	2012
	Carrying		Fair Value Hierarchy						Fair
	Amount		Level 1		Level 2		Level 3		Value
			(In thousands)
Financial assets:
Cash and cash equivalents	$	4,328	$	4,328	$	-	$	-	$	4,328
Securities available-for-sale		45,522		-		34,904		10,618		45,522
Securities held-to-maturity		116,033		-		119,600		-		119,600
Federal Home Loan Bank stock		7,536		-		-		7,536		7,536
Loans held-for-sale		2,030		-		-		2,076		2,076
Loans, net		245,653		-		-		253,073		253,073
Accrued interest receivable		1,250		-		-		1,250		1,250
Financial liabilities:
Deposits		337,174		-		-		339,838		339,838
Mortgagors’ escrow accounts		1,002		-		-		1,002		1,002
Federal Home Loan Bank advances		53,500		-		55,255		-		55,255
Securities sold under agreements to repurchase		6,222		-		6,222		-		6,222

	June 30,
	2012
	Carrying		Fair Value Hierarchy						Fair
	Amount		Level 1		Level 2		Level 3		Value
			(In thousands)
Financial assets:
Cash and cash equivalents	$	11,413	$	11,413	$	-	$	-	$	11,413
Securities available-for-sale		47,213		-		37,577		9,636		47,213
Securities held-to-maturity		105,195		-		108,336		-		108,336
Federal Home Loan Bank stock		7,536		-		-		7,536		7,536
Loans held-for-sale		776		-		-		782		782
Loans, net		248,572		-		-		255,075		255,075
Accrued interest receivable		1,158		-		-		1,158		1,158
Financial liabilities:
Deposits		342,338		-		-		344,675		344,675
Mortgagors’ escrow accounts		2,034		-		-		2,034		2,034
Federal Home Loan Bank advances		53,500		-		55,340		-		55,340
Securities sold under agreements to repurchase		3,653		-		3,653		-		3,653

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NOTE 11 – Stock-Based Incentive Plan

At the annual meeting of stockholders on October 21, 2005, stockholders of the Company approved the PSB Holdings, Inc. 2005 Stock-Based Incentive Plan (the “Incentive Plan”).  Under the Incentive Plan, the Company may grant up to 340,213 stock options and 136,085 shares of restricted stock to its employees, officers and directors for an aggregate amount of up to 476,298 shares of the Company’s common stock for issuance upon the grant or exercise of awards.  Both incentive stock options and non-statutory stock options may be granted under the Incentive Plan.

On November 7, 2005, the Company awarded 319,800 options to purchase the Company’s common stock and 129,281 shares of restricted stock.  Stock option awards were granted with an exercise price equal to the market price of the Company’s stock at the date of grant ($10.60) with a maximum term of ten years.

On June 7, 2006, the Company awarded 18,000 options to purchase the Company’s common stock and 6,000 shares of restricted stock.  Stock option awards were granted with an exercise price equal to the market price of the Company’s stock at the date of grant ($10.78) with a maximum term of ten years.

On May 25, 2007, the Company awarded 29,000 options to purchase the Company’s common stock and 9,500 shares of restricted stock.  Stock option awards were granted with an exercise price equal to the market price of the Company’s stock at the date of grant ($10.70) with a maximum term of ten years.

Both stock option and restricted stock awards granted to date vest at 20% per year beginning on the first anniversary of the date of the grant.

Stock options and restricted stock awards are considered common stock equivalents for the purpose of computing earnings per share on a diluted basis.

The Company has recorded share-based compensation expense related to outstanding stock option and restricted stock awards based upon the fair value at the date of grant over the vesting period of such awards on a straight-line basis.  The fair value of each restricted stock allocation, based on the market price at the date of grant, is recorded in Unearned stock awards.  Compensation expense related to unearned restricted shares is amortized to compensation and benefits expense over the vesting period of the restricted stock awards.   The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing method which includes several assumptions such as volatility, expected dividends, expected term and risk-free rate for each stock option award.

NOTE 12 – Dividends

The Company did not declare a dividend during the three months ended September 30, 2012 and 2011.

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NOTE 13 – Commitments to Extend Credit

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the Condensed Consolidated Balance Sheets.

The contractual amounts of outstanding commitments were as follows:

	September 30,		June 30,
	2012		2012
	(in thousands)
Commitments to extend credit:
Loan commitments	$	3,507	$	3,646
Unadvanced construction loans		2,257		1,559
Unadvanced lines of credit		12,623		12,690
Standby letters of credit		842		842
Outstanding commitments	$	19,229	$	18,737

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

The following analysis discusses changes in the financial condition at September 30, 2012 and June 30, 2012 and results of operations for the three months ended September 30, 2012 and 2011, and should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and the notes thereto, appearing in Part I, Item 1 of this quarterly report.  These financial statements should be read in conjunction with the 2012 Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on September 28, 2012.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of these safe harbor provisions.  Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions.  The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse effect on the operations of the Company and its subsidiary include, but are not limited to, changes in: interest rates, general economic conditions, legislation and regulations, real estate values, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area and accounting principles and guidelines.  These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  Further information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s filings with the Securities and Exchange Commission.

Except as required by applicable law and regulation, the Company does not undertake – and specifically disclaims any obligation – to publicly release the results of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

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Overview

The Company’s results of operations depend primarily on net interest and dividend income, which is the difference between the interest and dividend income earned on its interest-earning assets, such as loans and securities, and the interest expense on its interest-bearing liabilities, such as deposits and borrowings. The Company also generates non-interest income, primarily from fees and service charges.  Gains on sales of loans and securities and bank-owned life insurance income are added sources of non-interest income.  The Company’s non-interest expense primarily consists of employee compensation and benefits, occupancy and equipment expense, advertising, data processing, professional fees and other operating expenses.

During the quarters ended September 30, 2012 and 2011, the Company recorded non-cash OTTI charges of $89,000 and $798,000, respectively, on non-agency mortgage-backed securities.  The net interest margin increased from 2.47% for the quarter ended September 30, 2011 to 2.62% for the quarter ended September 30, 2012, as we experienced a $21,000 increase in net interest and dividend income over the periods.  In addition, non-interest expense decreased $185,000 during the quarter ended September 30, 2012 compared to the quarter ended September 30, 2011.  The provision for loan losses decreased $141,000 during the quarter ended September 30, 2012 as compared to the quarter ended September 30, 2011.

Comparison of Financial Condition at September 30, 2012 and June 30, 2012

Assets

Total assets decreased to $450.1 million at September 30, 2012 from $452.3 million at June 30, 2012.  Cash and cash equivalents decreased $7.1 million and totaled $4.3 million or 1.0% of total assets.  Investments in available-for-sale securities decreased $1.7 million and totaled $45.5 million or 10.1% of total assets at September 30, 2012.  Investments in held-to-maturity securities increased $10.8 million and totaled $116.0 million or 25.8% of total assets at September 30, 2012.  Net loans decreased $2.9 million and totaled $245.7 million or 54.6% of total assets at September 30, 2012.  Included in other assets as of September 30, 2012 was $887,000 in prepaid FDIC assessments.

Allowance for Loan Losses

The table below indicates the relationships between the allowance for loan losses, total loans outstanding and non-performing loans at September 30, 2012 and June 30, 2012.  For additional information, see “Comparison of Operating Results for the Three months ended September 30, 2012 and 2011 – Provision for loan losses.”

	September 30,			June 30,
	2012			2012
	(Dollars in thousands)
Allowance for loan losses	$	3,027		$	2,913
Gross loans outstanding		248,680			251,485
Non-performing loans		8,074			8,384
Allowance/gross loans outstanding		1.22	%		1.16	%
Allowance/non-performing loans		37.5	%		34.7	%

Liabilities

Total liabilities decreased to $400.5 million at September 30, 2012 from $404.2 million at June 30, 2012.  Total deposits decreased to $337.2 million at September 30, 2012 from $342.3 million at June 30, 2012, a decrease of $5.1 million or 1.5%.  Federal Home Loan Bank advances remained unchanged at $53.5 million.   Securities sold under agreements to repurchase increased to $6.2 million at September 30, 2012 from $3.7 million at June 30, 2012, an increase of $2.5 million or 70.3%.

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Stockholders’ Equity

Stockholders’ equity increased to $49.7 million at September 30, 2012 from $48.1 million at June 30, 2012, primarily due to a $1.0 million decrease in unrealized losses on available-for-sale securities net of tax recorded in accumulated other comprehensive income and net income of $503,000 for the three months ended September 30, 2012.

Comparison of Operating Results for the Three months ended September 30, 2012 and 2011

Net Income

Net income amounted to $503,000 or $0.08 per basic and diluted share for the quarter ended September 30, 2012 compared to net income of $805,000 or $0.13 per basic and diluted share for the quarter ended September 30, 2011. The decrease in net income was primarily due to a legal settlement on previously written-down securities of $1.5 million and $235,000 in gains on sales of securities available-for-sale during the three months ended September 30, 2011.  Other-than-temporarily impaired investment write-downs decreased $709,000 to $89,000 for the quarter ended September 30, 2012 compared to $798,000 for the quarter ended September 30, 2011.  Both items were non-recurring during the quarter ended September 30, 2012.  Income from bank-owned life insurance increased $184,000 to $259,000 for the quarter ended September 30, 2012 compared to $75,000 for the quarter ended September 30, 2011.  This increase included a $176,000 non-taxable death benefit realized during the quarter ended September 30, 2012.  The provision for loan loss decreased by $141,000 to $250,000 for the quarter ended September 30, 2012 compared to $391,000 for the quarter ended September 30, 2011.  Total non-interest expense decreased by $185,000 to $2.7 million for the quarter ended September 30, 2012 compared to $2.8 million for the quarter ended September 30, 2011.  Net interest income increased $21,000 to $2.8 million for the quarter ended September 30, 2012 compared to $2.8 million for the quarter ended September 30, 2011.  Income tax expense was $79,000 for the quarter ended September 30, 2012 compared to $285,000 for the quarter ended September 30, 2011.  This was the result of a decrease in pre-tax income, tax preference items and an increase in non-taxable income from bank-owned life insurance.

Interest and Dividend Income

Interest and dividend income amounted to $4.1 million for the quarter ended September 30, 2012 compared to $4.7 million for the quarter ended September 30, 2011, a decrease of $577,000 or 12.4%.  This was primarily due to a decrease in yield on earning assets of 33 basis points to 3.85% for the quarter ended September 30, 2012 compared to 4.18% for the quarter ended September 30, 2011.  Average investment securities decreased $14.8 million to $164.2 million for the quarter ended September 30, 2012 compared to $179.0 million for the quarter ended September 30, 2011.  The yield on investment securities decreased 37 basis points to 2.49% for the quarter ended September 30, 2012 compared to 2.86% for the quarter ended September 30, 2011.  Average loans decreased by $5.0 million to $251.2 million for the quarter ended September 30, 2012 compared to $256.2 million for the quarter ended September 30, 2011.  The yield on loans decreased 41 basis points to 4.82% for the quarter ended September 30, 2012 compared to 5.23% for the quarter ended September 30, 2011.

Interest Expense

Interest expense amounted to $1.3 million for the quarter ended September 30, 2012 compared to $1.9 million for the quarter ended September 30, 2011, a decrease of $598,000 or 31.4%.  The decrease was primarily due to changes in rates of interest-bearing liabilities.  The cost of average interest-bearing liabilities decreased 49 basis points to 1.45% for the quarter ended September 30, 2012 from 1.94% for the quarter ended September 30, 2011.  The average rate on interest-bearing deposits decreased by 33 basis points to 1.12% for the quarter ended September 30, 2012 compared to 1.45% for the quarter ended September 30, 2011.  The average rate on borrowed money decreased by 43 basis points to 3.08% for the quarter ended September 30, 2012 compared to 3.51% for the quarter ended September 30, 2011.

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Net Interest and Dividend Income

Net interest and dividend income amounted to $2.8 million for the quarter ended September 30, 2012 compared to $2.8 million for the quarter ended September 30, 2011, an increase of $21,000 or 0.8%.  Net interest rate spread increased by 16 basis points to 2.40% for the quarter ended September 30, 2012 from 2.24% for the quarter ended September 30, 2011.  Net interest margin increased 15 basis points to 2.62% from 2.47% when comparing the quarters ended September 30, 2012 and 2011, respectively.  Net interest-earning assets increased $10.3 million to $64.3 million for the quarter ended September 30, 2012 compared to $54.0 million for the quarter ended September 30, 2011.

Due to the large portion of fixed rate loans and securities in the Company’s asset portfolio, interest rate risk is a concern and the Company continues to monitor and adjust the asset and liability mix as much as possible to take advantage of the benefits and reduce the risks or potential negative effects of a rising rate environment.  Management attempts to mitigate the interest rate risk through balance sheet composition.  See “Market Risk, Liquidity and Capital Resources – Market Risk.”

Provision for Loan Losses

The provision for loan losses amounted to $250,000 for the quarter ended September 30, 2012 compared to $391,000 for the quarter ended September 30, 2011, a decrease of $141,000 or 36.1%.  The allowance for loan losses is based on management’s estimate of the probable losses inherent in the portfolio, considering the impact of certain internal and external factors.  Among the factors management considers are prior loss experience, current economic conditions and their effects on borrowers, the character and size of the portfolio, trends in non-performing loans and delinquency rates and the performance of individual loans in relation to contractual terms.  The provision for loan losses reflects adjustments to the allowance based on management’s review of the portfolio in light of these factors.  The ratio of the allowance to gross loans outstanding was 1.22% as of September 30, 2012 and 1.16% as of June 30, 2012.  Net charge-offs were $136,000 for the quarter ended September 30, 2012 compared to net charge-offs of $551,000 for the quarter ended September 30, 2011.

Non-interest Income

Non-interest income totaled $711,000 for the quarter ended September 30, 2012 compared to $1.6 million for the quarter ended September 30, 2011, a decrease of $855,000 or 54.6%.  The decrease was primarily due to a legal settlement on previously written-down securities of $1.5 million and $235,000 in gains on sales of securities available-for-sale during the three months ended September 30, 2011.  This was partially offset by a decrease in other-than-temporary impairment charges on available-for-sale securities of $709,000 to $89,000 for the quarter ended September 30, 2012 compared to $798,000 for the quarter ended September 30, 2011.  The impairment charges for the three months ended September 30, 2012 and September 30, 2011 were the result of credit losses on non-agency mortgage-backed securities.  Income from bank-owned life insurance increased $184,000 to $259,000 for the quarter ended September 30, 2012 compared to $75,000 for the quarter ended September 30, 2011.  This increase included a $176,000 non-taxable death benefit realized during the quarter ended September 30, 2012.  Service fees decreased by $80,000 or 15.4% to $438,000 for the quarter ended September 30, 2012 compared to $518,000 for the quarter ended September 30, 2011.

Non-interest Expense

Non-interest expense amounted to $2.7 million for the quarter ended September 30, 2012 compared to $2.8 million for the quarter ended September 30, 2011, a decrease of $185,000 or 6.5%.  Compensation and benefits expense decreased $79,000 or 5.2%.  Occupancy and equipment expense increased $9,000 or 2.9%.  All other non-interest expenses decreased $115,000 or 11.2% to $909,000 for the quarter ended September 30, 2012 compared to $1.0 million for the quarter ended September 30, 2011.

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Provision for Income Taxes

Income tax expense amounted to $79,000 for the quarter ended September 30, 2012 compared to $285,000 for the quarter ended September 30, 2011. The effective tax rates were 13.6% and 26.1%, respectively, mainly due to a decrease in pre-tax income, tax preference items and an increase in non-taxable income from bank-owned life insurance. The effective tax rates differed from the statutory tax rate of 34% primarily due to the dividends-received deduction applicable to certain securities in our investment portfolio, tax-exempt municipal income and non-taxable bank-owned life insurance income.

35

Average Balances and Yields

The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated.  No tax-equivalent yield adjustments were made, as the effect thereof was not material.  All average balances are daily average balances.  Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield.  The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.  Yields and costs are annualized.

	For the Three Months Ended September 30,
	2012							2011
	(Dollars in thousands)
	Average		Interest		Yield/			Average		Interest		Yield/
Interest-earning assets:	Balance		Income/Expense		Cost			Balance		Income/Expense		Cost
Investment securities	$	164,225	$	1,032		2.49	%	$	179,057	$	1,291		2.86	%
Loans		251,196		3,054		4.82	%		256,154		3,374		5.23	%
Other earning assets		6,213		3		0.19	%		7,542		1		0.05	%
Total interest-earnings assets		421,634		4,089		3.85	%		442,753		4,666		4.18	%
Non-interest-earning assets		30,191							31,200
Total assets	$	451,825						$	473,953
Interest-bearing liabilities:
NOW accounts	$	94,304	$	150		0.63	%	$	91,309	$	201		0.87	%
Savings accounts		53,560		27		0.20	%		49,207		43		0.35	%
Money market accounts		15,308		17		0.44	%		14,560		25		0.68	%
Time deposits		133,825		645		1.91	%		140,493		813		2.30	%
Borrowed money		60,350		469		3.08	%		93,164		824		3.51	%
Total interest-bearing liabilities		357,347		1,308		1.45	%		388,733		1,906		1.94	%
Non-interest-bearing demand deposits		43,101							36,384
Other non-interest-bearing liabilities		2,608							2,308
Capital accounts		48,769							46,528
Total liabilities and capital accounts	$	451,825						$	473,953
Net interest income			$	2,781						$	2,760
Interest rate spread						2.40	%						2.24	%
Net interest-earning assets	$	64,287						$	54,020
Net interest margin						2.62	%						2.47	%
Average earning assets to
average interest-bearing liabilities						117.99	%						113.90	%

36

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

	For the Three Months Ended September 30, 2012
	Compared to the Three Months Ended September 30, 2011
	Increase (Decrease) Due to
INTEREST INCOME	Rate			Volume			Net
	(In thousands)
Investment securities	$	(157	)	$	(102	)	$	(259	)
Loans		(256	)		(64	)		(320	)
Other interest-earning assets		3			(1	)		2
TOTAL INTEREST INCOME		(410	)		(167	)		(577	)
INTEREST EXPENSE:
NOW accounts		(92	)		41			(51	)
Savings accounts		(38	)		22			(16	)
Money Market accounts		(16	)		8			(8	)
Time deposits		(131	)		(37	)		(168	)
Borrowed money		(91	)		(264	)		(355	)
TOTAL INTEREST EXPENSE		(368	)		(230	)		(598	)
CHANGE IN NET INTEREST INCOME	$	(42	)	$	63		$	21

Market Risk, Liquidity and Capital Resources

Market Risk

The majority of our assets and liabilities are monetary in nature.  Consequently, our most significant form of market risk is interest rate risk (“IRR”).  Our assets, consisting primarily of mortgage loans, have longer maturities than our liabilities, consisting primarily of deposits and other borrowings.  As a result, a principal part of our business strategy is to manage IRR and reduce the exposure of our net interest income (“NII”) to changes in market interest rates.  Accordingly, our Board of Directors has established an Asset/Liability Management Committee which is responsible for evaluating the IRR inherent in our assets and liabilities, for determining the level of risk that is appropriate given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors.  With the assistance of an IRR management consultant, the committee monitors the level of IRR on a regular basis and generally meets at least on a quarterly basis to review our asset/liability policies and IRR position.

37

We have sought to manage our IRR in order to minimize the exposure of our earnings and capital to changes in interest rates.  As part of our ongoing asset/liability management, we currently use the following strategies to manage our IRR: (i) using alternative funding sources, such as advances from the Federal Home Loan Bank of Boston, to “match fund” certain investments and/or loans; (ii) continued emphasis on increasing core deposits; (iii) offering adjustable rate and shorter-term home equity loans, commercial real estate loans, construction loans and commercial and industrial loans; (iv) offering a variety of consumer loans, which typically have shorter-terms; (v) investing in mortgage-backed securities with variable rates or fixed rates with shorter durations.  Shortening the average maturity of our interest-earning assets by increasing our investments in shorter-term loans and securities, as well as loans and securities with variable rates of interest, helps to better match the maturities and interest rates of our assets and liabilities, thereby reducing the exposure of our NII to changes in market interest rates.

Net interest income at-risk measures the risk of a decline in earnings due to potential short-term and long- term changes in interest rates.  The table below represents an analysis of our IRR as measured by the estimated changes in NII, resulting from an instantaneous and sustained parallel shift in the yield curve (+100 and +200 basis points) at September 30, 2012 and June 30, 2012.

Net Interest Income At-Risk
	Estimated Increase (Decrease)	Estimated Increase (Decrease)
Change in Interest Rates	in NII	in NII
(Basis Points)	September 30, 2012	June 30, 2012
Stable
+ 100	-0.91%	-0.56%
+ 200	-5.18%	-4.81%

The preceding income simulation analysis does not represent a forecast of NII and should not be relied upon as being indicative of expected operating results.  These hypothetical estimates are based upon numerous assumptions, which are subject to change, including: the nature and timing of interest rate levels including the yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and others.  Also, as market conditions vary prepayment/refinancing levels will likely deviate from those assumed, the varying impact of interest rate changes on caps and floors embedded in adjustable rate loans, early withdrawal of deposits, changes in product preferences, and other internal/external variables.

Net Portfolio Value Simulation Analysis.  We compute the amounts by which the net present value of our cash flow from assets, liabilities and off-balance sheet items (the institution’s net portfolio value or “NPV”) would change in the event of a range of assumed changes in market interest rates.  Given the current low level of market interest rates, we do not prepare a net portfolio value calculation for an interest rate decrease of greater than 100 basis points.  A basis point equals one-hundredth of one percent, and 200 basis points equals two percent, an increase in interest rates from 3% to 5% would mean, for example, a 200 basis point increase in the “Change in Interest Rates” column below.

The tables below set forth, at September 30, 2012, the estimated changes in our net portfolio value that would result from the designated instantaneous changes in the United States Treasury yield curve based on information produced by an external consultant.  Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.  This data is for Putnam Bank only and does not include any yield curve changes in the assets of PSB Holdings, Inc.

38

									NPV as a Percentage of Present
									Value of Assets (3)
			Estimated Increase (Decrease) in
Change in			NPV									Increase
Interest Rates	Estimated											(Decrease)
(basis points) (1)	NPV (2)		Amount			Percent			NPV Ratio (4)			(basis points)
+300	$	36,342	$	(15,328	)		-29.67	%		8.67	%		-273
+200	$	44,417	$	(7,253	)		-14.04	%		10.29	%		-111
+100	$	49,885	$	(1,785	)		-3.45	%		11.25	%		-15
0	$	51,670	$	-			0.00	%		11.40	%		0
-100	$	53,443	$	1,773			3.43	%		11.60	%		19

(1) Assumes an instantaneous uniform change in interest rates at all maturities.

(2) NPV is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.

(3) Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

(4) NPV ratio represents NPV divided by the present value of assets.

Liquidity

The term liquidity refers to the ability of the Company and the Bank to meet current and future short-term financial obligations.  The Company and the Bank further define liquidity as the ability to generate adequate amounts of cash to fund loan originations, deposit withdrawals and operating expenses.  Liquidity management is both a daily and long-term function of business management. The Bank’s primary sources of liquidity are deposits, scheduled amortization and prepayments of loan principal and mortgage-related securities, and Federal Home Loan Bank of Boston borrowings.  The Bank can borrow funds from the Federal Home Loan Bank of Boston based on eligible collateral of loans and securities.  The Bank had Federal Home Loan Bank of Boston borrowings as of September 30, 2012 of $53.5 million with unused borrowing capacity of $58.9 million.  The Bank has an internal limit of wholesale borrowings to total assets ratio of 30.0%.  As of September 30, 2012, the ratio of wholesale borrowings to total assets was 11.9%.

The Bank’s primary investing activities are the origination of loans and the purchase of investment securities.  During the three months ended September 30, 2012 and 2011, the Bank’s principal collections net of loan originations were $2.4 million and $627,000, respectively. Purchases of securities totaled $19.7 million and $16.2 million, for the three months ended September 30, 2012 and 2011, respectively.

Loan repayments and maturing investment securities are a relatively predictable source of funds.  However, deposit flows, calls of investment securities and prepayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and economic conditions and competition in the marketplace.  These factors reduce the predictability of the timing of these sources of funds.  Deposit flows are affected by the level of interest rates, by the interest rates and products offered by competitors and by other factors.  The Bank monitors its liquidity position frequently and anticipates that it will have sufficient funds to meet its current funding commitments.

Certificates of deposits totaled $132.4 million at September 30, 2012. The Bank relies on competitive rates, customer service and long-standing relationships with customers to retain deposits.  Based on the Bank’s experience with deposit retention and current retention strategies, management believes that, although it is not possible to predict with certainty future terms and conditions upon renewal, a significant portion of such deposits will remain with the Bank.

39

The Bank was well capitalized at September 30, 2012 and exceeded each of the applicable regulatory capital requirements at such date.

	Required	Actual
Ratio of Tier 1 Capital to total assets	4%	8.50%
Ratio of Total Risk Based Capital to risk-weighted assets	8%	17.21%
Ratio of Tier 1 Risk Based Capital to risk-weighted assets	4%	15.96%

Management is not aware of any known trends, events or uncertainties that will have or are reasonably likely to have a material effect on the Company’s or the Bank’s liquidity, capital or operations, nor is management aware of any current recommendations by regulatory authorities which, if implemented, would have a material effect on the Company’s or the Bank’s liquidity, capital or operations.

Off-Balance Sheet Arrangements

In addition to the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles are not recorded in our financial statements.  These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk.  Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments, lines of credit, and letters of credit.

For the three months ended September 30, 2012, we engaged in no off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

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

Item 4.  Controls and Procedures

Under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15(d)-15(e) under the Exchange Act) as of the end of the period covered by this report.  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and in timely altering them to material information relating to the Company (or its consolidated subsidiaries) required to be filed in its periodic SEC filings.

There has been no change in the Company’s internal control over financial reporting in connection with the quarterly evaluation that occurred during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

40

Part II. – OTHER INFORMATION

Item 1.	Legal Proceedings – Not applicable
Item 1A.	Risk Factors – Not applicable
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	a) Not applicable
	b) Not applicable
	c) Not applicable
Item 3.	Defaults Upon Senior Securities – Not applicable
Item 4.	Mine Safety Disclosures – Not Applicable.
Item 5.	Other Information
	a. Not applicable.
Item 6.	Exhibits

Exhibits

31.1 Chief Executive Officer Certification pursuant to 17 CFR 240.13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Chief Financial Officer Certification pursuant to 17 CFR 240.13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350.

32.2 Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350.

101 The following materials from the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2012, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Changes in Stockholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements.

41

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PSB HOLDINGS, INC. (Registrant)
Date November 14, 2012		/s/  Thomas A. Borner
		Thomas A. Borner
		President and Chief Executive Officer
Date November 14, 2012		/s/  Robert J. Halloran, Jr.
		Robert J. Halloran, Jr.
		Executive Vice-President, Chief Financial Officer and Treasurer

42

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO 17 CFR 240.13a-14

I, Thomas A. Borner, certify that:

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

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

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

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

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

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

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

(d)           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (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 the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(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: November 14, 2012

/s/ Thomas A. Borner

Thomas A. Borner

President and Chief Executive Officer 

EX-31.2

EXHIBIT 31.2

CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO 17 CFR 240.13a-14

I, Robert J. Halloran, Jr., certify that:

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

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

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

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

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

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

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

(d)           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (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 the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(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:November 14, 2012

/s/  Robert J. Halloran, Jr.

Robert J. Halloran, Jr.

Executive Vice-President, Chief Financial Officer and Treasurer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of PSB Holdings, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas A. Borner, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350 that to the best of my knowledge:

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

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the report.

November 14, 2012

/s/  Thomas A. Borner

Thomas A. Borner

President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of PSB Holdings, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert J. Halloran, Jr., Executive Vice-President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350 that to the best of my knowledge:

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

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the report.

November 14, 2012

/s/  Robert J. Halloran, Jr.

Robert J. Halloran, Jr.

Executive Vice-President, Chief Financial Officer and Treasurer

XML

Investment Securities (Details Textuals 1) (USD $)	3 Months Ended		12 Months Ended
	Sep. 30, 2012 Securities	Sep. 30, 2011	Jun. 30, 2012 Securities
Investments, Debt and Equity Securities [Abstract]
Gross realized gains	$ 0	$ 235,000
Gross realized losses	0	0
Total other-than-temporary impairment losses	282,000	2,039,000
Portion of losses recognized in other comprehensive loss/income	193,000	1,241,000
Impairment losses on securities	$ 89,000	$ 798,000
Number of individual investment securities with unrealized losses	23		27

XML

FAIR VALUE MEASUREMENTS - Assets measured at fair value on a non-recurring basis and the adjustments to the carrying value (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Losses	$ (48)	$ (799)
Fair value measurements non recurring basis | Total Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	290	4,887
Fair value measurements non recurring basis | Quoted Prices in Active Markets for Identical Assets Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value
Fair value measurements non recurring basis | Significant Other Observable Inputs Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value
Fair value measurements non recurring basis | Significant Unobservable Inputs Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	290	4,887
Fair value measurements non recurring basis | Other real estate owned
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Losses	(48)	(15)
Fair value measurements non recurring basis | Other real estate owned | Total Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	290	127
Fair value measurements non recurring basis | Other real estate owned | Quoted Prices in Active Markets for Identical Assets Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value
Fair value measurements non recurring basis | Other real estate owned | Significant Other Observable Inputs Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value
Fair value measurements non recurring basis | Other real estate owned | Significant Unobservable Inputs Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	290	127
Fair value measurements non recurring basis | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Losses		(784)
Fair value measurements non recurring basis | Impaired loans | Total Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value		4,760
Fair value measurements non recurring basis | Impaired loans | Quoted Prices in Active Markets for Identical Assets Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value
Fair value measurements non recurring basis | Impaired loans | Significant Other Observable Inputs Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value
Fair value measurements non recurring basis | Impaired loans | Significant Unobservable Inputs Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value		$ 4,760

XML

Non-performing Assets, Past Due and Impaired Loans - Summary of additional information to impaired loans (Details 4) (Loans Receivable [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	$ 12,580	$ 9,644
Interest Income Recognized	93	85
Interest Income Recognized on Cash Basis	31	31
Residential Real Estate
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	4,826	2,308
Interest Income Recognized	31	17
Interest Income Recognized on Cash Basis	17	6
Commercial Real Estate
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	7,306	7,280
Interest Income Recognized	62	63
Interest Income Recognized on Cash Basis	14	21
Residential construction
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	426
Interest Income Recognized
Interest Income Recognized on Cash Basis
Commercial
Financing Receivable, Impaired [Line Items]
Average Recorded Investment
Interest Income Recognized		4
Interest Income Recognized on Cash Basis		4
Consumer and other
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	22	56
Interest Income Recognized		1
Interest Income Recognized on Cash Basis

XML

FAIR VALUE MEASUREMENTS - Company's financial instruments, all of which are held or issued for purposes other than trading (Details 3) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012
Financial assets:
Accrued interest receivable	$ 1,250	$ 1,158
Financial liabilities:
Mortgagors' escrow accounts	1,002	2,034
Carrying amount
Financial assets:
Cash and cash equivalents	4,328	11,413
Securities available-for-sale	45,522	47,213
Securities held-to-maturity	116,033	105,195
Federal Home Loan Bank Stock	7,536	7,536
Loans held-for-sale	2,030	776
Loans, net	245,653	248,572
Accrued interest receivable	1,250	1,158
Financial liabilities:
Deposits	337,174	342,338
Mortgagors' escrow accounts	1,002	2,034
Federal Home Loan Bank advances	53,500	53,500
Securities sold under agreements to repurchase	6,222	3,653
Fair value hierarchy level 1
Financial assets:
Cash and cash equivalents	4,328	11,413
Securities available-for-sale
Securities held-to-maturity
Federal Home Loan Bank Stock
Loans held-for-sale
Loans, net
Accrued interest receivable
Financial liabilities:
Deposits
Mortgagors' escrow accounts
Federal Home Loan Bank advances
Securities sold under agreements to repurchase
Fair value hierarchy level 2
Financial assets:
Cash and cash equivalents
Securities available-for-sale	34,904	37,577
Securities held-to-maturity	119,600	108,336
Federal Home Loan Bank Stock
Loans held-for-sale
Loans, net
Accrued interest receivable
Financial liabilities:
Deposits
Mortgagors' escrow accounts
Federal Home Loan Bank advances	55,255	55,340
Securities sold under agreements to repurchase	6,222	3,653
Fair value hierarchy level 3
Financial assets:
Cash and cash equivalents
Securities available-for-sale	10,618	9,636
Securities held-to-maturity
Federal Home Loan Bank Stock	7,536	7,536
Loans held-for-sale	2,076	782
Loans, net	253,073	255,075
Accrued interest receivable	1,250	1,158
Financial liabilities:
Deposits	339,838	344,675
Mortgagors' escrow accounts	1,002	2,034
Federal Home Loan Bank advances
Securities sold under agreements to repurchase
Fair Value
Financial assets:
Cash and cash equivalents	4,328	11,413
Securities available-for-sale	45,522	47,213
Securities held-to-maturity	119,600	108,336
Federal Home Loan Bank Stock	7,536	7,536
Loans held-for-sale	2,076	782
Loans, net	253,073	255,075
Accrued interest receivable	1,250	1,158
Financial liabilities:
Deposits	339,838	344,675
Mortgagors' escrow accounts	1,002	2,034
Federal Home Loan Bank advances	55,255	55,340
Securities sold under agreements to repurchase	$ 6,222	$ 3,653

XML

Non-performing Assets, Past Due and Impaired Loans - Past due loans (Details 2) (Loans receivables, USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	$ 30	$ 522
60-89 Days Past Due	3,062	162
90 days or greater Past Due	3,753	2,937
Total Past Due	6,845	3,621
Residential Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	30	363
60-89 Days Past Due	524	162
90 days or greater Past Due	1,359	940
Total Past Due	1,913	1,465
Commercial Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due		159
60-89 Days Past Due	2,071
90 days or greater Past Due	1,965	1,573
Total Past Due	4,036	1,732
Residential construction
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due
60-89 Days Past Due
90 days or greater Past Due	429	424
Total Past Due	429	424
Commercial
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due
60-89 Days Past Due	465
90 days or greater Past Due
Total Past Due	465
Consumer and other
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due
60-89 Days Past Due	2
90 days or greater Past Due
Total Past Due	$ 2

XML

Earnings Per Share (EPS) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Sep. 30, 2012		Sep. 30, 2011
Earnings Per Share [Abstract]
Net income	$ 503		$ 805
Average basic common shares	6,372,349		6,359,570
Dilutive effect of stock options		[1]		[1]
Average diluted common shares	6,372,349		6,359,570
Basic EPS:	$ 0.08		$ 0.13
Diluted EPS:	$ 0.08		$ 0.13

[1] Options to purchase 222,921 shares for the three months ended September 30, 2012 and 2011 were outstanding but not included in the computation of earnings per share because they were anti-dilutive, meaning the exercise price of such options exceeded the market value of the Company's common stock.

XML

Commitments to Extend Credit - Contractual amounts of outstanding commitments (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Outstanding commitments	$ 19,229	$ 18,737
Loan commitments
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Outstanding commitments	3,507	3,646
Unadvanced construction loans
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Outstanding commitments	2,257	1,559
Unadvanced lines of credit
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Outstanding commitments	12,623	12,690
Standby letters of credit
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Outstanding commitments	$ 842	$ 842

XML

Non-performing Assets, Past Due and Impaired Loans (Tables)

3 Months Ended

Sep. 30, 2012

Non Performing Assets [Abstract]

Schedule of non performing assets

	At September 30,			At June 30,
	2012			2012
	(Dollars in thousands)
Non-accrual loans:
Residential	$	3,622		$	3,985
Commercial real estate		3,601			3,975
Residential construction		429			424
Total non-accrual loans		7,652			8,384
Accruing loans past due 90 days or more:
Residential		422			-
Total		422			-
Total non-performing loans		8,074			8,384
Other real estate owned		1,865			1,683
Total non-performing assets	$	9,939		$	10,067
Total non-performing loans to total loans		3.25	%		3.33	%
Total non-performing assets to total assets		2.21	%		2.23	%

Schedule of the summary of past due loans

					90 days
	30–59 Days		60–89 Days		or greater		Total
At September 30, 2012	Past Due		Past Due		Past Due		Past Due
(in thousands)
Real Estate:
Residential	$	30	$	524	$	1,359	$	1,913
Commercial		-		2,071		1,965		4,036
Residential Construction		-		-		429		429
Commercial		-		465		-		465
Consumer		-		2		-		2
Total	$	30	$	3,062	$	3,753	$	6,845
At June 30, 2012
(in thousands)
Real Estate:
Residential	$	363	$	162	$	940	$	1,465
Commercial		159		-		1,573		1,732
Residential Construction		-		-		424		424
Total	$	522	$	162	$	2,937	$	3,621

Schedule of information pertaining to impaired loans

	At September 30, 2012						At June 30, 2012
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
Impaired loans without a valuation allowance:	(in thousands)
Real Estate:
Residential	$	1,392	$	1,392	$	-	$	1,415	$	1,415	$	-
Commercial		2,999		3,085		-		6,668		6,754		-
Residential construction		429		429		-		424		424		-
Consumer and other		22		22		-		27		27		-
Total impaired with no specific reserves		4,842		4,928		-		8,534		8,620		-
Impaired loans with a valuation allowance:
Real Estate:
Residential		3,413		3,508		167		3,431		3,527		185
Commercial		2,008		2,498		38		3,402		3,768		190
Total impaired with a specific reserve		5,421		6,006		205		6,833		7,295		375
Total Impaired Loans:
Real Estate:
Residential		4,805		4,900		167		4,846		4,942		185
Commercial		5,007		5,583		38		10,070		10,522		190
Residential construction		429		429		-		424		424		-
Consumer and other		22		22		-		27		27		-
Total impaired loans	$	10,263	$	10,934	$	205	$	15,367	$	15,915	$	375

The following is a summary of additional information pertaining to impaired loans:

	Three months ended						Three months ended
	September 30, 2012						September 30, 2011
	Average		Interest		Interest Income		Average		Interest		Interest Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		on Cash Basis		Investment		Recognized		on Cash Basis
(in thousands)
Real Estate:
Residential	$	4,826		31	$	17	$	2,308	$	17	$	6
Commercial		7,306		62		14		7,280		63		21
Residential Construction		426		-		-		-		-		-
Commercial		-		-		-		-		4		4
Consumer and other		22		-		-		56		1		-
Total impaired loans	$	12,580	$	93	$	31	$	9,644	$	85	$	31

XML

Allowance for Loan Losses - Further information pertaining to allowance for loan losses (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012	Sep. 30, 2011	Jun. 30, 2011
Loans receivables
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	$ 3,027	$ 2,913	$ 2,912	$ 3,072
Ending balance	248,166	251,022
Loans receivables | Residential Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	1,536	1,485	1,533	1,520
Ending balance	199,783	200,148
Loans receivables | Commercial Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	1,229	1,347	1,241	1,286
Ending balance	42,854	44,218
Loans receivables | Residential construction
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	19	20	21	28
Ending balance	1,604	2,299
Loans receivables | Commercial
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	32	17	86	140
Ending balance	2,970	3,459
Loans receivables | Consumer
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	36	37	10	11
Ending balance	955	898
Loans receivables | Unallocated
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	175	7	21	87
Impaired loan receivables
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	205	375
Ending balance	10,263	15,367
Impaired loan receivables | Residential Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	167	185
Ending balance	4,805	4,846
Impaired loan receivables | Commercial Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	38	190
Ending balance	5,007	10,070
Impaired loan receivables | Residential construction
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans
Ending balance	429	424
Impaired loan receivables | Commercial
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans
Ending balance
Impaired loan receivables | Consumer
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans
Ending balance	22	27
Impaired loan receivables | Unallocated
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans
Ending balance
Non-impaired loan receivables
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	2,822	2,538
Ending balance	237,903	235,655
Non-impaired loan receivables | Residential Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	1,369	1,300
Ending balance	194,978	195,302
Non-impaired loan receivables | Commercial Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	1,191	1,157
Ending balance	37,847	34,148
Non-impaired loan receivables | Residential construction
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	19	20
Ending balance	1,175	1,875
Non-impaired loan receivables | Commercial
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	32	17
Ending balance	2,970	3,459
Non-impaired loan receivables | Consumer
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	36	37
Ending balance	933	871
Non-impaired loan receivables | Unallocated
Financing Receivable, Allowance for Credit Losses [Line Items]
Amount of allowance for loan losses for impaired loans	175	7
Ending balance

XML

Loans - Loan segments by internally assigned grades (Details 2) (Loans receivables, USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	$ 248,166	$ 251,022
Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	231,459	233,464
Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	2,717	2,682
Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	13,215	14,027
Doubtful
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	775	849
Loss
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans
Residential real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	199,783	200,148
Residential real estate | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	195,825	195,825
Residential real estate | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	336	338
Residential real estate | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	3,250	3,605
Residential real estate | Doubtful
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	372	380
Residential real estate | Loss
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans
Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	42,854	44,218
Commercial real estate | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	31,028	32,032
Commercial real estate | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	1,887	1,719
Commercial real estate | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	9,536	9,998
Commercial real estate | Doubtful
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	403	469
Commercial real estate | Loss
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans
Residential construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	1,604	2,299
Residential construction | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	1,175	1,875
Residential construction | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans
Residential construction | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	429	424
Residential construction | Doubtful
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans
Residential construction | Loss
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	2,970	3,459
Commercial | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	2,476	2,834
Commercial | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	494	625
Commercial | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans
Commercial | Doubtful
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans
Commercial | Loss
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans
Consumer and other
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	955	898
Consumer and other | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans	955	898
Consumer and other | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans
Consumer and other | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans
Consumer and other | Doubtful
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans
Consumer and other | Loss
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans after unadvanced construction loans

XML

Investment Securities - Amount of credit losses on debt securities for which a portion of an other-than-temporary impairment was recognized in other comprehensive income (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Sep. 30, 2012	Jun. 30, 2012
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward]
Balance	$ 15,271	$ 13,307
Credit losses on securities for which other-than-temporary impairment was not previously recorded
Additional credit losses on securities for which an other-than-temporary impairment charge was previously recorded	89	1,964
Reductions for securities sold during the period
Balance	$ 15,360	$ 15,271

XML

FAIR VALUE MEASUREMENTS - Assets measured at fair value on a recurring basis (Details) (Fair Value, Measurements, Recurring, USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012
Total Fair Value
Securities available for sale:
Assets measured at fair value	$ 45,522	$ 47,213
Total Fair Value | U.S. government and government-sponsored securities
Securities available for sale:
Assets measured at fair value	411	459
Total Fair Value | Corporate bonds and other securities
Securities available for sale:
Assets measured at fair value	4,487	4,654
Total Fair Value | U.S. Government sponsored and guaranteed mortgage-backed securities
Securities available for sale:
Assets measured at fair value	21,293	24,113
Total Fair Value | Non-agency mortgage-backed securities
Securities available for sale:
Assets measured at fair value	8,713	8,351
Total Fair Value | Equity securities
Securities available for sale:
Assets measured at fair value	10,618	9,636
Quoted Prices in Active Markets for Identical Assets Level 1
Securities available for sale:
Assets measured at fair value
Quoted Prices in Active Markets for Identical Assets Level 1 | U.S. government and government-sponsored securities
Securities available for sale:
Assets measured at fair value
Quoted Prices in Active Markets for Identical Assets Level 1 | Corporate bonds and other securities
Securities available for sale:
Assets measured at fair value
Quoted Prices in Active Markets for Identical Assets Level 1 | U.S. Government sponsored and guaranteed mortgage-backed securities
Securities available for sale:
Assets measured at fair value
Quoted Prices in Active Markets for Identical Assets Level 1 | Non-agency mortgage-backed securities
Securities available for sale:
Assets measured at fair value
Quoted Prices in Active Markets for Identical Assets Level 1 | Equity securities
Securities available for sale:
Assets measured at fair value
Significant Other Observable Inputs Level 2
Securities available for sale:
Assets measured at fair value	34,904	37,577
Significant Other Observable Inputs Level 2 | U.S. government and government-sponsored securities
Securities available for sale:
Assets measured at fair value	411	459
Significant Other Observable Inputs Level 2 | Corporate bonds and other securities
Securities available for sale:
Assets measured at fair value	4,487	4,654
Significant Other Observable Inputs Level 2 | U.S. Government sponsored and guaranteed mortgage-backed securities
Securities available for sale:
Assets measured at fair value	21,293	24,113
Significant Other Observable Inputs Level 2 | Non-agency mortgage-backed securities
Securities available for sale:
Assets measured at fair value	8,713	8,351
Significant Other Observable Inputs Level 2 | Equity securities
Securities available for sale:
Assets measured at fair value
Significant Unobservable Inputs Level 3
Securities available for sale:
Assets measured at fair value	10,618	9,636
Significant Unobservable Inputs Level 3 | U.S. government and government-sponsored securities
Securities available for sale:
Assets measured at fair value
Significant Unobservable Inputs Level 3 | Corporate bonds and other securities
Securities available for sale:
Assets measured at fair value
Significant Unobservable Inputs Level 3 | U.S. Government sponsored and guaranteed mortgage-backed securities
Securities available for sale:
Assets measured at fair value
Significant Unobservable Inputs Level 3 | Non-agency mortgage-backed securities
Securities available for sale:
Assets measured at fair value
Significant Unobservable Inputs Level 3 | Equity securities
Securities available for sale:
Assets measured at fair value	$ 10,618	$ 9,636

XML

Non-performing Assets, Past Due and Impaired Loans - Summary of impaired loans (Details 3) (Loans receivables, USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012
Financing Receivable, Impaired [Line Items]
Impaired loans without a specific reserves, recorded investment	$ 4,842	$ 8,534
Impaired loans without a specific reserves, unpaid principal balance	4,928	8,620
Impaired loans with a specific reserves, recorded investment	5,421	6,833
Impaired loans with a specific reserves, unpaid principal balance	6,006	7,295
Impaired loans with a specific reserves, related allowance	205	375
Total impaired loans, recorded investment	10,263	15,367
Total impaired loans, unpaid principal balance	10,934	15,915
Impaired loans with a specific reserves, related allowance	205	375
Residential Real Estate
Financing Receivable, Impaired [Line Items]
Impaired loans without a specific reserves, recorded investment	1,392	1,415
Impaired loans without a specific reserves, unpaid principal balance	1,392	1,415
Impaired loans with a specific reserves, recorded investment	3,413	3,431
Impaired loans with a specific reserves, unpaid principal balance	3,508	3,527
Impaired loans with a specific reserves, related allowance	167	185
Total impaired loans, recorded investment	4,805	4,846
Total impaired loans, unpaid principal balance	4,900	4,942
Impaired loans with a specific reserves, related allowance	167	185
Commercial Real Estate
Financing Receivable, Impaired [Line Items]
Impaired loans without a specific reserves, recorded investment	2,999	6,668
Impaired loans without a specific reserves, unpaid principal balance	3,085	6,754
Impaired loans with a specific reserves, recorded investment	2,008	3,402
Impaired loans with a specific reserves, unpaid principal balance	2,498	3,768
Impaired loans with a specific reserves, related allowance	38	190
Total impaired loans, recorded investment	5,007	10,070
Total impaired loans, unpaid principal balance	5,583	10,522
Impaired loans with a specific reserves, related allowance	38	190
Residential construction
Financing Receivable, Impaired [Line Items]
Impaired loans without a specific reserves, recorded investment	429	424
Impaired loans without a specific reserves, unpaid principal balance	429	424
Total impaired loans, recorded investment	429	424
Total impaired loans, unpaid principal balance	429	424
Consumer and other
Financing Receivable, Impaired [Line Items]
Impaired loans without a specific reserves, recorded investment	22	27
Impaired loans without a specific reserves, unpaid principal balance	22	27
Total impaired loans, recorded investment	22	27
Total impaired loans, unpaid principal balance	$ 22	$ 27

XML

Organization

3 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Organization

NOTE 1 – Organization

PSB Holdings, Inc. (Company) is a federally chartered holding company formed on May 27, 2003 for the purpose of acquiring all of the common stock of Putnam Bank (Bank) concurrent with the Bank’s reorganization from a mutual savings institution to the mutual holding company form of organization.  No shares were offered to the public as part of this reorganization.

On October 4, 2004, the Company issued 6,943,125 shares of common stock, 3,729,846 shares (53.7%) of which were issued to Putnam Bancorp, MHC and 3,089,691 shares (44.5%) of which were sold to eligible depositors of the Bank and others at $10.00 per share. In addition, the Company issued 123,588 shares (1.8%) to a charitable foundation established by the Bank.

XML

Loans - Summary of modifications that were deemed to be troubled debt restructures (Details 3) (Loans receivables, Commercial Real Estate, USD $) In Thousands, unless otherwise specified	Sep. 30, 2011 Contracts
Loans receivables | Commercial Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of Contracts	1
Pre-Modifcation Outstanding Recorded Investment	$ 80
Post-Modification Outstanding Recorded Investment	$ 113

XML

COMMITMENTS AND CONTINGENT LIABILITIES (Tables)

3 Months Ended

Sep. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Schedule of notional amounts of commitments with off-balance-sheet credit risk

	September 30,		June 30,
	2012		2012
	(in thousands)
Commitments to extend credit:
Loan commitments	$	3,507	$	3,646
Unadvanced construction loans		2,257		1,559
Unadvanced lines of credit		12,623		12,690
Standby letters of credit		842		842
Outstanding commitments	$	19,229	$	18,737

XML

FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Schedule of summary assets measured at fair value on a recurring basis

			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
At September 30, 2012	Total Fair		Identical Assets		Inputs		Inputs
(in thousands)	Value		Level 1		Level 2		Level 3
Securities available-for-sale:
U.S. government and government-sponsored securities	$	411	$	-	$	411	$	-
Corporate bonds and other securities		4,487		-		4,487		-
U.S. Government agency sponsored and guaranteed mortgage-backed securities		21,293		-		21,293		-
Non-agency mortgage-backed securities		8,713		-		8,713		-
Equity securities		10,618		-		-		10,618
Total	$	45,522	$	-	$	34,904	$	10,618
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
At June 30, 2012	Total Fair		Identical Assets		Inputs		Inputs
(in thousands)	Value		Level 1		Level 2		Level 3
Securities available-for-sale:
U.S. government and government-sponsored securities	$	459	$	-	$	459	$	-
Corporate bonds and other securities		4,654		-		4,654		-
U.S. Government agency sponsored and guaranteed mortgage-backed securities		24,113		-		24,113		-
Non-agency mortgage-backed securities		8,351		-		8,351		-
Equity securities		9,636		-		-		9,636
Total	$	47,213	$	-	$	37,577	$	9,636

Schedule of the changes in level 3 assets measured at fair value

(in thousands)
Beginning balance, June 30, 2012	$	9,636
Unrealized gains included in other comprehensive loss		982
Ending balance, September 30, 2012	$	10,618

Schedule of assets measured at fair value on a non-recurring basis and the adjustments to the carrying value

			Quoted Prices in		Significant		Significant		Total Losses
			Active Markets for		Other Observable		Unobservable		for the three
At September 30, 2012	Total Fair		Identical Assets		Inputs		Inputs		months ended
(in thousands)	Value		Level 1		Level 2		Level 3		September 30, 2012
Other real estate owned		290	$	-	$	-		290		(48	)
			Quoted Prices in		Significant		Significant		Total Losses
			Active Markets for		Other Observable		Unobservable		for the three
At September 30, 2011	Total Fair		Identical Assets		Inputs		Inputs		months ended
(in thousands)	Value		Level 1		Level 2		Level 3		September 30, 2011
Impaired loans	$	4,760	$	-	$	-	$	4,760	$	(784	)
Other real estate owned		127		-		-		127		(15	)
Totals	$	4,887	$	-	$	-	$	4,887	$	(799	)

Schedule of estimated fair value of financial instruments which are held or issued for purposes other than trading

	September 30,
	2012
	Carrying		Fair Value Hierarchy						Fair
	Amount		Level 1		Level 2		Level 3		Value
			(In thousands)
Financial assets:
Cash and cash equivalents	$	4,328	$	4,328	$	-	$	-	$	4,328
Securities available-for-sale		45,522		-		34,904		10,618		45,522
Securities held-to-maturity		116,033		-		119,600		-		119,600
Federal Home Loan Bank stock		7,536		-		-		7,536		7,536
Loans held-for-sale		2,030		-		-		2,076		2,076
Loans, net		245,653		-		-		253,073		253,073
Accrued interest receivable		1,250		-		-		1,250		1,250
Financial liabilities:
Deposits		337,174		-		-		339,838		339,838
Mortgagors’ escrow accounts		1,002		-		-		1,002		1,002
Federal Home Loan Bank advances		53,500		-		55,255		-		55,255
Securities sold under agreements to repurchase		6,222		-		6,222		-		6,222

	June 30,
	2012
	Carrying		Fair Value Hierarchy						Fair
	Amount		Level 1		Level 2		Level 3		Value
			(In thousands)
Financial assets:
Cash and cash equivalents	$	11,413	$	11,413	$	-	$	-	$	11,413
Securities available-for-sale		47,213		-		37,577		9,636		47,213
Securities held-to-maturity		105,195		-		108,336		-		108,336
Federal Home Loan Bank stock		7,536		-		-		7,536		7,536
Loans held-for-sale		776		-		-		782		782
Loans, net		248,572		-		-		255,075		255,075
Accrued interest receivable		1,158		-		-		1,158		1,158
Financial liabilities:
Deposits		342,338		-		-		344,675		344,675
Mortgagors’ escrow accounts		2,034		-		-		2,034		2,034
Federal Home Loan Bank advances		53,500		-		55,340		-		55,340
Securities sold under agreements to repurchase		3,653		-		3,653		-		3,653

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Stock-Based Incentive Plan (Details Textuals) (USD $)	0 Months Ended		1 Months Ended
	Jun. 07, 2006	Nov. 07, 2005	May 25, 2007	Oct. 21, 2005 Stock Based Incentive Plan	Oct. 21, 2005 Stock Based Incentive Plan Stock Options	Oct. 21, 2005 Stock Based Incentive Plan Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares company may granted				476,298	340,213	136,085
Number of options to purchase common stock	18,000	319,800	29,000
Number of options to purchase restricted stock	6,000	129,281	9,500
Exercise price of option	$ 10.78	$ 10.60	$ 10.70
Term of award	10 years	10 years	10 years
Percentage of award vesting per year	20.00%	20.00%

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Loans - Summary of troubled debt restructurings that have subsequently defaulted within one year of modification (Details 4) (Loans receivables, USD $) In Thousands, unless otherwise specified	Sep. 30, 2012 Contracts	Sep. 30, 2011 Contracts
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of Contracts	2	2
Recorded Investment	$ 412	$ 416
Residential Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of Contracts	1	1
Recorded Investment	190	190
Commercial Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of Contracts	1	1
Recorded Investment	$ 222	$ 226

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Organization (Details Textuals 1) (USD $)	Sep. 30, 2012	Jun. 30, 2012	Oct. 04, 2004 Putnam Bancorp MHC	Oct. 04, 2004 Eligible depositors and the Putnam Savings Bank Employee Stock Ownership Plan
Related Party Transaction [Line Items]
Percentage of common stock issued			53.70%	44.50%
Common stock, shares issued	6,943,125	6,943,125	3,729,846	3,089,691
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10		$ 10.00

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Organization (Details Textuals 2)	Sep. 30, 2012	Jun. 30, 2012
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Common stock, shares issued	6,943,125	6,943,125
Putnam Savings Foundation
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Common stock, shares issued	123,588
Percentage of common stock issued	1.80%

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities
Net income	$ 503	$ 805
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of securities, net	329	361
Gain on sales of available-for-sale securities, net		(235)
Impairment losses on securities	89	798
Net (increase) decrease in loans held-for-sale	(1,254)	873
Accretion of deferred loan fees, net	(18)	(6)
Provision for loan losses	250	391
Write-down of other real estate owned	48	15
Depreciation and amortization	115	108
Amortization of core deposit intangible	23	31
Increase in accrued interest receivable and other assets	(130)	(254)
Increase in cash surrender value of bank-owned life insurance	(82)	(75)
Bank-owned life insurance death benefit income	(176)
Decrease in other liabilities	(119)	(136)
Deferred tax expense	141	1,344
Amortization of ESOP expense	14	16
Stock-based compensation		7
Net cash provided by operating activities	(267)	4,043
Cash flows from investing activities
Proceeds from sales, calls, pay downs and maturities of available-for-sale securities	3,140	3,102
Purchase of held-to-maturity securities	(19,708)	(16,189)
Proceeds from calls, pay downs and maturities of held-to-maturity securities	10,551	12,918
Loan repayments net of originations	2,412	627
Purchase of bank owned life insurance		(2,000)
Recoveries of loans previously charged off	45	8
Proceeds from the surrender of bank owned life insurance policy	386
Capital expenditures - premises and equipment	(17)	(34)
Net cash used in investing activities	(3,191)	(1,568)
Cash flows from financing activities
Net decrease in deposit accounts	(5,164)	(2,525)
Net decrease in mortgagors' escrow accounts	(1,032)	(832)
Proceeds from Federal Home Loan Bank advances	43,866	2,000
Repayments of Federal Home Loans Bank advances	(43,866)	(2,000)
Net increase in securities sold under agreements to repurchase	2,569	2,404
Net cash used in financing activities	(3,627)	(953)
(Decrease) increase in cash and cash equivalents	(7,085)	1,522
Cash and cash equivalents at beginning of year	11,413	8,273
Cash and cash equivalents at end of period	4,328	9,795
Cash paid during the period for:
Interest	1,297	1,905
Income taxes refunded	(62)	(458)
Loans transferred to other real estate owned	230	1,418
Decrease in due from broker	$ 2,000

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Recent Accounting Pronouncements (Detail Textuals 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
New Accounting Pronouncements and Changes In Accounting Principles [Abstract]
Impairment losses on securities	$ 89	$ 798

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Investment Securities (Details Textuals 2) (Auction rate preferred stock, USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2012 Securities
Auction rate preferred stock
Schedule Of Available-For-Sale Securities and Held-To-Maturity Securities [Line Items]
Available-for-sale securities equity securities fair value	$ 10,600
Number of days to reset dividend rate based on auction process	90 days
Number of auction-rate trust preferred securities	3

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FAIR VALUE MEASUREMENTS - Changes in level 3 assets measured at fair value (Details 1) (Available-for-sale securities, USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2012
Available-for-sale securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Beginning balance, July 1, 2012	$ 9,636
Unrealized gains included in other comprehensive loss	982
Ending balance, September 30, 2012	$ 10,618

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012
ASSETS
Cash and due from depository institutions	$ 3,635	$ 5,228
Interest-bearing demand deposits with other banks	693	6,185
Total cash and cash equivalents	4,328	11,413
Securities available-for-sale, at fair value	45,522	47,213
Securities held-to-maturity (fair value of $119,600 as of September 30, 2012 and $108,336 as of June 30, 2012)	116,033	105,195
Federal Home Loan Bank stock, at cost	7,536	7,536
Loans held-for-sale	2,030	776
Loans	248,680	251,485
Less: Allowance for loan losses	(3,027)	(2,913)
Net loans	245,653	248,572
Premises and equipment	4,450	4,526
Accrued interest receivable	1,250	1,158
Other real estate owned	1,865	1,683
Goodwill	6,912	6,912
Other intangible assets	179	202
Bank-owned life insurance	8,631	8,759
Due from broker		2,000
Deferred tax asset	3,363	3,890
Other assets	2,383	2,508
Total assets	450,135	452,343
Deposits
Noninterest-bearing	42,434	43,785
Interest-bearing	294,740	298,553
Total deposits	337,174	342,338
Mortgagors' escrow accounts	1,002	2,034
Federal Home Loan Bank advances	53,500	53,500
Securities sold under agreements to repurchase	6,222	3,653
Other liabilities	2,564	2,683
Total liabilities	400,462	404,208
Stockholders' Equity
Preferred stock, $0.10 par value, 1,000,000 shares authorized, no shares issued and outstanding
Common stock, $0.10 par value, 12,000,000 shares authorized, 6,943,125 shares issued, 6,528,863 shares outstanding at September 30, 2012 and June 30, 2012	694	694
Additional paid-in capital	30,602	30,602
Retained earnings	24,115	23,630
Accumulated other comprehensive income (loss)	8	(1,013)
Unearned ESOP shares	(1,533)	(1,565)
Treasury stock, at cost (414,262 shares at September 30, 2012 and June 30, 2012)	(4,213)	(4,213)
Total stockholders' equity	49,673	48,135
Total liabilities and stockholders' equity	$ 450,135	$ 452,343

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Non-performing Assets, Past Due and Impaired Loans - Amounts and categories of non performing assets (Details 1) (Loans receivables, USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012
Non Accrual Loans [Abstract]
Total non-accrual loans	$ 7,652	$ 8,384
Accruing Loans Past Due 90 Days Or More [Abstract]
Accruing loans past due 90 days or more	422
Total non-performing loans	8,074	8,384
Other real estate owned	1,865	1,683
Total non-performing assets	9,939	10,067
Total non-performing loans to total loans	3.25%	3.33%
Total non-performing assets to total assets	2.21%	2.23%
Residential Real Estate
Non Accrual Loans [Abstract]
Total non-accrual loans	3,622	3,985
Accruing Loans Past Due 90 Days Or More [Abstract]
Accruing loans past due 90 days or more	422
Commercial Real Estate
Non Accrual Loans [Abstract]
Total non-accrual loans	3,601	3,975
Residential construction
Non Accrual Loans [Abstract]
Total non-accrual loans	$ 429	$ 424

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Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (USD $) In Thousands, unless otherwise specified	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Unearned ESOP Shares	Unearned Stock Awards	Treasury Stock	Total
Balance at Jun. 30, 2011	$ 694	$ 30,594	$ 22,648	$ (1,267)	$ (1,693)	$ (16)	$ (4,213)	$ 46,747
Comprehensive income:
Net income			805					805
Net change in unrealized holding losses on available-for-sale securities, net of reclassification adjustments and tax effects				(2,081)				(2,081)
Stock-based compensation expense		3						3
Balance at Sep. 30, 2011	694	30,597	23,453	(3,348)	(1,693)	(16)	(4,213)	45,474
Balance at Jun. 30, 2012	694	30,602	23,630	(1,013)	(1,565)		(4,213)	48,135
Comprehensive income:
Net income			503					503
Net change in unrealized holding losses on available-for-sale securities, net of reclassification adjustments and tax effects				1,021				1,021
ESOP shares committed to be released (3,195 shares)			(18)		32			14
Balance at Sep. 30, 2012	$ 694	$ 30,602	$ 24,115	$ 8	$ (1,533)		$ (4,213)	$ 49,673

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Investment Securities - Carrying value and estimated market values of investment securities (Details 1) (USD $)	Sep. 30, 2012	Jun. 30, 2012
Securities available for sale:
Available-for-sale securities, amortized cost basis	$ 45,509,000	$ 48,747,000
Available-for-sale securities, gross unrealized gains	2,182,000	1,449,000
Available-for-sale Securities, gross unrealized losses	(2,169,000)	(2,983,000)
Total available-for-sale securities	45,522,000	47,213,000
Held-to-maturity Securities, Unclassified [Abstract]
Total held-to-maturity securities amortized cost basis	116,033,000	105,195,000
Total held-to-maturity securities, gross unrealized gain	3,728,000	3,158,000
Total held-to-maturity securities gross unrealized (loss)	(161,000)	(17,000)
Total held-to-maturity securities	119,600,000	108,336,000
Debt securities
Securities available for sale:
Total available-for-sale securities, Amortized Cost Basis	35,509,000	38,747,000
Total available-for-sale securities, Gross Unrealized Gain	1,564,000	1,438,000
Total available-for-sale securities, Gross Unrealized (Loss)	(2,169,000)	(2,608,000)
Total available-for-sale securities, Fair Value	34,904,000	37,577,000
Debt securities | U.S. Government and government-sponsored securities
Securities available for sale:
Available-for-sale due in one year or less amortized cost basis	407,000
Available-for-sale from one through five years amortized cost basis		450,000
Available-for-sale due in one year or less gross unrealized gain	4,000
Available-for-sale from one through five years gross unrealized gain		9,000
Available-for-sale due in one year or less gross unrealized (loss)
Available-for-sale from one through five years gross unrealized (loss)
Available-for-sale due in one year or less fair value	411,000
Available-for-sale from one through five years fair value		459,000
Held-to-maturity Securities, Unclassified [Abstract]
Held-to-maturity from one through five years amortized cost basis	3,996,000	5,996,000
Held-to-maturity from five through ten years amortized cost basis	3,187,000	3,196,000
Total held-to-maturity securities amortized cost basis	7,183,000	9,192,000
Held-to-maturity from one through five years unrealized gain	34,000	34,000
Held-to-maturity from five through ten years unrealized gain	173,000	149,000
Total held-to-maturity securities, gross unrealized gain	207,000	183,000
Held-to-maturity from one through five years unrealized (loss)
Held-to-maturity from five through ten years unrealized (loss)	(1,000)	(7,000)
Total held-to-maturity securities gross unrealized (loss)	(1,000)	(7,000)
Held-to-maturity from one through five years fair value	4,030,000	6,030,000
Held-to-maturity from five through ten years fair value	3,359,000	3,338,000
Total held-to-maturity securities	7,389,000	9,368,000
Debt securities | Corporate bonds and other securities
Securities available for sale:
Available-for-sale after ten years amortized cost basis	5,998,000	5,998,000
Available-for-sale from after ten years gross unrealized gain
Available-for-sale after ten years gross unrealized (loss)	(1,511,000)	(1,344,000)
Available-for-sale after ten years fair value	4,487,000	4,654,000
Debt securities | U.S. Government sponsored and guaranteed mortgage-backed securities
Securities available for sale:
Available-for-sale due in one year or less amortized cost basis	85,000	1,000
Available-for-sale from one through five years amortized cost basis	1,242,000	416,000
Available-for-sale from five through ten years amortized cost basis	1,176,000	2,564,000
Available-for-sale after ten years amortized cost basis	17,535,000	19,717,000
Total available-for-sale securities, Amortized Cost Basis	20,038,000	22,698,000
Available-for-sale due in one year or less gross unrealized gain	3,000
Available-for-sale from one through five years gross unrealized gain	78,000	24,000
Available-for-sale from five through ten years gross unrealized gain	57,000	140,000
Available-for-sale from after ten years gross unrealized gain	1,129,000	1,265,000
Total available-for-sale securities, Gross Unrealized Gain	1,267,000	1,429,000
Available-for-sale due in one year or less gross unrealized (loss)
Available-for-sale from one through five years gross unrealized (loss)
Available-for-sale from five through ten years gross unrealized (loss)
Available-for-sale after ten years gross unrealized (loss)	(12,000)	(14,000)
Total available-for-sale securities, Gross Unrealized (Loss)	(12,000)	(14,000)
Available-for-sale due in one year or less fair value	88,000	1,000
Available-for-sale from one through five years fair value	1,320,000	440,000
Available-for-sale from five through ten years fair value	1,233,000	2,704,000
Available-for-sale after ten years fair value	18,652,000	20,968,000
Total available-for-sale securities, Fair Value	21,293,000	24,113,000
Held-to-maturity Securities, Unclassified [Abstract]
Held-to-maturity from five through ten years amortized cost basis	6,248,000	6,767,000
Held-to-maturity after ten years amortized cost basis	102,602,000	89,236,000
Total held-to-maturity securities amortized cost basis	108,850,000	96,003,000
Held-to-maturity from five through ten years unrealized gain	234,000	192,000
Held-to-maturity after ten years gross unrealized gain	3,287,000	2,783,000
Total held-to-maturity securities, gross unrealized gain	3,521,000	2,975,000
Held-to-maturity from five through ten years unrealized (loss)
Held-to-maturity after ten years gross unrealized (loss)	(160,000)	(10,000)
Total held-to-maturity securities gross unrealized (loss)	(160,000)	(10,000)
Held-to-maturity from five through ten years fair value	6,482,000	6,959,000
Held-to-maturity after ten years gross fair value	105,729,000	92,009,000
Total held-to-maturity securities	112,211,000	98,968,000
Debt securities | Non-agency mortgage-backed securities
Securities available for sale:
Available-for-sale after ten years amortized cost basis	9,066,000	9,601,000
Available-for-sale from after ten years gross unrealized gain	293,000
Available-for-sale after ten years gross unrealized (loss)	(646,000)	(1,250,000)
Available-for-sale after ten years fair value	8,713,000	8,351,000
Equity securities | Auction rate preferred stock
Securities available for sale:
Available-for-sale equity securities, amortized cost basis	10,000,000	10,000,000
Available-for-sale securities equity securities gross unrealized gains	618,000	11,000
Available-for-sale securities equity securities gross unrealized loss		(375,000)
Available-for-sale securities equity securities fair value	$ 10,618,000	$ 9,636,000

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Earnings Per Share (EPS) (Tables)

3 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Schedule of computation of EPS on basic and diluted basis

	Three Months Ended		Three Months Ended
	September 30, 2012		September 30, 2011
Net income	$	503,000	$	805,000
Average basic common shares		6,372,349		6,359,570
Dilutive effect of stock options (1)		-		-
Average diluted common shares		6,372,349		6,359,570
Basic EPS:	$	0.08	$	0.13
Diluted EPS:	$	0.08	$	0.13

(1) Options to purchase 222,921 shares for the three months ended September 30, 2012 and 2011 were outstanding but not included in the computation of earnings per share because they were anti-dilutive.

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Investment Securities - Summary of the estimated fair value and related unrealized losses segregated by category (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012		Jun. 30, 2012
Schedule Of Available-For-Sale Securities and Held-To-Maturity Securities [Line Items]
Temporarily impaired available-for-sale less than 12 months fair value	$ 1,750		$ 9,451
Temporarily impaired available-for-sale less than 12 months unrealized losses	12		389
Temporarily impaired available-for-sale 12 months or more fair value	4,487		4,654
Temporarily impaired available-for-sale 12 months or more unrealized losses	1,511		1,344
Temporarily impaired available-for-sale securities continuous unrealized loss position fair value	6,237		14,105
Temporarily impaired available-for-sale securities continuous unrealized loss position aggregate losses	1,523		1,733
Temporarily impaired held-to-maturity securities continuous unrealized loss position less than twelve months fair value	19,396		12,398
Temporarily impaired held-to-maturity securities continuous unrealized loss position less than twelve months unrealized losses	161		17
Temporarily impaired held-to-maturity securities continuous unrealized loss position twelve months or longer fair value
Temporarily impaired held-to-maturity securities continuous unrealized loss position twelve months or longer unrealized losses
Temporarily impaired held-to-maturity securities continuous unrealized loss position fair value	19,396		12,398
Temporarily impaired held-to-maturity securities continuous unrealized loss position aggregate losses	161		17
Temporarily-impaired and other-than-temporarily impaired securities less than 12 months fair value	21,146		23,616
Temporarily-impaired and other-than-temporarily impaired securities less than 12 months unrealized losses	173		427
Temporarily-impaired and other-than-temporarily impaired securities 12 months or more fair value	8,187		11,166
Temporarily-impaired and other-than-temporarily impaired securities 12 months or more unrealized losses	2,157		2,573
Temporarily impaired and other than temporary impaired debt securities continuous unrealized loss position fair value	29,333		34,782
Temporarily impaired and other than temporary impaired debt securities continuous unrealized loss position unrealized losses	2,330		3,000
Debt securities | Corporate bonds and other securities
Schedule Of Available-For-Sale Securities and Held-To-Maturity Securities [Line Items]
Temporarily impaired available-for-sale less than 12 months fair value
Temporarily impaired available-for-sale less than 12 months unrealized losses
Temporarily impaired available-for-sale 12 months or more fair value	4,487		4,654
Temporarily impaired available-for-sale 12 months or more unrealized losses	1,511		1,344
Temporarily impaired available-for-sale securities continuous unrealized loss position fair value	4,487		4,654
Temporarily impaired available-for-sale securities continuous unrealized loss position aggregate losses	1,511		1,344
Debt securities | U.S. Government and government-sponsored securities
Schedule Of Available-For-Sale Securities and Held-To-Maturity Securities [Line Items]
Temporarily impaired held-to-maturity securities continuous unrealized loss position less than twelve months fair value	2,252		2,257
Temporarily impaired held-to-maturity securities continuous unrealized loss position less than twelve months unrealized losses	1		7
Temporarily impaired held-to-maturity securities continuous unrealized loss position twelve months or longer fair value
Temporarily impaired held-to-maturity securities continuous unrealized loss position twelve months or longer unrealized losses
Temporarily impaired held-to-maturity securities continuous unrealized loss position fair value	2,252		2,257
Temporarily impaired held-to-maturity securities continuous unrealized loss position aggregate losses	1		7
Debt securities | U.S. Government sponsored and guaranteed mortgage-backed securities
Schedule Of Available-For-Sale Securities and Held-To-Maturity Securities [Line Items]
Temporarily impaired available-for-sale less than 12 months fair value	1,750		1,826
Temporarily impaired available-for-sale less than 12 months unrealized losses	12		14
Temporarily impaired available-for-sale 12 months or more fair value
Temporarily impaired available-for-sale 12 months or more unrealized losses
Temporarily impaired available-for-sale securities continuous unrealized loss position fair value	1,750		1,826
Temporarily impaired available-for-sale securities continuous unrealized loss position aggregate losses	12		14
Temporarily impaired held-to-maturity securities continuous unrealized loss position less than twelve months fair value	17,144		10,141
Temporarily impaired held-to-maturity securities continuous unrealized loss position less than twelve months unrealized losses	160		10
Temporarily impaired held-to-maturity securities continuous unrealized loss position twelve months or longer fair value
Temporarily impaired held-to-maturity securities continuous unrealized loss position twelve months or longer unrealized losses
Temporarily impaired held-to-maturity securities continuous unrealized loss position fair value	17,144		10,141
Temporarily impaired held-to-maturity securities continuous unrealized loss position aggregate losses	160		10
Debt securities | Non-agency mortgage-backed securities
Schedule Of Available-For-Sale Securities and Held-To-Maturity Securities [Line Items]
Other-than-temporarily impaired debt securities less than 12 months fair value (1)		[1]	1,767	[1]
Other-than-temporarily impaired debt securities less than 12 months unrealized losses (1)		[1]	21	[1]
Other-than-temporarily impaired debt securities 12 months or more fair value (1)	3,700	[1]	6,512	[1]
Other-than-temporarily impaired debt securities 12 months or more unrealized losses (1)	646	[1]	1,229	[1]
Other than temporary impaired debt securities continuous unrealized loss position fair value	3,700	[1]	8,279	[1]
Other than temporary impaired debt securities continuous unrealized loss position unrealized losses	646	[1]	1,250	[1]
Equity securities
Schedule Of Available-For-Sale Securities and Held-To-Maturity Securities [Line Items]
Temporarily impaired available-for-sale less than 12 months fair value			7,625
Temporarily impaired available-for-sale less than 12 months unrealized losses			375
Temporarily impaired available-for-sale 12 months or more fair value
Temporarily impaired available-for-sale 12 months or more unrealized losses
Temporarily impaired available-for-sale securities continuous unrealized loss position fair value			7,625
Temporarily impaired available-for-sale securities continuous unrealized loss position aggregate losses			$ 375

[1] Includes other-than-temporary impaired available-for-sale debt securities in which a portion of the other-than-temporary impairment loss remains in accumulated other comprehensive income (loss).

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Loans (Tables)

3 Months Ended

Sep. 30, 2012

Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]

Schedule of composition of loan portfolio

	September 30,			June 30,
	2012			2012
	(in thousands)
Mortgage Loans:
Residential (1)	$	199,783		$	200,148
Commercial real estate		44,708			45,032
Residential construction		2,007			3,044
Commercial		2,970			3,459
Consumer and other		955			898
Total loans		250,423			252,581
Unadvanced construction loans		(2,257	)		(1,559	)
		248,166			251,022
Net deferred loan costs		514			463
Allowance for loan losses		(3,027	)		(2,913	)
Loans, net	$	245,653		$	248,572

(1)          Residential mortgage loans include one- to four-family mortgage loans, second mortgage loans, and home equity lines of credit.

Schedule of the company's loans by risk rating

	Residential		Commercial		Residential				Consumer
September 30, 2012	Real Estate		Real Estate		Construction		Commercial		and other		Total
(in thousands)
Grade:
Pass	$	195,825	$	31,028	$	1,175	$	2,476	$	955	$	231,459
Special Mention		336		1,887		-		494		-		2,717
Substandard		3,250		9,536		429		-		-		13,215
Doubtful		372		403		-		-		-		775
Loss		-		-		-		-		-		-
Total	$	199,783	$	42,854	$	1,604	$	2,970	$	955	$	248,166
	Residential		Commercial		Residential				Consumer
June 30, 2012	Real Estate		Real Estate		Construction		Commercial		and other		Total
(in thousands)
Grade:
Pass	$	195,825	$	32,032	$	1,875	$	2,834	$	898	$	233,464
Special Mention		338		1,719		-		625		-		2,682
Substandard		3,605		9,998		424		-		-		14,027
Doubtful		380		469		-		-		-		849
Loss		-		-		-		-		-		-
Total	$	200,148	$	44,218	$	2,299	$	3,459	$	898	$	251,022

Schedule of modifications that were deemed to be troubled debt restructures

			Pre-Modifcation		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
(Dollars in thousands)
Real Estate:
Commercial		1	$	80	$	113

Schedule of the summary of troubled debt restructurings that have subsequently defaulted within one year of modification

	Three months ended				Three months ended
	September 30, 2012				September 30, 2011
	Number of		Recorded		Number of		Recorded
	Contracts		Investment		Contracts		Investment
(Dollars in thousands)
Real Estate:
Residential		1	$	190		1	$	190
Commercial		1		222		1		226
Total		2	$	412		2	$	416

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Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals)	3 Months Ended
	Sep. 30, 2012
Statement Of Stockholders' Equity [Abstract]
Number of common stock held by ESOP committed to be released	3,195

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Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012
Statement Of Financial Position [Abstract]
Investments in held-to-maturity securities, fair value (in dollars)	$ 119,600	$ 108,336
Preferred stock, par value (in dollars per share)	$ 0.10	$ 0.10
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, shares authorized	12,000,000	12,000,000
Common stock, shares issued	6,943,125	6,943,125
Common stock, shares outstanding	6,528,863	6,528,863
Treasury stock, shares	414,262	414,262

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Accumulated Other Comprehensive Income (Loss)

3 Months Ended

Sep. 30, 2012

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Accumulated Other Comprehensive Income (Loss)

NOTE 9 – Accumulated Other Comprehensive Income (Loss)

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income.  Although certain changes in assets and liabilities are reported as a separate component of the equity section of the statement of condition, such items are components of accumulated other comprehensive income.

The components of accumulated other comprehensive income (loss) and related tax effects are as follows:

	September 30,		June 30,
	2012		2012
	(in thousands)
Net unrealized gain on securities available-for-sale	$	13	$	(1,534	)
Tax effect		5		(521	)
Accumulated other comprehensive income (loss)	$	8	$	(1,013	)

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Document and Entity Information	3 Months Ended
	Sep. 30, 2012	Oct. 31, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	PSB Holdings, Inc.
Entity Central Index Key	0001293211
Trading Symbol	psbh
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Current Fiscal Year End Date	--06-30
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		6,528,863
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1

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FAIR VALUE MEASUREMENTS

3 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

FAIR VALUE MEASURMENTS

NOTE 10 – FAIR VALUE MEASUREMENTS

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

Level 1 – Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange.  Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 – Valuations for assets and liabilities traded in less active dealer or broker markets.  Valuations are obtained from third party pricing services for identical or comparable assets or liabilities.

Level 3 – Valuations for assets and liabilities that are derived from other methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions.  Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets and liabilities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.  These valuation methodologies were applied to all of the Company’s assets and liabilities carried at fair value for September 30, 2012.

The Company’s investment and mortgage-backed securities and other debt securities available-for-sale are generally classified within Level 2 of the fair value hierarchy.  For these securities, we obtain fair value measurements from independent pricing services.  The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U. S. treasury yield curve, trading levels, market consensus prepayment speeds, credit information and the instrument’s terms and conditions.

Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence.  In the absence of such evidence, management’s best estimate is used.  Subsequent to inception, management only changes Level 3 inputs and assumptions when corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalization and other transactions across the capital structure, offerings in the equity or debt markets, and changes in financial ratios or cash flows.

The Company’s impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral.  Collateral values are estimated using Level 3 inputs based upon appraisals of similar properties obtained from a third party.

The Company did not have any significant transfers of assets or liabilities between Levels 1 and 2 of the fair value hierarchy during the three months ended September 30, 2012.

The following summarizes assets measured at fair value on a recurring basis at September 30, 2012 and June 30, 2012:

			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
At September 30, 2012	Total Fair		Identical Assets		Inputs		Inputs
(in thousands)	Value		Level 1		Level 2		Level 3
Securities available-for-sale:
U.S. government and government-sponsored securities	$	411	$	-	$	411	$	-
Corporate bonds and other securities		4,487		-		4,487		-
U.S. Government agency sponsored and guaranteed mortgage-backed securities		21,293		-		21,293		-
Non-agency mortgage-backed securities		8,713		-		8,713		-
Equity securities		10,618		-		-		10,618
Total	$	45,522	$	-	$	34,904	$	10,618
			Quoted Prices in		Significant		Significant
			Active Markets for		Other Observable		Unobservable
At June 30, 2012	Total Fair		Identical Assets		Inputs		Inputs
(in thousands)	Value		Level 1		Level 2		Level 3
Securities available-for-sale:
U.S. government and government-sponsored securities	$	459	$	-	$	459	$	-
Corporate bonds and other securities		4,654		-		4,654		-
U.S. Government agency sponsored and guaranteed mortgage-backed securities		24,113		-		24,113		-
Non-agency mortgage-backed securities		8,351		-		8,351		-
Equity securities		9,636		-		-		9,636
Total	$	47,213	$	-	$	37,577	$	9,636
The table below represents the changes in level 3 assets measured at fair value for the three months ended September 30, 2012.
(in thousands)
Beginning balance, June 30, 2012			$	9,636
Unrealized gains included in other comprehensive loss				982
Ending balance, September 30, 2012			$	10,618

The following summarizes assets measured at fair value on a non-recurring basis and the adjustments to the carrying value at and for the three months ended September 30, 2012 and 2011.

			Quoted Prices in		Significant		Significant		Total Losses
			Active Markets for		Other Observable		Unobservable		for the three
At September 30, 2012	Total Fair		Identical Assets		Inputs		Inputs		months ended
(in thousands)	Value		Level 1		Level 2		Level 3		September 30, 2012
Other real estate owned		290	$	-	$	-		290		(48	)
			Quoted Prices in		Significant		Significant		Total Losses
			Active Markets for		Other Observable		Unobservable		for the three
At September 30, 2011	Total Fair		Identical Assets		Inputs		Inputs		months ended
(in thousands)	Value		Level 1		Level 2		Level 3		September 30, 2011
Impaired loans	$	4,760	$	-	$	-	$	4,760	$	(784	)
Other real estate owned		127		-		-		127		(15	)
Totals	$	4,887	$	-	$	-	$	4,887	$	(799	)

The amount of loans represents the carrying value of impaired loans net of related write-downs and valuation allowances for which adjustments are based on the estimated fair value of the underlying collateral. The other real estate owned amount represents the carrying value for which adjustments are also based on the estimated fair value of the property.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because a market may not readily exist for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

There were no liabilities measured at fair value on a recurring or non-recurring basis at September 30, 2012 and 2011 or June 30, 2012.

The following methods and assumptions were used by the Company in estimating fair values of its financial instruments:

Cash and Cash Equivalents.  The carrying amounts of cash and cash equivalents approximate fair values based on the short-term nature of the assets.

Investment Securities and FHLBB Stock.  The fair value of securities held-to-maturity and available-for-sale is estimated based on quoted market prices, where available.  If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.  Ownership of Federal Home Loan Bank of Boston (“FHLBB”) stock is restricted to member banks; therefore, the stock is not traded.  The estimated fair value of FHLBB stock is equal to its carrying value, which represents the price at which the FHLBB is obligated to redeem its stock.

Loans.  For valuation purposes, the loan portfolio was segregated into its significant categories, which are residential, commercial real estate, residential construction, commercial and consumer and other loans. These categories were further segregated, where appropriate, into components based on significant financial characteristics such as type of interest rate (fixed or adjustable). Fair values were estimated for each component using assumptions developed by management and a valuation model provided by a third party specialist.

The fair values of residential, commercial real estate, residential construction, commercial and consumer and other loans were estimated by discounting the anticipated cash flows from the respective portfolios. Estimates of the timing and amount of these cash flows considered factors such as future loan prepayments. The discount rates reflected current market rates for loans with similar terms to borrowers of similar credit quality. The fair value of home equity lines of credit was based on the outstanding loan balances.  Fair values for non-performing loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

            Loans held for sale: Loans held for sale are accounted for at the lower of cost or market and the fair value of loans held for sale based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted as required for changes in loan characteristics.

Deposits and Mortgagors’ Escrow.  The fair value of deposits with no stated maturity and mortgagors’  escrow account, such as demand deposits, NOW, regular savings, and money market deposit accounts, is equal to the amount payable on demand.  The fair value estimates do not include the benefit that results from the generally lower cost of funding provided by the deposit liabilities compared to the cost of borrowing funds in the market.  The fair value estimate of time deposits is based on the discounted value of contractual cash flows.  The discount rate is estimated using the rates currently offered for deposits having similar remaining maturities.

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

Securities Sold Under Agreements to Repurchase.  The Company enters into overnight repurchase agreements with its customers. Since these agreements are short-term instruments, the fair value of these agreements approximates their recorded balance. The Company also secures term repurchase agreements through other financial institutions. The fair value of these agreements are determined by discounting the anticipated future cash payments using rates currently available to the Bank for debt with similar terms and remaining maturities.

Off-Balance Sheet Instruments.  The fair value of off-balance-sheet mortgage lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing.  In the case of the commitments discussed in Note 13, the fair value equals the carrying amounts which are not significant.

Summary of Fair Values of Financial Instruments.  The estimated fair values, and related carrying  amounts, of the Company’s financial instruments are as follows. Certain financial instruments and all nonfinancial instruments are exempt from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein do not represent the underlying fair value of the Company.

The following table presents the carrying amount and estimated fair values of the Company’s financial instruments, all of which are held or issued for purposes other than trading, as of September 30, 2012 and June 30, 2012:

	September 30,
	2012
	Carrying		Fair Value Hierarchy						Fair
	Amount		Level 1		Level 2		Level 3		Value
			(In thousands)
Financial assets:
Cash and cash equivalents	$	4,328	$	4,328	$	-	$	-	$	4,328
Securities available-for-sale		45,522		-		34,904		10,618		45,522
Securities held-to-maturity		116,033		-		119,600		-		119,600
Federal Home Loan Bank stock		7,536		-		-		7,536		7,536
Loans held-for-sale		2,030		-		-		2,076		2,076
Loans, net		245,653		-		-		253,073		253,073
Accrued interest receivable		1,250		-		-		1,250		1,250
Financial liabilities:
Deposits		337,174		-		-		339,838		339,838
Mortgagors’ escrow accounts		1,002		-		-		1,002		1,002
Federal Home Loan Bank advances		53,500		-		55,255		-		55,255
Securities sold under agreements to repurchase		6,222		-		6,222		-		6,222

	June 30,
	2012
	Carrying		Fair Value Hierarchy						Fair
	Amount		Level 1		Level 2		Level 3		Value
			(In thousands)
Financial assets:
Cash and cash equivalents	$	11,413	$	11,413	$	-	$	-	$	11,413
Securities available-for-sale		47,213		-		37,577		9,636		47,213
Securities held-to-maturity		105,195		-		108,336		-		108,336
Federal Home Loan Bank stock		7,536		-		-		7,536		7,536
Loans held-for-sale		776		-		-		782		782
Loans, net		248,572		-		-		255,075		255,075
Accrued interest receivable		1,158		-		-		1,158		1,158
Financial liabilities:
Deposits		342,338		-		-		344,675		344,675
Mortgagors’ escrow accounts		2,034		-		-		2,034		2,034
Federal Home Loan Bank advances		53,500		-		55,340		-		55,340
Securities sold under agreements to repurchase		3,653		-		3,653		-		3,653

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Condensed Consolidated Statements of Income (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Interest and dividend income:
Interest on loans	$ 3,054	$ 3,374
Interest and dividends on investments	1,035	1,292
Total interest and dividend income	4,089	4,666
Interest expense:
Deposits and escrow	839	1,082
Borrowed funds	469	824
Total interest expense	1,308	1,906
Net interest and dividend income	2,781	2,760
Provision for loan losses	250	391
Net interest and dividend income after provision for loan losses	2,531	2,369
Non-interest income:
Total other-than-temporary impairment losses on debt securities	(282)	(2,039)
Portion of losses recognized in other comprehensive loss/income	193	1,241
Net impairment losses recognized in earnings	(89)	(798)
Fees for services	438	518
Mortgage banking activities	39	8
Net commissions from brokerage service	35	46
Income from bank owned life insurance	258	75
Gain on sales of available-for-sale securities, net		235
Income from legal settlement		1,452
Other income	30	30
Total non-interest income	711	1,566
Non-interest expense:
Compensation and benefits	1,436	1,515
Occupancy and equipment	315	306
Data processing	164	259
LAN/WAN network expense	35	30
Advertising and marketing	35	61
OCC assessment	46	46
FDIC deposit insurance	145	138
Other real estate owned	40	47
Write-down of other real estate owned	48	15
Other non-interest expense	396	428
Total non-interest expense	2,660	2,845
Income before income tax expense	582	1,090
Income tax expense	79	285
NET INCOME	$ 503	$ 805
Earnings per common share
Basic (in dollars per share)	$ 0.08	$ 0.13
Diluted (in dollars per share)	$ 0.08	$ 0.13

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Earnings Per Share (EPS)

3 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share (EPS)

NOTE 4 – Earnings Per Share (EPS)

As presented below, basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. For purposes of computing diluted EPS, the treasury stock method is used.

The following information was used in the computation of EPS on both a basic and diluted basis for the three months ended September 30, 2012 and 2011:

	Three Months Ended		Three Months Ended
	September 30, 2012		September 30, 2011
Net income	$	503,000	$	805,000
Average basic common shares		6,372,349		6,359,570
Dilutive effect of stock options (1)		-		-
Average diluted common shares		6,372,349		6,359,570
Basic EPS:	$	0.08	$	0.13
Diluted EPS:	$	0.08	$	0.13

(1) Options to purchase 222,921 shares for the three months ended September 30, 2012 and 2011 were outstanding but not included in the computation of earnings per share because they were anti-dilutive.

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Recent Accounting Pronouncements

3 Months Ended

Sep. 30, 2012

New Accounting Pronouncements and Changes In Accounting Principles [Abstract]

Recent Accounting Pronouncements

NOTE 3 – Recent Accounting Pronouncements

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220), Presentation of Comprehensive Income. This ASU amends the disclosure requirements for the presentation of comprehensive income. The amended guidance eliminates the option to present components of other comprehensive income (OCI) as part of the statement of changes in stockholders’ equity. Under the amended guidance, all changes in OCI are to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive financial statements. The changes are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. In December 2011, the FASB issued ASU 2011-12 to defer changes that relate to the presentation of reclassification adjustments but the other requirements of ASU 2011-05 remain in effect. This amendment became effective for the Company on July 1, 2012 and did not have a significant impact on the Company’s condensed consolidated financial results as the amendments relate only to changes in financial statement presentation.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other (Topic 350), Testing Goodwill for Impairment. This ASU is intended to reduce the complexity and cost of performing an evaluation of impairment of goodwill. Under the new guidance, an entity will have the option of first assessing qualitative factors (events and circumstances) to determine whether it is more likely than not (meaning a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. If, after considering all relevant events and circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test will be unnecessary. The amendments will be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. This amendment became effective for the Company on July 1, 2012 and did not have a significant impact on the Company’s condensed consolidated financial statements.

Critical Accounting Policies

Critical accounting policies are those that involve significant judgments and assumptions by management that have, or could have, a material impact on our income or the carrying value of our assets. Our critical accounting policies are those related to our loans, allowance for loan losses, income taxes, goodwill and the impairment of securities.

Loans. The Company’s loan portfolio includes residential real estate, commercial real estate, construction, commercial and consumer/other segments. Residential real estate loans include classes for one-to four-family owner occupied, second mortgages and equity lines of credit. Consumer/other loans include personal loans. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

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

Allowance for Loan Losses. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed.

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

General component

The general component of the allowance for loan losses is based on historical loss experience adjusted for qualitative factors stratified by the following loan segments: residential real estate, commercial real estate, construction, commercial and consumer/other. Management uses a rolling average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: levels/trends in delinquencies; trends in volume and terms of loans; effects of changes in risk selection and underwriting standards and other changes in lending policies, procedures and practices; experience/ability/depth of lending management and staff; loan rating migration and national and local economic trends and conditions.

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

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

Commercial real estate - Loans in this segment are primarily income-producing properties throughout New England. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy as evidenced by increased vacancy rates, which in turn, will have an effect on the credit quality in this segment. Management obtains rent rolls annually and continually monitors the cash flows of these loans.

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

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

Consumer/other loans - Loans in this segment are generally unsecured and repayment is dependent on the credit quality of the individual borrower.

Specific component

The specific component relates to loans that are classified as impaired. Impairment is measured on a loan by loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent or foreclosure is probable. An allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential real estate loans for impairment disclosures, unless such loans are subject to a troubled debt restructuring (“TDR”) agreement.

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

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

Unallocated component

An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general reserves in the portfolio.

Goodwill. The Company’s goodwill was recorded as a result of business acquisitions and combinations. The Company’s goodwill (the amount paid in excess of fair value of acquired net assets) is reviewed at least annually to ensure that there have been no events or circumstances resulting in an impairment of the recorded amount of excess purchase price. Adverse changes in the economic environment, operations of acquired business units, or other factors could result in a decline in projected fair values. If the estimated fair value is less than the carrying amount, a loss would be recognized to reduce the carrying amount to implied fair value.

Other-Than-Temporary Impairment of Securities. Management periodically reviews all investment securities with significant declines in fair value for potential other-than-temporary impairment pursuant to the guidance provided by ASC 320-10 “Investments-Debt and Equity Securities”. The guidance addresses the determination as to when an investment is considered impaired, whether the impairment is other-than-temporary, and the measurement of an impairment loss. It also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. Management evaluates the Company’s investment portfolio on an ongoing basis and recorded $89,000 and $798,000 of other-than-temporary impairment charges through income during the three months ended September 30, 2012 and 2011, respectively.

Income Taxes. The Company recognizes income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are established for the temporary differences between the accounting basis and the tax basis of the Company’s assets and liabilities at enacted rates expected to be in effect when the amounts related to such temporary differences are realized or settled.

Management has discussed the development and selection of these critical accounting policies with the Audit Committee.

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Investment Securities (Tables)

3 Months Ended

Sep. 30, 2012

Investments, Debt and Equity Securities [Abstract]

Schedule of carrying value and estimated market values of investment securities by maturity

	Amortized		Gross Unrealized					Fair
	Cost Basis		Gain		(Loss)			Value
	(in thousands)
September 30, 2012
Available-for-sale:
Debt securities:
U.S. government and government-sponsored securities:
Due in one year or less	$	407	$	4	$	-		$	411
Corporate bonds and other securities:
After ten years		5,998		-		(1,511	)		4,487
U.S. Government sponsored and guaranteed mortgage-backed securities:
Due in one year or less		85		3		-			88
From one through five years		1,242		78		-			1,320
From five through ten years		1,176		57		-			1,233
After ten years		17,535		1,129		(12	)		18,652
		20,038		1,267		(12	)		21,293
Non-agency mortgage-backed securities:
After ten years		9,066		293		(646	)		8,713
Total debt securities		35,509		1,564		(2,169	)		34,904
Equity securities:
Auction rate preferred stock		10,000		618		-			10,618
Total available-for-sale securities	$	45,509	$	2,182	$	(2,169	)	$	45,522
Held-to-maturity:
U.S. government and government-sponsored securities:
From one through five years	$	3,996	$	34	$	-		$	4,030
From five through ten years		3,187		173		(1	)		3,359
		7,183		207		(1	)		7,389
U.S. Government sponsored and guaranteed mortgage-backed securities:
From five through ten years		6,248		234		-			6,482
After ten years		102,602		3,287		(160	)		105,729
		108,850		3,521		(160	)		112,211
Total held-to-maturity securities	$	116,033	$	3,728	$	(161	)	$	119,600

	Amortized		Gross Unrealized					Fair
	Cost Basis		Gain		(Loss)			Value
	(in thousands)
June 30, 2012:
Available-for-sale:
Debt securities:
U.S. government and government-sponsored securities:
From one through five years	$	450	$	9	$	-		$	459
Corporate bonds and other securities:
After ten years		5,998		-		(1,344	)		4,654
U.S. Government sponsored and guaranteed mortgage-backed securities:
Due in one year or less		1		-		-			1
From one through five years		416		24		-			440
From five through ten years		2,564		140		-			2,704
After ten years		19,717		1,265		(14	)		20,968
		22,698		1,429		(14	)		24,113
Non-agency mortgage-backed securities:
After ten years		9,601		-		(1,250	)		8,351
Total debt securities		38,747		1,438		(2,608	)		37,577
Equity securities:
Auction rate preferred stock		10,000		11		(375	)		9,636
Total available-for-sale securities	$	48,747	$	1,449	$	(2,983	)	$	47,213
Held-to-maturity:
U.S. government and government-sponsored securities:
From one through five years	$	5,996	$	34	$	-		$	6,030
From five through ten years		3,196		149		(7	)		3,338
		9,192		183		(7	)		9,368
U.S. Government sponsored and guaranteed mortgage-backed securities:
From five through ten years		6,767		192		-			6,959
After ten years		89,236		2,783		(10	)		92,009
		96,003		2,975		(10	)		98,968
Total held-to-maturity securities	$	105,195	$	3,158	$	(17	)	$	108,336

Schedule of the estimated fair value and related unrealized losses segregated by category and length of time that individual securities have been in a continuous unrealized loss position

September 30, 2012:	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	Value		Losses		Value		Losses		Value		Losses
Available-for-sale:
Debt securities:
Corporate bonds and other securities	$	-	$	-	$	4,487	$	1,511	$	4,487	$	1,511
U.S. Government sponsored and guaranteed
mortgage-backed securities		1,750		12		-		-		1,750		12
Total temporarily impaired available-for-sale		1,750		12		4,487		1,511		6,237		1,523
Held-to-maturity:
U.S. Government and government-sponsored securities		2,252		1		-		-		2,252		1
U.S. Government sponsored and guaranteed
mortgage-backed securities		17,144		160		-		-		17,144		160
Total temporarily impaired held-to-maturity		19,396		161		-		-		19,396		161
Other-than-temporarily impaired debt securities (1):
Non-agency mortgage-backed securities		-		-		3,700		646		3,700		646
Total temporarily-impaired and other-than-temporarily impaired securities	$	21,146	$	173	$	8,187	$	2,157	$	29,333	$	2,330
June 30, 2012:	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	Value		Losses		Value		Losses		Value		Losses
Available-for-sale:
Debt securities:
Corporate bonds and other obligations	$	-	$	-	$	4,654	$	1,344	$	4,654	$	1,344
U.S. Government sponsored and guaranteed mortgage-backed securities		1,826		14		-		-		1,826		14
Equity securities		7,625		375		-		-		7,625		375
Total temporarily impaired available-for-sale		9,451		389		4,654		1,344		14,105		1,733
Held-to-maturity:
U.S. Government and government-sponsored securities		2,257		7		-		-		2,257		7
U.S. Government sponsored and guaranteed mortgage-backed securities		10,141		10		-		-		10,141		10
Total temporarily impaired held-to-maturity		12,398		17		-		-		12,398		17
Other-than-temporarily impaired debt securities (1):
Non-agency mortgage-backed securities		1,767		21		6,512		1,229		8,279		1,250
Total temporarily-impaired and other-than-temporarily impaired securities	$	23,616	$	427	$	11,166	$	2,573	$	34,782	$	3,000

(1)  Includes other-than-temporary impaired available-for-sale debt securities in which a portion of the other-than-temporary impairment loss remains in accumulated other comprehensive income (loss).

Schedule of the amount of credit losses on debt securities for which a portion of an other-than-temporary impairment was recognized in other comprehensive income

Balance as of June 30, 2011	$	13,307
Credit losses on securities for which other-than-temporary impairment
was not previously recorded		-
Additional credit losses on securities for which an other-than-temporary
impairment charge was previously recorded		1,964
Reductions for securities sold during the period		-
Balance as of June 30, 2012		15,271
Credit losses on securities for which other-than-temporary impairment
was not previously recorded		-
Additional credit losses on securities for which an other-than-temporary
impairment charge was previously recorded		89
Reductions for securities sold during the period		-
Balance as of September 30, 2012	$	15,360

Schedule of various issuers of auction rate preferred securities owned

Issuer	Goldman Sachs	Merrill Lynch	Bank of America
Par amount	$3,000,000	$5,000,000	$2,000,000
Book Value	$3,000,000	$5,000,000	$2,000,000
Purchase Date	12-12-07	09-04-07	11-20-07
Maturity Date	08-23-26	05-28-27	08-17-47
Next Reset Date	11-21-12	11-27-12	11-16-12
Reset Frequency	Quarterly	Quarterly	Quarterly
Failed Auction	Yes	Yes	Yes
Receiving Default Rates	Yes	Yes	Yes
Current Rate	4.70%	4.66%	4.57%
Dividends Current:	Yes	Yes	Yes

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Stock-Based Incentive Plan

3 Months Ended

Sep. 30, 2012

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Stock-Based Incentive Plan

NOTE 11 – Stock-Based Incentive Plan

At the annual meeting of stockholders on October 21, 2005, stockholders of the Company approved the PSB Holdings, Inc. 2005 Stock-Based Incentive Plan (the “Incentive Plan”).  Under the Incentive Plan, the Company may grant up to 340,213 stock options and 136,085 shares of restricted stock to its employees, officers and directors for an aggregate amount of up to 476,298 shares of the Company’s common stock for issuance upon the grant or exercise of awards.  Both incentive stock options and non-statutory stock options may be granted under the Incentive Plan.

On November 7, 2005, the Company awarded 319,800 options to purchase the Company’s common stock and 129,281 shares of restricted stock.  Stock option awards were granted with an exercise price equal to the market price of the Company’s stock at the date of grant ($10.60) with a maximum term of ten years.

On June 7, 2006, the Company awarded 18,000 options to purchase the Company’s common stock and 6,000 shares of restricted stock.  Stock option awards were granted with an exercise price equal to the market price of the Company’s stock at the date of grant ($10.78) with a maximum term of ten years.

On May 25, 2007, the Company awarded 29,000 options to purchase the Company’s common stock and 9,500 shares of restricted stock.  Stock option awards were granted with an exercise price equal to the market price of the Company’s stock at the date of grant ($10.70) with a maximum term of ten years.

Both stock option and restricted stock awards granted to date vest at 20% per year beginning on the first anniversary of the date of the grant.

Stock options and restricted stock awards are considered common stock equivalents for the purpose of computing earnings per share on a diluted basis.

The Company has recorded share-based compensation expense related to outstanding stock option and restricted stock awards based upon the fair value at the date of grant over the vesting period of such awards on a straight-line basis.  The fair value of each restricted stock allocation, based on the market price at the date of grant, is recorded in Unearned stock awards.  Compensation expense related to unearned restricted shares is amortized to compensation and benefits expense over the vesting period of the restricted stock awards.   The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing method which includes several assumptions such as volatility, expected dividends, expected term and risk-free rate for each stock option award.

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Non-performing Assets, Past Due and Impaired Loans

3 Months Ended

Sep. 30, 2012

Non Performing Assets [Abstract]

Non-performing Assets, Past Due and Impaired Loans

NOTE 7 – Non-performing Assets, Past Due and Impaired Loans

The table below sets forth the amounts and categories of non-performing assets at the dates indicated:

	At September 30,			At June 30,
	2012			2012
	(Dollars in thousands)
Non-accrual loans:
Residential	$	3,622		$	3,985
Commercial real estate		3,601			3,975
Residential construction		429			424
Total non-accrual loans		7,652			8,384
Accruing loans past due 90 days or more:
Residential		422			-
Total		422			-
Total non-performing loans		8,074			8,384
Other real estate owned		1,865			1,683
Total non-performing assets	$	9,939		$	10,067
Total non-performing loans to total loans		3.25	%		3.33	%
Total non-performing assets to total assets		2.21	%		2.23	%

The balance in non-performing loans is a direct correlation to the deteriorating real estate climate.  Management is focused on working with borrowers and guarantors to resolve these trends by restructuring or liquidating assets when prudent. Many of our commercial relationships are secured by development loans, in particular condominiums which have experienced a significant reduction in demand. The Bank reviews the strength of the guarantors; requires face to face discussions and offers restructuring suggestions that provide the borrowers with short term relief and exit strategies. Overall, we expect to see improvement as solutions are identified and executed. The Bank obtains a current appraisal on all real estate secured loans that are 180 days or more past due if the appraisal on file is older than one year. If the determination is made that there is the potential for collateral shortfall, an allocated reserve will be assigned to the loan for the expected deficiency. It is the policy of the Bank to charge off or write down loans or other assets when, in the opinion of the Credit Committee and Loan Review, the ultimate amount recoverable is less than the book value, or the collection of the amount is expected to be unduly prolonged.  The level of non-performing assets is expected to fluctuate in response to changing economic and market conditions, and the relative sizes of the respective loan portfolios, along with management’s degree of success in resolving problem assets. Management takes a proactive approach with respect to the identification and resolution of problem loans.

The following table sets forth information regarding past due loans at September 30, 2012 and June 30, 2012:

					90 days
	30–59 Days		60–89 Days		or greater		Total
At September 30, 2012	Past Due		Past Due		Past Due		Past Due
(in thousands)
Real Estate:
Residential	$	30	$	524	$	1,359	$	1,913
Commercial		-		2,071		1,965		4,036
Residential Construction		-		-		429		429
Commercial		-		465		-		465
Consumer		-		2		-		2
Total	$	30	$	3,062	$	3,753	$	6,845
At June 30, 2012
(in thousands)
Real Estate:
Residential	$	363	$	162	$	940	$	1,465
Commercial		159		-		1,573		1,732
Residential Construction		-		-		424		424
Total	$	522	$	162	$	2,937	$	3,621

The following is a summary of information pertaining to impaired loans at September 30, 2012 and June 30, 2012.

	At September 30, 2012						At June 30, 2012
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
Impaired loans without a valuation allowance:	(in thousands)
Real Estate:
Residential	$	1,392	$	1,392	$	-	$	1,415	$	1,415	$	-
Commercial		2,999		3,085		-		6,668		6,754		-
Residential construction		429		429		-		424		424		-
Consumer and other		22		22		-		27		27		-
Total impaired with no specific reserves		4,842		4,928		-		8,534		8,620		-
Impaired loans with a valuation allowance:
Real Estate:
Residential		3,413		3,508		167		3,431		3,527		185
Commercial		2,008		2,498		38		3,402		3,768		190
Total impaired with a specific reserve		5,421		6,006		205		6,833		7,295		375
Total Impaired Loans:
Real Estate:
Residential		4,805		4,900		167		4,846		4,942		185
Commercial		5,007		5,583		38		10,070		10,522		190
Residential construction		429		429		-		424		424		-
Consumer and other		22		22		-		27		27		-
Total impaired loans	$	10,263	$	10,934	$	205	$	15,367	$	15,915	$	375

The following is a summary of additional information pertaining to impaired loans:

	Three months ended						Three months ended
	September 30, 2012						September 30, 2011
	Average		Interest		Interest Income		Average		Interest		Interest Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		on Cash Basis		Investment		Recognized		on Cash Basis
(in thousands)
Real Estate:
Residential	$	4,826		31	$	17	$	2,308	$	17	$	6
Commercial		7,306		62		14		7,280		63		21
Residential Construction		426		-		-		-		-		-
Commercial		-		-		-		-		4		4
Consumer and other		22		-		-		56		1		-
Total impaired loans	$	12,580	$	93	$	31	$	9,644	$	85	$	31

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Investment Securities

3 Months Ended

Sep. 30, 2012

Investments, Debt and Equity Securities [Abstract]

Investment Securities

NOTE 5 – Investment Securities

The carrying value and estimated market values of investment securities by maturity are as follows:

	Amortized		Gross Unrealized					Fair
	Cost Basis		Gain		(Loss)			Value
	(in thousands)
September 30, 2012
Available-for-sale:
Debt securities:
U.S. government and government-sponsored securities:
Due in one year or less	$	407	$	4	$	-		$	411
Corporate bonds and other securities:
After ten years		5,998		-		(1,511	)		4,487
U.S. Government sponsored and guaranteed mortgage-backed securities:
Due in one year or less		85		3		-			88
From one through five years		1,242		78		-			1,320
From five through ten years		1,176		57		-			1,233
After ten years		17,535		1,129		(12	)		18,652
		20,038		1,267		(12	)		21,293
Non-agency mortgage-backed securities:
After ten years		9,066		293		(646	)		8,713
Total debt securities		35,509		1,564		(2,169	)		34,904
Equity securities:
Auction rate preferred stock		10,000		618		-			10,618
Total available-for-sale securities	$	45,509	$	2,182	$	(2,169	)	$	45,522
Held-to-maturity:
U.S. government and government-sponsored securities:
From one through five years	$	3,996	$	34	$	-		$	4,030
From five through ten years		3,187		173		(1	)		3,359
		7,183		207		(1	)		7,389
U.S. Government sponsored and guaranteed mortgage-backed securities:
From five through ten years		6,248		234		-			6,482
After ten years		102,602		3,287		(160	)		105,729
		108,850		3,521		(160	)		112,211
Total held-to-maturity securities	$	116,033	$	3,728	$	(161	)	$	119,600

	Amortized		Gross Unrealized					Fair
	Cost Basis		Gain		(Loss)			Value
	(in thousands)
June 30, 2012:
Available-for-sale:
Debt securities:
U.S. government and government-sponsored securities:
From one through five years	$	450	$	9	$	-		$	459
Corporate bonds and other securities:
After ten years		5,998		-		(1,344	)		4,654
U.S. Government sponsored and guaranteed mortgage-backed securities:
Due in one year or less		1		-		-			1
From one through five years		416		24		-			440
From five through ten years		2,564		140		-			2,704
After ten years		19,717		1,265		(14	)		20,968
		22,698		1,429		(14	)		24,113
Non-agency mortgage-backed securities:
After ten years		9,601		-		(1,250	)		8,351
Total debt securities		38,747		1,438		(2,608	)		37,577
Equity securities:
Auction rate preferred stock		10,000		11		(375	)		9,636
Total available-for-sale securities	$	48,747	$	1,449	$	(2,983	)	$	47,213
Held-to-maturity:
U.S. government and government-sponsored securities:
From one through five years	$	5,996	$	34	$	-		$	6,030
From five through ten years		3,196		149		(7	)		3,338
		9,192		183		(7	)		9,368
U.S. Government sponsored and guaranteed mortgage-backed securities:
From five through ten years		6,767		192		-			6,959
After ten years		89,236		2,783		(10	)		92,009
		96,003		2,975		(10	)		98,968
Total held-to-maturity securities	$	105,195	$	3,158	$	(17	)	$	108,336

There were no realized gains or losses on sales of available-for-sale securities for the three months ended September 30, 2012.  There were gross gains of $235,000 and no gross losses realized on sales of available-for-sale securities for the three months ended September 30, 2011  Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.  There were other-than-temporary impairment charges on available-for-sale securities of $89,000 and $798,000 during the three months ended September 30, 2012 and 2011, respectively.  The write-downs of securities included total other-than-temporary impairment losses of $282,000 and $2.0 million, net of $193,000 and $1.2 million recognized in other comprehensive income/loss for the three months ended September 30, 2012 and 2011, respectively, before taxes.  See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Overview.”

The following is a summary of the estimated fair value and related unrealized losses segregated by category and length of time that individual securities have been in a continuous unrealized loss position at: 

September 30, 2012:	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	Value		Losses		Value		Losses		Value		Losses
Available-for-sale:
Debt securities:
Corporate bonds and other securities	$	-	$	-	$	4,487	$	1,511	$	4,487	$	1,511
U.S. Government sponsored and guaranteed
mortgage-backed securities		1,750		12		-		-		1,750		12
Total temporarily impaired available-for-sale		1,750		12		4,487		1,511		6,237		1,523
Held-to-maturity:
U.S. Government and government-sponsored securities		2,252		1		-		-		2,252		1
U.S. Government sponsored and guaranteed
mortgage-backed securities		17,144		160		-		-		17,144		160
Total temporarily impaired held-to-maturity		19,396		161		-		-		19,396		161
Other-than-temporarily impaired debt securities (1):
Non-agency mortgage-backed securities		-		-		3,700		646		3,700		646
Total temporarily-impaired and other-than-temporarily impaired securities	$	21,146	$	173	$	8,187	$	2,157	$	29,333	$	2,330
June 30, 2012:	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	Value		Losses		Value		Losses		Value		Losses
Available-for-sale:
Debt securities:
Corporate bonds and other obligations	$	-	$	-	$	4,654	$	1,344	$	4,654	$	1,344
U.S. Government sponsored and guaranteed mortgage-backed securities		1,826		14		-		-		1,826		14
Equity securities		7,625		375		-		-		7,625		375
Total temporarily impaired available-for-sale		9,451		389		4,654		1,344		14,105		1,733
Held-to-maturity:
U.S. Government and government-sponsored securities		2,257		7		-		-		2,257		7
U.S. Government sponsored and guaranteed mortgage-backed securities		10,141		10		-		-		10,141		10
Total temporarily impaired held-to-maturity		12,398		17		-		-		12,398		17
Other-than-temporarily impaired debt securities (1):
Non-agency mortgage-backed securities		1,767		21		6,512		1,229		8,279		1,250
Total temporarily-impaired and other-than-temporarily impaired securities	$	23,616	$	427	$	11,166	$	2,573	$	34,782	$	3,000

(1)  Includes other-than-temporary impaired available-for-sale debt securities in which a portion of the other-than-temporary impairment loss remains in accumulated other comprehensive income (loss).

Management evaluates securities for other-than-temporary impairment (OTTI) at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.

At September 30, 2012 and June 30, 2012, there were 23 and 27 individual investment securities, respectively, with declines in fair value below the amortized cost basis of the security.  Management has the intent and ability to hold these securities until cost recovery occurs and considers these declines to be temporary.

The unrealized losses on the Company’s investment in U.S. Government-sponsored agency bonds and U.S. government guaranteed and government-sponsored residential mortgage-backed securities were primarily caused by interest rate fluctuations.  These investments are guaranteed or sponsored by the U.S. government or an agency thereof.  Accordingly, it is expected that the securities would not be settled at a price less than the par value of the investment.  Because the decline in market value is attributable to changes in interest rates and not to credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2012.

The Company’s unrealized losses on investments in corporate bonds and other securities relate to investments in companies within the financial services sector.  The unrealized losses are primarily caused by (a) interest rate fluctuations, (b) recent decreases in profitability and near-term profit forecasts by industry analysts and (c) recent downgrades by industry analysts.  The contractual terms of these investments do not permit the companies to settle the security at a price less than the par value of investment.  While the companies’ credit ratings have decreased, the Company currently does not believe it is probable that it will be unable to collect all amounts due according to the contractual terms of the investments.  Therefore, it is expected that the bonds would not be settled at a price less than the par value of the investment.  Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity.

For the quarter ended September 30, 2012, securities with other-than-temporary impairment losses related to credit loss that were recognized in earnings consisted of non-agency mortgage-backed securities.  For these debt securities, the Company estimated the portion of loss attributable to credit loss using a discounted cash flow model.  Significant inputs included the estimated cash flows of the underlying loans based on key assumptions, such as default rate, loss severity and prepayment rate.  Assumptions can vary widely from security to security, and are influenced by such factors as loan interest rate, geographical location of the borrower, borrower characteristics and collateral type.  The present value of the expected cash flows was compared to the Company’s amortized cost basis to determine the credit-related impairment loss.  Based on the expected cash flows derived from the model, the Company expects to recover the remaining unrealized losses on these securities and the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2012.

The following table represents a roll-forward of the amount of credit losses on debt securities for which a portion of an other-than-temporary impairment was recognized in other comprehensive income (loss) (in thousands):

Balance as of June 30, 2011	$	13,307
Credit losses on securities for which other-than-temporary impairment
was not previously recorded		-
Additional credit losses on securities for which an other-than-temporary
impairment charge was previously recorded		1,964
Reductions for securities sold during the period		-
Balance as of June 30, 2012		15,271
Credit losses on securities for which other-than-temporary impairment
was not previously recorded		-
Additional credit losses on securities for which an other-than-temporary
impairment charge was previously recorded		89
Reductions for securities sold during the period		-
Balance as of September 30, 2012	$	15,360

Auction-rate trust preferred securities. At September 30, 2012, our auction-rate trust preferred securities (ARP) portfolio totaled $10.6 million, all of which were classified as available-for-sale.   Auction-rate trust preferred securities are a floating rate preferred stock, on which the dividend rate generally resets every 90 days based on an auction process to reflect the yield demand for the instruments by potential purchasers.  At September 30, 2012, our investments in auction-rate trust preferred securities consisted of investments in three corporate issuers.  These securities were originally purchased by the Company because they represented highly liquid, tax-preferred investments secured, in most cases, by preferred stock issued by high quality, investment grade companies (generally other financial institutions) (“collateral preferred shares”).  The ARP shares, or certificates, purchased by the Company are Class A certificates, which, among other rights, entitle the holder to priority claim on dividends paid into the Trust holding the preferred shares.

In most cases, the trusts which issued the ARP certificates own various callable preferred shares of stock by a single entity.  In addition to the call dates for redemption established by the collateral preferred shares, each trust has a maturity date upon which the trust itself will terminate.  The value of the remaining collateral preferred shares is not guaranteed, and may be more or less than the stated par value of the collateral preferred shares, and is dependent on the market value of those collateral preferred shares on the date of the trust’s maturity.

The certificates issued by the trusts traded in an active, open auction market, with each individual trust establishing the frequency of its auctions, typically every 90 days (the “reset date”).  The results of an auction would be the exchange of certificates, at par, between participants entering or exiting the market, and resetting of the yield to be earned by holders of the Class A certificates as well as the holders of other classes of trust certificates.

Beginning in February 2008, auctions for these securities began to fail when investors declined to bid on the securities.  Five of the largest investment banks that made a market in these securities (Merrill Lynch, Citigroup, UBS, AIG and Morgan Stanley) declined to act as bidders of last resort, as they had in the past.  The auction failures did not result in the loss of any principal value to the certificate holders, but prevented many sellers from exiting, or redeeming, their certificates at the reset date.  These unsuccessful sellers were required to continue to hold the certificates until the next scheduled reset date.  To compensate these unsuccessful sellers, the failed auctions triggered a penalty-rate feature which provided that owners of the Class A certificates were entitled to a higher portion of the dividends, and thus a higher yield, on the Class A certificates.

During this time, the Company attempted to divest itself of the ARPs, but was prevented from doing so due to the continued failure of the auction market.  The Company continued to carry its investments at par value, despite the increased liquidity risk, because the credit strength of the issuers of the collateral preferred shares remained high, and the yield remained above-market.

The turmoil in the financial markets caused the value of the underlying collateral preferred shares to decline. These declines in value are not considered other-than-temporary.

The Company had difficulty identifying market prices of comparable instruments for ARPs due to the inactive market.  As a result, during the quarter ended June 30, 2009, the Company modified its methodology for determining the fair value of the ARPs classified as Level 3, and used the quoted market values of the underlying collateral preferred shares, adjusted for the higher yield earned by the Company through the Class A certificates compared with the nominal rate available to a direct owner of the collateral preferred shares.

The Company adopted the guidance in ASC 820-10, “Fair Value Measurements and Disclosures,” in the second quarter of 2009.  The Company concluded that the market value of the underlying collateral preferred shares did not represent orderly transactions and adopted the use of a discounted cash flow model to determine if there was any other-than-temporary impairment of its investments in the ARPs.  The resulting discounted cash flow for each ARP classified as Level 3 showed no impairment in the fair value of the securities.

The Company has the ability and intent to hold these securities for the time necessary to collect the expected cash flows. 

The chart below includes information as of September 30, 2012 on the various issuers of Auction Rate Preferred securities owned by the Company:

Issuer	Goldman Sachs	Merrill Lynch	Bank of America
Par amount	$3,000,000	$5,000,000	$2,000,000
Book Value	$3,000,000	$5,000,000	$2,000,000
Purchase Date	12-12-07	09-04-07	11-20-07
Maturity Date	08-23-26	05-28-27	08-17-47
Next Reset Date	11-21-12	11-27-12	11-16-12
Reset Frequency	Quarterly	Quarterly	Quarterly
Failed Auction	Yes	Yes	Yes
Receiving Default Rates	Yes	Yes	Yes
Current Rate	4.70%	4.66%	4.57%
Dividends Current:	Yes	Yes	Yes

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Loans

3 Months Ended

Sep. 30, 2012

Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]

Loans

NOTE 6 – Loans

The following table sets forth the composition of our loan portfolio at September 30, 2012 and June 30, 2012:

	September 30,			June 30,
	2012			2012
	(in thousands)
Mortgage Loans:
Residential (1)	$	199,783		$	200,148
Commercial real estate		44,708			45,032
Residential construction		2,007			3,044
Commercial		2,970			3,459
Consumer and other		955			898
Total loans		250,423			252,581
Unadvanced construction loans		(2,257	)		(1,559	)
		248,166			251,022
Net deferred loan costs		514			463
Allowance for loan losses		(3,027	)		(2,913	)
Loans, net	$	245,653		$	248,572

(1)          Residential mortgage loans include one- to four-family mortgage loans, second mortgage loans, and home equity lines of credit.

Credit Quality Information

The Company utilizes a nine grade internal loan rating system as follows:

Loans rated 1 -5:  Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 6:  Loans in this category are considered “special mention.”  These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 7:  Loans in this category are considered “substandard.”  Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged.  There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

Loans rated 8:  Loans in this category are considered “doubtful.”  Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 9:  Loans in this category are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted.

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

The following table presents the Company’s loan segments by internally assigned grades at September 30, 2012:

	Residential		Commercial		Residential				Consumer
September 30, 2012	Real Estate		Real Estate		Construction		Commercial		and other		Total
(in thousands)
Grade:
Pass	$	195,825	$	31,028	$	1,175	$	2,476	$	955	$	231,459
Special Mention		336		1,887		-		494		-		2,717
Substandard		3,250		9,536		429		-		-		13,215
Doubtful		372		403		-		-		-		775
Loss		-		-		-		-		-		-
Total	$	199,783	$	42,854	$	1,604	$	2,970	$	955	$	248,166
	Residential		Commercial		Residential				Consumer
June 30, 2012	Real Estate		Real Estate		Construction		Commercial		and other		Total
(in thousands)
Grade:
Pass	$	195,825	$	32,032	$	1,875	$	2,834	$	898	$	233,464
Special Mention		338		1,719		-		625		-		2,682
Substandard		3,605		9,998		424		-		-		14,027
Doubtful		380		469		-		-		-		849
Loss		-		-		-		-		-		-
Total	$	200,148	$	44,218	$	2,299	$	3,459	$	898	$	251,022

The following table represents modifications that were deemed to be troubled debt restructures for the three months ended September 30, 2011.  There were no modifications that were deemed to be troubled debt restructures for the three months ended September 30, 2012.

			Pre-Modifcation		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
(Dollars in thousands)
Real Estate:
Commercial		1	$	80	$	113

The modification on the commercial loan provided a reduced rate for five years plus the capitalization of real estate taxes.  A tax escrow account has also been established.  Management performs a discounted cash flow calculation to determine the amount of impaired reserve required on each of the troubled debt restructures.  Any reserve required is recorded through the provision for loan losses.

The following is a summary of troubled debt restructurings that have subsequently defaulted within one year of modification during the periods indicated:

	Three months ended				Three months ended
	September 30, 2012				September 30, 2011
	Number of		Recorded		Number of		Recorded
	Contracts		Investment		Contracts		Investment
(Dollars in thousands)
Real Estate:
Residential		1	$	190		1	$	190
Commercial		1		222		1		226
Total		2	$	412		2	$	416

The defaults on the commercial and residential troubled debt restructures were the result of the borrower’s delinquent loan payments during the period.  The Company evaluates the levels/trends in delinquencies and non-accruals as part of the qualitative factors within the allowance for loan loss framework.

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Allowance for Loan Losses

3 Months Ended

Sep. 30, 2012

Receivables [Abstract]

Allowance for Loan Losses

NOTE 8 – Allowance for Loan Losses

An analysis of the allowance for loan losses for the three months ended September 30, 2012 and 2011 is as follows:
Three months ended
September 30, 2012	Residential			Commercial			Residential						Consumer
	Real Estate			Real Estate			Construction			Commercial			and other			Unallocated			Total
Allowance for loan losses:	(in thousands)
Beginning balance	$	1,485		$	1,347		$	20		$	17		$	37		$	7		$	2,913
Charge-offs		(41	)		(123	)		-			-			(17	)		-			(181	)
Recoveries		37			-			-			1			7			-			45
Provision		55			5			(1	)		14			9			168			250
Ending Balance	$	1,536		$	1,229		$	19		$	32		$	36		$	175		$	3,027
Three months ended
September 30, 2011	Residential			Commercial			Residential						Consumer
	Real Estate			Real Estate			Construction			Commercial			and other			Unallocated			Total
Allowance for loan losses:	(in thousands)
Beginning balance	$	1,520		$	1,286		$	28		$	140		$	11		$	87		$	3,072
Charge-offs		(67	)		(476	)		-			-			(16	)		-			(559	)
Recoveries		2			-			-			2			4			-			8
Provision		78			431			(7	)		(56	)		11			(66	)		391
Ending Balance	$	1,533		$	1,241		$	21		$	86		$	10		$	21		$	2,912

Further information pertaining to the allowance for loan losses at September 30, 2012 and June 30, 2012 is as follows:
At September 30, 2012	Residential		Commercial		Residential
	Real Estate		Real Estate		Construction		Commercial		Consumer		Unallocated		Total
(in thousands)
Ending balance: Amount of allowance for loan losses for impaired loans	$	167	$	38	$	-	$	-	$	-	$	-	$	205
Ending balance: Amount of allowance for loan losses for non-impaired loans	$	1,369	$	1,191	$	19	$	32	$	36	$	175	$	2,822
Loans: Ending balance	$	199,783	$	42,854	$	1,604	$	2,970	$	955	$	-	$	248,166
Ending balance: Impaired loans	$	4,805	$	5,007	$	429	$	-	$	22	$	-	$	10,263
Ending balance: Non-impaired loans	$	194,978	$	37,847	$	1,175	$	2,970	$	933	$	-	$	237,903
At June 30, 2012	Residential		Commercial		Residential
	Real Estate		Real Estate		Construction		Commercial		Consumer		Unallocated		Total
(in thousands)
Ending balance: Amount of allowance for loan losses for impaired loans	$	185	$	190	$	-	$	-	$	-	$	-	$	375
Ending balance: Amount of allowance for loan losses for non-impaired loans	$	1,300	$	1,157	$	20	$	17	$	37	$	7	$	2,538
Loans: Ending balance	$	200,148	$	44,218	$	2,299	$	3,459	$	898	$	-	$	251,022
Ending balance: Impaired loans	$	4,846	$	10,070	$	424	$	-	$	27	$	-	$	15,367
Ending balance: Non-impaired loans	$	195,302	$	34,148	$	1,875	$	3,459	$	871	$	-	$	235,655

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Earnings Per Share (EPS) (Details Textuals)	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Earnings Per Share [Abstract]
Number of options outstanding and excluded from computation of earnings per share	222,921	222,921

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Accumulated Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Net unrealized gain on securities available-for-sale	$ 13	$ (1,534)
Tax effect	5	(521)
Accumulated other comprehensive income (loss)	$ 8	$ (1,013)

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Commitments to Extend Credit

3 Months Ended

Sep. 30, 2012

Commitments To Extend Credit [Abstract]

Commitments To Extend Credit

NOTE 13 – Commitments to Extend Credit

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the Condensed Consolidated Balance Sheets.

The contractual amounts of outstanding commitments were as follows:

	September 30,		June 30,
	2012		2012
	(in thousands)
Commitments to extend credit:
Loan commitments	$	3,507	$	3,646
Unadvanced construction loans		2,257		1,559
Unadvanced lines of credit		12,623		12,690
Standby letters of credit		842		842
Outstanding commitments	$	19,229	$	18,737

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Allowance for Loan Losses (Tables)

3 Months Ended

Sep. 30, 2012

Receivables [Abstract]

Schedule of analysis of the allowance for loan losses

Three months ended
September 30, 2012	Residential			Commercial			Residential						Consumer
	Real Estate			Real Estate			Construction			Commercial			and other			Unallocated			Total
Allowance for loan losses:	(in thousands)
Beginning balance	$	1,485		$	1,347		$	20		$	17		$	37		$	7		$	2,913
Charge-offs		(41	)		(123	)		-			-			(17	)		-			(181	)
Recoveries		37			-			-			1			7			-			45
Provision		55			5			(1	)		14			9			168			250
Ending Balance	$	1,536		$	1,229		$	19		$	32		$	36		$	175		$	3,027
Three months ended
September 30, 2011	Residential			Commercial			Residential						Consumer
	Real Estate			Real Estate			Construction			Commercial			and other			Unallocated			Total
Allowance for loan losses:	(in thousands)
Beginning balance	$	1,520		$	1,286		$	28		$	140		$	11		$	87		$	3,072
Charge-offs		(67	)		(476	)		-			-			(16	)		-			(559	)
Recoveries		2			-			-			2			4			-			8
Provision		78			431			(7	)		(56	)		11			(66	)		391
Ending Balance	$	1,533		$	1,241		$	21		$	86		$	10		$	21		$	2,912

At September 30, 2012	Residential		Commercial		Residential
	Real Estate		Real Estate		Construction		Commercial		Consumer		Unallocated		Total
(in thousands)
Ending balance: Amount of allowance for loan losses for impaired loans	$	167	$	38	$	-	$	-	$	-	$	-	$	205
Ending balance: Amount of allowance for loan losses for non-impaired loans	$	1,369	$	1,191	$	19	$	32	$	36	$	175	$	2,822
Loans: Ending balance	$	199,783	$	42,854	$	1,604	$	2,970	$	955	$	-	$	248,166
Ending balance: Impaired loans	$	4,805	$	5,007	$	429	$	-	$	22	$	-	$	10,263
Ending balance: Non-impaired loans	$	194,978	$	37,847	$	1,175	$	2,970	$	933	$	-	$	237,903
At June 30, 2012	Residential		Commercial		Residential
	Real Estate		Real Estate		Construction		Commercial		Consumer		Unallocated		Total
(in thousands)
Ending balance: Amount of allowance for loan losses for impaired loans	$	185	$	190	$	-	$	-	$	-	$	-	$	375
Ending balance: Amount of allowance for loan losses for non-impaired loans	$	1,300	$	1,157	$	20	$	17	$	37	$	7	$	2,538
Loans: Ending balance	$	200,148	$	44,218	$	2,299	$	3,459	$	898	$	-	$	251,022
Ending balance: Impaired loans	$	4,846	$	10,070	$	424	$	-	$	27	$	-	$	15,367
Ending balance: Non-impaired loans	$	195,302	$	34,148	$	1,875	$	3,459	$	871	$	-	$	235,655

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Allowance for Loan Losses - Analysis of allowance for loan losses (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 Loans receivables	Sep. 30, 2011 Loans receivables	Sep. 30, 2012 Loans receivables Residential Real Estate	Sep. 30, 2011 Loans receivables Residential Real Estate	Sep. 30, 2012 Loans receivables Commercial Real Estate	Sep. 30, 2011 Loans receivables Commercial Real Estate	Sep. 30, 2012 Loans receivables Residential construction	Sep. 30, 2011 Loans receivables Residential construction	Sep. 30, 2012 Loans receivables Commercial	Sep. 30, 2011 Loans receivables Commercial	Sep. 30, 2012 Loans receivables Consumer and other	Sep. 30, 2011 Loans receivables Consumer and other	Sep. 30, 2012 Loans receivables Unallocated	Sep. 30, 2011 Loans receivables Unallocated	Sep. 30, 2012 Impaired loan receivables	Jun. 30, 2012 Impaired loan receivables	Sep. 30, 2012 Impaired loan receivables Residential Real Estate	Jun. 30, 2012 Impaired loan receivables Residential Real Estate	Sep. 30, 2012 Impaired loan receivables Commercial Real Estate	Jun. 30, 2012 Impaired loan receivables Commercial Real Estate	Sep. 30, 2012 Impaired loan receivables Residential construction	Jun. 30, 2012 Impaired loan receivables Residential construction	Sep. 30, 2012 Impaired loan receivables Commercial	Jun. 30, 2012 Impaired loan receivables Commercial	Sep. 30, 2012 Impaired loan receivables Consumer and other	Jun. 30, 2012 Impaired loan receivables Consumer and other	Sep. 30, 2012 Impaired loan receivables Unallocated	Jun. 30, 2012 Impaired loan receivables Unallocated	Sep. 30, 2012 Non-impaired loan receivables	Jun. 30, 2012 Non-impaired loan receivables	Sep. 30, 2012 Non-impaired loan receivables Residential Real Estate	Jun. 30, 2012 Non-impaired loan receivables Residential Real Estate	Sep. 30, 2012 Non-impaired loan receivables Commercial Real Estate	Jun. 30, 2012 Non-impaired loan receivables Commercial Real Estate	Sep. 30, 2012 Non-impaired loan receivables Residential construction	Jun. 30, 2012 Non-impaired loan receivables Residential construction	Sep. 30, 2012 Non-impaired loan receivables Commercial	Jun. 30, 2012 Non-impaired loan receivables Commercial	Sep. 30, 2012 Non-impaired loan receivables Consumer and other	Jun. 30, 2012 Non-impaired loan receivables Consumer and other	Sep. 30, 2012 Non-impaired loan receivables Unallocated	Jun. 30, 2012 Non-impaired loan receivables Unallocated
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Allowance for loan losses, Beginning balance			$ 2,913	$ 3,072	$ 1,485	$ 1,520	$ 1,347	$ 1,286	$ 20	$ 28	$ 17	$ 140	$ 37	$ 11	$ 7	$ 87	$ 205	$ 375	$ 167	$ 185	$ 38	$ 190									$ 2,822	$ 2,538	$ 1,369	$ 1,300	$ 1,191	$ 1,157	$ 19	$ 20	$ 32	$ 17	$ 36	$ 37	$ 175	$ 7
Charge-offs			(181)	(559)	(41)	(67)	(123)	(476)					(17)	(16)
Recoveries			45	8	37	2					1	2	7	4
Provision	250	391	250	391	55	78	5	431	(1)	(7)	14	(56)	9	11	168	(66)
Allowance for loan losses, Ending balance			$ 3,027	$ 2,912	$ 1,536	$ 1,533	$ 1,229	$ 1,241	$ 19	$ 21	$ 32	$ 86	$ 36	$ 10	$ 175	$ 21	$ 205	$ 375	$ 167	$ 185	$ 38	$ 190									$ 2,822	$ 2,538	$ 1,369	$ 1,300	$ 1,191	$ 1,157	$ 19	$ 20	$ 32	$ 17	$ 36	$ 37	$ 175	$ 7

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Loans - Summary of Loans (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012		Jun. 30, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	$ (3,027)		$ (2,913)
Net loans	245,653		248,572
Loans receivables
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	250,423		252,581
Unadvanced construction loans	(2,257)		(1,559)
Total loans after unadvanced construction loans	248,166		251,022
Net deferred loan costs	514		463
Allowance for loan losses	(3,027)		(2,913)
Net loans	245,653		248,572
Loans receivables | Residential real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Residential	199,783	[1]	200,148	[1]
Total loans after unadvanced construction loans	199,783		200,148
Loans receivables | Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Commercial real estate	44,708		45,032
Total loans after unadvanced construction loans	42,854		44,218
Loans receivables | Residential construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Residential construction	2,007		3,044
Total loans after unadvanced construction loans	1,604		2,299
Loans receivables | Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Commercial	2,970		3,459
Total loans after unadvanced construction loans	2,970		3,459
Loans receivables | Consumer and other
Accounts, Notes, Loans and Financing Receivable [Line Items]
Consumer and other	955		898
Total loans after unadvanced construction loans	$ 955		$ 898

[1] Residential mortgage loans include one- to four-family mortgage loans, second mortgage loans, and home equity lines of credit.

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Comprehensive Income (Loss), Net Of Tax, Attributable To Parent [Abstract]
Net Income	$ 503	$ 805
Other comprehensive income
Net unrealized holding gains (losses) on available-for-sale securities	1,651	(2,475)
Reclassification adjustment for losses realized in income on available-for-sale securities	89	563
Non credit portion of other- than- temporary losses on available - for - sale securities	(193)	(1,241)
Other comprehensive income (loss) before tax	1,547	(3,153)
Income tax (expense) benefit related to other comprehensive income	(526)	1,072
Other comprehensive income (loss) net of tax	1,021	(2,081)
Total comprehensive income (loss)	$ 1,524	$ (1,276)

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Basis of Presentation

3 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Basis of Presentation

NOTE  2 – Basis of Presentation

The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and the instructions to Form 10-Q, and accordingly do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary, consisting of only normal recurring accruals and the elimination of all significant intercompany accounts, to present fairly the financial position, results of operations and cash flows of the Company for the periods presented.  The interim results of operations are not necessarily indicative of the operating results to be expected for future periods, including the year ending June 30, 2013.  These financial statements should be read in conjunction with the 2012 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on September 28, 2012.

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Accumulated Other Comprehensive Income (Loss) (Tables)

3 Months Ended

Sep. 30, 2012

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of accumulated other comprehensive income (loss)

	September 30,		June 30,
	2012		2012
	(in thousands)
Net unrealized gain on securities available-for-sale	$	13	$	(1,534	)
Tax effect		5		(521	)
Accumulated other comprehensive income (loss)	$	8	$	(1,013	)

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Investment Securities - Various issuers of Auction Rate Preferred securities owned by Company (Details 4) (USD $)			3 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Sep. 30, 2012 Auction Rate Preferred securities Goldman Sachs	Sep. 30, 2012 Auction Rate Preferred securities Merrill Lynch	Sep. 30, 2012 Auction Rate Preferred securities Bank of America
Schedule of Available-for-sale Securities [Line Items]
Par amount			$ 3,000,000	$ 5,000,000	$ 2,000,000
Book Value	$ 45,522,000	$ 47,213,000	$ 3,000,000	$ 5,000,000	$ 2,000,000
Purchase Date			Dec. 12, 2007	Sep. 04, 2007	Nov. 20, 2007
Maturity Date			Aug. 23, 2026	May 28, 2027	Aug. 17, 2047
Next Reset Date			Nov. 21, 2012	Nov. 27, 2012	Nov. 16, 2012
Reset Frequency			Quarterly	Quarterly	Quarterly
Failed Auction			Yes	Yes	Yes
Receiving Default Rates			Yes	Yes	Yes
Current Rate			4.70%	4.66%	4.57%
Dividends Current:			Yes	Yes	Yes

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Dividends

3 Months Ended

Sep. 30, 2012

Dividends [Abstract]

Dividends

NOTE 12 – Dividends

The Company did not declare a dividend during the three months ended September 30, 2012 and 2011.