S-1

As filed with the Securities and Exchange Commission on March 17, 2010

Registration No. 333-________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-1

REGISTRATION STATEMENT UNDER

THE SECURITIES ACT OF 1933

Peoples Federal Bancshares, Inc. and

Peoples Federal Savings Bank 401(k) Plan

(Exact Name of Registrant as Specified in Its Charter)

Maryland	6712	Being applied for
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

435 Market Street

Brighton, Massachusetts 02135

(617) 254-0707

(Address, Including Zip Code, and Telephone Number, Including Area Code, of

Registrant’s Principal Executive Offices)

Mr. Maurice H. Sullivan, Jr.

Chief Executive Officer

435 Market Street

Brighton, Massachusetts 02135

(617) 254-0707

(Address, Including Zip Code, and Telephone Number, Including Area Code, of

Agent for Service)

Copies to:

Lawrence M. F. Spaccasi, Esq.

Steven Lanter, Esq.

Luse Gorman Pomerenk & Schick, P.C.

5335 Wisconsin Avenue, N.W., Suite 780

Washington, D.C. 20015

(202) 274-2000

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

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: x

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

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

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

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

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

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Amount to be registered	Proposed maximum offering price per share	Proposed maximum aggregate offering price	Amount of registration fee
Common Stock, $0.01 par value per share	7,141,500 shares	$10.00	$71,415,000 (1)	$5,092
Participation interests	338,880 interests (2)			(2)

(1) Estimated solely for the purpose of calculating the registration fee.

(2) The securities of Peoples Federal Bancshares, Inc. to be purchased by the Peoples Federal Savings Bank 401(k) Plan are included in the amount shown for the common stock. Accordingly, no separate fee is required for the participation interests. In accordance with Rule 457(h) of the Securities Act of 1933, as amended, the registration fee has been calculated on the basis of the number of shares of common stock that may be purchased with the current assets of such Plan.

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

Prospectus Supplement

Interests in

PEOPLES FEDERAL SAVINGS BANK

401(k) PLAN

Offering of Participation Interests in up to 338,880 Shares of

PEOPLES FEDERAL BANCSHARES, INC.

Common Stock

In connection with the conversion of Peoples Federal MHC from the mutual to the stock form of organization, Peoples Federal Bancshares, Inc. is allowing participants in the newly adopted Peoples Federal Savings Bank 401(k) Plan (the “Plan”) to invest all or a portion of their accounts in stock units representing an ownership interest in the common stock of Peoples Federal Bancshares, Inc. Peoples Federal Savings Bank adopted the Plan, effective as of May 1, 2010. The Plan was adopted for the benefit of Peoples Federal Savings Bank’s active employees, to replace the Pentegra Defined Contribution Plan for Financial Institutions. The account balances of active employees of Peoples Federal Savings Bank have been transferred from the Pentegra Defined Contribution Plan for Financial Institutions, a multiple-employer plan in which Peoples Federal Savings Bank participated, to the Plan, effective as of May 1, 2010, provided that such employees consented to such transfer. Based upon the value of the assets in the Pentegra Defined Contribution Plan for Financial Institutions attributable to active employees at Peoples Federal Savings Bank at December 31, 2009, the trustee of the Plan could purchase up to 338,880 shares of Peoples Federal Bancshares, Inc. common stock, at the purchase price of $10.00 per share. This prospectus supplement relates to the initial election of Plan participants to direct the trustee of the Plan to invest all or a portion of their Plan accounts in stock units representing an ownership interest in the Peoples Federal Bancshares, Inc. Stock Fund at the time of the stock offering.

The prospectus of Peoples Federal Bancshares, Inc., dated             , 2010, accompanies this prospectus supplement. It contains detailed information regarding the conversion and stock offering of Peoples Federal Bancshares, Inc. common stock and the financial condition, results of operations and business of Peoples Federal MHC and Peoples Federal Savings Bank. This prospectus supplement provides information regarding the Plan. You should read this prospectus supplement together with the prospectus and keep both for future reference.

For a discussion of risks that you should consider, see the “Risk Factors” section of the prospectus.

The interests in the Plan and the offering of Peoples Federal Bancshares, Inc. common stock have not been approved or disapproved by the Office of Thrift Supervision, the Securities and Exchange Commission or any other federal or state agency. Any representation to the contrary is a criminal offense.

The securities offered in this prospectus supplement and in the prospectus are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

This prospectus supplement may be used only in connection with offers and sales by Peoples Federal Bancshares, Inc. of interests or shares of common stock pursuant to the Plan. No one may use this prospectus supplement to re-offer or resell interests or shares of common stock acquired through the Plan.

You should rely only on the information contained in this prospectus supplement and the accompanying prospectus. Peoples Federal Bancshares, Inc., Peoples Federal Savings Bank and the Plan have not authorized anyone to provide you with information that is different.

This prospectus supplement does not constitute an offer to sell or solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make an offer or solicitation in that jurisdiction. Neither the delivery of this prospectus supplement and the prospectus nor any sale of common stock or stock units representing an ownership interest in Peoples Federal Bancshares, Inc. common stock shall under any circumstances imply that there has been no change in the affairs of Peoples Federal Bancshares, Inc. or any of its subsidiaries or the Plan since the date of this prospectus supplement, or that the information contained in this prospectus supplement or incorporated by reference is correct as of any time after the date of this prospectus supplement.

The date of this prospectus supplement is             , 2010.

TABLE OF CONTENTS

THE OFFERING	1
Securities Offered	1
Election to Purchase Common Stock in the Offering: Priorities	1
Composition and Purpose of Stock Units	3
Value of the Plan Assets	4
In Order to Participate in the Offering	4
How to Order	4
Order Deadline	6
Irrevocability of Transfer Direction	6
Other Purchases in Your Account During the Offering Period	6
Direction to Purchase Peoples Federal Bancshares, Inc. Stock Fund Units after the Offering	7
Purchase Price of Common Stock in the Offering	7
Nature of a Participant’s Interest in the Common Stock	7
Voting Rights of Common Stock	7
DESCRIPTION OF THE PLAN	8
Introduction	8
Eligibility and Participation	9
Contributions under the Plan	9
Limitations on Contributions	9
Benefits under the Plan	10
Investment of Contributions and Account Balances	11
Performance History	12
Description of the Investment Funds	13
Withdrawals and Distributions from the Plan	17
Administration of the Plan	18
Amendment and Termination	18
Merger, Consolidation or Transfer	18
Federal Income Tax Consequences	19
Notice of Your Rights Concerning Employer Securities	20
Additional ERISA Considerations	21
Securities and Exchange Commission Reporting and Short-Swing Profit Liability	21
Financial Information Regarding Plan Assets	22
LEGAL OPINION	22

THE OFFERING

Securities Offered Peoples Federal Bancshares, Inc. is offering stock units in the Peoples Federal Savings Bank 401(k) Profit Sharing Plan (the “Plan”). The stock units represent indirect ownership of Peoples Federal Bancshares, Inc. common stock through the Peoples Federal Bancshares, Inc. Stock Fund being established under the Plan in connection with the stock offering. Given the purchase price of $10 per share in the stock offering, the Plan may acquire up to 338,880 shares of Peoples Federal Bancshares, Inc. common stock in the stock offering, based on the Plan’s asset value as of December 31, 2009, for the accounts of active employees (assuming that the Plan had been in effect on such date). Only employees of Peoples Federal Savings Bank may become participants in the Plan and only participants may purchase stock units in the Peoples Federal Bancshares, Inc. Stock Fund. Your investment in stock units in connection with the stock offering through the Peoples Federal Bancshares, Inc. Stock Fund is subject to the purchase priorities contained in the Plan of Conversion and Reorganization of Peoples Federal MHC.

Information with regard to the Plan is contained in this prospectus supplement and information with regard to the financial condition, results of operations and business of Peoples Federal Bancshares, Inc. is contained in the accompanying prospectus. The address of the principal executive office of Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank is 435 Market Street, Brighton, Massachusetts 02135. Our telephone number at this address is (617) 254-0707.

All elections to purchase stock units in the Peoples Federal Bancshares, Inc. Stock Fund in the stock offering under the Plan and any questions about this prospectus supplement should be addressed to Lee Ann Coté, Senior Vice-President, Retail Banking and Human Resources, Peoples Federal Savings Bank, 435 Market Street, Brighton, Massachusetts 02135; phone: (617) 254-0707; fax: (617) 254-0087; email: lcote@pfsb.com.

Election to Purchase Common Stock in the Offering: Priorities In connection with the conversion and stock offering, you may elect to transfer all or part of your account balances in the Plan to the Peoples Federal Bancshares, Inc. Stock Fund, to be used to purchase common stock of Peoples Federal Bancshares, Inc. issued in the stock offering. The trustee of the Peoples Federal Bancshares, Inc. Stock Fund will purchase common stock of Peoples Federal Bancshares, Inc. to be held as stock units in accordance with your

directions. However, such directions are subject to purchase limitations in the Plan of Conversion and Reorganization of Peoples Federal MHC.

The shares of common stock of Peoples Federal Bancshares, Inc. are being offered at $10 per share in a subscription offering and community offering. In the offering, the shares are being offered in the following descending order of priority:

Subscription Offering:

(1) First, to depositors of Peoples Federal Savings Bank with $50 or more as of December 31, 2008.

(2) Second, to Peoples Federal Savings Bank and Peoples Federal Bancshares, Inc.’s tax-qualified plans, including the employee stock ownership plan and the Plan.

(3) Third, to depositors of Peoples Federal Savings Bank with $50 or more on deposit as of March 31, 2010.

(4) Fourth, to depositors of Peoples Federal Savings Bank as of                     , 2010 and borrowers of Peoples Federal Savings as of January 19, 1983 whose borrowings as of that date remain outstanding as of                     , get fourth priority.

If there are shares remaining after all of the orders in the subscription offering have been filled, shares will be offered in a community offering with a preference to natural persons residing in the Massachusetts counties of Norfolk, Suffolk and Middlesex.

If you fall into subscription offering categories (1), (3), or (4) above, you have subscription rights to purchase Peoples Federal Bancshares, Inc. common stock in the subscription offering. You will separately receive offering materials in the mail, including a Stock Order Form. If you wish to purchase stock outside of the Plan, you must complete and submit the Stock Order Form and payment, using the reply envelope provided.

Additionally, or instead of placing an order outside of the Plan through a Stock Order Form, as a Plan participant, you may place an order for stock units through the Plan, using the enclosed Special Investment Election Form, to be completed and submitted in the manner described below.

No later than                    , the subscription offering period deadline, the amount that you elect to transfer from your existing account balances for the purchase of stock units representing an

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ownership interest in shares of Peoples Federal Bancshares, Inc. common stock in the stock offering will be removed from your existing accounts and transferred to an interest-bearing cash account in the Peoples Federal Bancshares, Inc. Stock Fund, pending the closing of the offering.

At the closing of the offering, and subject to a determination as to whether all or any portion of your order may be filled (based on your purchase priority and whether the stock offering is over-subscribed), the amount that you have transferred to purchase stock units will be placed in the Peoples Federal Bancshares, Inc. Stock Fund and allocated to your Plan account.

In the event the stock offering is oversubscribed, i.e. there are more orders for shares of common stock than shares available for sale in the stock offering, and the trustee is unable to use the full amount allocated by you to purchase shares of common stock in the stock offering, the amount that cannot be invested in shares of common stock, and any interest earned, will be reinvested in the other investment funds of the Plan in accordance with your then existing investment election (in proportion to your investment direction for future contributions). If you do not have an existing election as to the investment of future contributions, then such amounts will be transferred to and invested in the applicable Target Retirement Date Fund (based on your normal retirement date), pending your reinvestment in another fund of your choice.

If you choose not to direct the investment of your account balances towards the purchase of any shares in the offering, your account balances will remain in the investment funds of the Plan as previously directed by you.

Composition and Purpose of Stock Units The Peoples Federal Bancshares, Inc. Stock Fund will initially invest 100% in the common stock of Peoples Federal Bancshares, Inc. Accordingly, initially one stock unit will equal one share of common stock of Peoples Federal Bancshares, Inc. and a stock unit will be initially valued at $10.

After the closing of the stock offering, as Plan participants begin to trade their stock units or acquire new stock units, the Peoples Federal Bancshares, Inc. Stock Fund will maintain a cash component for liquidity purposes. Liquidity is required in order to facilitate daily transactions such as investment transfers or distributions from the Peoples Federal Bancshares, Inc. Stock Fund. Following the stock offering, each day, the stock unit value of the Peoples Federal Bancshares, Inc. Stock Fund will be determined by

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dividing the total market value of the Peoples Federal Bancshares, Inc. Stock Fund at the end of the day by the total number of units held in the Peoples Federal Bancshares, Inc. Stock Fund by all participants as of the previous day’s end. The change in stock unit value reflects the day’s change in stock price, any cash dividends accrued and the interest earned on the cash component of the Peoples Federal Bancshares, Inc. Stock Fund, less any investment management fees. The market value and unit holdings of your account in the Peoples Federal Bancshares, Inc. Stock Fund will be reported to you on your regular Plan participant statements.

Value of the Plan Assets As of December 31, 2009, the market value of the assets of the Pentegra Defined Contribution Plan for Financial Institutions attributable to active and former employees was approximately $3,521,929, of which approximately $3,388,817 is attributable to active employees. Only the portion attributable to active employees will be available to purchase Peoples Federal Bancshares, Inc. common stock in the offering. The Plan administrator informed each participant of the value of his or her account balance under the Pentegra Defined Contribution Plan for Financial Institutions as of December 31, 2009.

In Order to Participate in the Offering Enclosed is a Special Investment Election Form on which you can elect to transfer all or a portion of your account balance in the Plan to the Peoples Federal Bancshares, Inc. Stock Fund for the purchase of stock units at $10 each in the offering. If you wish to use all or part of your account balance in the Plan to purchase common stock issued in the offering (which will be designated as “stock units” in the Plan), you should indicate that decision on the Special Investment Election Form. If you do not wish to purchase stock units in the offering through the Plan, you must still fill out the Special Investment Election Form and check the box for “No Election” in Section D of the form and return the form to Lee Ann Coté, Senior Vice-President, Retail Banking and Human Resources, Peoples Federal Savings Bank, as indicated below.

How to Order You can elect to transfer in whole percentages all or a portion of your account balance in the Plan to the Peoples Federal Bancshares, Inc. Stock Fund for the purchase of stock units. This is done by following the procedures described below. Please note the following stipulations concerning this election:

• You can direct all or a portion of your current account balance to the Peoples Federal Bancshares, Inc. Stock Fund.

• Your election is subject to a minimum purchase of 25 shares which equates to $250.00.

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• Your election is subject to a maximum purchase of 25,000 shares which equates to $250,000.

• The election period opens                     , 2010 and closes                     , 2010.

• After your election is accepted, it will be rounded down to the closest dollar amount divisible by $10.00. The difference will remain in the Peoples Federal Bancshares, Inc. Stock Fund until the final transaction has been completed. At that time, the common shares purchased based on your election will be transferred to the Peoples Federal Bancshares, Inc. Stock Fund and any remaining funds will be transferred out of the Peoples Federal Bancshares, Inc. Stock Fund for investment in other funds under the Plan based on your election currently on file for future contributions. If you do not have an election on file for future contributions, any remaining funds will be transferred to the applicable Target Retirement Date Fund (based on your normal retirement date) to be reinvested by you in your discretion.

• You will continue to have the ability to transfer amounts not invested in the Peoples Federal Bancshares, Inc. Stock Fund among all the other investment funds on a daily basis.

• The amount transferred to the Peoples Federal Bancshares, Inc. Stock Fund needs to be segregated and held until the offering closes. Therefore, this money is not available for distributions, loans or withdrawals until the transaction is completed, which is after the closing of the subscription offering period.

You are allowed only one election to transfer funds to the Peoples Federal Bancshares, Inc. Stock Fund. Follow these steps to make your election to use all or part of your account balance in the Plan to purchase shares in the stock offering:

• Use the enclosed Special Investment Election Form to transfer all or a portion of your account balance to the Peoples Federal Bancshares, Inc. Stock Fund to purchase stock in the offering. Your interests in the fund will be represented by stock units. Indicate next to each fund in which you are invested, the percentage of that fund you wish to transfer to the Peoples Federal Bancshares, Inc. Stock Fund.

• Please print your name and social security number on the Special Investment Election Form.

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• Please complete Section D of the Special Investment Election Form– Purchaser Information - indicating your individual purchase priority and provide the information requested on your accounts in Peoples Federal Savings Bank.

• Sign and date the Special Investment Election Form and return it by hand delivery or fax to the person designated immediately below.

Order Deadline If you wish to purchase common stock with your Plan account balances, your Special Investment Election Form must be received by Lee Ann Coté, Senior Vice-President, Retail Banking and Human Resources, Peoples Federal Savings Bank, 435 Market Street, Brighton, Massachusetts 02135, telephone number (617) 254-0707; fax (617) 254-0087; no later than     :00 p.m. Massachusetts time, on                     [day],                     , 2010. To allow for processing, this deadline is prior to the subscription offering period deadline (which is                     , 2010). If you have any questions with respect to the Special Investment Election Form, please contact Lee Ann Coté.

Irrevocability of Transfer Direction You may not revoke your Special Investment Election Form once it has been delivered to Lee Ann Coté. You will, however, continue to have the ability to transfer amounts not directed towards the purchase of stock in the offering among all of the other investment funds on a daily basis.

Other Purchases in Your Account During the Offering Period Whether or not you choose to purchase stock in the offering through the Plan, you will at all times have complete access to those amounts in your account that you do not apply towards purchases in the offering. For example, you will be able to purchase other funds within the Plan with that portion of your account balance that you do not apply towards purchases in the offering during the offering period. Such purchases will be made at the prevailing market price in the same manner as you make such purchases now, i.e., through telephone transfers and internet access to your account. You can only purchase stock units in the offering through the Plan by returning your Special Investment Election Form to Lee Ann Coté, Senior Vice-President, Retail Banking and Human Resources, Peoples Federal Savings Bank, by the due date. You cannot purchase stock units in the offering by means of telephone transfers or the internet. That portion of your Plan account balance that you elect to apply towards the purchase of stock units in the offering will be irrevocably committed to such purchase.

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Direction to Purchase Peoples Federal Bancshares, Inc. Stock Fund Units after the Offering After the offering, you will again have complete access to any amount that you directed towards the purchase of shares in the offering. For example, after the offering closes, you may sell any shares that you purchased in the offering. Special restrictions may apply to transfers directed to and from the Peoples Federal Bancshares, Inc. Stock Fund by the participants who are subject to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, relating to the purchase and sale of securities by officers, directors and principal shareholders of Peoples Federal Bancshares, Inc.

Purchase Price of Common Stock in the Offering The trustee will pay $10 per share of common stock in the stock offering, which will be the same price paid by all other persons for a share of common stock in the stock offering. No sales commision will be charged for common stock purchased in the stock offering.

After the offering, the trustee will acquire common stock in open market transactions at the prevailing price. The trustee will pay transaction fees, if any, associated with the purchase, sale or transfer of the common stock after the offering.

Nature of a Participant’s Interest in the Common Stock The common stock acquired by the trustee will be denominated in stock units in trust for the participants of the Plan. Stock units acquired by the trustee at your direction will be allocated to your account.

Voting Rights of Common Stock The Plan provides that you may direct the trustee how to vote any shares of Peoples Federal Bancshares, Inc. common stock held by the Peoples Federal Bancshares, Inc. Stock Fund, represented by the stock units credited to your account. If the trustee does not receive your voting instructions, the Plan administrator will exercise these rights as it determines in its discretion and will direct the trustee accordingly. All voting instructions will be kept confidential.

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DESCRIPTION OF THE PLAN

Introduction

Peoples Federal Savings Bank adopted the Pentegra Defined Contribution Plan for Financial Institutions, a multiple employer plan, on May 1, 1998. In connection with the conversion of Peoples Federal MHC from the mutual to stock form of organization as Peoples Federal Bancshares, Inc., Peoples Federal Savings Bank desired to permit employees who participated in the Pentegra Defined Contribution Plan for Financial Institutions and who have the ability to direct the investment of their account balances to purchase common stock of Peoples Federal Bancshares, Inc. in their accounts in the plan. In order to do so, however, Peoples Federal Savings Bank was required to transfer the account balances of the Peoples Federal Savings Bank employees who participated in the plan from the Pentegra Defined Contribution Plan for Financial Institutions to a single employer plan that Peoples Federal Savings Bank established. However, the Pentegra Defined Contribution Plan for Financial Institutions does not permit the account balances of former employees to be transferred from that plan to the new single employer plan. Accordingly, no account of former employees has been transferred to the Plan.

The Plan was adopted by Peoples Federal Savings Bank, effective as of May 1, 2010. The Plan is a single-employer, tax-qualified plan with a cash or deferred compensation feature established in accordance with the requirements under Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”).

Peoples Federal Savings Bank intends that the Plan, in operation, will comply with the requirements under Section 401(a) and Section 401(k) of the Code. Peoples Federal Savings Bank will adopt any amendments to the Plan that may be necessary to ensure the continuing qualified status of the Plan under the Code and applicable Treasury Regulations.

Employee Retirement Income Security Act of 1974 (“ERISA”). The Plan is an “individual account plan” other than a “money purchase pension plan” within the meaning of ERISA. As such, the Plan is subject to all of the provisions of Title I (Protection of Employee Benefit Rights) and Title II (Amendments to the Code Relating to Retirement Plans) of ERISA, except to the funding requirements contained in Part 3 of Title I of ERISA, which by their terms do not apply to an individual account plan (other than a money purchase plan). The Plan is not subject to Title IV (Plan Termination Insurance) of ERISA. The funding requirements contained in Title IV of ERISA are not applicable to participants or beneficiaries under the Plan.

Reference to Full Text of Plan. The following portions of this prospectus supplement summarize certain provisions of the Plan. They are not complete and are qualified in their entirety by the full text of the Plan. Copies of the Plan are available to all employees by filing a request with the Plan Administrator c/o Peoples Federal Savings Bank, Attn: Lee Ann Coté, Senior Vice-President, Retail Banking and Human Resources, Peoples Federal Savings Bank; telephone number: (617) 254-0707; fax: (617) 254-0087; email: lcote@pfsb.com. You are urged to read carefully the full text of the Plan.

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Eligibility and Participation

As an employee of Peoples Federal Savings Bank, you are eligible to become a participant in the Plan on the first day of the month coinciding with or next following the date you complete one year of employment with Peoples Federal Savings Bank and reach age 21. In order for you to complete one year of employment, you must complete at least 1,000 hours of employment in a 12-consecutive-month period. The initial 12 consecutive month period is measured from your date of employment. If you do not complete at least 1,000 hours of employment in such period, subsequent 12-month periods are measured. The Plan year is January 1 to December 31 (the “Plan Year”).

As of December 31, 2009, there were approximately 60 active employees whose account balances in the Pentegra Defined Contribution Plan for Financial Institutions have been transferred to the Plan.

Contributions under the Plan

Elective Deferrals. You are permitted to defer on a pre-tax basis any whole percentage of your Plan Salary, from 1% up to 100%, subject to certain restrictions imposed by the Code, and to have that amount contributed to the Plan on your behalf. You may also designate your elective contributions to a Plan account that accepts Roth after-tax contributions. For purposes of the Plan, “Plan Salary” means your all income received for services performed for your Employer as defined by reference to Code Section 415 Compensation. In addition, any pre-tax contributions that you make to a 401(k) plan and pre-tax contributions to a Section 125 cafeteria plan and qualified transportation fringe benefits are included in Plan Salary. In 2010, the Plan Salary of each participant taken into account under the Plan is limited to $245,000. (Limits established by the Internal Revenue Service are subject to increase pursuant to an annual cost-of-living adjustment, as permitted by the Code). You may elect to modify the amount contributed to the Plan by filing a new elective deferral agreement with the Plan administrator at the beginning of each contribution reporting period.

Employer Matching Contributions. Peoples Federal Savings Bank will make matching contributions to the Plan equal to 50% of your contributions, up to the first 6% of your Plan Salary.

Limitations on Contributions

Limitations on Employee Salary Deferrals. For the Plan Year beginning January 1, 2010, the amount of your before-tax contributions and, if applicable, Roth after-tax contributions may not exceed $16,500 per calendar year. Contributions in excess of this limit are known as excess deferrals. If you defer amounts in excess of this limitation, your gross income for federal income tax purposes will include the excess in the year of the deferral. In addition, unless the excess deferral is distributed before April 15 of the following year, it will be taxed again in the year distributed. Income on the excess deferral distributed by April 15 of the immediately succeeding year will be treated, for federal income tax purposes, as earned and received by you in the tax year in which the contribution is made.

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Catch-up Contributions. If you have made the maximum amount of regular before-tax contributions allowed by the Plan or other legal limits and you have attained at least age 50 (or will reach age 50 prior to the end of the Plan Year), you are also eligible to make an additional catch-up contribution. You may authorize your employer to withhold a specified dollar amount of your compensation for this purposes. For 2010, the maximum catch-up contribution is $5,500.

Rollovers. You may make a rollover contribution of an eligible rollover distribution from any other qualified retirement plan or an individual retirement arrangement (IRA). These funds will be maintained in a separate rollover account in which you will have a nonforfeitable vested interest.

Benefits under the Plan

Vesting. At all times, you have a fully vested, nonforfeitable interest in your elective deferral contributions. You will be 100% vested in the employer matching contributions and in any earnings related thereto after you complete three years of employment. You will also become 100% vested in the employer matching contributions and earnings thereon credited to your account in the event you die while employed with Peoples Federal Savings Bank. If you terminate employment prior to completing three years of employment, you will forfeit all of the employer matching contributions and earnings thereon credited to your account. However, if you are reemployed by Peoples Federal Savings Bank prior to incurring five consecutive one-year breaks in service, measured from your date of termination, you are eligible to have the amount of the forfeiture and your corresponding vesting service restored to your account.

Withdrawals. While you are working, you may withdraw all or part of your vested account balance, subject to certain limitations. Upon termination of employment, you may leave your account with the Plan until April 1 of the calendar year following the calendar year in which you attain age 70  ¹/2, except to the extent your vested account balance as of the date of your termination is less than $1,000, in which case your interest in the Plan will be cashed out and payment sent to you. You may make one withdrawal per account each calendar year. If your total vested account is $1,000 or more, you may elect, in lieu of a lump sum payment, to be paid in annual installments with the right to take in a lump sum the vested balance of your account at any time during such payment period. If you become disabled, you will be entitled to the same withdrawal rights as if you had terminated employment.

Death. If you die before the value of your account is paid to you, your beneficiary may receive the full value of your account or may defer payment within certain limits. If you are married, your spouse will be your beneficiary unless your spouse consents in writing to the designation of a different beneficiary. Payment will be made in a lump sum, unless the payment would exceed $1,000 and you had elected that the payment be made in annual installments over a period not to exceed 5 years (10 years if your spouse is your beneficiary). If such an election is not in effect at the time of your death, your beneficiary may elect to receive the benefit in annual installments over a period not to exceed 5 years (10 years if your spouse is your beneficiary) or make withdrawals as often as once per year, except that any balance remaining must be withdrawn by the 5^th anniversary (10^th anniversary if your spouse is your beneficiary) of your death.

Loans. You may take a loan from your account and pay your account back with interest.

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Investment of Contributions and Account Balances

All amounts credited to your accounts under the Plan are held in the Plan trust (the “Trust”), which is administered by the trustee appointed by Peoples Federal Savings Bank’s Board of Directors. Commencing May 1, 2010, when we transferred from the Pentegra Defined Contribution Plan for Financial Institutions to a single employer plan, you were given the opportunity to direct the investment of your account into one or more of the following funds:

S&P 500 Index Fund

TIPS Index Fund

S&P MidCap Fund

Russell 2000 Index Fund

International Fund

Passive Bond Market Index Fund

NASDAQ 100 Index Fund

SSgA Target Retirement 2010 Fund

SSgA Target Retirement 2015 Fund

SSgA Target Retirement 2020 Fund

SSgA Target Retirement 2025 Fund

SSgA Target Retirement 2030 Fund

SSgA Target Retirement 2035 Fund

SSgA Target Retirement 2040 Fund

SSgA Target Retirement 2045 Fund

SSgA Target Retirement 2050 Fund

SSgA Target Retirement Income Fund

Pentegra Stable Value Fund

Short Term Investment Fund

Government Short Term Investment Fund

REIT Index Fund

Vanguard Growth Index Fund

Vanguard Value Index Fund

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Performance History

The following table provides performance data with respect to the above investment funds as of December 31, 2009, for average annual total returns and for year-to-date returns as of December 31, 2009:

Fund Name	YTD Returns as of December 31, 2009		Average Annual Total Returns as of December 31, 2009
			1 Year		3 Year		5 Year		10 Year
S&P 500 Index Fund	26.71	%	26.71	%	-5.53	%	0.48	%	-0.90	%
TIPS Index Fund	11.29	%	11.29	%	6.61	%	4.59	%	n/a
S&P MidCap Fund	37.25	%	37.25	%	-1.79	%	3.33	%	6.44	%
Nasdaq 100 Index Fund	54.81	%	54.81	%	2.37	%	3.07	%	-6.48	%
Russell 2000 Index Fund	26.87	%	26.87	%	-6.10	%	0.40	%	3.30	%
International Fund	31.61	%	31.61	%	n/a		n/a		n/a
Passive Bond Market Index Fund	6.39	%	6.39	%	6.33	%	5.15	%	6.46	%
SSgA Target Retirement 2010 Fund	n/a		n/a		n/a		n/a		n/a
SSgA Target Retirement 2015 Fund	18.15	%	18.15	%	0.48	%	n/a		n/a
SSgA Target Retirement 2020 Fund	n/a		n/a		n/a		n/a		n/a
SSgA Target Retirement 2025 Fund	21.80	%	21.80	%	-1.91	%	n/a		n/a
SSgA Target Retirement 2030 Fund	n/a		n/a		n/a		n/a		n/a
SSgA Target Retirement 2035 Fund	26.92	%	26.92	%	-3.15	%	n/a		n/a
SSgA Target Retirement 2040 Fund	n/a		n/a		n/a		n/a		n/a
SSgA Target Retirement 2045 Fund	27.41	%	27.41	%	-2.81	%	n/a		n/a
SSgA Target Retirement 2050 Fund	n/a		n/a		n/a		n/a		n/a
SSgA Target Retirement Income Fund	14.75	%	14.75	%	2.07	%	n/a		n/a
Pentegra Stable Value Fund	2.78	%	2.78	%	3.55	%	3.92	%	4.72	%
Short Term Investment Fund	0.59	%	0.59	%	2.86	%	3.41	%	3.27	%
Government Short Term Investment Fund	0.31	%	0.31	%	2.61	%	3.26	%	3.15	%
REIT Index Fund	27.58	%	27.58	%	-13.68	%	-0.31	%	n/a
Vanguard Growth Index Fund	36.66	%	36.66	%	-1.59	%	1.86	%	-2.53	%
Vanguard Value Index Fund	19.88	%	19.88	%	-8.29	%	0.27	%	1.45	%

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Description of the Investment Funds

The following is a description of each of the funds as of December 31, 2009:

S&P 500 Index Fund. The fund seeks to replicate the returns and characteristics of the S&P 500 Index. The fund seeks to maintain the returns of the index by investing in a portfolio that replicates the index by owning securities in the same capitalization weights as they appear in the index. Replication seeks low turnover, accurate tracking, and low costs. The fund’s approach is to buy and hold securities, trading only when there is a change to the composition of the index or when cash flow activity occurs in the fund. The fund uses a hierarchy of trading alternatives when appropriate – internal crossing, external crossing, futures, and open market trades – to attempt to capitalize on every opportunity to reduce the fund’s transaction costs. To provide 100% equity exposure, the base fund maintains a small (generally less than 5%) position in unleveraged S&P 500 stock index futures contracts. Futures help enable better tracking of index returns and allow for greater liquidity.

TIPS Index Fund. The fund seeks to match the total rate of return of the Barclays Capital U.S. Inflation Notes Index during a calendar year. The fund seeks to match the return of the index by investing in a portfolio of U.S. Treasury inflation protected securities. The duration of the fund is managed to that of the benchmark at all times, as are the sector and security weights. Overall sector and security weightings are also matched to the index. The fund is one of full replication, investing in a portfolio that owns the market-value weight of each security in the index.

S&P MidCap Fund. The fund seeks to replicate the returns and characteristics of the S&P MidCap 400 Index. The fund seeks to match the return of the index by investing in a portfolio that owns units of one or more portfolios that hold securities of the index, in the same capitalization weights as they appear in the index. Replication seeks low turnover, accurate tracking and low costs. The fund’s approach is to buy and hold securities, trading only when there is a change to the composition of the index or when cash flow activity occurs. We use a hierarchy of trading alternatives when appropriate – internal crossing, external crossing, futures, and open market trades – to attempt to capitalize on every opportunity to reduce transaction costs. To provide 100% equity exposure, the base fund maintains a small (generally less than 5%) position in S&P MidCap 400 stock index futures contract. Futures help enable better tracking of index returns and allow for greater liquidity.

Nasdaq 100 Index Fund. The fund seeks to match the performance of the NASDAQ 100 Index. The fund invests in all of the stocks in the NASDAQ 100 Index in proportion to their weighting in the Index. The Fund may also hold 2-5% of its value in futures contracts (an agreement to buy or sell a specific security by a specific date at an agreed upon price). The strategy of investing in the same stocks as the Index minimizes the need for trading and therefore results in lower expenses.

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Russell 2000 Index Fund. The fund seeks to replicate the returns and characteristics of the Russell 2000 Index. The fund seeks to match the return of the index by investing in a portfolio that holds the securities of the index. Replication seeks low turnover, accurate tracking and low costs. The fund’s approach is to buy and hold securities, trading only when there is a change to the composition of the index or when cash flow activity occurs. We use a hierarchy of trading alternatives when appropriate – internal crossing, external crossing, futures, and open market trades – to attempt to capitalize on every opportunity to reduce transaction costs. To provide 100% exposure to the equity market and help increase tracking accuracy, the base fund may hold Russell 2000 Index futures contracts (no more than 5% of the holdings are futures). Futures help enable better tracking of index returns and allow for greater liquidity.

International Fund. The fund seeks to match the performance of the Morgan Stanley Capital International, Europe, Australia, Far East (MSCI EAFE) Index while providing daily liquidity. The fund typically invests in all the stocks in the MSCI EAFE Index in proportion to their weighting in the Index. The strategy of investing in the same stocks as the Index minimizes the need for trading and therefore results in lower expenses.

Passive Bond Market Index Fund. The fund seeks to match the returns of the Barclays Capital U.S. Aggregate Bond Index. The fund invests primarily in government, corporate, mortgage-backed and asset-backed securities. The fund invests in a well-diversified portfolio that is representative of the broad domestic bond market.

SSgA Target Retirement Funds (including SSgA Target Retirement Income Fund, SSgA Target Retirement 2010 Fund, SSgA Target Retirement 2015 Fund, SSgA Target Retirement 2020 Fund, SSgA Target Retirement 2025, Fund SSgA Target Retirement 2030 Fund, SSgA Target Retirement 2035, SSgA Target Retirement 2040, Fund Fund SSgA Target Retirement 2045 Fund, and SSgA Target Retirement 2050 Fund). These funds offer complete, low cost investment strategies with asset allocations which become more conservative as you near retirement and are designed for people who want a professional to decide what types of investments are best for their selected retirement date. You simply select the fund with a date closest to when you expect to retire and invest accordingly. The funds seek to match, as closely as possible, the performance of the corresponding SSgA Custom Index, over the long term. Each fund seeks to achieve its objective by investing in a set of underlying SSgA collective trust funds representing various asset classes. Each fund (other than the SSgA Target Retirement Income Fund) is managed to a specific retirement year (target date) included in its name.

Over time, the allocation to asset classes and funds change according to a predetermined “glide path.” (The glide path represents the shifting of asset classes over time and does not apply to the Income Fund). Each fund’s asset allocation will become more conservative as it approaches its target retirement date. This reflects the need for reduced investment risks as retirement approaches and the need for lower volatility of a portfolio, which may be a primary source of income after retirement. The allocations reflected in the glide path do not reflect tactical decisions made by SSgA to overweight or underweight a particular asset class based on its market outlook but rather management of each fund’s strategic allocation according to its glide path and applicable benchmark. Each fund attempts to closely match the characteristics and returns or its custom benchmark as opposed to any attempts to outperform this benchmark.

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Once a fund reaches its target retirement date, it will begin a five-year transition period to the SSgA Target Retirement Income Fund resulting at the end of that five-year period in an allocation to stocks that will remain fixed at approximately 35% of assets. The remainder of the fund will be invested in fixed-income securities.

Pentegra Stable Value Fund. The fund seeks to preserve the principal amount of your contributions while maintaining a rate of return comparable to other fixed income instruments. The fund invests in investment contracts issued by insurance companies, banks, and other financial institutions, as well as enhanced short-term investment products. Each issuer must meet the credit quality criteria in order to be approved by the investment manager. The fund is managed to a weighted average maturity of approximately 1.5-4.0 years and maintains an average AA credit quality.

Short Term Investment Fund. The fund seeks to maximize current income while preserving capital and liquidity through investing in a diversified portfolio of short-term securities. The fund’s yield reflects short-term interest rates. The fund seeks to maintain a diversified portfolio of short-term securities by investing in high-quality money market securities and other short-term debt investments. Most of the investments in the fund may have a range of maturity from overnight to 90 days; however, 20% of the value of the fund may be invested in assets with a maturity date in excess of 90 days, but not to exceed 13 months. All securities are required to meet strict guidelines for credit quality and must be rated at least A1 by Standard & Poor’s and P1 by Moody’s Investors Service.

Government Short Term Investment Fund. This fund seeks to provide the safety of principal and current income offered by short-term U.S. government securities. The fund seeks to preserve principal and offer liquidity by investing only in short-term issues of the U.S. Treasury and its agencies. The fund’s investments have a short time to maturity, with no more than 20% of the fund invested beyond 90 days. No security may have a maturity of more than 13 months.

REIT Index Fund. The fund invests primarily in equity shares of real estate investment trusts (REITs). The fund typically invests in all securities in the Dow Jones/Wilshire REIT Index in proportion to their weighting in the Index. The fund seeks to match the performance of the Dow Jones/Wilshire REIT Index while providing daily liquidity. As such we seek to maintain sector and security weightings that closely match the Index. The Dow Jones/Wilshire REIT Index is comprised of 90 publicly traded REITs. To be included in the Index, a company must be an equity owner and operator of commercial (or residential) real estate and must generate at least 75% of its revenue from such assets. The REITs invest in loans secured by real estate and invest directly in real estate properties such as apartments, office buildings, and shopping malls. REITS generate income from rentals or lease payments and offer the potential for growth from property appreciation and the potential for capital gains from the sale of properties.

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Vanguard Growth Index. The fund seeks to track the investment performance of the MSCI US Prime Market Growth Index, an unmanaged benchmark representing large U.S. firms. Using full replication, the portfolio holds all stocks in the same capitalization weighing as the index. The experience and stability of Vanguard’s Quantitative Equity Group have permitted continuous refinement of techniques for reducing tracking error. The group uses proprietary software to implement trading decisions that accommodate cash flow and maintain close correlation with index characteristics. Vanguard’s refined indexing process, combined with low management fees and efficient trading, has provided tight tracking net of expenses.

Vanguard Value Index. The fund seeks to track the investment performance of the MSCI US Prime Market Value Index, an unmanaged benchmark representing U.S. large-capitalization value stocks. Using full replication, the portfolio holds all stocks in the same capitalization weighing as the index. The experience and stability of Vanguard’s Quantitative Equity Group have permitted continuous refinement of techniques for reducing tracking error. The group uses proprietary software to implement trading decisions that accommodate cash flow and maintain close correlation with index characteristics. Vanguard’s refined indexing process, combined with low management fees and efficient trading, has provided tight tracking net of expenses.

An investment in any of the funds listed above is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. As with any mutual fund investment, there is always a risk that you may lose money on your investment in any of the funds listed above.

Peoples Federal Bancshares, Inc. Stock Fund. In connection with the stock offering, the Plan now offers the Peoples Federal Bancshares, Inc. Stock Fund as an additional choice to the investment options described above. Peoples Federal Bancshares, Inc. Stock Fund invests primarily in the shares of common stock of Peoples Federal Bancshares, Inc. In connection with the stock offering, you may, in the manner described earlier, direct the trustee to invest up to 100% of your Plan account in Peoples Federal Bancshares, Inc. Stock Fund as a one-time special election. Subsequent to the stock offering, you may elect to invest all or a portion of your elective deferral contributions or matching contributions in Peoples Federal Bancshares, Inc. Stock Fund; you may also elect to transfer into Peoples Federal Bancshares, Inc. Stock Fund all or a portion of your accounts currently invested in other funds under the Plan.

Peoples Federal Bancshares, Inc. Stock Fund consists primarily of investments in the shares of common stock of Peoples Federal Bancshares, Inc. After the stock offering, the trustee of the Plan will use all amounts held by it in Peoples Federal Bancshares, Inc. Stock Fund to purchase additional shares of common stock of Peoples Federal Bancshares, Inc.

As of the date of this prospectus supplement, there is no established market for Peoples Federal Bancshares, Inc. common stock. Accordingly, there is no record of the historical performance of Peoples Federal Bancshares, Inc. Stock Fund. Performance of Peoples Federal Bancshares, Inc. Stock Fund depends on a number of factors, including the financial condition and profitability of Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank and market conditions for shares of Peoples Federal Bancshares, Inc. common stock generally.

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Investments in Peoples Federal Bancshares, Inc. Stock Fund involve special risks common to investments in the shares of common stock of Peoples Federal Bancshares, Inc.

For a discussion of material risks you should consider, see “Risk Factors” section of the attached prospectus and the section of the Prospectus Supplement called “Notice of Your Rights Concerning Employer Securities” (see below).

Withdrawals and Distributions from the Plan

Applicable federal law requires the Plan to impose substantial restrictions on the right of a Plan participant to withdraw amounts held for his or her benefit under the Plan prior to the participant’s termination of employment with Peoples Federal Savings Bank. A substantial federal tax penalty may also be imposed on withdrawals made prior to the participant’s attainment of age 59  ¹/2, regardless of whether such a withdrawal occurs during his or her employment with Peoples Federal Savings Bank or after termination of employment.

Withdrawal from your Account while Employed. While you are employed, you may not make more than one withdrawal from your 401(k) account in a calendar year (including any account balances, if applicable, attributable to Roth after-tax contributions). A withdrawal from your 401(k) account, including Roth after-tax source accumulation) prior to age 59  ¹/2 or prior to termination of employment can only be made on account of hardship.

Hardship. In the event you incur a financial hardship, you may request a withdrawal from the following contribution types:. Employee Pre-Tax contributions, Employee After-Tax contributions, Employee Roth after-tax contributions, Rollover contributions, Employer Matching contributions.

In general, employer contributions credited on your behalf will not be available for in-service withdrawal until such employer contributions have been invested in the Plan for at least two years or you have been a participant in the Plan for at least five years or have reached age 59  ¹/2.

Loan. You may request a loan from your account pursuant to the procedures established in the Plan.

Distribution upon Termination of Employment. You may make withdrawals from your account at any time after you terminate employment. In the event your vested account balance as of the date of your termination is less than $1,000, your interest in the Plan will be cashed out and payment sent to you. If your total vested account equals or exceeds $1,000, you may elect, in lieu of a lump sum payment, to be paid in annual installments with the right to take in a lump sum the vested balance of your account at any time during such payment period.

Disability. In the event you become disabled, you will be entitled to the same withdrawal rights as if you had terminated your employment.

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Death. In the event of your death, the value of your entire account will be payable to your beneficiary. Payment will be made in a lump sum unless the amount exceeds $500, in which event payments must commence by December 31 of the calendar year immediately following the calendar year in which you died or, if your spouse is your beneficiary, by December 31 of the calendar year in which you would have reached age 70  ¹/2, if later.

Administration of the Plan

The Trustee and Custodian. The trustee of the Plan is Pentegra Trust Company. Pentegra Trust Company serves as trustee for all the investments funds under the Plan. Reliance Trust Company is the custodian of the Peoples Federal Bancshares, Inc. Stock Fund.

Plan Administrator. Pursuant to the terms of the Plan, the Plan is administered by the Plan administrator. The address of the Plan administrator is Peoples Federal Savings Bank, Attention: Lee Ann Coté, Senior Vice-President, Retail Banking and Human Resources, Peoples Federal Savings Bank, is 435 Market Street, Brighton, Massachusetts 02135, telephone number (617) 254-0707. The Plan administrator is responsible for the administration of the Plan, interpretation of the provisions of the Plan, prescribing procedures for filing applications for benefits, preparation and distribution of information explaining the Plan, maintenance of Plan records, books of account and all other data necessary for the proper administration of the Plan, preparation and filing of all returns and reports relating to the Plan which are required to be filed with the U.S. Department of Labor and the Internal Revenue Service, and for all disclosures required to be made to participants, beneficiaries and others under Sections 104 and 105 of ERISA.

Reports to Plan Participants. The Plan administrator will furnish you a statement at least quarterly showing the balance in your account as of the end of that period, the amount of contributions allocated to your account for that period, and any adjustments to your account to reflect earnings or losses (if any).

Amendment and Termination

It is the intention of Peoples Federal Savings Bank to continue the Plan indefinitely. Nevertheless, Peoples Federal Savings Bank may terminate the Plan at any time. If the Plan is terminated in whole or in part, then regardless of other provisions in the Plan, you will have a fully vested interest in your accounts. Peoples Federal Savings Bank reserves the right to make any amendment or amendments to the Plan which do not cause any part of the trust to be used for, or diverted to, any purpose other than the exclusive benefit of participants or their beneficiaries; provided, however, that Peoples Federal Savings Bank may make any amendment it determines necessary or desirable, with or without retroactive effect, to comply with ERISA.

Merger, Consolidation or Transfer

In the event of the merger or consolidation of the Plan with another plan, or the transfer of the trust assets to another plan, the Plan requires that you would, if either the Plan or the other

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plan terminates, receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit you would have been entitled to receive immediately before the merger, consolidation or transfer, if the Plan had then terminated.

Federal Income Tax Consequences

The following is a brief summary of the material federal income tax aspects of the Plan. You should not rely on this summary as a complete or definitive description of the material federal income tax consequences relating to the Plan. Statutory provisions change, as do their interpretations, and their application may vary in individual circumstances. Finally, the consequences under applicable state and local income tax laws may not be the same as under the federal income tax laws. Please consult your tax advisor with respect to any distribution from the Plan and transactions involving the Plan.

As a “tax-qualified retirement plan,” the Code affords the Plan special tax treatment, including:

(1) the sponsoring employer is allowed an immediate tax deduction for the amount contributed to the Plan each year;

(2) participants pay no current income tax on amounts contributed by the employer on their behalf; and

(3) earnings of the Plan are tax-deferred, thereby permitting the tax-free accumulation of income and gains on investments.

Peoples Federal Savings Bank will administer the Plan to comply with the requirements of the Code as of the applicable effective date of any change in the law.

Lump-Sum Distribution. A distribution from the Plan to a participant or the beneficiary of a participant will qualify as a lump-sum distribution if it is made within one taxable year, on account of the participant’s death, disability or separation from service, or after the participant attains age 59  ¹/2, and consists of the balance credited to participants under the Plan and all other profit sharing plans (and in some cases all other stock bonus plans), if any, maintained by Peoples Federal Savings Bank. The portion of any lump-sum distribution required to be included in your taxable income for federal income tax purposes consists of the entire amount of the lump-sum distribution, less the amount of after-tax contributions, if any, you have made to this Plan and any other profit sharing plans maintained by Peoples Federal Savings Bank, which is included in the distribution.

Peoples Federal Bancshares, Inc. Common Stock Included in Lump-Sum Distribution. If a lump-sum distribution includes Peoples Federal Bancshares, Inc. common stock, the distribution generally will be taxed in the manner described above, except that the total taxable amount may be reduced by the amount of any net unrealized appreciation with respect to Peoples Federal Bancshares, Inc. common stock, that is, the excess of the value of Peoples Federal Bancshares, Inc. common stock at the time of the distribution over its cost or other basis of the

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securities to the trust. The tax basis of Peoples Federal Bancshares, Inc. common stock, for purposes of computing gain or loss on its subsequent sale, equals the value of Peoples Federal Bancshares, Inc. common stock at the time of distribution, less the amount of net unrealized appreciation. Any gain on a subsequent sale or other taxable disposition of Peoples Federal Bancshares, Inc. common stock, to the extent of the amount of net unrealized appreciation at the time of distribution, will constitute long-term capital gain, regardless of the holding period of Peoples Federal Bancshares, Inc. common stock. Any gain on a subsequent sale or other taxable disposition of Peoples Federal Bancshares, Inc. common stock, in excess of the amount of net unrealized appreciation at the time of distribution, will be considered long-term capital gain. The recipient of a distribution may elect to include the amount of any net unrealized appreciation in the total taxable amount of the distribution, to the extent allowed by regulations to be issued by the Internal Revenue Service.

Distributions: Rollovers and Direct Transfers to Another Qualified Plan or to an IRA. You may roll over virtually all distributions from the Plan to another qualified plan or to an individual retirement account (IRA) in accordance with the terms of the other plan or account.

Notice of Your Rights Concerning Employer Securities

There has been an important change in Federal law that provides specific rights concerning investments in employer securities, such as Peoples Federal Bancshares, Inc. common stock. Because you may in the future have investments in Peoples Federal Bancshares, Inc. Stock Fund under the Plan, you should take the time to read the following information carefully.

Your Rights Concerning Employer Securities. The Plan must allow you to elect to move any portion of your account that is invested in the Peoples Federal Bancshares, Inc. Stock Fund from that investment into other investment alternatives under the Plan. You may contact the Plan Administrator shown above for specific information regarding this new right, including how to make this election. In deciding whether to exercise this right, you will want to give careful consideration to the information below that describes the importance of diversification. All of the investment options under the Plan are available to you if you decide to diversify out of the Peoples Federal Bancshares, Inc. Stock Fund.

The Importance of Diversifying Your Retirement Savings. To help achieve long-term retirement security, you should give careful consideration to the benefits of a well-balanced and diversified investment portfolio. Spreading your assets among different types of investments can help you achieve a favorable rate of return, while minimizing your overall risk of losing money. This is because market or other economic conditions that cause one category of assets, or one particular security, to perform very well often cause another asset category, or another particular security, to perform poorly. If you invest more than 20% of your retirement savings in any one company or industry, your savings may not be properly diversified. Although diversification is not a guarantee against loss, it is an effective strategy to help you manage investment risk.

In deciding how to invest your retirement savings, you should take into account all of your assets, including any retirement savings outside of the Plan. No single approach is right for everyone because, among other factors, individuals have different financial goals, different time

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horizons for meeting their goals, and different tolerance for risk. Therefore, you should carefully consider the rights described here and how these rights affect the amount of money that you invest in Peoples Federal Bancshares, Inc. common stock through the Plan.

It is also important to periodically review your investment portfolio, your investment objectives, and the investment options under the Plan to help ensure that your retirement savings will meet your retirement goals.

Additional ERISA Considerations

As noted above, the Plan is subject to certain provisions of ERISA, including special provisions relating to control over the Plan’s assets by participants and beneficiaries. The Plan’s feature that allows you to direct the investment of your account balances is intended to satisfy the requirements of Section 404(c) of ERISA relating to control over plan assets by a participant or beneficiary. The effect of this is two-fold. First, you will not be deemed a “fiduciary” because of your exercise of investment discretion. Second, no person who otherwise is a fiduciary, such as Peoples Federal Savings Bank, the Plan Administrator, or the Plan’s trustee is liable under the fiduciary responsibility provision of ERISA for any loss which results from your exercise of control over the assets in your Plan account.

Because you will be entitled to invest all or a portion of your account balance in the Plan in Peoples Federal Bancshares, Inc. common stock, the regulations under Section 404(c) of ERISA require that the Plan establish procedures that ensure the confidentiality of your decision to purchase, hold, or sell employer securities, except to the extent that disclosure of such information is necessary to comply with federal or state laws not preempted by ERISA. These regulations also require that your exercise of voting and similar rights with respect to the common stock be conducted in a way that ensures the confidentiality of your exercise of these rights.

Securities and Exchange Commission Reporting and Short-Swing Profit Liability

Section 16 of the Securities Exchange Act of 1934, as amended, imposes reporting and liability requirements on officers, directors, and persons beneficially owning more than 10% of public companies such as Peoples Federal Bancshares, Inc. Section 16(a) of the Securities Exchange Act of 1934 requires the filing of reports of beneficial ownership. Within 10 days of becoming an officer, director or person beneficially owning more than 10% of the shares of Peoples Federal Bancshares, Inc., a Form 3 reporting initial beneficial ownership must be filed with the Securities and Exchange Commission. Changes in beneficial ownership, such as purchases, sales and gifts generally must be reported periodically, either on a Form 4 within two business days after the change occurs, or annually on a Form 5 within 45 days after the close of Peoples Federal Bancshares, Inc.’s fiscal year. Discretionary transactions in and beneficial ownership of the common stock through the Peoples Federal Bancshares, Inc. Stock Fund of the Plan by officers, directors and persons beneficially owning more than 10% of the common stock of Peoples Federal Bancshares, Inc. generally must be reported to the Securities and Exchange Commission by such individuals.

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In addition to the reporting requirements described above, Section 16(b) of the Securities Exchange Act of 1934, as amended, provides for the recovery by Peoples Federal Bancshares, Inc. of profits realized by an officer, director or any person beneficially owning more than 10% of Peoples Federal Bancshares, Inc.’s common stock resulting from non-exempt purchases and sales of Peoples Federal Bancshares, Inc. common stock within any six-month period.

The Securities and Exchange Commission has adopted rules that provide exemptions from the profit recovery provisions of Section 16(b) for all transactions in employer securities within an employee benefit plan, provided certain requirements are met. These requirements generally involve restrictions upon the timing of elections to acquire or dispose of employer securities for the accounts of Section 16(b) persons.

Except for distributions of common stock due to death, disability, retirement, termination of employment or under a qualified domestic relations order, persons affected by Section 16(b) are required to hold shares of common stock distributed from the Plan for six months following such distribution and are prohibited from directing additional purchases within the Peoples Federal Bancshares, Inc. Stock Fund for six months after receiving such a distribution.

Financial Information Regarding Plan Assets

Financial information representing the assets available for plan benefits at December  31, 2009, is available upon written request to the Plan Administrator at the address shown above.

LEGAL OPINION

The validity of the issuance of the common stock has been passed upon by Luse Gorman Pomerenk & Schick, A Professional Corporation, Washington, D.C., which firm acted as special counsel to Peoples Federal Bancshares, Inc. in connection with Peoples Federal Bancshares, Inc.’s stock offering.

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PLAN NAME: PEOPLES FEDERAL SAVINGS BANK 401(k) PLAN (“401(k) Plan”)

SPECIAL ONE-TIME ELECTION FORM TO BE USED IN CONNECTION WITH PEOPLES FEDERAL BANCSHARES, INC. STOCK OFFERING

WHETHER OR NOT YOU WISH TO PLACE AN ORDER, PLEASE RETURN THIS FORM TO LEE ANN COTE, AT PEOPLES FEDERAL SAVINGS BANK, BY HAND DELIVERY, MAIL, OR BY FAXING IT TO (617)254-0087, TO BE RECEIVED NO LATER THAN          P.M., LOCAL TIME, ON             , 2010. IF YOU DO NOT WISH TO PLACE AN ORDER, CHECK BOX E ON THE REVERSE SIDE OF THE FORM.

SECTION A: NAME / SOCIAL SECURITY #

		-        -
PLEASE PRINT: Last Name                                First Name	Middle	Social Security #

SECTION B: SPECIAL ONE-TIME INVESTMENT ELECTION

Participants with existing 401(k) Plan account balances may invest all or a portion of their account in Peoples Federal Bancshares, Inc. common stock in connection with the stock offering. The purchase price of the common stock in the offering is $10 per share. You must purchase a minimum of 25 shares ($250) and your combined orders for stock in the offering inside and outside the 401(k) Plan cannot exceed 25,000 shares ($250,000). Participants may transfer amounts from any current investment fund to the Peoples Federal Bancshares, Inc. Stock Fund in the 401(k) Plan, which will be held in a short-term interest bearing account until it is invested in common stock.

Fund Name	Indicate whole percentages to be transferred from each fund to the Peoples Federal Bancshares, Inc. Stock Fund
S&P 500 Index Fund	%
TIPS Index Fund	%
S&P MidCap Fund	%
Nasdaq 100 Index Fund	%
Russell 2000 Index Fund	%
International Fund	%
Passive Bond Market Index Fund	%
SSgA Target Retirement 2010 Fund	%
SSgA Target Retirement 2015 Fund	%
SSgA Target Retirement 2020 Fund	%
SSgA Target Retirement 2025 Fund	%
SSgA Target Retirement 2030 Fund	%
SSgA Target Retirement 2035 Fund	%
SSgA Target Retirement 2040 Fund	%
SSgA Target Retirement 2045 Fund	%
SSgA Target Retirement 2050 Fund	%
SSgA Target Retirement Income Fund	%
Pentegra Stable Value Fund	%
Short Term Investment Fund	%
Government Short Term Investment Fund	%
REIT Index Fund	%
Vanguard Growth Index Fund	%
Vanguard Value Index Fund	%

SECTION C: IMPORTANT CONSIDERATIONS

The percentage amount you elect should be the percentage you wish to have removed from that fund. For example, if you have $10,000 in the 401(k) Plan and $2,000 in the TIPS Index Fund and you elect to transfer 50% from the TIPS Index Fund, we will remove $1,000 from that fund (or 50% of $2,000) to transfer to the Peoples Federal Bancshares, Inc. Stock Fund to purchase stock in the stock offering. Please note, percentages will be transferred to the nearest $10 increment. For example if you elect to transfer 50% from the TIPS Index Fund and at the time you have $2,348 in that fund, we will transfer $1,170 to the Peoples Federal Bancshares, Inc. Stock Fund to purchase stock in the offering ($2,348 x 50% = $1,174 or $1,170 to the nearest $10 increment).

Please note that your election to invest all or a portion of your account in the common stock will be IRREVOCABLE. As you know, you are permitted to change your investment election among the various investment funds in the 401(k) Plan on a daily basis. However, you will not be permitted to change your investment election with respect to that portion of your account that you indicated above to be invested in the Peoples Federal Bancshares, Inc. Stock Fund. After this form has been submitted and processed, the amount transferred in accordance with Section B above will be placed in the Peoples Federal Bancshares, Inc. Stock Fund. You will not have access to the amounts from your account placed in the Peoples Federal Bancshares, Inc. Stock Fund until after the conclusion of the offering. Following the conclusion of the offering, you will be permitted to change your investment elections, including diversifying out of the Peoples Federal Bancshares, Inc. Stock Fund. If some or all of the amount that you direct to be invested in the Peoples Federal Bancshares, Inc. Stock Fund cannot be used to purchase stock units because the offering is oversubscribed, following the consummation of the stock offering, the trustee will reinvest unused funds in the other investment funds in accordance with your then existing investment election for future contributions.

SECTION D: PURCHASER INFORMATION

A. ¨ Eligible Account Holder - Check here if you were a depositor with at least $50 on deposit with Peoples Federal Savings Bank as of the close of business on December 31, 2008. Enter information below for all deposit accounts that you had at Peoples Federal Savings Bank as of the close of business on December 31, 2008.

B. ¨ Supplemental Eligible Account Holder - Check here if A above does not apply, but you were a depositor with at least $50 on deposit with Peoples Federal Savings Bank as of the close of business on March 31, 2010. Enter information below for all deposit accounts that you had at Peoples Federal Savings Bank as of the close of business on March 31, 2010.

C. ¨ Other Depositors and Borrowers - Check here if A and B above do not apply, but you were a depositor with Peoples Federal Savings Bank as of the close of business on              or a borrower from Peoples Federal Savings Bank as of January 19, 1983 whose borrowings as of that date remained outstanding at the close of business of             , 2010. Enter information below for all deposit accounts that you had at Peoples Federal Savings Bank as of the close of business on             .

D. ¨ Community Member - Check here if none of the above subscription offering categories applies, but you wish to place an order for common stock through the 401(k) Plan.

E. ¨ No Election - I do not wish to make an election to purchase stock in the offering through my 401(k) Plan account. If you elect this option, you do not need to submit the requested account information.

Please Note: Failure to list all of your accounts may result in the loss of part or all of your stock allocation in the event of oversubscription.

Account Title (Names on Accounts) Deposit Account Number

SECTION E: PARTICIPANT AUTHORIZATION

I certify that I received a copy of the Prospectus of Peoples Federal Bancshares, Inc. which provides detailed information with respect to the offering of Peoples Federal Bancshares, Inc. stock and the attached Prospectus Supplement relating to the election to direct investments under the 401(k) Plan to the common stock. I understand that the value of the investments may fluctuate over time and that risks are associated with investing in the investment options I have selected. Furthermore, I authorize the Plan Administrator to execute my directions as set forth above. I understand these directions are irrevocable.

Participant Signature Date

PROSPECTUS

PEOPLES FEDERAL BANCSHARES, INC.

(Proposed Holding Company for Peoples Federal Savings Bank)

Up to 5,750,000 Shares of Common Stock

Peoples Federal Bancshares, Inc., a Maryland corporation, is offering shares of common stock for sale in connection with the conversion of Peoples Federal MHC from the mutual to the stock form of organization. We expect that our common stock will be listed for trading on the Nasdaq Capital Market under the symbol “PEOP” upon conclusion of the stock offering. There is currently no public market for the shares of our common stock.

We are offering for sale up to 5,750,000 shares of common stock for sale on a best efforts basis. We may sell up to 6,612,500 shares of common stock because of demand for the shares in excess of 5,750,000 shares or changes in market conditions that would increase our pro forma market value in excess of $62.1 million (5,750,000 shares sold multiplied by the $10.00 purchase price per share plus $4.6 million worth of stock that we will contribute to a charitable foundation) without resoliciting subscribers. We must sell a minimum of 4,250,000 shares in order to complete the offering. In addition to the shares that we will sell in the offering, we will also contribute stock equal to 8% of the shares sold in the offering to a charitable foundation that we are establishing.

We are offering the shares of common stock in a “subscription offering.” Depositors of Peoples Federal Savings Bank with aggregate account balances of at least $50 as of the close of business on December 31, 2008 will have first priority rights to buy our shares of common stock. Shares of common stock not purchased in the subscription offering will be offered for sale to the general public in a “community offering.” We also may offer for sale shares of common stock not subscribed for in the subscription offering or community offering through a “syndicated community offering” managed by Sandler O’Neill & Partners, L.P.

The minimum number of shares of common stock that you may order is 25 shares. The maximum number of shares of common stock that can be ordered through a single qualifying account or by any person in the subscription offering is 25,000 shares, and no person by himself or with an associate or group of persons acting in concert may purchase more than 35,000 shares in the offering. The subscription and community offerings are expected to expire at 3:00 p.m., Eastern Time, on [expiration date]. We may extend the subscription offering and/or community offering expiration dates without notice to you until [extension date], unless the Office of Thrift Supervision approves a later date, which may not be beyond [final date]. Once submitted, orders are irrevocable unless the offering is terminated or is extended beyond [extension date], or the number of shares of common stock to be sold is increased to more than 6,612,500 shares or decreased to fewer than 4,250,000 shares. If the offering is extended beyond [extension date], or the number of shares of common stock to be sold is increased to more than 6,612,500 shares or decreased to fewer than 4,250,000 shares, we will resolicit subscribers, and all funds delivered to us to purchase shares of common stock will be returned promptly with interest. Funds received during the offering will be held in a segregated account at Peoples Federal Savings Bank, or, in our discretion, at another insured depository institution, and will earn interest at our passbook rate which is currently 0.50%.

Sandler O’Neill & Partners, L.P. will assist us in selling our shares of common stock on a best efforts basis. Sandler O’Neill & Partners, L.P. is not required to purchase any shares of the common stock that are being offered for sale.

This investment involves a degree of risk, including the possible loss of your investment.

Please read “Risk Factors” beginning on page 15.

OFFERING SUMMARY

Price: $10.00 per Share

	Minimum		Maximum		Adjusted Maximum
Number of shares		4,250,000		5,750,000		6,612,500
Gross offering proceeds	$	42,500,000	$	57,500,000	$	66,125,000
Estimated offering expenses (excluding selling agent fees and expenses)	$	1,285,000	$	1,285,000	$	1,285,000
Estimated selling agent fees and expenses (1)	$	363,280	$	500,320	$	579,118
Estimated net proceeds	$	40,851,720	$	55,714,680	$	64,260,882
Estimated net proceeds per share	$	9.61	$	9.69	$	9.72

(1) The amounts shown assume that all shares are sold in the subscription and community offerings. If shares are sold in the syndicated community offering, compensation paid to Sandler O’Neill & Partners, L.P. will be higher and net proceeds and net proceeds per share will be lower. See “The Conversion—Marketing and Distribution; Compensation” for a discussion of Sandler O’Neill & Partners, L.P.’s compensation for this offering.

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

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

For assistance, please call the Conversion Center, toll free, at [stock info #].

SANDLER O’NEILL + PARTNERS, L.P.

The date of this prospectus is [prospectus date].

[MAP SHOWING MARKET AREA APPEARS ON INSIDE FRONT COVER]

TABLE OF CONTENTS

	Page
SUMMARY	1
RISK FACTORS	15
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA	28
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	30
HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING	31
OUR POLICY REGARDING DIVIDENDS	33
MARKET FOR THE COMMON STOCK	33
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE	35
CAPITALIZATION	36
PRO FORMA DATA	38
COMPARISON OF VALUATION AND PRO FORMA INFORMATION WITH AND WITHOUT THE CHARITABLE FOUNDATION	44
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	45
BUSINESS OF PEOPLES FEDERAL BANCSHARES, INC.	66
BUSINESS OF PEOPLES FEDERAL SAVINGS BANK	67
SUPERVISION AND REGULATION	94
TAXATION	104
MANAGEMENT OF PEOPLES FEDERAL BANCSHARES, INC.	107
SUBSCRIPTIONS BY DIRECTORS AND EXECUTIVE OFFICERS	124
THE CONVERSION; PLAN OF DISTRIBUTION	125
PEOPLES FEDERAL SAVINGS BANK CHARITABLE FOUNDATION	149
RESTRICTIONS ON ACQUISITION OF PEOPLES FEDERAL BANCSHARES, INC.	153
DESCRIPTION OF CAPITAL STOCK	159
TRANSFER AGENT	160
EXPERTS	160
LEGAL MATTERS	161
WHERE YOU CAN FIND ADDITIONAL INFORMATION	161
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF PEOPLES FEDERAL MHC	F-1

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SUMMARY

The following summary highlights material information in this prospectus. It may not contain all the information that is important to you. For additional information, you should read this entire prospectus carefully, including the Consolidated Financial Statements and the notes to the Consolidated Financial Statements.

In this prospectus, the terms “we, “our,” and “us” refer to Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank unless the context indicates another meaning.

Peoples Federal Savings Bank

Peoples Federal Savings Bank is a federally chartered savings bank headquartered in Brighton, Massachusetts. We were organized in 1888, and reorganized into the mutual holding company structure in 2005. Peoples Federal Savings Bank is currently the wholly owned subsidiary of Peoples Federal Bancorp, Inc., a federal corporation, which is the wholly owned subsidiary of Peoples Federal MHC, a federal mutual holding company. On a consolidated basis, as of December 31, 2009, Peoples Federal MHC had total assets of $482.8 million, total loans of $377.4 million, total deposits of $370.5 million and equity of $51.7 million. We provide financial services to individuals, families and businesses in the Boston metropolitan area through our six banking offices located in Brighton, Allston, West Roxbury and Jamaica Plain, in Suffolk County, Massachusetts, and Brookline and Norwood in Norfolk County, Massachusetts.

In September 2007, we completed an acquisition of Brookline Co-Operative Bank, a Massachusetts-chartered cooperative bank with $58.3 million in total assets, $7.9 million in capital and one full-service branch office located in Brookline, Massachusetts.

Peoples Federal Savings Bank’s business consists primarily of accepting deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in one- to four-family residential mortgage loans, including home equity loans and lines of credit, multi-family mortgage loans, commercial real estate loans and construction loans and lines of credit. To a much lesser extent, we also originate commercial loans and consumer loans and invest in mortgage-backed securities. Peoples Federal Savings Bank offers a variety of deposit accounts, including statement savings accounts, certificates of deposit, money market accounts, commercial and regular checking accounts and individual retirement accounts.

Peoples Federal Savings Bank’s executive offices are located at 435 Market Street, Brighton, Massachusetts 02135. Our telephone number at this address is (617) 254-0707. Our website address is www.pfsb.com. Information on our website is not incorporated into this prospectus and should not be considered part of this prospectus.

Peoples Federal Bancshares, Inc.

Peoples Federal Bancshares, Inc. is a newly formed Maryland corporation that will own all of the outstanding shares of common stock of Peoples Federal Savings Bank upon completion of the mutual-to-stock conversion and the offering. Peoples Federal Bancshares, Inc. has not engaged in any business to date.

Our executive offices are located at 435 Market Street, Brighton, Massachusetts 02135. Our telephone number at this address is (617) 254-0707.

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Our Organizational Structure

In 2005, Peoples Federal Savings Bank’s mutual predecessor reorganized into the mutual holding company form of organization by forming Peoples Federal MHC. Peoples Federal MHC owns 100% of the outstanding shares of common stock of Peoples Federal Bancorp, Inc., a federal corporation. Peoples Federal MHC is a mutual holding company that has no stockholders and is controlled by its members. Peoples Federal Bancorp, Inc. owns 100% of the outstanding shares of common stock of Peoples Federal Savings Bank. Peoples Federal Bancorp, Inc. has not issued shares of stock to the public.

Pursuant to the terms of Peoples Federal MHC’s plan of conversion and reorganization, Peoples Federal MHC will convert from a mutual holding company to the stock holding company corporate structure. Upon the completion of the conversion, Peoples Federal MHC and Peoples Federal Bancorp, Inc. will cease to exist, and Peoples Federal Savings Bank will be a wholly owned subsidiary of Peoples Federal Bancshares, Inc.

Business Strategy

Our primary objective is to remain a profitable, community-oriented financial institution offering deposit and loan products to retail customers and servicing the financial needs of small businesses in our market area. We intend to continue our origination and purchase of one- to four-family residential mortgage loans as well as continuing to offer our other loan products. We do not expect that the type of business that we conduct or the mix of our loan portfolio will change significantly in the years immediately following the completion of the conversion and stock offering. Our operations and strategy will include:

• Increasing our multi-family and commercial real estate lending in our primary market area while maintaining high asset quality;

• Emphasizing lower cost core deposits by attracting new customers and enhancing existing customer relationships;

• Expanding our banking franchise by establishing or acquiring new branches, or by acquiring other financial institutions, or the deposits and assets of other institutions, including in FDIC-assisted transactions of failed institutions, or other financial services companies. We currently intend to open or acquire up to four new branch offices over the next five years; and

• To a lesser extent, increasing our small business lending.

A full description of our products and services begins on page 67 of this prospectus under the heading “Business of Peoples Federal Savings Bank.”

These strategies are intended to guide our investment of the net proceeds of the offering. We intend to continue to pursue our business strategy after the conversion and the offering, subject to changes necessitated by future market conditions and other factors. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Strategy” for a further discussion of our business strategy.

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Reasons for the Conversion

Our primary reasons for converting and raising additional capital through the offering are:

• to improve our capital position during a period of significant economic uncertainty;

• to support our internal growth through lending in the communities that we serve or may serve in the future;

• to provide additional financial resources to pursue future expansion and acquisition opportunities, although we have no current arrangements or agreements with respect to any such acquisitions;

• to provide better capital management tools, including the ability to pay dividends and to repurchase shares of our common stock, subject to market conditions; and

• to retain and attract qualified personnel by establishing stock-based benefit plans.

We believe that the additional capital raised in the offering may enable us to take advantage of business opportunities that may not otherwise be available to us. As of December 31, 2009, Peoples Federal Savings Bank was considered “well capitalized” for regulatory purposes and is not subject to any directive or a recommendation from the Office of Thrift Supervision to raise capital.

For further information about our reasons for the conversion and stock offering, please see “The Conversion—Reasons for the Conversion.”

Terms of the Conversion and the Offering

Under Peoples Federal MHC’s plan of conversion and reorganization, our organization will convert to a fully public stock holding company structure. In connection with the conversion, we are offering between 4,250,000 and 5,750,000 shares of common stock to eligible depositors and borrowers of Peoples Federal Savings Bank, to our tax-qualified employee benefit plans and, to the extent shares remain available, to the general public. The number of shares of common stock to be sold may be increased to up to 6,612,500 as a result of demand for the shares or changes in the market for financial institution stocks. Unless the number of shares of common stock to be offered for sale is increased to more than 6,612,500 or decreased to less than 4,250,000, or the offering is extended beyond [extension date], subscribers will not have the opportunity to change or cancel their stock orders.

The purchase price of each share of common stock to be sold in the offering (other than shares we are contributing to our charitable foundation) is $10.00. All investors will pay the same purchase price per share. Investors will not be charged a commission to purchase shares of common stock in the offering. Sandler O’Neill & Partners, L.P., our marketing advisor in the offering, will use its best efforts to assist us in selling shares of our common stock. Sandler O’Neill & Partners, L.P. is not obligated to purchase any shares of common stock in the offering.

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Persons Who May Order Shares of Common Stock in the Offering

We are offering the shares of common stock in a “subscription offering” in the following descending order of priority:

• First, to depositors of Peoples Federal Savings Bank with aggregate account balances of at least $50 as of the close of business on December 31, 2008.

• Second, to Peoples Federal Savings Bank’s tax-qualified employee benefit plans (including our employee stock ownership plan and 401(k) plan), which will receive, without payment therefor, nontransferable subscription rights to purchase in the aggregate up to 10% of the shares of common stock issued in the offering (including shares contributed to our charitable foundation). We expect our employee stock ownership plan to purchase 8% of the shares of common stock issued in the offering.

• Third, to depositors of Peoples Federal Savings Bank with aggregate account balances of at least $50 as of the close of business on [supplemental date].

• Fourth, to depositors of Peoples Federal Savings Bank as of [other member date] and to borrowers of Peoples Federal Savings Bank as of January 19, 1983 whose borrowings as of that date remain outstanding as of [other member date].

Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a community offering, with a preference given to natural persons residing in the Massachusetts counties of Suffolk, Norfolk and Middlesex. The community offering is expected to begin concurrently with the subscription offering. If shares remain available for sale following the subscription offering or community offering, we also may offer for sale shares of common stock through a syndicated community offering managed by Sandler O’Neill & Partners, L.P. We have the right to accept or reject, in our sole discretion, orders received in the community offering or syndicated community offering.

To ensure a proper allocation of stock, each subscriber eligible to purchase stock in the subscription offering must list on his or her stock order and certification form all deposit accounts in which he or she had an ownership interest at December 31, 2008, [supplemental date] or [other member date], as applicable. Failure to list all accounts, or providing incorrect information, could result in the loss of all or part of a subscriber’s stock allocation. Our interpretation of the terms and conditions of the plan of conversion and reorganization and of the acceptability of the order forms will be final.

If we receive orders for more shares than we are offering, we may not be able to fully or partially fill your order. Shares will be allocated first in the order of priority to subscribers in the subscription offering. For a detailed description of the offering, including share allocation procedures, please see “The Conversion.”

How We Determined the Offering Range

The amount of common stock that we are offering is based on an independent appraisal of the estimated market value of Peoples Federal Bancshares, Inc., assuming the conversion and the offering are completed. RP Financial, LC., our independent appraiser, has estimated that, as of February 26, 2010, the market value of the shares to be issued in the offering (including shares to be contributed to the charitable foundation) ranged from $45.9 million to $62.1 million, with a midpoint of $54.0 million. Based on this valuation and a $10.00 per share price, the number of shares of common stock being offered for sale by us will range from 4,250,000 shares to 5,750,000 shares. The $10.00 per share price was selected primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions.

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RP Financial, LC. advised the Board of Directors that the appraisal was prepared in conformance with the regulatory appraisal methodology. That methodology requires a valuation based on an analysis of the trading prices of comparable public companies whose stocks have traded for at least one year prior to the valuation date. RP Financial, LC selected a group of 10 comparable public companies for this analysis.

RP Financial, Inc. also considered that we intend to contribute stock equal to 8% of the shares sold in the offering to a charitable foundation that we are establishing in connection with the conversion. The intended contribution of shares of common stock to the charitable foundation has the effect of reducing our estimated pro forma valuation. See “Comparison of Valuation and Pro Forma Information With and Without the Charitable Foundation.”

The appraisal peer group consists of the following companies:

Company Name	Ticker Symbol	Exchange	Headquarters	Total Assets
				(in millions)
Beacon Federal Bancorp	BFED	NASDAQ	East Syracuse, NY	1,070(1)
ESSA Bancorp, Inc.	ESSA	NASDAQ	Stroudsburg, PA	1,034
Elmira Savings Bank	ESBK	NASDAQ	Elmira, NY	506(1)
LSB Corporation	LSBX	NASDAQ	N. Andover, MA	807(1)
Mayflower Bancorp, Inc.	MFLR	NASDAQ	Middleboro, MA	246
Newport Bancorp, Inc.	NFSB	NASDAQ	Newport, RI	459
Rome Bancorp, Inc.	ROME	NASDAQ	Rome, NY	330
TF Financial Corporation	THRD	NASDAQ	Newton, PA	714
WVS Financial Corporation	WVFC	NASDAQ	Pittsburgh, PA	392
Westfield Financial, Inc.	WFD	AMEX	Westfield, MA	1,191

(1) As of September 30, 2009.

The following table presents a summary of selected pricing ratios for Peoples Federal Bancshares, Inc. and the peer group companies identified by RP Financial, LC. Ratios are based on earnings for the twelve months ended December 31, 2009 and book value as of December 31, 2009. Tangible book value is total equity, less intangible assets. Compared to the median pricing of the peer group, our pro forma pricing ratios at the maximum of the offering range indicated a discount of 30.1% on a price-to-book value basis, a discount of 32.1% on a price-to-tangible book value basis and a premium of 156.6% on a price-to- earnings basis. The price ratios also reflect recent volatile market conditions, particularly for stock of financial institution holding companies, and the effect of such conditions on the trading market for recent mutual-to-stock conversions. Our Board of Directors, in reviewing and approving the valuation, considered our pro forma earnings and the range of price-to-book value ratios and price-to-tangible book value ratios at the different amounts of shares to be sold in the offering. The appraisal did not consider one valuation approach to be more important than the other.

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	Price-to-earnings multiple		Price-to-book value ratio		Price-to-tangible book value ratio
Peoples Federal Bancshares, Inc. (pro forma)
Maximum, as adjusted	36.61	x	65.23	%	65.23
Maximum	30.54		61.01		61.01
Midpoint	25.65		56.79		56.79
Minimum	21.09		51.95		51.95
Valuation of peer group companies using stock prices as of February 26, 2010
Averages	14.73	x	84.34	%	89.61	%
Medians	11.90		87.23		89.87

Our Board of Directors carefully reviewed the information provided to it by RP Financial, LC. through the appraisal process, but did not make any determination regarding whether prior standard mutual-to-stock conversions have been undervalued, nor did the Board of Directors draw any conclusions regarding how the historical data reflected above may affect Peoples Federal Bancshares, Inc.’s appraisal. Instead, we engaged RP Financial, LC. to help us understand the regulatory process as it applies to the appraisal and to advise the Board of Directors as to how much capital Peoples Federal Bancshares, Inc. would be required to raise under the regulatory appraisal guidelines.

The independent appraisal does not indicate per share market value. Do not assume or expect that the valuation of Peoples Federal Bancshares, Inc. as indicated above means that, after the conversion and the offering, the shares of common stock will trade at or above the $10.00 offering price. Furthermore, the pricing ratios presented above were utilized by RP Financial, LC. to estimate our market value and not to compare the relative value of shares of our common stock with the value of the capital stock of the peer group. The value of the capital stock of a particular company may be affected by a number of factors such as financial performance, asset size and market location.

For a more complete discussion of the amount of common stock we are offering for sale and the independent appraisal, including information with respect to the peer group selected by RP Financial, LC., as well a comparison of selected pro forma pricing ratios compared to pricing ratios of the peer group, see “The Conversion—Determination of Share Price and Number of Shares to be Issued.”

Limits on How Much Common Stock You May Purchase

The minimum number of shares of common stock that may be purchased is 25. Generally, no individual with one or more qualifying accounts, or individuals exercising subscription rights through a single qualifying account held jointly, may purchase more than 25,000 shares ($250,000) of common stock in the subscription offering. If any of the following persons purchases shares of common stock, their purchases, in all categories of the offering, when combined with your purchases, cannot exceed 35,000 shares ($350,000):

• your spouse or relatives of you or your spouse living in your house;

• companies, trusts or other entities in which you are a trustee, have a substantial beneficial interest or hold a senior management position; or

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• other persons who may be your associates or persons acting in concert with you.

See the detailed descriptions of “acting in concert” and “associate” in “The Conversion—Limitations on Common Stock Purchases.”

How You May Purchase Shares of Common Stock

In the subscription offering and community offering, you may pay for your shares only by:

• personal check, bank check or money order, made payable to Peoples Federal Bancshares, Inc.; or

• authorizing us to withdraw funds from the types of Peoples Federal Savings Bank deposit accounts permitted on the stock order and certification form.

Peoples Federal Savings Bank is not permitted to knowingly lend funds to anyone for the purpose of purchasing shares of common stock in the offering. Additionally, you may not use a check drawn on a Peoples Federal Savings Bank line of credit or a third-party check to pay for shares of common stock.

You can subscribe for shares of common stock in the offering by delivering a signed and completed original stock order and certification form, together with full payment or authorization to withdraw from one or more of your Peoples Federal Savings Bank deposit accounts, so that it is received (not postmarked) before 3:00 p.m., Eastern Time, on [expiration date], which is the expiration of the offering period. You may submit your stock order and certification form by mail using the order reply envelope provided, by overnight courier to the indicated address on the order form, or by hand delivery to our Conversion Center, located at 435 Market Street, Brighton, Massachusetts 02135. We will not accept stock order forms at our branch offices.

You may be able to subscribe for shares of common stock using funds in your individual retirement account (IRA). If you wish to use some or all of the funds in your Peoples Federal Savings Bank IRA to purchase our common stock, the applicable funds must be transferred to a self-directed account maintained by an independent trustee, such as a brokerage firm, and the purchase must be made through that account. Because individual circumstances differ and processing of IRA fund orders takes additional time, we recommend that you contact our Conversion Center promptly, preferably at least two weeks before the [expiration date] expiration of the offering period, for assistance with purchases using funds from your Peoples Federal Savings Bank IRA or any other retirement account that you may have. Whether you may use such funds for the purchase of shares in the stock offering may depend on time constraints and, possibly, limitations imposed by the brokerage firm or institution where your funds are held.

See “The Conversion—Procedure for Purchasing Shares” for a complete description of how to purchase shares in the stock offering.

Deadline for Orders of Common Stock

The deadline for purchasing shares of common stock in the offering is 3:00 p.m., Eastern Time, on [expiration date]. A postmark prior to [expiration date] will not entitle you to purchase shares of common stock unless we receive the envelope by 3:00 p.m., Eastern Time on [expiration date].

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Although we will make reasonable attempts to provide a prospectus and offering materials to holders of subscription rights, the subscription offering and all subscription rights will expire at 3:00 p.m., Eastern Time, on [expiration date], whether or not we have been able to locate each person entitled to subscription rights.

See “The Conversion—Procedure for Purchasing Shares” for a complete description of how to purchase shares in the stock offering.

Delivery of Stock Certificates

Certificates representing shares of common stock sold in the offering will be mailed to the certificate registration address noted on the order form. We expect stock certificates to be sent to purchasers by first-class mail on the day the stock offering closes, and expect trading in the stock typically to begin the business day following the closing of the stock offering. The stock offering is expected to close as soon as practicable following satisfaction of the conditions described in “Conditions to Completion of the Conversion and the Offering.” It is possible that, until certificates for the common stock are delivered, purchasers might not be able to sell the shares of common stock that they ordered, even though the common stock will have begun trading. Your ability to sell the shares of common stock prior to your receipt of the stock certificate will depend on arrangements you may make with a brokerage firm, as you are generally required to deliver stock certificates within three business days of selling the underlying securities.

After-Market Stock Price Performance Provided by Independent Appraiser

The following table presents stock price appreciation information for all standard mutual-to-stock conversions completed between January 1, 2009 and February 26, 2010. None of these companies was included in the group of 10 comparable public companies utilized in RP Financial, LC.’s valuation analysis.

Mutual-to-Stock Conversion Offerings with Closing Dates

between January 1, 2009 and February 26, 2010

	Conversion Date	Exchange	Percentage Price Appreciation From Initial Trading Date
Company Name and Ticker Symbol			One Day		One Week		One Month		Through February 26, 2010
OBA Financial Services, Inc.	1/22/10	NASDAQ	3.9	%	1.1	%	3.0	%	5.1	%
OmniAmerican Bancorp, Inc.	1/21/10	NASDAQ	18.5		13.2		9.9		9.1
Versailles Financial Corp. (1)	1/13/10	OTC	—		—		—		—
Athens Bancshares, Inc.	1/7/10	NASDAQ	16.0		13.9		10.6		9.7
Territorial Bancorp, Inc.	7/13/09	NASDAQ	49.9		47.5		48.7		97.8
St. Joseph Bancorp, Inc. (1)	2/2/09	OTC	—		—		—		—
Hibernia Homestead Bancorp, Inc.	1/28/09	OTC	5.0		5.0		5.0		37.5
Average			13.3	%	11.5	%	11.0	%	22.7	%
Median			5.0	%	5.0	%	5.0	%	9.1	%

(1) There were no reported trades in the common stock of either Versailles Financial Corp. or St. Joseph Bancorp, Inc. through February 26, 2010.

Stock price appreciation is affected by many factors, including, but not limited to: general market and economic conditions; the interest rate environment; the amount of proceeds a company raises in its offering; and numerous factors relating to the specific company, including the experience and ability of

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management, historical and anticipated operating results, the nature and quality of the company’s assets, and the company’s market area. None of the companies listed in the table above are exactly the same as Peoples Federal Bancshares, Inc., the pricing ratios for their stock offerings were in some cases different from the pricing ratios for Peoples Federal Bancshares, Inc.’s common stock and the market conditions in which these offerings were completed were, in most cases, different from current market conditions. The performance of these stocks may not be indicative of how our stock will perform.

There can be no assurance that our stock price will not trade below $10.00 per share, as has been the case for some mutual-to-stock conversions. Before you make an investment decision, we urge you to carefully read this prospectus, including, but not limited to, the section entitled “Risk Factors” beginning on page 15.

Steps We May Take If We Do Not Receive Orders for the Minimum Number of Shares

If we do not receive orders for at least 4,250,000 shares of common stock (not counting shares to be contributed to our charitable foundation), we may take the following steps to sell the minimum number of shares of common stock in the offering range:

• increase the maximum purchase limitations; and/or

• seek the approval of the Office of Thrift Supervision to extend the offering beyond [extension date], provided that any such extension beyond [extension date] will require that we resolicit subscriptions that we have previously received in the offering.

If one or more purchase limitations are increased, subscribers in the subscription offering who ordered the maximum amount will be, and, in our sole discretion, some other large subscribers may be, given the opportunity to increase their subscriptions up to the then-applicable limit.

Possible Change in the Offering Range

RP Financial, LC. will update its appraisal before we complete the offering. If, as a result of demand for the shares, or changes in market conditions, RP Financial, LC. determines that our pro forma market value has increased, we may sell up to 6,612,500 shares in the offering without further notice to you. If our pro forma market value at that time (which is the pro forma market value of the shares to be issued in the offering including the shares to be contributed to the charitable foundation) is either below $45.9 million or above $71.4 million, then, after consulting with the Office of Thrift Supervision, we may:

• terminate the stock offering and promptly return all funds;

• set a new offering range; or

• take such other actions as may be permitted by the Office of Thrift Supervision and the Securities and Exchange Commission.

If we set a new offering range, we will be required to resolicit subscribers and we will promptly return your subscription funds, with interest at our passbook rate, and cancel any authorization to withdraw funds from your deposit accounts for the purchase of shares of common stock.

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Possible Termination of the Offering

We may terminate the offering at any time prior to the special meeting of members of Peoples Federal MHC that is being called to vote upon the conversion, and at any time after such member approval with the approval of the Office of Thrift Supervision. If we terminate the offering, we will promptly return your funds with interest at our passbook rate which is currently 0.50% and we will cancel any deposit account withdrawal authorizations.

How We Intend to Use the Proceeds From the Offering

We intend to invest 50% of the net proceeds from the offering in Peoples Federal Savings Bank, and to use approximately 8.9% of the net proceeds at the maximum of the offering range to fund the loan to our employee stock ownership plan to finance its purchase of our shares of common stock and retain the remainder of the net proceeds from the offering. Therefore, assuming we sell 6,612,500 shares of common stock in the stock offering, and we have net proceeds of $64.3 million, we intend to invest $32.1 million in Peoples Federal Savings Bank, loan or have a subsidiary that we capitalize loan $5.7 million to our employee stock ownership plan to fund its purchase of our shares of common stock loan and retain the remaining $26.4 million of the net proceeds.

We may use the funds we retain for investments, to pay cash dividends, to provide funding to Peoples Federal Savings Bank, to repurchase shares of common stock and for other general corporate purposes.

Peoples Federal Savings Bank may use the proceeds it receives from us to support increased lending and other products and services, and to repay and/or refinance short-term borrowings. It is expected that funds received by Peoples Federal Savings Bank will be invested in short-term U.S. Government agency securities until Peoples Federal Savings Bank can redeploy these funds into higher-yielding assets, including loans. See “How We Intend to Use the Proceeds from the Stock Offering.”

Our Issuance of Shares of Common Stock to Peoples Federal Savings Bank Charitable Foundation

To further our commitment to our local community, we intend to establish a charitable foundation as part of the conversion and stock offering. Assuming we receive approval from our members to fund the charitable foundation with shares of our common stock, we intend to issue shares of our common stock, ranging from 340,000 shares at the minimum of the valuation range to 460,000 shares at the maximum of the valuation range, which shares will have a value of $3.4 million at the minimum of the valuation range and $4.6 million at the maximum of the valuation range, based on the $10.00 per share offering price. As a result of the issuance of shares to the charitable foundation, we will record an after-tax expense of approximately $2.0 million at the minimum of the valuation range and of approximately $2.8 million at the maximum of the valuation range, during the quarter in which the stock offering is completed.

The charitable foundation will be dedicated exclusively to supporting charitable causes and community development activities in the communities in which we operate. The charitable foundation is expected to make contributions totaling approximately $200,000 in its first year of operation, assuming we sell our shares of common stock at the midpoint of the offering range.

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Issuing shares of common stock to the charitable foundation will:

• dilute the voting interests of purchasers of shares of our common stock in the stock offering; and

• result in an expense, and a reduction in earnings, during the quarter in which the contribution is made, equal to the full amount of the contribution to the charitable foundation, offset in part by a corresponding tax benefit.

The establishment and funding of the charitable foundation has been approved by the Boards of Directors of Peoples Federal MHC, Peoples Federal Bancorp, Inc. and Peoples Federal Savings Bank and is subject to approval by members of Peoples Federal MHC. If the members do not approve the funding of the charitable foundation with shares of our common stock, we may, in our discretion, complete the conversion and stock offering without the inclusion of the charitable foundation and without resoliciting subscribers. We may also determine, in our discretion, not to complete the conversion and stock offering if the members do not approve the charitable foundation.

The amount of common stock that we would offer for sale would be greater if the offering were to be completed without the formation and funding of the Peoples Federal Savings Bank Charitable Foundation. For a further discussion of the financial impact of the charitable foundation, including its effect on those who purchase shares in the offering, see “Risk Factors—The contribution of shares to the charitable foundation will dilute your ownership interest and adversely affect net income in 2010,” “Comparison of Independent Valuation and Pro Forma Financial Information With and Without the Charitable Foundation” and “Peoples Federal Savings Bank Charitable Foundation.”

You May Not Sell or Transfer Your Subscription Rights

Office of Thrift Supervision regulations prohibit you from transferring your subscription rights. If you order shares of common stock in the subscription offering, you will be required to state that you are purchasing the shares of common stock for yourself and that you have no agreement or understanding to sell or transfer your subscription rights. We intend to take legal action, including reporting persons to federal or state regulatory agencies, against anyone who we believe has sold or given away his or her subscription rights. We will not accept your order if we have reason to believe that you have sold or transferred your subscription rights. When completing your stock order and certification form, you should not add the name(s) of persons who do not have subscription rights or who qualify only in a lower subscription priority than you do. In addition, the stock order and certification form requires that you list all deposit or loan accounts, giving all names on each account and the account number at the applicable eligibility record date. Your failure to provide this information, or providing incomplete or incorrect information, may result in a loss of part or all of your share allocation, if there is an oversubscription.

With the exception of stock purchased through IRA or Keogh accounts, shares purchased in the subscription offering must be registered in the names of all depositors on the qualifying account(s). Deleting names of depositors or adding non-depositors or otherwise altering the form of beneficial ownership of a qualifying account will result in the loss of your subscription rights.

Purchases by Officers and Directors

We expect our directors and executive officers, together with their associates, to subscribe for 217,500 shares ($2,175,000) of common stock in the offering, or 4.5% of the shares to be sold at the

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midpoint of the offering range. The purchase price paid by our directors and executive officers for their shares will be the same $10.00 per share price paid by all other persons who purchase shares of common stock in the offering.

See “Subscriptions by Our Directors and Executive Officers” for more information on the proposed purchases of our shares of common stock by our directors and executive officers.

Benefits to Management and Potential Dilution to Stockholders Following the Conversion

We expect our employee stock ownership plan, which is a tax-qualified retirement plan for the benefit of all of our eligible employees, to purchase 8% of the total number of shares of common stock that we issue in the offering (including shares contributed to our charitable foundation). If we receive orders for more shares of common stock than the maximum of the offering range, the employee stock ownership plan will have first priority to purchase shares over this maximum, up to a total of 8% of the total number of shares of common stock issued in the offering (including shares contributed to our charitable foundation). This would reduce the number of shares available for allocation to eligible account holders. Purchases by the employee stock ownership plan will be included in determining whether the required minimum number of shares has been sold in the offering.

We also intend to implement one or more stock-based benefit plans no earlier than six months after completion of the conversion. Stockholder approval of these plans will be required, and the stock-based benefit plans cannot be implemented until at least six months after the completion of the conversion pursuant to applicable Office of Thrift Supervision regulations. If they are adopted within 12 months following the completion of the conversion, the stock-based benefit plans will reserve a number of shares of common stock equal to not more than 4% of the shares issued in the offering (including shares contributed to our charitable foundation), for restricted stock awards to key employees and directors, at no cost to the recipients, and will also reserve a number of stock options equal to not more than 10% of the shares of common stock issued in the offering (including shares contributed to our charitable foundation) for key employees and directors. If the stock-based benefit plans are adopted after one year from the date of the completion of the conversion, the 4% and 10% limitations described above will no longer apply, and we may adopt stock-based benefit plans encompassing more than 14% of the shares of common stock that were issued in the offering. We have not yet determined whether we will present these plans for stockholder approval within 12 months following the completion of the conversion or more than 12 months after the completion of the conversion, and we have not yet determined the number of shares that would be reserved for issuance under these plans.

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The following table summarizes the number of shares of common stock and aggregate dollar value of grants (valuing each share granted at the offering price of $10.00) that are available under one or more stock-based benefit plans if such plans reserve a number of shares of common stock equal to not more than 4% and 10% of the shares issued in the offering (including shares contributed to our charitable foundation) for restricted stock awards and stock options, respectively. The table shows the dilution to stockholders if all of these shares are issued from authorized but unissued shares, instead of shares purchased in the open market. The table also sets forth the number of shares of common stock to be acquired by the employee stock ownership plan for allocation to all eligible employees.

	Number of Shares to be Granted or Purchased				Dilution Resulting From Issuance of Shares for Stock Benefit Plans		Value of Grants (1)
	At Minimum of Offering Range	At Adjusted Maximum of Offering Range	As a Percentage of Common Stock to be Issued (2)				At Minimum of Offering Range		At Adjusted Maximum of Offering Range
							(Dollars in thousands)
Employee stock ownership plan	367,200	571,320	8.00	%	N/A		$	3,672,000	$	5,713,200
Stock awards	183,600	285,660	4.00		3.85	%		1,836,000		2,856,600
Stock options	459,000	714,150	10.00		9.09	%		2,496,960		3,884,976
Total	1,009,800	1,571,130	22.00	%	12.28	%	$	8,004,960	$	12,454,776

(1) The actual value of restricted stock grants will be determined based on their fair value as of the date grants are made. For purposes of this table, fair value is assumed to be the same as the offering price of $10.00 per share. The fair value of stock options has been estimated at $5.44 per option using the Black-Scholes option pricing model, based upon assumptions described in “Pro Forma Data.” The actual expense of stock options granted under a stock-based benefit plan will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted, which may or may not be the Black-Scholes model.

(2) The stock-based benefit plans may award a greater number of options and shares, respectively, if the plans are adopted more than 12 months after the completion of the conversion.

In addition to the stock-based benefit plans that we may adopt, we have entered into employment agreements with our Chief Executive Officer, our President and Chief Operating Officer, our Executive Vice President and two other executive officers. See “Management of Peoples Federal Bancshares, Inc.—Executive Officer Compensation” for a further discussion of these agreements, including their terms and potential costs, as well as a description of other benefits arrangements. In addition, for further information with respect to the expenses related to the stock-based benefit plans, see “Risk Factors—Our stock-based benefit plans will increase our costs, which will reduce our income” and “Management of Peoples Federal Bancshares, Inc.—Benefits to be Considered Following Completion of the Stock Offering.”

Market for Common Stock

We expect that our common stock will be listed for trading on the Nasdaq Capital Market under the symbol “PEOP.” Sandler O’Neill & Partners, L.P. currently intends to make a market in the shares of our common stock, but is under no obligation to do so. See “Market for the Common Stock.”

Our Policy Regarding Dividends

Following completion of the stock offering, our Board of Directors will have the authority to declare dividends on our common stock, subject to statutory and regulatory requirements. However, no decision has been made with respect to the amount, if any, and timing of any dividend payments. The payment and amount of any dividend payments will depend upon a number of factors.

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For further information, see “Our Policy Regarding Dividends.”

Tax Consequences

As a general matter, the conversion will not be a taxable transaction for federal or state income tax purposes to Peoples Federal MHC, Peoples Federal Bancorp, Inc., Peoples Federal Savings Bank, Peoples Federal Bancshares, Inc., or persons eligible to subscribe in the subscription offering. See “Taxation” for additional information.

Conditions to Completion of the Conversion and the Offering

We cannot complete the conversion and the offering unless:

• the plan of conversion and reorganization is approved by at least a majority of votes eligible to be cast by members of Peoples Federal MHC. A special meeting of members to consider and vote upon the plan of conversion and reorganization and to vote upon the establishment and funding of the charitable foundation has been set for                             , 2010;

• we have received and accepted orders to purchase at least the minimum number of shares of common stock offered for sale; and

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

How You Can Obtain Additional Information

Our branch office personnel may not, by law, assist with investment-related questions about the offering. If you have any questions regarding the conversion or the offering, please call our Conversion Center, toll free, at [stock info #], Monday through Friday between 10:00 a.m. and 4:00 p.m., Eastern Time, or visit the Conversion Center located at 435 Market Street, Brighton, Massachusetts, Monday through Friday between 10:00 a.m. and 4:00 p.m., Eastern Time. The Conversion Center will be closed on weekends and bank holidays.

TO ENSURE THAT EACH PERSON RECEIVES A PROSPECTUS AT LEAST 48 HOURS PRIOR TO THE EXPIRATION DATE OF [EXPIRATION DATE] IN ACCORDANCE WITH FEDERAL LAW, NO PROSPECTUS WILL BE MAILED OR HAND-DELIVERED ANY LATER THAN FIVE DAYS OR TWO DAYS, RESPECTIVELY, PRIOR TO [EXPIRATION DATE].

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RISK FACTORS

You should consider carefully the following risk factors in evaluating an investment in our

shares of common stock.

Risks Related to Our Business

Because we intend to continue to emphasize our commercial real estate and multi-family loan originations, our credit risk will increase, and continued downturns in the local real estate market or economy could adversely affect our earnings.

We intend to continue originating commercial real estate and multi-family loans. At December 31, 2009, $40.0 million, or 10.6%, of our total loan portfolio consisted of multi-family loans and $63.9 million, or 16.9%, of our total loan portfolio consisted of commercial real estate loans. Commercial real estate and multi-family loans generally have more risk than the one- to four-family residential real estate loans that we originate. Because the repayment of commercial real estate and multi-family loans depends on the successful management and operation of the borrower’s properties or related businesses, repayment of such loans can be affected by adverse conditions in the local real estate market or economy. Commercial real estate and multi-family loans may also involve relatively large loan balances to individual borrowers or groups of related borrowers. A downturn in the real estate market or the local economy could adversely affect the value of properties securing the loan or the revenues from the borrower’s business, thereby increasing the risk of nonperforming loans. As our commercial real estate and multi-family loan portfolios increase, the corresponding risks and potential for losses from these loans may also increase.

A portion of our one-to four-family residential mortgage loans is comprised of non-owner occupied properties which increases the credit risk on this portion of our loan portfolio.

Much of the housing stock in our primary lending market area is comprised of two-, three- and four-unit properties. At December 31, 2009, of the $249.1 million of one- to four-family residential mortgage loans in our portfolio, $ 105.8 million, or 42.5% of this amount, were comprised of non-owner occupied properties. We believe that there is a greater credit risk inherent in two-, three- and four-unit properties and especially in investor-owner and non-owner occupied properties, than in owner-occupied one-unit properties since, similar to commercial real estate and multi-family loans, the repayment of these loans may depend, in part, on the successful management of the property and/or the borrower’s ability to lease the units of the property. A downturn in the real estate market or the local economy could adversely affect the value of properties securing these loans or the revenues derived from these properties which could affect the borrower’s ability to repay the loan.

We make and hold in our portfolio construction loans which are considered to have greater credit risk than other types of residential loans made by financial institutions.

We originate construction loans for one- to four-family residential properties, multi-family properties and commercial properties, including commercial “mixed-use” buildings and homes built by developers on speculative, undeveloped property. At December 31, 2009, $17.3 million, or 4.6% of our total loan portfolio, consisted of construction loans, $7.1 million of which were secured by one- to four-family residential real estate, $4.0 million of which were secured by multi-family real estate, and $6.2 million of which were secured by commercial real estate. Construction loans are considered more risky than other types of residential mortgage loans. The primary credit risks associated with construction

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lending are underwriting, project risks and market risks. Project risks include cost overruns, borrower credit risk, project completion risk, general contractor credit risk, and environmental and other hazard risks. Market risks are risks associated with the sale of the completed residential units. They include affordability risk, which means the risk of affordability of financing by borrowers, product design risk, and risks posed by competing projects. While we believe we have established adequate reserves on our financial statements to cover the credit risk of our construction loan portfolio, there can be no assurance that losses will not exceed our reserves, which could adversely impact our future earnings.

If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings will decrease.

We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. If our assumptions are incorrect, our allowance for loan losses may not be sufficient to cover probable incurred losses in our loan portfolio, resulting in additions to our allowance. Material additions to our allowance could materially decrease our net income.

In addition, bank regulators periodically review our allowance for loan losses and may require us to increase our allowance for loan losses or recognize further loan charge-offs. Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities might have a material adverse effect on our financial condition and results of operations.

Future changes in interest rates could reduce our profits.

Our ability to make a profit largely depends on our net interest income, which could be negatively affected by changes in interest rates. Net interest income is the difference between:

• the interest income we earn on our interest-earning assets, such as loans and securities; and

• the interest expense we pay on our interest-bearing liabilities, such as deposits and borrowings.

A significant portion of our loans are fixed-rate one- to four-family residential mortgage loans, and like many savings institutions, our focus on deposit accounts as a source of funds, which have no stated maturity date or shorter contractual maturities, results in our liabilities having a shorter duration than our assets. For example, as of December 31, 2009, 22.5% of our loans had maturities of 15 years or longer, while 25.4% of our certificates of deposit had maturities of one year or less. This imbalance can create significant earnings volatility, because market interest rates change over time. In a period of rising interest rates, the interest income earned on our assets, such as loans and investments, may not increase as rapidly as the interest paid on our liabilities, such as deposits. In a period of declining interest rates, the interest income earned on our assets may decrease more rapidly than the interest paid on our liabilities, as borrowers prepay mortgage loans, and mortgage-backed securities and callable investment securities are called or prepaid, thereby requiring us to reinvest these funds at lower interest rates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Management of Market Risk.”

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Changes in interest rates also create reinvestment risk, which is the risk that we may not be able to reinvest prepayments at rates that are comparable to the rates we earned on the prepaid loans or securities in a declining interest rate environment.

Additionally, increases in interest rates may decrease loan demand and/or make it more difficult for borrowers to repay adjustable-rate loans. At December 31, 2009, $114.7 million, or 46.0% of our $249.1 million of our one- to four-family residential mortgage loans at such date had adjustable rates of interest. If interest rates increase, the rates on these loans will, in turn, increase, thereby increasing the risk that borrowers will not be able to repay these loans.

Changes in interest rates also affect the current fair value of our interest-earning securities portfolio. Generally, the value of securities moves inversely with changes in interest rates.

At December 31, 2009, the Office of Thrift Supervision “rate shock” analysis indicated that our net portfolio value (the difference between the present value of our assets and the present value of our liabilities) would decrease by $6.3 million, or 8.0%, if there was an instantaneous 200 basis point increase in market interest rates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Management of Market Risk.”

Concentration of loans in our primary market area, which has recently experienced an economic downturn, may increase risk.

Our success depends primarily on the general economic conditions in the Boston metropolitan area, as nearly all of our loans are to customers in these markets. Accordingly, the local economic conditions in this market have a significant impact on the ability of borrowers to repay loans as well as our ability to originate new loans. As such, a continuation of the weakness in real estate values in this market would also lower the value of the collateral securing loans on properties in our market. In addition, a continued weakening in general economic conditions caused by inflation, recession, unemployment or other factors beyond our control could negatively affect our financial results.

Risks Related to Recent Economic Conditions and Governmental Response Efforts

Our business has been and may continue to be adversely affected by current conditions in the financial markets and economic conditions generally. The global, United States and Massachusetts economies are experiencing significantly reduced business activity and consumer spending as a result of, among other factors, disruptions in the capital and credit markets. Dramatic declines in the housing market, with falling home prices and increasing foreclosures and unemployment, have resulted in significant write-downs of asset values by financial institutions, including government-sponsored entities and major commercial and investment banks. A sustained weakness or weakening in business and economic conditions generally or specifically in the principal markets in which we do business could have one or more of the following adverse effects on our business:

• a decrease in the demand for loans or other products and services offered by us;

• a decrease in the value of our loans or other assets secured by residential or commercial real estate;

• a decrease in deposit balances due to overall reductions in the accounts of customers;

• an impairment of our investment securities;

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• an increase in the number of borrowers who become delinquent, file for protection under bankruptcy laws or default on their loans or other obligations to us. An increase in the number of delinquencies, bankruptcies or defaults could result in a higher level of nonperforming assets, net charge-offs and provision for credit losses, which would reduce our earnings.

Loss of key personnel could adversely impact results.

Our success has been and will continue to be greatly influenced by our ability to retain the services of our existing senior management. We have benefited from consistency within our senior management team, with our top three executives averaging over 28 years of service with the Bank. Peoples Federal Bancshares, Inc. has entered into employment contracts with each of these top management officials. Nevertheless, the unexpected loss of the services of any of the key management personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse impact on our business and financial results.

Any future Federal Deposit Insurance Corporation insurance premium increases will adversely affect our earnings.

On May 22, 2009, the Federal Deposit Insurance Corporation adopted a final rule levying a five basis point special assessment on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009. We recorded an expense of $205,000 during the quarter ended June 30, 2009, to reflect the special assessment. Any further special assessments that the Federal Deposit Insurance Corporation levies will be recorded as an expense during the appropriate period. In addition, the Federal Deposit Insurance Corporation increased the general assessment rate and our prior credits for federal deposit insurance were fully utilized during the quarter ended June 30, 2009. Therefore, our Federal Deposit Insurance Corporation general insurance premium expense will increase compared to prior periods.

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and our income.

In response to the developments described above, Congress has taken actions that are intended to strengthen confidence and encourage liquidity in financial institutions, and the Federal Deposit Insurance Corporation has taken actions to increase insurance coverage on deposit accounts.

The potential exists for additional federal or state laws and regulations, or changes in policy, regarding lending and funding practices and liquidity standards, and bank regulatory agencies have been active in responding to concerns and trends identified in examinations, and have issued many formal enforcement orders. Bank regulatory agencies, such as the Office of Thrift Supervision and the Federal Deposit Insurance Corporation, govern the activities in which we may engage, primarily for the protection of depositors, and not for the protection or benefit of potential investors. In addition, new laws, regulations, and other regulatory changes may increase our costs of regulatory compliance and of doing business, and otherwise affect our operations. New laws, regulations, and other regulatory changes may significantly affect the markets in which we do business, the markets for and value of our loans and investments, and our ongoing operations, costs and profitability. Proposals limiting our rights as a creditor could result in credit losses or increased expense in pursuing our remedies as a creditor.

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Legislative proposals have been introduced that would eliminate our primary federal regulator, require Peoples Federal Savings Bank to convert to a national bank or state bank, and require Peoples Federal Bancshares, Inc. to become a bank holding company.

Legislation has been proposed that would implement sweeping changes to the current bank regulatory structure. The proposal would, among other things, merge the Office of Thrift Supervision into the Office of the Comptroller of the Currency. If the Office of Thrift Supervision is eliminated, Peoples Federal Bancshares, Inc. would become a bank holding company subject to regulation and supervision under the Bank Holding Company Act of 1956, and the supervision and regulation of the Board of Governors of the Federal Reserve System, including holding company regulatory capital requirements to which we would not be subject as a savings and loan holding company.

Future legislative or regulatory actions responding to perceived financial and market problems could impair our ability to collect our loans and foreclose on collateral.

There have been proposals made by members of Congress and others that would reduce the amount distressed borrowers are otherwise contractually obligated to pay under their mortgage loans and limit an institution’s ability to foreclose on mortgage collateral. Were proposals such as these, or other proposals limiting our rights as a creditor, to be implemented, we could experience increased credit losses or increased expense in pursuing our remedies as a creditor. In addition, there have been legislative proposals to create a federal consumer protection agency that may, among other powers, have the ability to limit our rights as a creditor.

If our investment in the common stock of the Federal Home Loan Bank of Boston is classified as other-than-temporarily impaired or as permanently impaired, our earnings and stockholders’ equity could decrease.

We own common stock of the Federal Home Loan Bank of Boston. We hold this stock to qualify for membership in the Federal Home Loan Bank System and to be eligible to borrow funds under the Federal Home Loan Bank of Boston’s advance program. The aggregate cost and fair value of our Federal Home Loan Bank of Boston common stock as of December 31, 2009 was $4.3 million based on its par value. Federal Home Loan Bank common stock is not a marketable security and can only be redeemed by the Federal Home Loan Bank. However, the Federal Home Loan Bank of Boston is currently not repurchasing excess stock outstanding.

In addition, Federal Home Loan Banks may be subject to accounting rules and asset quality risks that could materially lower their regulatory capital. In an extreme situation, it is possible that the capitalization of a Federal Home Loan Bank, including the Federal Home Loan Bank of Boston, could be substantially diminished or reduced to zero. Consequently, we believe that there is a risk that our investment in Federal Home Loan Bank of Boston common stock could be deemed impaired at some time in the future, and if this occurs, it would cause our earnings and stockholders’ equity to decrease by the after-tax amount of the impairment charge.

Our earnings have been negatively affected by the suspension of dividends by the Federal Home Loan Bank of Boston since the fourth quarter of 2008 on its common stock.

The Federal Home Loan Bank of Boston has not paid a dividend since the fourth quarter of 2008, and we may not receive dividends from the Federal Home Loan Bank of Boston in the near future. We received $135,000 in total dividends from the Federal Home Loan Bank of Boston during fiscal 2008, and

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the failure of the Federal Home Loan Bank of Boston to pay dividends for any quarter will reduce our earnings during that quarter. In addition, the Federal Home Loan Bank of Boston is an important source of liquidity for us, and any restrictions on their operations may hinder our ability to use it as a liquidity source.

Our branch network expansion strategy may negatively affect our financial performance.

We intend to expand our branch network by establishing up to four new branch offices in the next five years. This strategy may not generate earnings, or may not generate earnings within a reasonable period of time. Numerous factors contribute to the performance of a new branch, such as a suitable location, qualified personnel, and an effective marketing strategy. Additionally, it takes time for a new branch to originate sufficient loans and generate sufficient deposits to produce enough income to offset expenses, some of which, like salaries and occupancy expense, are relatively fixed costs.

Strong competition within our market areas may limit our growth and profitability.

Competition in the banking and financial services industry is intense. In our market areas, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Some of our competitors have greater name recognition and market presence that benefit them in attracting business, and offer certain services that we do not or cannot provide. In addition, larger competitors may be able to price loans and deposits more aggressively than we do, which could affect our ability to grow and remain profitable on a long-term basis. Our profitability depends upon our continued ability to successfully compete in our market areas. If we must raise interest rates paid on deposits or lower interest rates charged on our loans, our net interest margin and profitability could be adversely affected. For additional information see “Business of Peoples Federal Savings Bank—Competition.”

We may face increasing deposit-pricing pressures, which may, among other things, reduce our profitability.

Checking and savings account balances and other forms of deposits can decrease when our deposit customers perceive alternative investments, such as the stock market or other non-depository investments, as providing superior expected returns or seek to spread their deposits over several banks to maximize FDIC insurance coverage. Furthermore, technology and other changes have made it more convenient for bank customers to transfer funds into alternative investments, including products offered by other financial institutions or non-bank service providers. Additional increases in short-term interest rates could increase transfers of deposits to higher yielding deposits. Efforts and initiatives we undertake to retain and increase deposits, including deposit pricing, can increase our costs. When bank customers move money out of bank deposits in favor of alternative investments or into higher yielding deposits, or spread their accounts over several banks, we can lose a relatively inexpensive source of funds, thus increasing our funding costs.

Technological advances impact our business.

The banking industry is undergoing technological changes with frequent introductions of new technology-driven products and services. In addition to improving customer services, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend, in part, on our ability to address the needs of our customers by using technology to provide

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products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in operations. Many competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or successfully market such products and services to our customers.

Our information systems may experience an interruption or breach in security.

We rely heavily on communications and information systems to conduct our business. Any failure, interruption, or breach in security or operational integrity of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan, and other systems. While we have policies and procedures designed to prevent or limit the effect of the failure, interruption, or security breach of our information systems, we cannot assure you that any such failures, interruptions, or security breaches will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions, or security breaches of our information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

Risks Related to this Stock Offering

The future price of the shares of common stock may be less than the purchase price in the stock offering.

If you purchase shares of common stock in the stock offering, you may not be able to sell them at or above the purchase price in the stock offering. The aggregate purchase price of the shares of common stock sold in the offering is determined by an independent, third-party appraisal, pursuant to federal banking regulations and subject to review and approval by the Office of Thrift Supervision. The appraisal is not intended, and should not be construed, as a recommendation of any kind as to the advisability of purchasing shares of common stock. Following the completion of the stock offering, our aggregate pro forma market value will be based on the market trading price of the shares, and not the final, approved independent appraisal, which may result in our stock trading below the initial offering price of $10.00 per share.

Our return on equity will be low following the stock offering. This could negatively affect the trading price of our shares of common stock.

Net income divided by average equity, known as “return on equity,” is a ratio many investors use to compare the performance of a financial institution to its peers. Following the conversion, we expect our consolidated equity to be between $88.4 million at the minimum of the offering range and $109.5 million at the adjusted maximum of the offering range. Based upon our net income for the fiscal year ended September 30, 2009, and these pro forma equity levels, our return on equity would be 3.02% and 2.44% at the minimum and adjusted maximum of the offering range, respectively. We expect our return on equity to remain low until we are able to leverage the additional capital we receive from the stock offering. Although we will be able to increase net interest income using proceeds of the stock offering, our return on equity will be negatively affected by our increased capital resulting from the proceeds from the offering as well as higher expenses from the costs of being a public company and added expenses associated with our employee stock ownership plan and the stock-based benefit plan we intend to adopt. Until we can increase our net interest income and non-interest income and leverage the capital raised in the stock offering, we expect our return on equity to remain low, which may reduce the value of our shares of common stock.

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The contribution of shares to the charitable foundation will dilute your ownership interest and adversely affect net income in 2010.

We intend to establish and fund a charitable foundation in connection with the conversion and stock offering. We will contribute stock equal to 8% of the shares sold in the offering to the charitable foundation. The contribution of shares of common stock will total $3.4 million at the minimum of the offering range, up to a contribution of $5.3 million at the maximum, as adjusted of the offering range. At the midpoint of the offering range, we will contribute $4.0 million (400,000 shares) of common stock to the charitable foundation. The aggregate contribution will also have an adverse effect on our net income for the quarter and year in which we make the issuance and contribution to the charitable foundation. The after-tax expense of the contribution will reduce net income in fiscal 2010 by approximately $2.4 million at the midpoint of the offering range. We had net income of $2.7 million for fiscal 2009. Persons purchasing shares in the stock offering will have their ownership and voting interests in Peoples Federal Bancshares, Inc. diluted by up to 7.4% due to the issuance of shares of common stock to the charitable foundation.

Our contribution to the charitable foundation may not be tax deductible, which could reduce our profits.

We believe that the contribution to the charitable foundation will be deductible for federal income tax purposes. However, the Internal Revenue Service may disagree with our determination and not grant tax-exempt status to the charitable foundation. If the contribution is not deductible, we would not receive any tax benefit from the contribution. The value of the contribution would be $5.3 million in shares of common stock at the maximum, as adjusted, of the offering range, which would result in after-tax expense of approximately $3.2 million during 2010. In the event that the Internal Revenue Service does not grant tax-exempt status to the charitable foundation or the contribution to the charitable foundation is otherwise not tax deductible, we would recognize as after-tax expense the value of the entire contribution, or $5.3 million at the maximum, as adjusted, of the offering range.

In addition, even if the contribution is tax deductible, we may not have sufficient profits to be able to use the deduction fully. Pursuant to the Internal Revenue Code, an entity is permitted to deduct up to 10% of its taxable income (income before income taxes) in any one year for charitable contributions. Any contribution in excess of the 10% limit may be deducted for federal income tax purposes over each of the five years following the year in which the charitable contribution is made. Accordingly, a charitable contribution could, if necessary, be deducted over a six-year period. Based on $4.4 million of income before income tax expense in fiscal 2009, and assuming that our income before income tax expense remained at that level in future years following our conversion and stock offering, we estimate that we would be able to deduct for federal income tax purposes only $2.64 million of the contribution to the charitable foundation. This would result in after-tax expense of $1.58 million at the midpoint of the offering range, and not $2.64 million as we currently estimate.

We will need to implement additional finance and accounting systems, procedures and controls in order to satisfy our new public company reporting requirements.

Upon completion of the stock offering, we will become a public reporting company. The federal securities laws and regulations of the Securities and Exchange Commission require that we file annual, quarterly and current reports, and that we maintain effective disclosure controls and procedures and

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internal controls over financial reporting. We expect that the obligations of being a public company, including substantial public reporting obligations, will require significant expenditures and place additional demands on our management team. These obligations will increase our operating expenses and could divert management’s attention from our banking operations.

Compliance with the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the Securities and Exchange Commission will require us to certify the adequacy of our internal controls and procedures, which could require us to upgrade our systems, and/or hire additional staff, which would increase our operating costs.

Our stock-based benefit plans will increase our costs, which will reduce our income.

We anticipate that our employee stock ownership plan will purchase 8% of the total shares of common stock issued in the stock offering (including shares contributed to the charitable foundation) with funds borrowed from Peoples Federal Bancshares, Inc. or a subsidiary. We will record annual employee stock ownership plan expense in an amount equal to the fair value of shares of common stock committed to be released to employees. Assuming the employee stock ownership plan purchases 571,320 shares in the offering at the adjusted maximum of the offering range, we will recognize additional pre-tax compensation expense of $5.7 million over a 20-year period, assuming the shares of common stock have a fair market value of $10.00 per share for the full 20-year period. If shares of common stock appreciate in value over time, compensation expense relating to the employee stock ownership plan will increase.

We also intend to adopt a stock-based benefit plan after the stock offering that would award participants shares of our common stock (at no cost to them) and/or options to purchase shares of our common stock. The number of shares of restricted stock or stock options reserved for issuance under any initial stock-based benefit plan may not exceed 4% and 10%, respectively, of our total shares issued in the offering including shares contributed to the charitable foundation, if these plans are adopted within 12 months after the completion of the conversion. We may grant shares of common stock and stock options in excess of these amounts provided the stock-based benefit plan is adopted more than one year following the stock offering. Assuming a $10.00 per option exercise price and an estimated grant-date fair value of the options utilizing a Black-Scholes option pricing analysis of $5.44 per option granted, with the value amortized over a five-year vesting period, the corresponding annual pre-tax expense associated with the stock options would be $777,000 at the adjusted maximum of the offering range. In addition, assuming that all shares of restricted stock are awarded at a price of $10.00 per share, and that the awards vest over a five-year period, the corresponding annual pre-tax expense associated with restricted stock awarded under the stock-based benefit plan would be $571,000 at the adjusted maximum of the offering range. However, if we grant shares of common stock or options in excess of these amounts, such grants would increase our costs further.

The shares of restricted stock granted under the stock-based benefit plan will be expensed by us over their vesting period at the fair market value of the shares on the date they are awarded. If the shares of restricted stock to be granted under the plan are repurchased in the open market (rather than issued directly from authorized but unissued shares by Peoples Federal Bancshares, Inc.) and cost the same as the purchase price in the stock offering, the reduction to stockholders’ equity due to the plan would be between $1.8 million at the minimum of the offering range and $2.9 million at the adjusted maximum of the offering range. To the extent we repurchase shares of common stock in the open market to fund the grants of shares under the plan, and the price of such shares exceeds the offering price of $10.00 per share, the reduction to stockholders’ equity would exceed the range described above. Conversely, to the extent the price of such shares is below the offering price of $10.00 per share, the reduction to stockholders’ equity would be less than the range described above.

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The implementation of stock-based benefit plans may dilute your ownership interest. Historically, stockholders have approved these stock-based benefit plans.

We intend to adopt one or more stock-based benefit plans, which will allow participants to be awarded shares of common stock (at no cost to them) or options to purchase shares of our common stock, following the stock offering. These stock-based benefit plans will be funded through either open market purchases of shares of common stock or from the issuance of authorized but unissued shares of common stock. Our ability to repurchase shares of common stock to fund these plans will be subject to many factors, including, but not limited to, applicable regulatory restrictions on stock repurchases, the availability of stock in the market, the trading price of the stock, our capital levels, alternative uses for our capital and our financial performance. Although our current intention is to fund these plans with stock repurchases, we may not be able to conduct such repurchases. If we do not repurchase shares of common stock to fund these plans, then stockholders would experience a reduction in their ownership interest, which would total 12.3% in the event newly issued shares are used to fund stock options and awards of shares of common stock under these plans in an amount equal to 10% or 4%, respectively, of the shares issued in the stock offering. We may grant shares of common stock and stock options in excess of these amounts provided the stock-based benefit plan is adopted more than one year following the completion of the stock offering.

Although the implementation of the stock-based benefit plan will be subject to stockholder approval, historically, the overwhelming majority of stock-based benefit plans adopted by savings institutions and their holding companies following mutual-to-stock conversions have been approved by stockholders.

We have not determined whether we will adopt stock-based benefit plans more than one year following the stock offering. Stock-based benefit plans adopted more than one year following the stock offering may exceed regulatory restrictions on the size of stock-based benefit plans adopted within one year, which would further increase our costs.

If we adopt stock-based benefit plans more than one year following the completion of the stock offering, then grants of shares of common stock or stock options under our stock-based benefit plans may exceed 4% and 10%, respectively, of the total shares issued in the offering, including shares contributed to our charitable foundation. Stock-based benefit plans that provide for awards in excess of these amounts would increase our costs beyond the amounts estimated in “—Our stock-based benefit plans will increase our costs, which will reduce our income.” Stock-based benefit plans that provide for awards in excess of these amounts could also result in dilution to stockholders in excess of that described in “—The implementation of stock-based benefit plans will dilute your ownership interest.” Although the implementation of the stock-based benefit plan will be subject to stockholder approval, the determination as to the timing of the implementation of such a plan will be at the discretion of our Board of Directors.

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We have entered into employment agreements with certain of our officers which may increase our compensation costs or increase the cost of acquiring us.

We have entered into employment agreements with Maurice H. Sullivan, Jr., our Chairman and Chief Executive Officer, Thomas J. Leetch, Jr., our President and Chief Operating Officer, James J. Gavin, our Executive Vice President, and with two other executive officers. In the event of termination of employment of any of these individuals other than for cause, or in the event of certain types of termination following a change in control, as set forth in the employment agreements, and assuming the agreements were in effect, the employment agreements provide for cash severance benefits that would cost up to approximately $4.23 million in the aggregate based on information as of December 31, 2009. For additional information see “Management of Peoples Federal Bancshares, Inc.—Executive Officer Compensation.”

We have broad discretion in using the proceeds of the stock offering. Our failure to effectively use such proceeds could reduce our profits.

We will use a portion of the net proceeds to finance or to capitalize a subsidiary which will finance the purchase of shares of common stock in the stock offering by the employee stock ownership plan, and may use the remaining net proceeds to pay dividends to stockholders, repurchase shares of common stock, purchase investment securities, deposit funds in Peoples Federal Savings Bank, acquire other financial services companies or branch offices or for other general corporate purposes. Peoples Federal Savings Bank may use the proceeds it receives to fund new loans, establish or acquire new branches, purchase investment securities, reduce a portion of our borrowings, or for general corporate purposes. We have not identified specific amounts of proceeds for any of these purposes and we will have significant flexibility in determining the amount of net proceeds we apply to different uses and the timing of such applications. Our failure to utilize these funds effectively could reduce our profitability. We have not established a timetable for the effective deployment of the proceeds and we cannot predict how long we will require to effectively deploy the proceeds.

Our stock value may be negatively affected by federal regulations that restrict takeovers.

For three years following the stock offering, Office of Thrift Supervision regulations prohibit any person from acquiring or offering to acquire more than 10% of our common stock without the prior written approval of the Office of Thrift Supervision. See “Restrictions on Acquisition of Peoples Federal Bancshares, Inc.” for a discussion of applicable Office of Thrift Supervision regulations regarding acquisitions.

The corporate governance provisions in our articles of incorporation and bylaws, Peoples Federal Savings Bank’s federal stock charter and the corporate governance provisions under Maryland law, may prevent or impede the holders of our common stock from obtaining representation on our board of directors and may impede takeovers of the company.

Provisions in our articles of incorporation and bylaws, as well as the federal stock charter of Peoples Federal Savings Bank, may prevent or impede holders of our common stock from obtaining representation on our Board of Directors and may make takeovers of Peoples Federal Bancshares, Inc. more difficult. For example, our Board of Directors is divided into three staggered classes. A classified board makes it more difficult for stockholders to change a majority of the directors because it generally takes at least two annual elections of directors for this to occur. In addition, our articles of incorporation include a provision that no person will be entitled to vote any shares of our common stock in excess of 10% of our outstanding shares of common stock. This limitation does not apply to the purchase of shares

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by a tax-qualified employee stock benefit plan established by us. Peoples Federal Savings Bank’s federal stock charter will contain a provision that for a period of five years from the closing of the conversion, no person other than Peoples Federal Bancshares, Inc. may offer directly or indirectly to acquire the beneficial ownership of more than 10% of any class of equity security of Peoples Federal Savings Bank. This limitation does not apply to the purchase of shares by a tax-qualified employee stock benefit plan established by us, as well as other acquisitions specified in the federal stock charter. In addition, our articles of incorporation and bylaws restrict who may call special meetings of stockholders and how directors may be removed from office. Additionally, in certain instances, the Maryland General Corporation Law requires a supermajority vote of our stockholders to approve a merger or other business combination with a large stockholder, if the proposed transaction is not approved by a majority of our directors.

The current bylaws of Peoples Federal Bancshares MHC and Peoples Federal Savings Bank contain residency and integrity qualifications for all of our board members. The current bylaws of Peoples Federal Bancshares, Inc. contain similar provisions but only require that a majority of the Board meet such residency requirements. After the Conversion, we intend to review our board qualification standards set forth in our bylaws and may adopt revised board qualification standards. These revised board qualification standards would include residency requirements for all board members, limitations on the ability of individuals affiliated with competing institutions to serve as board members of Peoples Federal Bancshares, Inc., and integrity provisions which limit individuals with past regulatory orders or sanctions from serving on the board. See “Restrictions on Acquisition of Peoples Federal Bancshares, Inc.”

Our stock value may be negatively affected by federal regulations that restrict stock repurchases.

Office of Thrift Supervision regulations restrict us from repurchasing our shares of common stock during the first year following the conversion unless extraordinary circumstances exist. Stock repurchases are a capital management tool that can enhance the value of a company’s stock, and our inability to repurchase our shares of common stock during the first year following the conversion may negatively affect our stock price.

We have never issued common stock and there is no guarantee that a liquid market will develop.

We have never issued capital stock and there is no established market for our common stock. We expect that our common stock will be listed for trading on the Nasdaq Capital Market under the symbol “PEOP,” subject to completion of the offering and compliance with certain conditions, including the presence of at least three registered and active market makers. Sandler O’Neill & Partners, L.P. has advised us that it intends to make a market in shares of our common stock following the offering, but it is under no obligation to do so or to continue to do so once it begins. While we will attempt before completion of the offering to obtain commitments from at least two other broker-dealers to make a market in shares of our common stock, we may not be able to obtain such commitments. This would result in our common stock not being listed for trading on the Nasdaq Capital Market, which could reduce the liquidity of our common stock.

We may take other actions to meet the minimum required sales of shares if we cannot find enough purchasers in the community. Such actions may reduce the net proceeds from the stock offering or concentrate ownership in fewer stockholders.

If we do not sell enough shares to reach the minimum of the offering range through the subscription and community offerings, shares may be offered for sale to the general public in a syndicated

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community offering to be managed by Sandler O’Neill & Partners, L.P., acting as our agent. The fee to be paid in connection with such a syndicated community offering would be higher than the fee paid in the subscription and community offerings, which would increase the expenses associated with the stock offering and reduce the net proceeds. Specifically, Sandler O’Neill & Partners, L.P. will receive a fee of 1.00% of the aggregate dollar amount of the common stock sold in the subscription offering and the community offering (less shares sold to the ESOP and to our insiders). If there is a syndicated community offering, Sandler O’Neill & Partners, L.P. will receive a fee not to exceed 6.00% of the aggregate dollar amount of the common stock sold in the syndicated community offering, which would be in addition to the fee earned by Sandler O’Neill & Partners, L.P. in the subscription and community offerings. In addition, we can increase the maximum purchase limitations and allow all maximum purchase subscribers to increase their orders to the new maximum purchase limitations. This could result in a small number of stockholders owning a larger percentage of our stock, which could provide these stockholders with greater influence over management or our board of directors in a manner that other stockholders may not agree is in their best interests.

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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following tables set forth selected consolidated historical financial and other data of Peoples Federal MHC and its subsidiary for the years and at the dates indicated. The information at September 30, 2009 and 2008 and for the fiscal years ended September 30, 2009 and 2008 is derived in part from, and should be read together with, the audited consolidated financial statements and notes thereto of Peoples Federal MHC beginning at page F-1 of this prospectus. The information at September 30, 2007 and 2006 and for the fiscal years ended September 30, 2007 and 2006 is derived in part from audited consolidated financial statements that are not included in this prospectus. The information at September 30, 2005 and for the fiscal year ended September 30, 2005 is derived in part from the audited financial statements of Peoples Federal MHC and from unaudited financial information for Brookline Co-Operative Bank. The information at and for the fiscal years ended September 30, 2006 and 2005 includes information for Brookline Co-Operative Bank which Peoples Federal Savings Bank acquired in September 2007.

The information at and for the three months ended December 31, 2009 and 2008 is unaudited. However, in the opinion of management of Peoples Federal MHC, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of operations for the unaudited periods have been made. The selected operating data presented below for the three months ended December 31, 2009, are not necessarily indicative of the results that may be expected for the year ending September 30, 2010 or for future periods. The following information is only a summary, and should be read in conjunction with our financial statements and notes beginning on page F-1 of this prospectus. Financial ratios for interim periods have been annualized.

	At December 31, 2009		At September 30,
			2009		2008		2007		2006		2005 (1)
	(unaudited)						(In thousands)
Selected Financial Condition Data:
Total assets	$	482,758	$	482,828	$	437,623	$	362,184	$	372,665	$	363,172
Total cash and cash equivalents		80,187		88,634		17,339		28,003		43,109		22,942
Investments in available-for-sale securities, at fair value		955		6,328		22,149		20,683		6,387		17,952
Investments in held-to-maturity securities		—		—		—		5,271		17,748		21,487
Loans held-for-sale		—		—		—		—		255		70
Loans, net		374,172		362,667		373,309		284,906		282,357		281,044
Cash surrender value of life insurance policies		11,349		11,249		10,858		10,439		10,026		6,215
Federal Home Loan Bank of Boston stock, at cost		4,339		4,339		4,339		2,760		2,882		2,682
Deposits		370,508		366,464		302,954		282,073		282,882		279,544
Federal Home Loan Bank of Boston advances		54,000		58,000		80,060		28,639		41,215		36,787
Total equity		51,652		50,943		48,274		46,305		44,478		41,405

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	Three Months Ended December 31,				Years Ended September 30,
	2009		2008		2009		2008		2007		2006			2005 (1)
	(unaudited)				(In thousands)
Selected Operating Data:
Interest and dividend income	$	5,207	$	5,981	$	22,614	$	22,096	$	22,395	$	21,516		$	19,156
Interest expense		1,793		2,354		8,687		9,272		9,649		7,844			5,382
Net interest and dividend income		3,414		3,627		13,927		12,824		12,746		13,672			13,774
Provision for loan losses		—		—		127		—		20		245			60
Net interest and dividend income after provision for loan losses		3,414		3,627		13,800		12,824		12,726		13,427			13,714
Net gain on sale of mortgage loans		73		1		307		24		24		197			153
Net gain on sale of available-for-sale securities		210		—		208		43		10		(188	)		312
Other noninterest income		368		353		1,301		1,342		1,258		1,118			1,106
Total noninterest income		651		354		1,816		1,409		1,292		1,127			1,571
Noninterest expense		2,651		2,445		11,263		10,866		11,036		9,606			9,384
Income before income taxes		1,414		1,536		4,353		3,367		2,982		4,948			5,901
Income taxes		556		602		1,681		1,294		1,178		2,009			2,375
Net income	$	858	$	934	$	2,672	$	2,073	$	1,804	$	2,939		$	3,526

	At or For the Three Months Ended December 31,				At or For the Years Ended September 30,
	2009		2008		2009		2008		2007		2006		2005
	(Unaudited)
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on assets (ratio of net income to average total assets) (2)	0.71	%	0.86	%	0.59	%	0.53	%	0.48	%	0.80	%	0.99	%
Return on equity (ratio of net income to average equity) (2)	6.69	%	7.64	%	5.32	%	4.38	%	3.92	%	6.85	%	8.72	%
Interest rate spread (2) (3)	2.79	%	3.14	%	2.97	%	3.02	%	3.20	%	3.59	%	3.84	%
Net interest margin (2)(4)	3.02	%	3.55	%	3.31	%	3.54	%	3.66	%	4.01	%	4.14	%
Efficiency ratio (5)	65.22	%	61.42	%	71.54	%	76.34	%	78.62	%	64.91	%	61.15	%
Noninterest expense to average total assets (2)	2.18	%	2.24	%	2.50	%	2.79	%	2.94	%	2.63	%	2.64	%
Average interest-earning assets to average interest-bearing liabilities	114.32	%	117.91	%	116.46	%	120.20	%	116.65	%	118.23	%	118.90	%
Average equity to average total assets	10.57	%	11.22	%	11.16	%	12.16	%	12.28	%	11.73	%	11.40	%
Asset Quality Ratios:
Non-performing assets to total assets	1.08	%	0.67	%	1.19	%	0.81	%	0.35	%	0.16	%	0.01	%
Non-performing loans to total loans	1.39	%	0.79	%	1.56	%	0.94	%	0.43	%	0.21	%	0.01	%
Allowance for loan losses to non-performing loans	60.15	%	110.43	%	55.97	%	90.21	%	263.85	%	557.65	%	10,679.30	%
Allowance for loan losses to total loans	0.83	%	0.87	%	0.88	%	0.85	%	1.15	%	1.16	%	1.09	%
Net charge-offs to average loans outstanding (1)	0.01	%	—	%	0.04	%	0.03	%	0.01	%	0.01	%	0.02	%
Capital Ratios:
Total capital (to risk-weighted assets)	17.27	%	16.73	%	16.93	%	16.13	%	18.48	%	18.02	%	16.97	%
Tier 1 capital (to risk-weighted assets)	16.30	%	15.70	%	15.95	%	15.11	%	17.23	%	16.79	%	15.78	%
Tier 1 capital (to average assets)	10.68	%	11.21	%	10.48	%	10.89	%	12.60	%	11.86	%	11.29	%
Other Data:
Number of full service offices	6		6		6		6		6		6		6

(1) Information at and for the fiscal year ended September 30, 2005 is unaudited.

(2) Ratios for the three months ended December 31, 2009 and 2008 are annualized.

(3) The interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted- average cost of interest-bearing liabilities for the period.

(4) The net interest margin represents net interest income as a percent of average interest-earning assets for the period.

(5) The efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

• statements of our goals, intentions and expectations;

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

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

• estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this prospectus.

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

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

• competition among depository and other financial institutions;

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

• adverse changes in the securities markets;

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

• our ability to enter new markets successfully and capitalize on growth opportunities;

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

• changes in consumer spending, borrowing and savings habits;

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

• changes in our organization, compensation and benefit plans;

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

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

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Please see “Risk Factors” beginning on page 15.

HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING

Although we cannot determine what the actual net proceeds from the sale of the shares of common stock in the offering will be until the offering is completed, we anticipate that the net proceeds will be between $40.9 million and $55.7 million, or $64.3 million if the offering range is increased by 15%.

We intend to distribute the net proceeds from the stock offering as follows:

	Based Upon the Sale at $10.00 Per Share of
	4,250,000 Shares					5,000,000 Shares					5,750,000 Shares					6,612,500 Shares (1)
	Amount			Percent of Net Proceeds		Amount			Percent of Net Proceeds		Amount			Percent of Net Proceeds		Amount			Percent of Net Proceeds
	(Dollars in thousands)
Stock offering proceeds	$	42,500				$	50,000				$	57,500				$	66,125
Less offering expenses		(1,648	)				(1,717	)				(1,785	)				(1,864	)
Net offering proceeds (2)	$	40,852		100.0	%	$	48,283		100.0	%	$	55,715		100.0	%	$	64,261		100.0	%
Use of net proceeds:
To Peoples Federal Savings Bank	$	20,426		50.0	%	$	24,142		50.0	%	$	27,858		50.0	%	$	32,131		50.0	%
To fund loan to employee stock ownership plan (3)	$	3,672		9.0	%	$	4,320		8.9	%	$	4,968		8.9	%	$	5,713		8.9	%
Retained by Peoples Federal Bancshares, Inc.	$	16,754		41.0	%	$	19,822		41.1	%	$	22,890		41.1	%	$	26,417		41.1	%

(1) As adjusted to give effect to an increase in the number of shares, which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(2) Assumes all shares of common stock are sold in the subscription offering and/or the community offering.

(3) We may capitalize a subsidiary that will loan the funds to the employee stock ownership plan.

Payments for shares of common stock made through withdrawals from existing deposit accounts will not result in the receipt of new funds for investment but will result in a reduction of Peoples Federal Savings Bank’s deposits. The net proceeds may vary because the total expenses relating to the offering may be more or less than our estimates. For example, our expenses would increase if a syndicated community offering were used to sell shares of common stock not purchased in the subscription and community offerings.

Peoples Federal Bancshares, Inc. may use the proceeds it retains from the stock offering:

• to invest in mortgage-backed securities and debt securities issued by the United States Government and United States Government-sponsored agencies or entities;

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• to finance the acquisition of financial institutions or other financial service companies or the deposits and assets of other institutions, including in FDIC-assisted transactions of failed institutions;

• to pay cash dividends to stockholders;

• to repurchase shares of our common stock; and

• for other general corporate purposes, including depositing such funds with, or making additional capital contributions to, Peoples Federal Savings Bank.

With the exception of the funding of the loan to the employee stock ownership plan (or funding a subsidiary which will make this loan), Peoples Federal Bancshares, Inc. has not quantified its plans for use of the offering proceeds for each of the foregoing purposes. Initially, we intend to invest a substantial portion of the net proceeds in short-term investments, U.S. Government Agency securities and mortgage-backed securities.

Under current Office of Thrift Supervision regulations, we may not repurchase shares of our common stock during the first year following the conversion, except to fund equity benefit plans other than stock options or except when extraordinary circumstances exist and with prior regulatory approval.

Peoples Federal Savings Bank intends to invest the remaining proceeds it receives from the offering initially in short-term investments, U.S. Government Agency securities and mortgage-backed securities. Over time, Peoples Federal Savings Bank may use the proceeds that it receives from the stock offering as follows:

• to fund new loans;

• to repay borrowings;

• to invest in mortgage-backed securities and debt securities issued by the United States Government and United States Government-sponsored agencies or entities;

• to expand its banking franchise by establishing or acquiring new branches, or by acquiring other financial institutions, or the deposits and assets of other institutions, including in FDIC-assisted transactions of failed institutions, or other financial services companies; and

• for other general corporate purposes.

Peoples Federal Savings Bank has not quantified its plans for use of the offering proceeds for each of the foregoing purposes. Our short-term and long-term growth plans anticipate that, upon completion of the offering, we will experience growth through increased lending and investment activities and, possibly, acquisitions. We currently have no understandings or agreements to acquire other banks, thrifts, branches thereof or other financial services companies. There can be no assurance that we would be able to consummate any acquisition.

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OUR POLICY REGARDING DIVIDENDS

Following completion of the stock offering, our Board of Directors will have the authority to declare dividends on our shares of common stock, subject to statutory and regulatory requirements. However, no decision has been made with respect to the payment of dividends. In determining whether to pay a cash dividend and the amount of such cash dividend, the Board of Directors is expected to take into account a number of factors, including capital requirements, our consolidated financial condition and results of operations, tax considerations, statutory and regulatory limitations and general economic conditions. No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in the future. Special cash dividends, stock dividends or returns of capital, to the extent permitted by Office of Thrift Supervision policy and regulations, may be paid in addition to, or in lieu of, regular cash dividends. We will file a consolidated tax return with Peoples Federal Savings Bank. Accordingly, it is anticipated that any cash distributions made by us to our stockholders would be treated as cash dividends and not as a non-taxable return of capital for federal and state tax purposes. Additionally, pursuant to Office of Thrift Supervision regulations, during the three-year period following the stock offering, we will not take any action to declare an extraordinary dividend to stockholders that would be treated by recipients as a tax-free return of capital for federal income tax purposes.

Pursuant to our Articles of Incorporation, we are authorized to issue preferred stock. If we issue preferred stock, the holders thereof may have a priority over the holders of our shares of common stock with respect to the payment of dividends. For a further discussion concerning the payment of dividends on our shares of common stock, see “Description of Capital Stock—Common Stock.” Initially, dividends we can declare and pay will depend upon the proceeds retained from the stock offering and the earnings received from the investment of those proceeds. In the future, dividends will depend in large part upon receipt of dividends from Peoples Federal Savings Bank, because we expect to have limited sources of income other than dividends from Peoples Federal Savings Bank and interest payments received in connection with the loan to the employee stock ownership plan (which will be funded through a subsidiary formed solely for the purpose of making the loan to the employee stock ownership plan).

A regulation of the Office of Thrift Supervision imposes limitations on capital distributions by savings institutions. See “Supervision and Regulation—Federal Banking Regulation—Capital Distributions.”

Any payment of dividends by Peoples Federal Savings Bank to us that would be deemed to be drawn out of Peoples Federal Savings Bank’s bad debt reserves, if any, would require a payment of taxes at the then-current tax rate by Peoples Federal Savings Bank on the amount of earnings deemed to be removed from the reserves for such distribution. See “Supervision and Regulation—Federal Banking Regulation—Capital Distributions.” Peoples Federal Savings Bank does not intend to make any distribution to us that would create such a federal tax liability. See “Taxation—Federal Taxation” and “—State Taxation.”

MARKET FOR THE COMMON STOCK

We have never issued capital stock and there is no established market for our shares of common stock. We expect that our shares of common stock will be listed for trading on the Nasdaq Capital Market under the symbol “PEOP,” subject to completion of the offering and compliance with certain conditions, including the presence of at least three registered and active market makers. Sandler O’Neill & Partners, L.P. has advised us that it intends to make a market in shares of our common stock following the offering, but it is under no obligation to do so or to continue to do so once it begins. While we will attempt before completion of the offering to obtain commitments from at least two other broker-dealers to make a market in shares of our common stock, there can be no assurance that we will be successful in obtaining such commitments.

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

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HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE

At December 31, 2009, Peoples Federal Savings Bank exceeded all of the applicable regulatory capital requirements. The table below sets forth the historical equity capital and regulatory capital of Peoples Federal Savings Bank at December 31, 2009, and the pro forma regulatory capital of Peoples Federal Savings Bank, after giving effect to the sale of shares of common stock at a $10.00 per share purchase price. The table assumes the receipt by Peoples Federal Savings Bank of 50% of the net offering proceeds. See “How We Intend to Use the Proceeds from the Offering.”

	Peoples Federal Savings Bank Historical at December 31, 2009				Pro Forma at December 31, 2009, Based Upon the Sale in the Offering of (5)
					4,250,000 Shares					5,000,000 Shares					5,750,000 Shares					6,612,500 Shares (1)
	Amount		Percent of Assets (2)		Amount			Percent of Assets (2)		Amount			Percent of Assets (2)		Amount			Percent of Assets (2)		Amount			Percent of Assets (2)
	(Dollars in thousands)
Equity	$	51,550	10.68	%	$	66,468		13.22	%	$	69,212		13.66	%	$	71,956		14.10	%	$	75,111		14.60	%
Tangible capital (3)(4)	$	51,510	10.68	%	$	66,428		13.21	%	$	69,172		13.65	%	$	71,916		14.09	%	$	75,071		14.59	%
Tangible requirement		7,237	1.50			7,543		1.50			7,599		1.50			7,655		1.50			7,719		1.50
Excess	$	44,273	9.18	%	$	58,885		11.71	%	$	61,573		12.15	%	$	64,261		12.59	%	$	67,352		13.09	%
Core capital (3)(4)	$	51,510	10.68	%	$	66,428		13.21	%	$	69,172		13.65	%	$	71,916		14.09	%	$	75,071		14.59	%
Core requirement		19,298	4.00			20,115		4.00			20,264		4.00			20,413		4.00			20,584		4.00
Excess	$	32,212	6.68	%	$	46,313		9.21	%	$	48,908		9.65	%	$	51,503		10.09	%	$	54,487		10.59	%
Tier 1 risk-based capital	$	51,510	16.30	%	$	66,428		20.36	%	$	69,172		21.08	%	$	71,916		21.79	%	$	75,071		22.60	%
Risk-based requirement		12,642	4.00			13,051		4.00			13,125		4.00			13,200		4.00			13,285		4.00
Excess	$	38,868	12.30	%	$	53,377		16.36	%	$	56,047		17.08	%	$	58,716		17.79	%	$	61,786		18.60	%
Total risk-based capital (3)	$	54,570	17.27	%	$	69,488		21.30	%	$	72,232		22.01	%	$	74,976		22.72	%	$	78,131		23.52	%
Risk-based requirement		25,285	8.00			26,102		8.00			26,251		8.00			26,399		8.00			26,570		8.00
Excess	$	29,285	9.27	%	$	43,386		13.30	%	$	45,981		14.01	%	$	48,577		14.72	%	$	51,561		15.52	%
Reconciliation of capital infused into Peoples Federal Savings Bank:
Net proceeds					$	20,426				$	24,142				$	27,858				$	32,131
Less: Common stock acquired by employee stock ownership plan						(3,672	)				(4,320	)				(4,968	)				(5,713	)
After-tax contribution of shares to charitable foundation						(1,836	)				(2,160	)				(2,484	)				(2,857	)
Pro forma increase					$	14,918				$	17,662				$	20,406				$	23,561

(1) As adjusted to give effect to an increase in the number of shares which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(2) The current Office of Thrift Supervision core capital requirement for financial institutions is 3% of total adjusted assets for financial institutions that receive the highest supervisory rating for safety and soundness and a 4% to 5% core capital ratio requirement for all other financial institutions.

(3) Tangible and core capital levels are shown as a percentage of total adjusted assets. Risk-based capital levels are shown as a percentage of risk-weighted assets.

(4) Pro forma capital levels assume that the employee stock ownership plan purchases 8% of the shares of common stock to be outstanding immediately following the stock offering (including shares contributed to the charitable foundation) with funds borrowed from Peoples Federal Bancshares, Inc. or a subsidiary. Pro forma generally accepted accounting principles (“GAAP”) and regulatory capital have been reduced by the amount required to fund this plan. See “Management of Peoples Federal Bancshares, Inc.” for a discussion of the employee stock ownership plan.

(5) Pro forma amounts and percentages assume net proceeds are invested in assets that carry a 50% risk weighting.

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CAPITALIZATION

The following table presents the historical consolidated capitalization of Peoples Federal MHC at December 31, 2009 and the pro forma consolidated capitalization of Peoples Federal Bancshares, Inc., after giving effect to the conversion and the offering, based upon the assumptions set forth in the “Pro Forma Data” section.

	Peoples Federal MHC Historical at December 31, 2009			Peoples Federal Bancshares, Inc. Pro Forma, Based Upon the Sale in the Offering at $10.00 per Share of
				4,250,000 Shares			5,000,000 Shares			5,750,000 Shares			6,612,500 Shares (1)
	(Dollars in thousands)
Deposits (2)	$	370,508		$	370,508		$	370,508		$	370,508		$	370,508
Borrowings		54,000			54,000			54,000			54,000			54,000
Total deposits and borrowed funds	$	424,508		$	424,508		$	424,508		$	424,508		$	424,508
Stockholders’ equity:
Preferred stock $0.01 par value, 50,000,000 shares authorized; none issued or outstanding	$	—		$	—		$	—		$	—		$	—
Common stock $0.01 par value, 100,000,000 shares authorized; assuming shares outstanding as shown (3)(4)		—			46			54			62			71
Additional paid-in capital (4)		—			44,206			52,229			60,253			69,480
Retained earnings (5)		51,628			51,628			51,628			51,628			51,628
Less: Expense of stock contribution to charitable foundation		—			(3,400	)		(4,000	)		(4,400	)		(5,290	)
Plus:
Tax benefit of shares contributed to charitable foundation		—			1,367			1,608			1,849			2,127
Accumulated other comprehensive income		24			24			24			24			24
Common stock to be acquired by employee stock ownership plan (6)		—			(3,672	)		(4,320	)		(4,968	)		(5,713	)
Common stock to be acquired by stock-based benefit plans (7)		—			(1,836	)		(2,160	)		(2,484	)		(2,857	)
Total stockholders’ equity	$	51,652		$	88,363		$	95,063		$	101,764		$	109,470
Pro forma shares outstanding:
Shares issued to charitable foundation		—			340,000			400,000			460,000			529,000
Shares offered for sale in offering					4,250,000			5,000,000			5,750,000			6,612,500
Total shares outstanding					4,590,000			5,400,000			6,210,000			7,141,500
Total stockholders’ equity as a percentage of total assets (2)		10.70	%		17.01	%		18.07	%		19.10	%		20.25	%

(1) As adjusted to give effect to an increase in the number of shares of common stock that could occur due to a 15% increase in the offering range to reflect demand for shares or changes in market conditions following the commencement of the subscription and community offerings.

(2) Does not reflect withdrawals from deposit accounts for the purchase of shares of common stock in the conversion and offering. These withdrawals would reduce pro forma deposits and assets by the amount of the withdrawals.

(3) No effect has been given to the issuance of additional shares of Peoples Federal Bancshares, Inc. common stock pursuant to one or more stock-based benefit plans. If these plans are implemented within 12 months following the completion of the stock offering, an amount up to 10% and 4% of the shares of Peoples Federal Bancshares, Inc. common stock issued in the offering, including shares contributed to the charitable foundation, will be reserved for issuance upon the exercise of stock options and for issuance as restricted stock awards, respectively. See “Management of Peoples Federal Bancshares, Inc.”

(4) The sum of the par value of the total shares outstanding and additional paid-in capital equals the net stock offering proceeds at the offering price of $10.00 per share.

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(5) The retained earnings of Peoples Federal Savings Bank will be substantially restricted after the conversion. See “Our Policy Regarding Dividends,” “The Conversion—Liquidation Rights” and “Supervision and Regulation.”

(6) Assumes that 8% of the shares issued in the offering, including shares contributed to the charitable foundation, will be acquired by the employee stock ownership plan financed by a loan from Peoples Federal Bancshares, Inc. or a subsidiary. The loan will be repaid principally from Peoples Federal Savings Bank’s contributions to the employee stock ownership plan. Since Peoples Federal Bancshares, Inc. or a subsidiary will finance the employee stock ownership plan debt, this debt will be eliminated through consolidation and no asset or liability will be reflected on Peoples Federal Bancshares, Inc.’s consolidated financial statements. Accordingly, the amount of shares of common stock acquired by the employee stock ownership plan is shown in this table as a reduction of total stockholders’ equity.

(7) Assumes a number of shares of common stock equal to 4% of the shares of common stock to be issued in the offering, including shares contributed to the charitable foundation, will be purchased for grant by one or more stock-based benefit plans in open market purchases. The dollar amount of common stock to be purchased is based on the $10.00 per share subscription price in the offering and represents unearned compensation. This amount does not reflect possible increases or decreases in the value of common stock relative to the subscription price in the offering. As Peoples Federal Bancshares, Inc. accrues compensation expense to reflect the vesting of shares pursuant to the stock-based benefit plans, the credit to equity will be offset by a charge to noninterest expense. Implementation of the stock stock-based benefit plans will require stockholder approval. The funds to be used by the stock-based benefit plans will be provided by Peoples Federal Bancshares, Inc.

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PRO FORMA DATA

The following tables summarize historical data of Peoples Federal MHC and pro forma data of Peoples Federal Bancshares, Inc. at and for the three months ended December 31, 2009 and at and for the fiscal year ended September 30, 2009. This information is based on assumptions set forth below and in the table, and should not be used as a basis for projections of market value of the shares of common stock following the conversion and offering.

The net proceeds in the tables are based upon the following assumptions:

• all shares of common stock will be sold in the subscription and/or community offerings;

• 250,000 shares of common stock will be purchased by our executive officers and directors, and their associates;

• our employee stock ownership plan will purchase 8% of the shares of common stock issued in the stock offering including shares contributed to the charitable foundation with a loan from Peoples Federal Bancshares, Inc. or a subsidiary that will adjust with the prime interest rate. The loan will be repaid in substantially equal payments of principal and interest over a period of 20 years, and interest income that Peoples Federal Bancshares, Inc. will earn on the loan will offset the interest paid on the loan by Peoples Federal Savings Bank;

• Sandler O’Neill & Partners, L.P. will receive a fee equal to 1.00% of the dollar amount of the shares of common stock sold in the subscription and community offerings. Shares purchased by our employee benefit plans or by our officers, directors and employees, and their immediate families and shares contributed to our charitable foundation will not be included in calculating the shares of common stock sold for this purpose; and

• expenses of the stock offering, other than fees and expenses to be paid to Sandler O’Neill & Partners, L.P., will be $1.3 million.

We calculated pro forma consolidated net income for the three months ended December 31, 2009 and for the fiscal year ended September 30, 2009 as if the estimated net proceeds we received had been invested at an assumed interest rate of 1.70% (1.02% on an after-tax basis) and 1.45% (0.87% on an after-tax basis), respectively. This represents the three-year United States Treasury Note as of December 31, 2009 and September 30, 2009, respectively, which, in light of current market interest rates, we consider to more accurately reflect the pro forma reinvestment rate than the arithmetic average of the weighted average yield earned on our interest earning assets and the weighted average rate paid on our deposits, which is the reinvestment rate generally required by Office of Thrift Supervision regulations.

We calculated historical and pro forma per share amounts by dividing historical and pro forma amounts of consolidated net income and stockholders’ equity by the indicated number of shares of common stock. We adjusted these figures to give effect to the shares of common stock purchased by the employee stock ownership plan. We computed per share amounts for each period as if the shares of common stock were outstanding at the beginning of each period, but we did not adjust per share historical or pro forma stockholders’ equity to reflect the earnings on the estimated net proceeds.

The pro forma tables give effect to the implementation of stock-based benefit plans. Subject to the receipt of stockholder approval, we have assumed that the stock-based benefit plans will acquire for

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restricted stock awards a number of shares of common stock equal to 4% of our outstanding shares of common stock (including shares contributed to the charitable foundation) at the same price for which they were sold in the stock offering. We assume that shares of common stock are granted under the plans in awards that vest over a five-year period.

We have also assumed that the stock-based benefit plans will grant options to acquire shares of common stock equal to 10% of our outstanding shares of common stock, including shares contributed to the charitable foundation. In preparing the tables below, we assumed that stockholder approval was obtained, that the exercise price of the stock options and the market price of the stock at the date of grant were $10.00 per share and that the stock options had a term of ten years and vested over five years. We applied the Black-Scholes option pricing model to estimate a grant-date fair value of $5.44 for each option. In addition to the terms of the options described above, the Black-Scholes option pricing model assumed an estimated volatility rate of 36.45% for the shares of common stock, a dividend yield of 0%, an expected option life of 10 years and a risk-free interest rate of 3.85%. Because there is currently no market for our shares of common stock, the assumed expected volatility is based on the SNL Securities index for all publicly-traded thrift institutions and their holding companies.

We may grant options and award shares of common stock under one or more stock-based benefit plans in excess of 10% and 4%, respectively, of our total outstanding shares, including shares contributed to the charitable foundation, if the stock-based benefit plans are adopted more than one year following the stock offering. In addition, we may grant options and award shares that vest sooner than over a five-year period if the stock-based benefit plans are adopted more than one year following the stock offering.

As discussed under “How We Intend to Use the Proceeds from the Stock Offering,” we intend to contribute at least 50% of the net proceeds from the stock offering to Peoples Federal Savings Bank, and we will retain the remainder of the net proceeds from the stock offering. We will use a portion of the proceeds for the purpose of making a loan to the employee stock ownership plan and retain the rest of the proceeds for future use.

The pro forma table does not give effect to:

• withdrawals from deposit accounts for the purpose of purchasing shares of common stock in the stock offering;

• our results of operations after the stock offering; or

• changes in the market price of the shares of common stock after the stock offering.

The following pro forma information may not represent the financial effects of the stock offering at the date on which the stock offering actually occurs and you should not use the table to indicate future results of operations. Pro forma stockholders’ equity represents the difference between the stated amount of our assets and liabilities, computed in accordance with GAAP. We did not increase or decrease stockholders’ equity to reflect the difference between the carrying value of loans and other assets and their market value. Pro forma stockholders’ equity is not intended to represent the fair market value of the shares of common stock and may be different than the amounts that would be available for distribution to stockholders if we liquidated. Pro forma stockholders’ equity does not give effect to the impact of intangible assets, the liquidation account we will establish in the conversion or tax bad debt reserves in the unlikely event we are liquidated.

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	At or For the three months ended December 31, 2009 Based Upon the Sale at $10.00 Per Share of
	4,250,000 Shares			5,000,000 Shares			5,750,000 Shares			6,612,500 Shares (1)
	(Dollars in thousands, except per share amounts)
Gross Proceeds of Offering	$	42,500		$	50,000		$	57,500		$	66,125
Plus: Market value of shares issued to the Foundation		3,400			4,000			4,600			5,290
Pro form market capitalization	$	45,900		$	54,000		$	62,100		$	71,415
Gross proceeds of offering		42,500			50,000			57,500			66,125
Less: expenses		(1,648	)		(1,717	)		(1,785	)		(1,864	)
Estimated net proceeds	$	40,852		$	48,283		$	55,715		$	64,261
Less: Common stock purchased by ESOP (2)		(3,672	)		(4,320	)		(4,968	)		(5,713	)
Less: Common stock awarded under stock-based benefit plans (3)		(1,836	)		(2,160	)		(2,484	)		(2,857	)
Estimated net cash proceeds	$	35,344		$	41,803		$	48,263		$	55,691
For the three months ended December 31, 2009
Consolidated net income:
Historical	$	858		$	858		$	858		$	858
Pro forma income on net proceeds		90			106			123			142
Pro forma ESOP adjustment(2)		(28	)		(32	)		(37	)		(43	)
Pro forma stock award adjustment (3)		(55	)		(65	)		(74	)		(86	)
Pro forma stock option adjustment (4)		(112	)		(132	)		(152	)		(175	)
Pro forma net income	$	753		$	736		$	717		$	697
Per share net income (reflects SOP 93-6):
Historical	$	0.20		$	0.17		$	0.15		$	0.13
Pro forma income on net proceeds		0.02			0.02			0.02			0.02
Pro forma ESOP adjustment (2)		(0.01	)		(0.01	)		(0.01	)		(0.01	)
Pro forma stock award adjustment (3)		(0.01	)		(0.01	)		(0.01	)		(0.01	)
Pro forma stock option adjustment (4)		(0.03	)		(0.03	)		(0.03	)		(0.03	)
Pro forma net income per share (5)	$	0.17		$	0.14		$	0.12		$	0.10
Offering price as a multiple of pro forma net income per share		14.71			17.86			20.83			25.00
Number of shares outstanding for pro forma net income per share calculations (5)		4,227,390			4,973,400			5,719,410			6,577,322
At December 31, 2009
Stockholders’ equity:
Historical	$	51,652		$	51,652		$	51,652		$	51,652
Estimated net proceeds		40,852			48,283			55,715			64,261
Plus: shares issued to Foundation		3,400			4,000			4,600			5,290
Less: shares issued to Foundation		(3,400	)		(4,000	)		(4,600	)		(5,290	)
Plus: tax benefit of the contribution to the Foundation		1,367			1,608			1,849			2,127
Less: Common stock acquired by ESOP (2)		(3,672	)		(4,320	)		(4,968	)		(5,713	)
Less: Common stock awarded under stock-based benefit plans (3) (4)		(1,836	)		(2,160	)		(2,484	)		(2,857	)
Pro forma stockholders’ equity	$	88,363		$	95,063		$	101,764		$	109,470
Stockholders’ equity per share:
Historical	$	11.25		$	9.57		$	8.32		$	7.23
Estimated net proceeds		8.90			8.94			8.97			9.00
Plus: shares issued to Foundation		0.74			0.74			0.74			0.74
Less: shares contribution to Foundation		(0.74	)		(0.74	)		(0.74	)		(0.74	)
Plus: tax benefit of the contribution to the Foundation		0.30			0.30			0.30			0.30
Less: Common stock acquired by ESOP (2)		(0.80	)		(0.80	)		(0.80	)		(0.80	)
Less: Common stock awarded under stock-based benefit plans (3) (4)		(0.40	)		(0.40	)		(0.40	)		(0.40	)
Pro forma stockholders’ equity per share (6)	$	19.25		$	17.61		$	16.39		$	15.33
Offering price as percentage of pro forma stockholders’ equity per share		51.95	%		56.79	%		61.01	%		65.23	%
Number of shares outstanding for pro forma book value per share calculations		4,590,000			5,400,000			6,210,000			7,141,500

(footnotes begin on following page)

40

(Footnotes from previous page)

(1) As adjusted to give effect to an increase in the number of shares which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(2) Assumes that 8% of shares of common stock issued in the offering (including shares contributed to the charitable foundation) will be purchased by the employee stock ownership plan. For purposes of this table, the funds used to acquire these shares are assumed to have been borrowed by the employee stock ownership plan from Peoples Federal Bancshares, Inc. or a subsidiary. Peoples Federal Savings Bank intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the required principal and interest payments on the debt. Peoples Federal Savings Bank’s total annual payments on the employee stock ownership plan debt are based upon 20 equal annual installments of principal and interest. Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans” (“SOP 93-6”), requires that an employer record compensation expense in an amount equal to the fair value of the shares committed to be released to employees. The pro forma adjustments assume that the employee stock ownership plan shares are allocated in equal annual installments based on the number of loan repayment installments assumed to be paid by Peoples Federal Savings Bank, the fair value of the common stock remains equal to the subscription price and the employee stock ownership plan expense reflects an effective combined federal and state tax rate of 40.2%. The unallocated employee stock ownership plan shares are reflected as a reduction of stockholders’ equity. No reinvestment is assumed on proceeds contributed to fund the employee stock ownership plan. The pro forma net income further assumes that 4,590, 5,400, 6,210 and 7,142 shares were committed to be released during the period at the minimum, midpoint, maximum, and adjusted maximum of the offering range, respectively, and in accordance with SOP 93-6, only the employee stock ownership plan shares committed to be released during the period were considered outstanding for purposes of income per share calculations.

(3) If approved by Peoples Federal Bancshares, Inc.’s stockholders, one or more stock-based benefit plans plan may purchase an aggregate number of shares of common stock equal to 4% of the shares to be issued in the offering (including shares contributed to the charitable foundation) (or possibly a greater number of shares if the plan is implemented more than one year after completion of the conversion). Stockholder approval of the stock-based benefit plans, and purchases by the plan may not occur earlier than six months after the completion of the conversion. The shares may be acquired directly from Peoples Federal Bancshares, Inc. or through open market purchases. The funds to be used by the stock-based benefit plans to purchase the shares will be provided by Peoples Federal Bancshares, Inc. The table assumes that (i) the stock-based benefit plans acquire the shares through open market purchases at $10.00 per share, (ii) 5% of the amount contributed to the stock-based benefit plans is amortized as an expense during the period and (iii) the stock-based benefit plans expense reflects an effective combined federal and state tax rate of 40.2%. Assuming stockholder approval of the stock-based benefit plans and that shares of common stock (equal to 4% of the shares issued in the offering (including shares contributed to the charitable foundation)) are awarded through the use of authorized but unissued shares of common stock, stockholders would have their ownership and voting interests diluted by approximately 3.85%.

(4) If approved by Peoples Federal Bancshares, Inc.’s stockholders, one of more stock-based benefit plans may grant options to acquire an aggregate number of shares of common stock equal to 10% of the shares to be issued in the offering (including shares contributed to the charitable foundation) (or possibly a greater number of shares if the plan is implemented more than one year after completion of the conversion). Stockholder approval of the stock-based benefit plans may not occur earlier than six months after the completion of the conversion. In calculating the pro forma effect of the stock options to be granted under stock-based benefit plans, it is assumed that the exercise price of the stock options and the trading price of the common stock at the date of grant were $10.00 per share, the estimated grant-date fair value determined using the Black-Scholes option pricing model was $5.44 for each option, the aggregate grant-date fair value of the stock options was amortized to expense on a straight-line basis over a five-year vesting period of the options. The actual expense of the stock options to be granted under the stock-based benefit plans will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted. Under the above assumptions, the adoption of the stock-based benefit plans will result in no additional shares under the treasury stock method for purposes of calculating earnings per share. There can be no assurance that the actual exercise price of the stock options will be equal to the $10.00 price per share. If a portion of the shares to satisfy the exercise of options under the stock-based benefit plans is obtained from the issuance of authorized but unissued shares, our net income per share and stockholders’ equity per share would decrease. Assuming shares of common stock used to fund stock options (equal to 10% of the shares issued in the offering (including shares contributed to the charitable foundation) are awarded through the use of authorized but unissued shares of common stock, stockholders would have their ownership and voting interests diluted by approximately 9.09%.

(5) Income per share computations are determined by taking the number of shares assumed to be issued in the offering (including shares contributed to the charitable foundation) and, in accordance with SOP 93-6, subtracting the employee stock ownership plan shares that have not been committed for release during the period and subtracting non-vested stock awards granted under one or more stock-based benefit plans. See note 2, above.

(6) The retained earnings of Peoples Federal Savings Bank will be substantially restricted after the conversion. See “Our Policy Regarding Dividends,” “The Conversion—Liquidation Rights” and “Supervision and Regulation.” The number of shares used to calculate pro forma stockholders’ equity per share is equal to the total number of shares to be outstanding upon completion of the offering.

41

	At or for the Fiscal Year Ended September 30, 2009 Based Upon the Sale at $10.00 Per Share of
	4,250,000 Shares			5,000,000 Shares			5,750,000 Shares			6,612,500 Shares (1)
	(Dollars in thousands, except per share amounts)
Gross Proceeds of Offering	$	42,500		$	50,000		$	57,500		$	66,125
Plus: Shares issued to the Foundation		3,400			4,000			4,600			5,290
Pro form market capitalization	$	45,900		$	54,000		$	62,100		$	71,415
Gross proceeds of offering		42,500			50,000			57,500			66,125
Less: expenses		(1,648	)		(1,717	)		(1,785	)		(1,864	)
Estimated net proceeds	$	40,852		$	48,283		$	55,715		$	64,261
Less: Common stock purchased by ESOP (2)		(3,672	)		(4,320	)		(4,968	)		(5,713	)
Less: Common stock awarded under stock-based benefit plans (3)		(1,836	)		(2,160	)		(2,484	)		(2,857	)
Estimated net cash proceeds	$	35,344		$	41,803		$	48,263		$	55,691
For the fiscal year ended September 30, 2009
Consolidated net income:
Historical	$	2,672		$	2,672		$	2,672		$	2,672
Pro forma income on net proceeds		306			362			418			483
Pro forma ESOP adjustment(2)		(110	)		(129	)		(149	)		(171	)
Pro forma stock award adjustment (3)		(220	)		(258	)		(297	)		(342	)
Pro forma stock option adjustment (4)		(449	)		(528	)		(608	)		(699	)
Pro forma net income	$	2,199		$	2,119		$	2,036		$	1,943
Per share net income (reflects SOP 93-6):
Historical	$	0.63		$	0.54		$	0.47		$	0.40
Pro forma income on net proceeds		0.07			0.07			0.07			0.07
Pro forma ESOP adjustment (2)		(0.03	)		(0.03	)		(0.03	)		(0.03	)
Pro forma stock award adjustment (3)		(0.05	)		(0.05	)		(0.05	)		(0.05	)
Pro forma stock option adjustment (4)		(0.11	)		(0.11	)		(0.11	)		(0.11	)
Pro forma net income per share (5)	$	0.51		$	0.42		$	0.35		$	0.28
Offering price as a multiple of pro forma net income per share		19.61			23.81			28.57			35.71
Number of shares outstanding for pro forma net loss per share calculations (5)		4,241,160			4,989,600			5,738,040			6,598,746
At September 30, 2009
Stockholders’ equity:
Historical	$	50,943		$	50,943		$	50,943		$	50,943
Estimated net proceeds		40,852			48,283			55,715			64,261
Plus: shares issued to Foundation		3,400			4,000			4,600			5,290
Less: shares issued to Foundation		(3,400	)		(4,000	)		(4,600	)		(5,290	)
Plus: tax benefit of the Contribution to the Foundation		1,367			1,608			1,849			2,127
Less: Common stock acquired by ESOP (2)		(3,672	)		(4,320	)		(4,968	)		(5,713	)
Less: Common stock awarded under stock-based benefit plans (3) (4)		(1,836	)		(2,160	)		(2,484	)		(2,857	)
Pro forma stockholders’ equity	$	87,654		$	94,354		$	101,055		$	108,761
Stockholders’ equity per share:
Historical	$	11.10		$	9.43		$	8.20		$	7.13
Estimated net proceeds		8.90			8.94			8.97			9.00
Plus: shares issued to Foundation		0.74			0.74			0.74			0.74
Less: shares contribution to Foundation		(0.74	)		(0.74	)		(0.74	)		(0.74	)
Plus: tax benefit of the contribution to the Foundation		0.30			0.30			0.30			0.30
Less: Common stock acquired by ESOP (2)		(0.80	)		(0.80	)		(0.80	)		(0.80	)
Less: Common stock awarded under stock-based benefit plans (3) (4)		(0.40	)		(0.40	)		(0.40	)		(0.40	)
Pro forma stockholders’ equity per share (6)	$	19.10		$	17.47		$	16.27		$	15.23
Offering price as percentage of pro forma stockholders’ equity per share		52.36	%		57.24	%		61.46	%		65.66	%
Number of shares outstanding for pro forma book value per share calculations		4,590,000			5,400,000			6,210,000			7,141,500

(footnotes begin on following page)

42

(Footnotes from previous page)

(1) As adjusted to give effect to an increase in the number of shares which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(2) Assumes that 8% of shares of common stock issued in the offering (including shares contributed to the charitable foundation) will be purchased by the employee stock ownership plan. For purposes of this table, the funds used to acquire these shares are assumed to have been borrowed by the employee stock ownership plan from Peoples Federal Bancshares, Inc. or a subsidiary. Peoples Federal Savings Bank intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the required principal and interest payments on the debt. Peoples Federal Savings Bank’s total annual payments on the employee stock ownership plan debt are based upon 20 equal annual installments of principal and interest. Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans” (“SOP 93-6”), requires that an employer record compensation expense in an amount equal to the fair value of the shares committed to be released to employees. The pro forma adjustments assume that the employee stock ownership plan shares are allocated in equal annual installments based on the number of loan repayment installments assumed to be paid by Peoples Federal Savings Bank, the fair value of the common stock remains equal to the subscription price and the employee stock ownership plan expense reflects an effective combined federal and state tax rate of 40.1%. The unallocated employee stock ownership plan shares are reflected as a reduction of stockholders’ equity. No reinvestment is assumed on proceeds contributed to fund the employee stock ownership plan. The pro forma net income further assumes that 18,360, 21,600, 24,840 and 28,566 shares were committed to be released during the period at the minimum, midpoint, maximum, and adjusted maximum of the offering range, respectively, and in accordance with SOP 93-6, only the employee stock ownership plan shares committed to be released during the period were considered outstanding for purposes of income per share calculations.

(3) If approved by Peoples Federal Bancshares, Inc.’s stockholders, one or more stock-based benefit plans plan may purchase an aggregate number of shares of common stock equal to 4% of the shares to be issued in the offering (including shares contributed to the charitable foundation) (or possibly a greater number of shares if the plan is implemented more than one year after completion of the conversion). Stockholder approval of the stock-based benefit plans, and purchases by the plan may not occur earlier than six months after the completion of the conversion. The shares may be acquired directly from Peoples Federal Bancshares, Inc. or through open market purchases. The funds to be used by the stock-based benefit plans to purchase the shares will be provided by Peoples Federal Bancshares, Inc. The table assumes that (i) the stock-based benefit plans acquire the shares through open market purchases at $10.00 per share, (ii) 20% of the amount contributed to the stock-based benefit plans is amortized as an expense during the period and (iii) the stock-based benefit plans expense reflects an effective combined federal and state tax rate of 40.1%. Assuming stockholder approval of the stock-based benefit plans and that shares of common stock (equal to 4% of the shares issued sold in the offering (including shares contributed to the charitable foundation)) are awarded through the use of authorized but unissued shares of common stock, stockholders would have their ownership and voting interests diluted by approximately 3.85%.

(4) If approved by Peoples Federal Bancshares, Inc.’s stockholders, one of more stock-based benefit plans may grant options to acquire an aggregate number of shares of common stock equal to 10% of the shares to be issued in the offering (including shares contributed to the charitable foundation) (or possibly a greater number of shares if the plan is implemented more than one year after completion of the conversion). Stockholder approval of the stock-based benefit plans may not occur earlier than six months after the completion of the conversion. In calculating the pro forma effect of the stock options to be granted under stock-based benefit plans, it is assumed that the exercise price of the stock options and the trading price of the common stock at the date of grant were $10.00 per share, the estimated grant-date fair value determined using the Black-Scholes option pricing model was $5.44 for each option, the aggregate grant-date fair value of the stock options was amortized to expense on a straight-line basis over a five-year vesting period of the options. The actual expense of the stock options to be granted under the stock-based benefit plans will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted. Under the above assumptions, the adoption of the stock-based benefit plans will result in no additional shares under the treasury stock method for purposes of calculating earnings per share. There can be no assurance that the actual exercise price of the stock options will be equal to the $10.00 price per share. If a portion of the shares to satisfy the exercise of options under the stock-based benefit plans is obtained from the issuance of authorized but unissued shares, our net income per share and stockholders’ equity per share would decrease. Assuming shares of common stock used to fund stock options (equal to 10% of the shares issued in the offering (including shares contributed to the charitable foundation)) are awarded through the use of authorized but unissued shares of common stock, stockholders would have their ownership and voting interests diluted by approximately 9.09%.

(5) Income per share computations are determined by taking the number of shares assumed to be issued in the offering (including shares contributed to the charitable foundation) and, in accordance with SOP 93-6, subtracting the employee stock ownership plan shares that have not been committed for release during the period and subtracting non-vested stock awards granted under one or more stock-based benefit plans. See note 2, above.

(6) The retained earnings of Peoples Federal Savings Bank will be substantially restricted after the conversion. See “Our Policy Regarding Dividends,” “The Conversion—Liquidation Rights” and “Supervision and Regulation.” The number of shares used to calculate pro forma stockholders’ equity per share is equal to the total number of shares to be outstanding upon completion of the offering.

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COMPARISON OF VALUATION AND PRO FORMA INFORMATION

WITH AND WITHOUT THE CHARITABLE FOUNDATION

As reflected in the table below, if the charitable foundation is not established and funded as part of the stock offering, RP Financial, L.C. estimates that our pro forma valuation would be greater and, as a result, a greater number of shares of common stock would be issued in the stock offering. At the minimum, midpoint, maximum and adjusted maximum of the valuation range, our pro forma valuation is $45.9 million, $54.0 million, $62.1 million and $71.4 million with the charitable foundation, as compared to $48.0 million, $56.5 million, $65.0 million and $74.7 million, respectively, without the charitable foundation. There is no assurance that in the event the charitable foundation were not formed, the appraisal prepared at that time would conclude that our pro forma market value would be the same as that estimated in the table below. Any appraisal prepared at that time would be based on the facts and circumstances existing at that time, including, among other things, market and economic conditions.

For comparative purposes only, set forth below are certain pricing ratios and financial data and ratios at and for the three months ended December 31, 2009 at the minimum, midpoint, maximum and adjusted maximum of the offering range, assuming the stock offering was completed at the beginning of the three-month period, with and without the charitable foundation.

	Minimum of Offering Range						Midpoint of Offering Range						Maximum of Offering Range						Adjusted Maximum of Offering Range
	With Foundation			Without Foundation			With Foundation			Without Foundation			With Foundation			Without Foundation			With Foundation			Without Foundation
	(Dollars in thousands, except per share amounts)
Estimated stock offering amount	$	42,500		$	48,025		$	50,000		$	56,500		$	57,500		$	64,975		$	66,125		$	74,721
Estimated full value		45,900			48,028			54,000			56,500			62,100			64,975			71,415			74,721
Total assets		519,469			523,318			526,169			530,698			532,870			538,078			540,576			546,566
Total liabilities		431,106			431,106			431,106			431,106			431,106			431,106			431,106			431,106
Pro forma stockholders’ equity		88,363			92,212			95,063			99,592			101,764			106,972			109,470			115,460
Pro forma net income		753			757			736			740			717			723			697			704
Pro forma stockholders’ equity per share		19.25			19.21			17.61			17.62			16.39			16.46			15.33			15.45
Pro forma net income per share		0.17			0.16			0.14			0.13			0.12			0.11			0.10			0.09
Pro forma pricing ratios:
Offering price as a percentage of pro forma stockholders’ equity per share		51.95	%		52.06	%		56.79	%		56.75	%		61.01	%		60.75	%		65.23	%		64.72	%
Offering price to pro forma net income per share		14.71	x		15.63	x		17.86	x		19.23	x		20.83	x		22.73	x		25.00	x		27.78	x
Offering price to assets		8.84	%		9.18	%		10.26	%		10.65	%		11.65	%		12.08	%		13.21	%		13.67	%
Pro forma financial ratios:
Return on assets (annualized)		0.58	%		0.58	%		0.56	%		0.56	%		0.54	%		0.54	%		0.52	%		0.51	%
Return on equity (annualized)		3.41			3.28			3.09			2.97			2.82			2.70			2.54			2.44
Equity to assets		17.01			17.62			18.07			18.77			19.10			19.88			20.25			21.12
Total shares issued		4,590,000			4,802,500			5,400,000			5,650,000			6,210,000			6,497,500			7,141,500			7,472,125

44

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

This section is intended to help potential investors understand our financial performance through a discussion of the factors affecting our financial condition at December 31, 2009 and our results of operations for quarters ended December 31, 2009 and 2008 and the fiscal years ended September 30, 2009 and 2008. This section should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements that appear elsewhere in this prospectus. Peoples Federal Bancshares, Inc. had not engaged in any activities at December 31, 2009; therefore, the information reflected in this section reflects the financial performance of Peoples Federal MHC and its subsidiary.

We have prepared this Prospectus in accordance with Securities and Exchange Commission regulations applicable to “smaller reporting companies.”

Overview

We have historically operated as a traditional thrift institution. A significant majority of our assets consist of long-term, fixed-rate and adjustable rate one- to four-family residential mortgage loans, which we have funded primarily with retail deposit accounts and Federal Home Loan Bank of Boston advances. Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets, consisting primarily of loans, investment securities (including securities issued by U.S. government agencies and residential mortgage-backed securities issued by government-sponsored entities) and other interest-earning assets, primarily interest-earning deposits at other financial institutions, and the interest we pay on our interest-bearing liabilities, consisting primarily of money market accounts, savings accounts, certificates of deposit, and Federal Home Loan Bank of Boston advances. Our results of operations also are affected by our provisions for loan losses, non-interest income and non-interest expense. Non-interest income currently consists primarily of service charges on deposit accounts, income derived from insurance policies we hold on certain of our executive officers which serve as a funding source for our benefit obligations, loan servicing fees and other income and gains or losses on the sale of loans and on the sale of available-for-sale securities. Non-interest expense currently consists primarily of salaries and employee benefits, occupancy and equipment expenses, data processing, legal, accounting and exam fees, FDIC insurance premiums and other operating expenses. Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.

All of our residential mortgage-backed securities have been issued or guaranteed by Freddie Mac, Fannie Mae or Ginnie Mae, all of which are U.S. government-sponsored entities. These agencies guarantee the payment of principal and interest on our residential mortgage-backed securities. We do not own any trust preferred securities or collateralized debt obligations (CDOs).

Since September 30, 2007, we have increased our total assets by 33.3% from $362.2 million at September 30, 2007 to $482.8 million at December 31, 2009. In September 2007, we acquired Brookline Co-Operative Bank, a Massachusetts-chartered cooperative bank with $58.3 million in assets. During fiscal 2008 and 2009, we purchased approximately $78.0 million of one- to four-family residential mortgage loans, substantially all of which are higher-yielding, jumbo mortgage loans, collateralized by single-family properties in our market area. Additionally, during the quarter ended December 31, 2009, we purchased $20.6 million of one- to four-family residential mortgage loans, substantially all of which are collateralized by single-family, owner-occupied properties in our market area.

45

Our operations in recent years have also been affected by our efforts to manage our interest rate risk position by reducing our exposure to long-term, fixed-rate assets and replacing a portion of these assets with adjustable-rate loans. Specifically, since September 30, 2008 we have sold $15.2 million of 10-, 15-, 20- and 30-year fixed-rate, lower-yielding, conforming one- to four-family residential mortgage loans and $13.3 million of securities classified as available-for-sale, and we have used the net proceeds of these sales to repay short-term borrowings and to fund loan originations and purchases. Our net gain during fiscal 2009 on the sale of investment securities was $208,000. See “Management of Market Risk” for a discussion of all of the actions we took in fiscal 2008 and 2009 in managing interest rate risk.

The low-interest rate environment during fiscal 2008 and 2009 generated a substantial amount of loan pre-payments in our one-to four- family residential mortgage loan portfolio. Management made the determination to re-pay FHLB advances rather than re-deploy these funds back in to lower-yielding fixed-rate loans. Accordingly during fiscal 2009, our FHLB advances decreased to $58.0 million at September 30, 2009 from $80.1 million at September 30, 2008. During fiscal 2009, we also increased our emphasis on the origination of commercial real estate loans which generally have adjustable-rates, and these loans increased $9.8 million, or 18.1%, to $63.9 million at September 30, 2009 from $54.1 million at September 30, 2008.

We have traditionally focused on the origination of one- to four-family residential mortgage loans, and on the origination or participation in multi-family mortgage loans and commercial real estate loans, and at December 31, 2009, 93.5% of our loan portfolio was comprised of these types of loans. We intend to continue to emphasize the origination of these types of loans following the completion of the conversion and the offering.

Our emphasis on conservative loan underwriting has resulted in historical low levels of non-performing assets at a time when many financial institutions are experiencing significant asset quality issues. Our non-performing assets totaled $5.2 million or 1.1% of total assets, at December 31, 2009, compared to $5.7 million, or 1.2% of total assets at September 30, 2009, and $3.6 million or 0.81% of total assets, at September 30, 2008. Total loan delinquencies as of December 31, 2009 were $9.2 million. Our non-performing loans and loss experience has enabled us to maintain a relatively low allowance for loan losses in relation to other peer institutions and correspondingly resulted in low levels of provisions for loan losses. Our provision for loan losses was $127,000, $0 and $20,000 for the fiscal years ended September 30, 2009, 2008 and 2007, respectively.

We do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on his or her loan, resulting in an increased principal balance during the life of the loan. We generally do not offer “subprime loans” (loans that are made with low down-payments to borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments and bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (generally defined as loans having less than full documentation). We do offer “interest only” loans (where the borrower pays only interest for an initial period, after which the loan converts to a fully amortizing loan) for the construction of one- to four-family residential properties, multi-family properties (which we define as five or more units) and commercial properties. Although we participate in Fannie Mae’s Expanded Approval Program and Freddie Mac’s A Minus program, which previously did not require income verification, we still verified income for these, as well as all types, of mortgage loans.

46

Business Strategy

Our primary objective is to remain a profitable, community-oriented financial institution offering deposit and loan products to retail customers and servicing the financial needs of small businesses in our market area. We were established in 1888 and have operated continuously in the Boston metropolitan area since that date. We are committed to meeting the financial needs of the communities in which we operate, and we are dedicated to providing quality personal service to our customers. We provide a broad range of consumer and business financial services from our six banking offices. We have sought to accomplish these business objectives through the adoption of a business strategy designed to maintain a strong capital position and high asset quality. This business strategy includes the following elements:

• Continuing to emphasize the origination of multi-family mortgage loans and commercial real estate loans while maintaining high asset quality. At December 31, 2009, multi-family mortgage loans and commercial real estate loans comprised 27.5% of our total loan portfolio. These loans generally are higher-yielding than one- to four-family residential mortgage loans, and also, generally, have adjustable-rates of interest which helps in our interest rate risk management. We underwrite all of our loans in our main office in order to ensure uniformity and consistency on underwriting decisions. We intend to continue to make these types of loans a significant part of our total loan portfolio.

• Continuing to emphasize the origination and purchase of one-to four-family residential mortgage loans. We have been and will continue to be primarily a one- to four- family residential mortgage lender for borrowers in our market areas. At December 31, 2009, $249.1 million, or 66.0% of our total loan portfolio, consisted of one- to four- family residential mortgage loans (including home equity loans and lines of credit). We intend to continue our focus on this type of lending after completion of the conversion and stock offering.

• Emphasizing lower cost core deposits by attracting new customers and enhancing existing customer relationships. In an effort to grow our banking franchise, we have enhanced our direct marketing efforts to local businesses and established a stronger culture of cross-selling our products to our existing customers. In addition, we attract and retain deposits by offering enhanced technology, such as mobile banking and on-line banking, with a continued emphasis on quality customer service.

• Expanding our branch network. We currently operate from six banking offices. We intend to evaluate additional branch expansion opportunities, through acquisitions and de novo branching. In addition, we intend to evaluate acquisitions of other financial institutions, as opportunities present themselves. We would like to expand our branch office network by up to four de novo or purchased branch offices over the next five years with a focus on communities contiguous to our current offices that we do not currently serve.

Anticipated Increase in Noninterest Expense

Following the completion of the conversion and offering, we anticipate that our noninterest expense will increase as a result of the increased costs associated with managing a public company, increased compensation expenses associated with the purchases of shares of common stock by our employee stock ownership plan, and the adoption of one or more stock-based benefit plans, if approved by Peoples Federal Bancshares, Inc.’s stockholders.

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Assuming that the adjusted maximum number of shares are issued in the offering (including shares contributed to the charitable foundation) (7,141,500 shares):

• our employee stock ownership plan would acquire 571,320 shares of common stock with an $5,713,200 million loan that is expected to be repaid over 20 years, resulting in an annual pre-tax expense of approximately $285,660 (assuming that the common stock maintains a value of $10.00 per share);

• our stock-based benefit plans would award a number of shares equal to 4% of the shares issued in the offering (including shares contributed to our charitable foundation), or 285,660 shares at the maximum, as adjusted, of the offering range, to eligible participants, which would be expensed as the awards vest. Assuming that all shares are awarded under the stock-based benefit plans at a price of $10.00 per share, and that the awards vest over a five-year period, the corresponding annual pre-tax expense associated with shares awarded under the stock-based benefit plans would be approximately $571,320; and

• our stock-based benefit plans would grant stock options to purchase shares equal to 10% of the total shares issued in the offering (including shares contributed to our charitable foundation), or 714,150 shares at the maximum, as adjusted, of the offering range, to eligible participants, which would result in compensation expense over the vesting period of the options. Assuming the market price of the common stock is $10.00 per share; all stock options are granted with an exercise price of $10.00 per share and have a term of 10 years; the dividend yield on the stock is 0%; the risk free interest rate is 3.85%; and the volatility rate on the common stock is 36.45%, the estimated grant-date fair value of the stock options utilizing a Black-Scholes option pricing analysis is $5.44 per option granted. Assuming this value is amortized over the five-year vesting period, the corresponding annual pre-tax expense associated with stock options granted under the stock-based benefit plans would be approximately $777,000.

The actual expense that will be recorded for the employee stock ownership plan will be determined by the market value of the shares of common stock as they are allocated to employees over the term of the loan, and whether the loan is repaid faster than its contractual term. Accordingly, increases in the stock price above $10.00 per share will increase the total employee stock ownership plan expense, and any accelerated repayment of the loan would increase the annual employee stock ownership plan expense. Additionally, the actual expense of shares awarded under one or more stock-based benefit plans will be determined by the fair market value of the stock on the grant date, which might be greater than $10.00 per share. Further, the actual expense of stock options granted under one or more stock-based benefit plans would be determined by the grant-date fair value of the options, which would depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately used.

We may award shares of common stock and grant options in excess of 4% and 10%, respectively, of our shares of issued sold in the stock offering (including shares contributed to our charitable foundation) if our stock-based benefit plans are adopted more than one year following the stock offering. This would further increase our expenses associated with stock-based benefit plans.

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Critical Accounting Policy

We consider accounting policies that require management to exercise significant judgment or discretion or make significant assumptions that have, or could have, a material impact on the carrying value of certain assets or on income, to be critical accounting policies. We consider the following to be our critical accounting policy:

Allowance for Loan Losses. The allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Among the material estimates required to establish the allowance are the following: loss exposure at default; the amount and timing of future cash flows on impacted loans; value of collateral; and determination of loss factors to be applied to the various elements of the portfolio. All of these estimates are susceptible to significant change. Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the Office of Thrift Supervision (“OTS”), as an integral part of its examination process, periodically reviews our allowance for loan losses. The OTS may require us to recognize adjustments to the allowance based on its judgments about information available to it at the time of its examination. The allowance for loan losses is maintained at a level that management considers adequate to provide for estimated losses and impairment based upon an evaluation of known and inherent risk in the loan portfolio. Loan impairment is evaluated based on the fair value of collateral or estimated net realizable value. A provision for loan losses is charged to operations based on management’s evaluation of the estimated losses that have been incurred in our loan portfolio. It is the policy of management to provide for losses on unidentified loans in its portfolio in addition to classified loans.

Management monitors its allowance for loan losses at least quarterly and makes adjustments to the allowance through the provision for loan losses as economic conditions and other pertinent factors indicate. The quarterly review and adjustment of the qualitative factors employed in the allowance methodology and the updating of historic loss experience allow for timely reaction to emerging conditions and trends. In this context, a series of qualitative factors are used in a methodology as a measurement of how current circumstances are affecting the loan portfolio. Included in these qualitative factors are:

• Levels of past due, classified and non-accrual loans, troubled debt restructurings and modifications;

• Nature and volume of loans;

• Changes in lending policies and procedures, underwriting standards, collections and charge-offs and recoveries, and for commercial loans, the level of loans being approved with exceptions to policy;

• National and local economic and business conditions, including various market segments;

• Quality of our loan review system and degree of Board oversight;

• Concentrations of credit by industry, geography and collateral type, with a specific emphasis on real estate, and changes in levels of such concentrations; and

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• Effect of external factors, including the deterioration of collateral values, on the level of estimated credit losses in the current portfolio.

In determining the allowance for loan losses, management has established both specific allowances and general pooled allowances. The general pooled allowances are determined by assigning certain qualitative factors and quantitative factors developed from historic loss experience which provide a dynamic basis for the calculation of reserve factors for both pass-rated loans (general pooled allowance) and those criticized and classified loans under ASC 310-10-35, “Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality—Subsequent Measurement.” The amount of the specific allowance is determined through a loan-by-loan analysis of certain large dollar loans. Loans not individually reviewed are evaluated as a group using reserve factor percentages based on historic loss experience and the qualitative factors described above. In determining the appropriate level of the general pooled allowance, management makes estimates based on internal risk ratings, which take into account such factors as debt service coverage, loan-to-value ratios, and external factors. Estimates are periodically measured against actual loss experience.

As changes in our operating environment occur and as recent loss experience fluctuates, the factors for each category of loan based on type and risk rating will change to reflect current circumstances and the quality of the loan portfolio. Given that the components of the allowance are based partially on historical losses and on risk rating changes in response to recent events, required reserves may trail the emergence of any unforeseen deterioration in credit quality.

Although we maintain our allowance for loan losses at levels considered adequate to provide for the inherent risk of loss in our loan portfolio, if economic conditions differ substantially from the assumptions used in making the evaluations there can be no assurance that future losses will not exceed estimated amounts or that additional provisions for loan losses will not be required in future periods. Accordingly, the current decline in the national economy and the local economies of the areas in which the loans are concentrated could result in an increase in loan delinquencies, foreclosures or repossessions resulting in increased charge-off amounts and the need for additional loan loss allowances in future periods. In addition, our determination as to the amount of our allowance for loan losses is subject to review by the OTS, our primary regulator, as part of its examination process, which may result in the establishment of an additional allowance based upon the judgment of the OTS after a review of the information available at the time of the OTS examination. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would negatively affect earnings.

Comparison of Financial Condition at December 31, 2009 and September 30, 2009

At December 31, 2009, our total assets were $482.8 million, unchanged from our total assets of $482.8 million at September 30, 2009. Loans, net increased $11.5 million, or 3.2%, to $374.2 million at December 31, 2009 from $362.7 million at September 30, 2009 primarily from the purchase of $20.6 million of one- to four- family residential mortgage loans, all of which were collateralized by properties in our market area, partially offset by a $5.4 million decrease in securities available-for-sale to $955,000 at December 31, 2009 from $6.3 million at September 30, 2009 resulting from principal repayments and sales of these securities. During the three months ended December 31, 2009, one- to four-family residential mortgage loans increased by $11.7 million, or 4.9%, and all other loan categories remained relatively unchanged during the quarter.

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Deposits increased slightly to $370.5 million at December 31, 2009 from $366.5 million at September 30, 2009. The increase resulted in part from an increase in money market accounts to $155.8 million at December 31, 2009 from $148.3 million at September 30, 2009, offset partially by a decrease in our certificates of deposit to $109.3 million at December 31, 2009 from $112.3 million at September 30, 2009.

Borrowings, consisting of FHLB advances, decreased $4.0 million to $54.0 million at December 31, 2009 from $58.0 million at September 30, 2009.

Total equity increased to $51.7 million at December 31, 2009 from $50.9 million at September 30, 2009. The increase resulted primarily from net income of $858,000 for the three months ended December 31, 2009.

Comparison of Financial Condition at September 30, 2009 and September 30, 2008

Our total assets increased to $482.8 million at September 30, 2009 from $437.6 million at September 30, 2008. The increase was due primarily to an increase in cash and cash equivalents of $71.3 million, or 412.0%, to $88.6 million at September 30, 2009 from $17.3 million at September 30, 2008 reflecting our strategic decision not to compete for the refinancing of one-to four-family residential mortgage loans that were pre-paid during the low interest rate environment during the fiscal year, but rather, to add liquidity to our balance sheet by increasing cash and cash equivalents. The increase in cash and cash equivalents also reflected a decrease of $15.8 million in securities available-for-sale to $6.3 million at September 30, 2009 from $22.1 million at September 30, 2008 and the redeployment of these funds into liquid assets.

Net loans decreased $10.6 million, or 2.8%, to $362.7 million at September 30, 2009 from $373.3 million at September 30, 2008. The largest growth in our loan portfolio during the fiscal year ended September 30, 2009 was in commercial real estate loans, which increased 18.1% to $63.9 million at September 30, 2009 from $54.1 million at September 30, 2008, reflecting steady demand for commercial real estate loans in our market area in a relatively low interest rate environment. During fiscal 2009, we experienced an increase in prepayments of one- to four-family residential mortgage loans in a low interest rate environment, and management determined to deploy these funds into the repayment of borrowings, cash and the origination of commercial real estate loans, rather than the origination or refinancing of one- to four-family residential mortgage loans.

Bank-owned life insurance increased modestly to $11.2 million at September 30, 2009 from $10.9 million at September 30, 2008 due to an increase in cash value.

Deposits increased $63.5 million, or 21.0%, to $366.5 million at September 30, 2009 from $303.0 million at September 30, 2008. The increase in deposits was due to an increase in money market accounts of $91.2 million, or 159.6%, as we attracted both existing and new customers to these accounts by offering above-market rates. Correspondingly, customers shifted funds to these higher-rate deposit products from certificates of deposits, which decreased $26.3 million, or 19.0%, to $112.3 million at September 30, 2009 from $138.6 million at September 30, 2008. The increase in total deposits was also offset by a decrease in demand accounts of $2.6 million, or 7.9%, to $30.5 million at September 30, 2009 from $33.1 million at September 30, 2008 due to the weak economic environment.

We utilize borrowings from the Federal Home Loan Bank of Boston (“FHLB-Boston”), and although we expect FHLB-Boston advances to remain an integral part of our funding strategy, our

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borrowings from the FHLB-Boston decreased to $58.0 million at September 30, 2009 from $80.1 million at September 30, 2008. This decrease reflected management’s concern about the adequate capitalization and viability during fiscal 2009 of the FHLB-Boston. We continue to utilize borrowings as an alternative funding source, and our borrowings from the FHLB-Boston generally consist of advances with laddered terms of up to five years.

Total equity was $50.9 million at September 30, 2009 compared to $48.3 million at September 30, 2008. The increase resulted primarily from net income of $2.7 million and an increase of approximately $265,000 in accumulated other comprehensive income for the year ended September 30, 2009.

Comparison of Operating Results for the Three Months Ended December 31, 2009 and December 31, 2008

General. We recorded net income of $858,000 for the three months ended December 31, 2009 compared to net income of $934,000 for the three months ended December 31, 2008 as net interest and dividend income decreased slightly period over period to $3.4 million from $3.6 million. Although non-interest income increased to $651,000 for the 2009 quarter from $354,000 for the 2008 quarter, this increase was offset by an increase in noninterest expense to $2.7 million for the three months ended December 31, 2009 from $2.4 million for the year earlier period.

Interest and Dividend Income. Interest and dividend income decreased to $5.2 million for the three months ended December 31, 2009 from $6.0 million for the three months ended December 31, 2008. Average interest-earning assets increased to $432.7 million for the 2009 period compared to $409.0 million for the 2008 period; however the average yield on interest-earning assets decreased to 4.81% from 5.85% during the periods. The decrease in market interest rates contributed to the downward re-pricing of a portion of our existing assets and to lower rates for new assets.

Interest income on loans decreased to $5.1 million for the three months ended December 31, 2009 from $5.7 million for the three months ended December 31, 2008, as the average balance of our loans decreased to $362.3 million from $370.0 million, reflecting management’s decision to reduce our one-to four- family residential mortgage loan portfolio in the low interest rate environment, and the average yield on loans decreased to 5.66% from 6.17%. The decrease in average yield on our loan portfolio reflected the impact of decreases in interest rates on our adjustable-rate loan products, as well as decreased rates on newly originated loans based on lower market interest rates. Interest income on taxable investment securities decreased to $59,000 for the three months ended December 31, 2009 from $230,000 for the three months ended December 31, 2008, reflecting the significant decrease in the average balance of such securities to $5.4 million from $21.5 million, offset partially by an increase in the average yield on such securities to 4.38% from 4.29%.

Interest Expense. Interest expense decreased $561,000, or 23.8%, to $1.8 million for the three months ended December 31, 2009 from $2.4 million for the three months ended December 31, 2008. The decrease reflected a decrease in the average rate paid on deposits and borrowings in the 2009 period of 1.81% compared to an average rate paid of 2.71% in the 2008 period, which more than offset an increase of $49.0 million in the average balance of such deposits and borrowings to $395.9 million for the 2009 quarter versus $346.9 million during the 2008 quarter.

Interest expense on money market accounts increased to $603,000 for the quarter ended December 31, 2009 from $380,000 for the quarter ended December 31, 2008, an increase of $223,000, or

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58.7%, reflecting a $99.1 million increase in the average balance of these accounts during the 2009 quarter to $154.9 million from an average balance of $55.8 million during the year earlier period. The average cost of these accounts decreased to 1.56% for the quarter ended December 31, 2009 from 2.73% for the 2008 quarter. Interest expense on the average balance of certificates of deposit decreased to $592,000 for the three months ended December 31, 2009 from $1.2 million for the three months ended December 31, 2008, as the average balance of such certificates decreased to $110.5 million from $140.8 million, and the average rate paid on these certificates decreased to 2.14% for the quarter ended December 31, 2009 from 3.32% for the quarter ended December 31, 2008. The decrease in average balances of our certificates of deposit resulted primarily from our customers seeking higher returns in our money market accounts which we competitively priced, while the decrease in the average cost of such certificates reflected the re-pricing in response to interest rate cuts initiated by the Federal Reserve Board and the lower market interest rates resulting from such cuts.

Interest expense on borrowings, which were solely advances from the Federal Home Loan Bank of Boston, were $473,000 for the quarter ended December 31, 2009.

Net Interest and Dividend Income. Net interest and dividend income decreased to $3.4 million for the three months ended December 31, 2009 from $3.6 million for the three months ended December 31, 2008. The decrease was due, in part, to the impact of lower market interest rates on our loan portfolio, greater than 60% of which have adjustable rates of interest, and the change in the overall mix of our interest-earning assets. Our interest rate spread and net interest margin both decreased period to period. The interest rate spread and net interest margin were 2.79% and 3.02%, respectively, during the quarter ended December 31, 2009, compared to 3.14% and 3.55% for the 2008 quarter. Additionally, the ratio of our average interest-earning assets to average interest-bearing liabilities decreased to 114.32% during the quarter ended December 31, 2009 from 117.91% during the quarter ended December 31, 2008. The decreases in our interest rate spread, net interest margin and ratio of our average interest-earning assets to average interest-bearing liabilities all reflect our decision to reduce our exposure to fixed-rate loans during the low-interest rate environment and to increase the Bank’s liquidity through increased cash and cash equivalents.

Provision for Loan Losses. We establish a provision for loan losses, which is charged to operations, in order to maintain the allowance for loan losses at a level we consider necessary to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimable at the balance sheet date. In determining the level of the allowance for loans losses, we consider past and current loss experience, evaluations of real estate collateral, current economic conditions, volume and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of nonperforming loans. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates as more information becomes available or economic conditions change. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as circumstances change or as more information becomes available. We assess the allowance for loan losses on a quarterly basis and make provisions for loan losses as required in order to maintain the allowance.

Based on the above factors, we recorded no provision for loan losses for either the three months ended December 31, 2009 or the three months ended December 31, 2008. The allowance for loan losses was $3.2 million or 0.83% of total loans at December 31, 2009 compared to $3.2 million, or 0.87% of total loans at December 31, 2008. Total non-performing assets were $5.2 million at December 31, 2009 compared to $2.9 million at December 31, 2008. While we used the same methodology in assessing the allowances for both periods, we increased the impact of qualitative factors in the first quarter of fiscal 2009 to reflect further deterioration in the economy. To the best of our knowledge, we have recorded all losses that are both probable and reasonably estimable for the three months ended December 31, 2009 and 2008.

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Noninterest Income. Noninterest income increased to $651,000 for the three months ended December 31, 2009 from $354,000 for the three months ended December 31, 2008. The increase in noninterest income was due to a gain of $210,000 on the sale of approximately $4.6 million of short-term, mortgage-backed securities and a gain of $73,000 on loan sales to Freddie Mac. These sales reflected management’s decision to reduce our interest rate risk profile in a low interest rate environment by reducing our securities portfolio and increasing our liquidity position.

Noninterest Expense. Noninterest expense increased $206,000, or 8.4%, to $2.7 million for the three month period ended December 31, 2009 from $2.4 million for the three month period ended December 31, 2008. The increase in noninterest expense was primarily attributable to increases in salaries and employee benefits (which increased to $1.7 million from $1.6 million), occupancy and equipment expense (which increased to $192,000 from $173,000), professional fees (which increased to $125,000 from $103,000), and FDIC insurance premiums (which increased to $115,000 from $46,000). These increases were partially offset by decreases in data processing expense (which decreased to $118,000 from $156,000) and advertising expense (which decreased to $42,000 from $76,000).

Income Tax Expense. The provision for income taxes was $556,000 for the three months ended December 31, 2009 compared to $602,000 for the three months ended December 31, 2008, reflecting slightly lower pre-tax income in the 2009 quarter of $1.4 million versus pre-tax income of $1.5 million for the 2008 quarter. Our effective tax rate was 39.3% for the three months ended December 31, 2009 compared to 39.2% for the three months ended December 31, 2008.

Comparison of Operating Results for the Years Ended September 30, 2009 and September 30, 2008

General. Net income increased to $2.7 million for the year ended September 30, 2009 from $2.1 million for the year ended September 30, 2008. The increase reflected higher net interest and dividend income as well as higher noninterest income, offset partially by higher noninterest expense and an increase in our provision for loan losses during fiscal 2009.

Interest and Dividend Income. Interest and dividend income increased $518,000, or 2.3%, to $22.6 million for the year ended September 30, 2009 from $22.1 million for the year ended September 30, 2008. The increase reflected an increase in average interest-earning assets to $420.8 million for fiscal 2009 compared to $362.4 million for fiscal 2008, offset by a reduction in the average yield on interest-earning assets to 5.37% in fiscal 2009 from 6.10% in fiscal 2008.

Interest income and fees on loans increased $1.9 million or 9.5%, to $22.0 million for the year ended September 30, 2009 from $20.1 million for the year ended September 30, 2008, reflecting the growth in our loan portfolio, discussed above. The lower yields reflected primarily lower market interest rates. Interest income on taxable investment securities decreased to $599,000 for the year ended September 30, 2009 from $1.1 million for the year ended September 30, 2008, reflecting a significant decrease in the average balance of such securities to $13.7 million during the year ended September 30, 2009 from $24.9 million in fiscal 2008, as well as a decrease in the average yield on such securities to 4.36% from 4.47%.

Interest Expense. Interest expense decreased $585,000, or 6.3%, to $8.7 million for the year ended September 30, 2009 from $9.3 million for the year ended September 30, 2008. The decrease

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reflected a decrease in the average rate paid on deposits and borrowings in fiscal 2009 to 2.40% compared to 3.08% during fiscal 2008, which more than offset the increase in the average balance of such deposits and borrowings to $361.3 million during the year ended September 30, 2009 from $301.5 million during the year ended September 30, 2008.

Interest expense on money market funds increased $1.4 million, or 204.3%, to $2.1 million during fiscal 2009 from $677,000 during the year earlier period, reflecting the substantial increase in the average balance of these accounts in 2009 to $89.5 million from $47.8 million during the year ended September 30, 2008. During fiscal 2008 we determined to reduce our borrowings from the FHLB of Boston and increases money market accounts by offering above-market rates on these products. The average balance of our certificates of deposits also decreased to $126.8 million for the year ended September 30, 2009 from $137.1 million for the year ended September 30, 2008, as some certificate customers moved their funds to these higher-yielding, variable-rate products. As a result, interest expense on certificates of deposits decreased significantly to $3.6 million for fiscal 2009 from $6.4 million for fiscal 2008, reflecting the lower average balances as well as a reduction in the average cost of these certificates to 2.85% in fiscal 2009 from 4.67% in fiscal 2008.

Interest expense on borrowings, which were solely advances from the Federal Home Loan Bank of Boston, increased $837,000, or 50.7%, to $2.5 million for the year ended September 30, 2009 from $1.7 million for the year ended September 30, 2008. The increase resulted from the increase in the average balance of these borrowings during the 2009 period to $70.7 million as compared to $40.3 million during fiscal 2008, partially offset by a lower average rate paid on such borrowings to 3.52% from 4.09%.

Net Interest and Dividend Income. Net interest and dividend income increased $1.1 million, or 8.6%, to $13.9 million for the year ended September 30, 2009 from $12.8 million for the year ended September 30, 2008. The increase resulted from the increase in the balance of our average interest-earnings assets year over year, partially offset by the reduction in our net interest rate spread to 2.97% for the year ended September 30, 2009 from 3.02% for the year ended September 30, 2008, as well as a decrease in the ratio of our average interest-earning assets to average interest-bearing liabilities to 116.5% from 120.2%. Our net interest margin also decreased to 3.31% from 3.54% during the periods. The decreases in our net interest rate spread and net interest margin reflected significant pre-payment activity during the period, a declining interest rate environment, low loan volume for new originations in a challenging economy and our decision to temporarily place some of these funds in lower-interest rate cash and cash equivalents. The decrease in our ratio of our average interest-earning assets to average interest-bearing liabilities reflected, in part, an increase in our non-performing assets from $3.6 million at September 30, 2008 to $5.7 million at September 30, 2009.

Provision for Loan Losses. We recorded a provision for loan losses of $127,000 for the year ended September 30, 2009, and recorded no provision for loan losses for the year ended September 30, 2008. The provision for loan losses in 2009 reflected net charge offs of $131,000 for the year ended September 30, 2009 compared to $106,000 for the year ended September 30, 2008. The allowance for loan losses was $3.2 million, or 0.88% of total loans at September 30, 2009 compared to $3.2 million, or 0.85% of total loans at September 30, 2008. Total nonperforming assets were $5.7 million at September 30, 2009 compared to $3.6 million at September 30, 2008. We used the same methodology in assessing the allowances for both periods. Of the $5.7 million of nonperforming loans at September 30, 2009, $3.4 million reflected two construction loan relationships which, based on appraisals of the underlying real estate, management believes are well-collateralized and will not expose us to a risk of loss of principal loan amount.

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Noninterest Income. Noninterest income increased $407,000, or 28.9%, to $1.8 million for the year ended September 30, 2009 from $1.4 million for the year ended September 30, 2008. The increase in noninterest income was attributable to increased customer service charges to $813,000 from $796,000, reflecting higher balances of deposits; an increase in net gain on sales of mortgage loans to $307,000 from $24,000, reflecting the sale of approximately $8.5 million in mortgage loans during fiscal 2009; and an increase in net gain in sales of available-for-sale securities to $208,000 from $43,000. These sales reflected management’s decision to reduce our interest rate risk profile in a low interest rate environment by reducing our securities portfolio and increasing our liquidity position. These gains were offset partially by a decrease in the income in the cash surrender value of our bank-owned life insurance to $391,000 from $419,000 and a decrease in other income to $69,000 from $96,000.

Noninterest Expense. Noninterest expense increased $397,000, or 3.7%, to $11.3 million for the year ended September 30, 2009 from $10.9 million for the year ended September 30, 2008. The increase was due to increased salaries and employee benefits expense to $7.1 million for the year ended September 30, 2009 from $6.8 million for the year ended September 30, 2008, reflecting normal annual salary increases and payouts under our benefit plans. The number of full time equivalent employees increased to 67 at September 30, 2009 from 61 at September 30, 2008. Additionally, professional fees increased $57,000, or 14.0%, to $465,000 from $408,000, reflecting increased legal fees, and federal deposit insurance premiums increased 278.7% to $587,000 from $155,000 resulting from an increase in the rate the FDIC charged insured institutions on deposits as well as a one-time additional fee imposed by the FDIC on all insured depository institutions.

Income Tax Expense. The provision for income taxes was $1.7 million for the fiscal year ended September 30, 2009 compared to $1.3 million for the fiscal year ended September 30, 2008, reflecting an increase in pretax income. Our effective tax rate was 38.6% for the year ended September 30, 2009 compared to 38.4% for the year ended September 30, 2008.

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Average Balances and Yields

The following tables set 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.

	At December 31, 2009		For the Three Months Ended December 31,
			2009							2008
	Yield/ Rate		Average Outstanding Balance			Interest		Yield/ Rate(1)		Average Outstanding Balance			Interest		Yield/ Rate(1)
Interest-earning assets:
Loans	5.64	%	$	362,299		$	5,131	5.66	%	$	369,946		$	5,721	6.19	%
Taxable securities	5.20	%		5,393			59	4.38	%		21,465			230	4.29	%
Tax-exempt securities	—	%		—			—	—	%		—			—	—	%
Other interest-earning assets	0.10	%		80,530			17	0.08	%		13,287			7	0.21	%
FHLB of Boston stock	—	%		4,339			—	—	%		4,339			23	2.12	%
Total interest-earning assets	4.87	%		452,561			5,207	4.60	%		409,037			5,981	5.85	%
Noninterest-earning assets				33,125							26,742
Total assets			$	485,686						$	435,779
Interest-bearing liabilities:
Savings deposits	0.91	%	$	44,374			113	1.02	%	$	42,728			114	1.07	%
Money market	1.38	%		154,850			603	1.56	%		55,767			380	2.73	%
NOW accounts	0.15	%		30,257			14	0.19	%		31,134			15	0.19	%
Certificates of deposit	1.99	%		110,468			590	2.14	%		140,776			1,170	3.32	%
Total deposits	1.40	%		339,949			1,320	1.55	%		270,405			1,679	2.48	%
Federal Home Loan Bank advances	3.36	%		55,935			473	3.38	%		76,493			675	3.53	%
Total interest-bearing liabilities	1.67	%		395,884			1,793	1.81	%		346,898			2,354	2.71	%
Demand deposits				31,890							33,515
Noninterest-bearing liabilities				6,579							6,451
Total liabilities				434,353							386,864
Equity				51,333							48,915
Total liabilities and equity			$	485,686						$	435,779
Net interest income						$	3,414						$	3,627
Net interest rate spread (2)	3.20	%						2.79	%						3.14	%
Net interest-earning assets (3)			$	56,677						$	62,139
Net interest margin (4)	3.05	%						3.02	%						3.55	%
Average interest-earning assets to interest-bearing liabilities	110.81	%		114.32	%						117.91	%

(footnotes on following page)

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	For the Years Ended September 30,
	2009							2008							2007
	Average Outstanding Balance			Interest		Yield/ Rate		Average Outstanding Balance			Interest		Yield/ Rate		Average Outstanding Balance			Interest		Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	367,936		$	21,962	5.97	%	$	308,995		$	20,060	6.49	%	$	285,225		$	19,316	6.77	%
Taxable securities		13,725			599	4.36	%		24,930			1,114	4.47	%		27,825			1,306	4.69	%
Tax-exempt securities		—			—	—			153			7	4.58	%		200			8	4.00	%
Other interest-earning assets		34,759			30	0.09	%		25,342			780	3.08	%		31,734			1,594	5.02	%
FHLB of Boston stock		4,339			23	0.53	%		3,003			135	4.50	%		2,822			171	6.06	%
Total interest-earning assets		420,759			22,614	5.37	%		362,423			22,096	6.10	%		347,806			22,395	6.44	%
Noninterest-earning assets		29,275							26,720							26,955
Total assets	$	450,034						$	389,143						$	374,761
Interest-bearing liabilities:
Savings deposits	$	43,058			459	1.07	%	$	43,802			462	1.05	%	$	46,319			297	0.64	%
Money market		89,519			2,060	2.30	%		47,791			677	1.42	%		39,530			1,410	3.57	%
NOW accounts		31,210			69	0.22	%		32,496			74	0.23	%		37,885			186	0.49	%
Certificates of deposit		126,822			3,612	2.85	%		137,099			6,409	4.67	%		139,477			6,075	4.36	%
Total deposits		290,609			6,200	2.13	%		261,188			7,622	2.92	%		263,211			7,968	3.03	%
FHLB of Boston advances		70,687			2,487	3.52	%		40,318			1,650	4.09	%		34,959			1,681	4.81	%
Total interest-bearing liabilities		361,296			8,687	2.40	%		301,506			9,272	3.08	%		298,170			9,649	3.24	%
Demand deposits		32,150							34,757							25,914
Noninterest-bearing liabilities		6,352							5,541							4,665
Total liabilities		399,798							341,804							328,749
Equity		50,236							47,339							46,012
Total liabilities and equity	$	450,034						$	389,143						$	374,761
Net interest income				$	13,927						$	12,824						$	12,746
Net interest rate spread (2)						2.97	%						3.02	%						3.20	%
Net interest-earning assets (3)	$	59,463						$	60,917						$	49,636
Net interest margin (4)						3.31	%						3.54	%						3.66	%
Average of interest-earning assets to interest-bearing liabilities		116.46	%						120.20	%						116.65	%

(1) Yields and rates for the three months ended December 31, 2009 and 2008 are annualized.

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

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

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

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Rate/Volume Analysis

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

	Three Months Ended December 31, 2009 vs. 2008									Years Ended September 30, 2009 vs. 2008									Years Ended September 30, 2008 vs. 2007
	Increase (Decrease) Due to						Total Increase (Decrease)			Increase (Decrease) Due to						Total Increase (Decrease)			Increase (Decrease) Due to						Total Increase (Decrease)
	Volume			Rate						Volume			Rate						Volume			Rate
	(In thousands)
Interest-earning assets:
Loans	$	(116	)	$	(474	)	$	(590	)	$	3,293		$	(1,391	)	$	1,902		$	1,477		$	(733	)	$	744
Taxable securities		(176	)		5			(171	)		(490	)		(25	)		(515	)		(131	)		(61	)		(192	)
Tax-exempt securities		—			—			—			(7	)		—			(7	)		(3	)		2			(1	)
Other interest-earning assets		11			(1	)		10			464			(1,214	)		(750	)		(279	)		(535	)		(814	)
FHLB of Boston stock		—			(23	)		(23	)		114			(226	)		(112	)		12			(48	)		(36	)
Total interest-earning assets		(281	)		(493	)		(774	)		3,374			(2,856	)		518			1,076			(1,375	)		(299	)
Interest-bearing liabilities:
Savings deposits		5			(6	)		(1	)		(8	)		5			(3	)		(15	)		180			165
Money market		294			(71	)		223			806			577			1,383			389			(1,122	)		(733	)
NOW accounts		—			(1	)		(1	)		(3	)		(2	)		(5	)		(23	)		(89	)		(112	)
Certificates of deposit		(218	)		(362	)		(580	)		(450	)		(2,347	)		(2,797	)		(101	)		435			334
Total deposits		81			(440	)		(359	)		345			(1,767	)		(1,422	)		250			(596	)		(346	)
FHLB of Boston advances		(175	)		(27	)		(202	)		1,029			(192	)		837			(1,084	)		1,053			(31	)
Total interest-bearing liabilities		(94	)		(467	)		(561	)		1,374			(1,959	)		(585	)		(834	)		457			(377	)
Change in net interest income	$	(187	)	$	(26	)	$	(213	)	$	2,000		$	(897	)	$	1,103		$	1,910		$	(1,832	)	$	78

Management of Market Risk

General. Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our net interest income to changes in market interest rates. Our Board of Directors has established an Asset/Liability Management Committee, which is responsible for evaluating the interest rate risk 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.

Historically, we have operated as a traditional thrift institution. A significant portion of our assets consist of longer-term, fixed- and adjustable-rate residential mortgage loans and mortgage-backed securities, which we funded primarily with checking and savings accounts and short-term borrowings. In recent years, in an effort to improve our earnings and to decrease our exposure to interest rate risk, we generally have sold long-term (primarily 20- and 30-year), fixed-rate, conforming one- to four-family residential mortgage loans and we have shifted our focus to originating and purchasing more higher-yielding, fixed-rate jumbo loans and adjustable-rate jumbo loans (generally with rates that adjust after the

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initial 5 years) and more commercial real estate loans, which generally have shorter maturities than one- to four-family residential mortgage loans, and are usually originated with adjustable interest rates. Additionally, to increase our liquidity and further reduce our exposure to interest rate risk, in recent years we have sold a substantial amount of our short-term, mortgage-backed securities in the relatively low interest rate environment.

In addition to the above strategies with respect to our lending activities, we have used the following strategies to reduce our interest rate risk:

• increasing our money market accounts, which are less rate-sensitive than certificates of deposit and which provide us with a stable, low-cost source of funds;

• repaying short-term borrowings; and

• maintaining relatively high levels of capital.

We have not conducted hedging activities, such as engaging in futures, options or swap transactions, or investing in high-risk mortgage derivatives, such as collateralized mortgage obligations, residual interests, real estate mortgage investment conduit residual interests or stripped mortgage backed securities.

In addition, changes in interest rates can affect the fair values of our financial instruments. During the fiscal year ended September 30, 2009, decreases in market interest rates were the primary factor in the increases in the fair values of our loans, deposits and Federal Home Loan Bank advances when compared to the carrying values on our financial statements. For additional information, see Note 11 to the Notes to our Consolidated Financial Statements.

Net Portfolio Value. The Office of Thrift Supervision requires the computation of amounts by which the difference between the present value of an institution’s assets and liabilities (the institution’s net portfolio value or “NPV”) would change in the event of a range of assumed changes in market interest rates. The Office of Thrift Supervision provides all institutions that file a Consolidated Maturity/Rate Schedule as a part of their quarterly Thrift Financial Report with a report that measures the sensitivity of net portfolio value. The Office of Thrift Supervision simulation model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. Historically, the Office of Thrift Supervision model estimated the economic value of each type of asset, liability and off-balance sheet contract using the current interest rate yield curve with instantaneous increases or decreases of 100 to 300 basis points in 100 basis point increments. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below. Given the current relatively low level of market interest rates, an NPV calculation for an interest rate decrease of greater than 100 basis points has not been prepared. The Office of Thrift Supervision provides us the results of the interest rate sensitivity model, which is based on information we provide to the Office of Thrift Supervision to estimate the sensitivity of our NPV.

The table below sets forth, as of December 31, 2009, the Office of Thrift Supervision’s calculation of the estimated changes in our net portfolio value that would result from the designated instantaneous changes in the interest rate yield curve. 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.

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			Estimated Increase (Decrease) in NPV					NPV as a Percentage of Present Value of Assets (3)
Change in Interest Rates (basis points) (1)	Estimated NPV (2)		Amount			Percent		NPV Ratio (4)		Increase (Decrease) (basis points)
	(Dollars in thousands)
+300	$	62,986	$	(12,339	)	(16	)%	12.78	%	(202	)
+200		69,018		(6,307	)	(8	)%	13.80		(100	)
+100		73,169		(2,156	)	(3	)%	14.48		(33	)
0		75,325		—		—		14.80		—
-100		74,555		(770	)	(1	)%	14.64		(16	)

(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.

The table above indicates that at December 31, 2009, in the event of a 200 basis point increase in interest rates, we would experience an 8.0% decrease in net portfolio value. In the event of a 100 basis point decrease in interest rates, we would experience a 1.0% decrease in net portfolio value.

Certain shortcomings are inherent in the methodologies used in determining interest rate risk through changes in net portfolio value. Modeling changes in net portfolio value require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the net portfolio value tables presented assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assume that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the net portfolio value tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.

Liquidity and Capital Resources

Liquidity is the ability to meet current and future financial obligations. Our primary sources of funds consist of deposit inflows, loan repayments, advances from the Federal Home Loan Bank of Boston, principal repayments and loan sales and the sale of available-for-sale securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. Our Asset/Liability Management Committee, under the direction of our Chief Financial Officer, is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We believe that we have enough sources of liquidity to satisfy our short- and long-term liquidity needs as of December 31, 2009.

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

(i) expected loan demand;

(ii) expected deposit flows and borrowing maturities;

(iii) yields available on interest-earning deposits and securities; and

(iv) the objectives of our asset/liability management program.

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

Our most liquid assets are cash and cash equivalents. The level of these assets is dependent on our operating, financing, lending and investing activities during any given period. At December 31, 2009, cash and cash equivalents totaled $80.2 million.

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

At December 31, 2009, we had $2.7 million in loan commitments outstanding, $139,000 of which were for fixed-rate loans and $2.6 million of which were for adjustable-rate loans. In addition to commitments to originate loans, we had $35.9 million in unused lines of credit to borrowers. Certificates of deposit due within one year of December 31, 2009 totaled $89.2 million, or 24.1% of total deposits. If these deposits do not remain with us, we may be required to seek other sources of funds, including loan sales, brokered deposits, repurchase agreements and Federal Home Loan Bank advances. However, recently, we have had cash in excess of our funding needs because of increased loan and investment securities sales and prepayments on longer-term, one- to four-family residential real estate loans, resulting from refinancings with other financial institutions. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before December 31, 2010, or on our money market accounts. We believe, however, based on historical experience and current market interest rates, that we will retain upon maturity a large portion of our certificates of deposit with maturities of one year or less as of December 31, 2009.

Our primary investing activity is originating loans. During the fiscal years ended September 30, 2009 and 2008, we originated $74.8 million and $59.7 million of loans, respectively. Additionally, during the fiscal year ended September 30, 2008 we purchased $78.0 million of loans, and during the quarter ended December 31, 2009 we purchased $20.6 million of loans.

Financing activities consist primarily of activity in deposit accounts and Federal Home Loan Bank advances. We experienced a net increase in deposits of $63.5 million for the year ended September 30, 2009. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors, and by other factors.

Liquidity management is both a daily and long-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the Federal Home Loan Bank of Boston, which provide an additional source of funds. Although we have historically relied on Federal Home Loan Bank advances as a funding source and expect that we will continue to utilize these as a source of funding, Federal Home Loan Bank advances decreased by $22.1 million at

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September 30, 2009 to $58.0 million, from $80.1 million at September 30, 2008. At December 31, 2009, we had the ability to borrow up to an additional $45.5 million from the Federal Home Loan Bank of Boston.

Peoples Federal Savings Bank is subject to various regulatory capital requirements, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At December 31, 2009, Peoples Federal Savings Bank exceeded all regulatory capital requirements. Peoples Federal Savings Bank is considered “well capitalized” under regulatory guidelines. See “Supervision and Regulation—Federal Banking Regulation—Capital Requirements” and Note 13 of the Notes to the Consolidated Financial Statements.

The net proceeds from the stock offering will significantly increase our liquidity and capital resources. Over time, the initial level of liquidity will be reduced as net proceeds from the stock offering are used for general corporate purposes, including the funding of loans. Our financial condition and results of operations will be enhanced by the net proceeds from the stock offering, resulting in increased net interest-earning assets and net interest income. However, due to the increase in equity resulting from the net proceeds raised in the stock offering, our return on equity will be adversely affected following the stock offering.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our potential future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. In addition, we enter into commitments to sell mortgage loans. For additional information, see Note 10 of the Notes to our Consolidated Financial Statements.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities and agreements with respect to investments.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued an update to Accounting Standard Codification 105-10, “Generally Accepted Accounting Principles.” This standard establishes the FASB Accounting Standard Codification (“Codification” or “ASC”) as the source of authoritative U.S. GAAP recognized by the FASB for nongovernmental entities. The Codification is effective for interim and annual periods ending after September 15, 2009. The Codification is a reorganization of existing U.S. GAAP and does not change existing U.S. GAAP. We adopted this standard during the third quarter of 2009, and its adoption had no impact on our financial position or results of operations.

In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets”, and SFAS No. 167, “Amendments to FASB Interpretation No. 46(R).” These standards are effective for the first interim reporting period of 2010. SFAS No. 166 amends the guidance in ASC 860 to eliminate the concept of a qualifying special-purpose entity (“QSPE”) and changes some of the requirements for

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derecognizing financial assets. SFAS No. 167 amends the consolidation guidance in ASC 810-10. Specifically, the amendments will (a) eliminate the exemption for QSPEs from the new guidance, (b) shift the determination of which enterprise should consolidate a variable interest entity (“VIE”) to a current control approach, such that an entity that has both the power to make decisions and right to receive benefits or absorb losses that could potentially be significant, will consolidate a VIE, and (c) change when it is necessary to reassess who should consolidate a VIE. We are evaluating the impact that these standards will have on our financial statements.

In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, “Measuring Liabilities at Fair Value”, which updates ASC 820-10, “Fair Value Measurements and Disclosures.” The updated guidance clarifies that the fair value of a liability can be measured in relation to the quoted price of the liability when it trades as an asset in an active market, without adjusting the price for restrictions that prevent the sale of the liability. This guidance is effective beginning October 1, 2009. The adoption of this guidance did not change our valuation techniques for measuring liabilities at fair value.

In May 2009, the FASB updated ASC 855, “Subsequent Events.” ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. We adopted this guidance during 2009. In accordance with the update, we evaluate subsequent events through the date our financial statements are issued. The adoption of this guidance did not have an impact on our financial position or results of operations.

In April 2009, the FASB updated ASC 320-10, “Investments – Debt and Equity Securities.” The guidance amends the other-than-temporary impairment (“OTTI”) guidance for debt securities. If the fair value of a debt security is less than its amortized cost basis at the measurement date, the updated guidance requires us to determine whether we have the intent to sell the debt security or whether it is more likely than not we will be required to sell the debt security before the recovery of its amortized cost basis. If either condition is met, an entity must recognize full impairment. For all other debt securities that are considered other-than-temporarily impaired and do not meet either condition, the guidance requires that the credit loss portion of impairment be recognized in earnings and the temporary impairment related to all other factors be recorded in other comprehensive income. In addition, the guidance requires additional disclosures regarding impairments on debt and equity securities. We adopted this guidance effective April 1, 2009. The adoption of this guidance did not have an impact on our financial position or results of operations.

In April 2009, the FASB updated ASC 820-10, “Fair Value Measurements and Disclosures” to provide guidance on determining fair value when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly. This issuance provides guidance on estimating fair value when there has been a significant decrease in the volume and level of activity for the asset or liability and for identifying transactions that may not be orderly. The guidance requires entities to disclose the inputs and valuation techniques used to measure fair value and to discuss changes in valuation techniques and related inputs, if any, in both interim and annual periods. We adopted this guidance during 2009 and the adoption did not have a material impact on our financial position and results of operations. The enhanced disclosures related to this guidance are included in Note 11, “Fair Value Measurements,” to the Consolidated Financial Statements.

In April 2009, the FASB updated ASC 825-10 “Financial Instruments.” This update amends the fair value disclosure guidance in ASC 825-10-50 and requires an entity to disclose the fair value of its financial instruments in interim reporting periods as well as in annual financial statements. The methods

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and significant assumptions used to estimate the fair value of financial instruments and any changes in methods and assumptions used during the reporting period are also required to be disclosed both on an interim and annual basis. We adopted this guidance during 2009. The required disclosures have been included in Note 11, “Fair Value Measurements,” to the Consolidated Financial Statements.

In March 2008, the FASB updated ASC 815, “Derivatives and Hedging.” This guidance changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under ASC 815 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The guidance in ASC 815 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This guidance encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The adoption of this guidance did not have a material impact on our financial condition and results of operations.

In February 2008, the FASB updated ASC 860, “Transfers and Servicing.” This guidance clarifies how the transferor and transferee should separately account for a transfer of a financial asset and a related repurchase financing if certain criteria are met. This guidance will be effective October 1, 2009. The adoption of this guidance did not have a material effect on our results of operations or financial position.

In December 2007, the FASB updated ASC 805, “Business Combinations.” The updated guidance will significantly change the accounting for business combinations. Under ASC 805, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. It also amends the accounting treatment for certain specific items including acquisition costs and non controlling minority interests and includes a substantial number of new disclosure requirements. ASC 805 applies prospectively to business combinations for which the acquisition date is on or after October 1, 2009. The adoption of this statement did not have a material impact on our financial condition and results of operations.

Impact of Inflation and Changing Prices

Our consolidated financial statements and related notes have been prepared in accordance with U.S. GAAP. U.S. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration of changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.

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BUSINESS OF PEOPLES FEDERAL BANCSHARES, INC.

Peoples Federal Bancshares, Inc. is incorporated in the State of Maryland. We have not engaged in any business to date. Upon completion of the conversion, we will own all of the issued and outstanding stock of Peoples Federal Savings Bank. We will retain up to 50% of the net proceeds from the offering and initially invest the remaining net proceeds in Peoples Federal Savings Bank as additional capital of Peoples Federal Savings Bank. Peoples Federal Bancshares, Inc. will use a portion of the net proceeds to make a loan to the employee stock ownership plan or to capitalize a subsidiary that will make a loan to the employee stock ownership plan. At a later date, we may use the net proceeds to pay dividends to stockholders and may repurchase shares of common stock, subject to regulatory limitations. We will invest our initial capital as discussed in “How We Intend to Use the Proceeds from the Offering.”

In the future, Peoples Federal Bancshares, Inc., as the holding company of Peoples Federal Savings Bank, will be authorized to pursue other business activities permitted by applicable laws and regulations, which may include the acquisition of banking and financial services companies. See “Supervision and Regulation—Holding Company Regulation” for a discussion of the activities that are permitted for savings and loan holding companies. We currently have no understandings or agreements to acquire other financial institutions. We may also borrow funds for reinvestment in Peoples Federal Savings Bank.

Following the offering, our cash flow will primarily depend on earnings from the investment of the net proceeds from the offering that we retain and any dividends we receive from Peoples Federal Savings Bank. Initially, Peoples Federal Bancshares, Inc. will neither own nor lease any property, but will instead pay a fee to Peoples Federal Savings Bank for the use of its premises, equipment and furniture. At the present time, we intend to employ only persons who are officers of Peoples Federal Savings Bank to serve as officers of Peoples Federal Bancshares, Inc. We will, however, use the support staff of Peoples Federal Savings Bank from time to time. We will pay a fee to Peoples Federal Savings Bank for the time devoted to Peoples Federal Bancshares, Inc. by employees of Peoples Federal Savings Bank. However, these persons will not be separately compensated by Peoples Federal Bancshares, Inc. Peoples Federal Bancshares, Inc. may hire additional employees, as appropriate, to the extent it expands its business in the future.

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BUSINESS OF PEOPLES FEDERAL SAVINGS BANK

General

Peoples Federal Savings Bank’s business consists primarily of accepting deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in one- to four-family residential mortgage loans, multi-family mortgage loans, commercial real estate loans and construction loans and investment securities. To a much lesser extent, we also originate consumer loans and commercial business loans. Peoples Federal Savings Bank offers a variety of deposit accounts, including passbook and statement savings accounts, certificates of deposit, money market accounts, commercial and regular checking accounts and IRAs.

We offer extended hours at all of our branches, and we are dedicated to offering alternative banking delivery systems utilizing state-of-the-art technology, including ATMs, online banking, remote deposit capture and telephone banking delivery systems.

Our website address is www.pfsb.com. Information on our website is not incorporated into this prospectus and should not be considered part of this prospectus.

Market Area

Our lending activities are concentrated primarily in the Boston metropolitan area and eastern Massachusetts. The Boston metropolitan area benefits from the presence of numerous institutions of higher learning, medical care and research centers and the corporate headquarters of several significant mutual fund investment companies. Eastern Massachusetts also has many high technology companies employing personnel with specialized skills. These factors affect the demand for residential homes, multi-family apartments, office buildings, shopping centers, industrial warehouses and other commercial properties.

Our lending area is primarily an urban market area with a substantial amount of two-, three- and four-unit properties, some of which are non-owner occupied, as well as apartment buildings, condominiums and office buildings. As a result, compared to many thrift institutions, our loan portfolio contains a significant amount of multi-family loans and commercial real estate loans, and at December 31, 2009, $103.9 million, or 27.5% of our total loan portfolio was comprised of these types of loans. Additionally, at December 31, 2009, $105.8 million, or 45.2% of the $249.1 million of one-to four-family residential mortgage loans were collateralized by non-owner occupied properties.

We conduct our operations from our six full-service branch offices located in Brighton, Allston, West Roxbury and Jamaica Plain, in Suffolk County, Massachusetts, and Brookline and Norwood, in Norfolk County, Massachusetts. We consider Suffolk County, Norfolk County and portions of Middlesex County, Massachusetts as our primary market area for deposits and lending.

The Boston metropolitan area is the 11 ^th largest metropolitan area in the United States. Located adjacent to major transportation corridors, the Boston metropolitan area provides a highly diversified economic base, with major employment sectors ranging from services, manufacturing and wholesale retail trade, to finance, technology and medical care. According to the United States Department of Labor, in December 2009, the Boston-Cambridge-Quincy, Massachusetts/New Hampshire Metropolitan Statistical Area had an unemployment rate of 8.2% compared to the national unemployment rate of 10.0% for December 2009.

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Based on census estimates, from 2000 to 2008, the population of Suffolk, Norfolk and Middlesex Counties increased 6.2%, 1.5% and 1.1%, respectively. This compares to population increases of 2.3% for Massachusetts and 8.0% for the United States for the comparable period. In addition, 2008 median household income was $51,000, $81,000 and $78,000 for Suffolk, Norfolk and Middlesex, respectively, compared to median household income for Massachusetts of $65,000 and $52,000 for the United States for 2008.

Competition

We face intense competition in our market area both in making loans and attracting deposits. We compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies and investment banking firms. Some of our competitors have greater name recognition and market presence that benefit them in attracting business, and offer certain services that we do not or cannot provide.

Our deposit sources are primarily concentrated in the communities surrounding our banking offices, located in Suffolk County and Norfolk Counties, Massachusetts. As of June 30, 2009 (the latest date for which information is publicly available from the Federal Deposit Insurance Corporation), there were 41 banks and thrift institutions with offices in Suffolk County, Massachusetts and 46 banks and thrift institutions with offices in Norfolk County, Massachusetts. At June 30, 2009 we had less than a 1.0% market share in all of the communities in which we operate.

Lending Activities

Our primary lending activity is the origination of one- to four-family residential mortgage loans, multi-family mortgage loans, commercial real estate loans and construction loans. To a much lesser extent, we also originate consumer loans and commercial business loans.

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Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio, including loans held-for-sale, by type of loan at the dates indicated.

	At December 31, 2009					At September 30,
						2009					2008					2007					2006					2005
	Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent
	(Dollars in thousands)
Mortgage loans:
One- to four-family residential(1) (2)	$	249,114		66.0	%	$	237,429		64.9	%	$	249,833		66.3	%	$	170,050		58.8	%	$	172,514		60.2	%	$	179,055		62.8	%
Multi-family		40,018		10.6			40,966		11.2			46,659		12.4			44,830		15.5			39,898		13.9			30,716		10.8
Commercial real estate		63,850		16.9			63,861		17.4			54,062		14.4			53,691		18.6			43,773		15.3			36,368		12.7
Construction		17,312		4.6			16,536		4.5			18,890		5.0			13,777		4.8			23,771		8.3			34,116		11.9
Consumer loans		2,532		0.7			2,523		0.7			2,239		0.6			2,418		0.8			3,056		1.0			3,302		1.2
Commercial loans		4,536		1.2			4,830		1.3			4,998		1.3			4,293		1.5			3,621		1.3			1,687		0.6
Total loans		377,362		100.0	%		366,145		100.0	%		376,681		100.0	%		289,059		100.0	%		286,633		100.0	%		285,244		100.0	%
Other items:
Deferred loan origination fees, net		(40	)				(274	)				(164	)				(839	)				(958	)				(1,103	)
Allowance for loan losses		(3,150	)				(3,203	)				(3,208	)				(3,314	)				(3,318	)				(3,097	)
Total loans, net	$	374,172				$	362,667				$	373,309				$	284,906				$	282,357				$	281,044

⁽¹⁾ Includes $19.1 million; $19.8 million; $19.8 million; $18.8 million; $21.9 million; and $18.7 million of home equity loans and lines of credit at December 31, 2009, September 30, 2009, 2008, 2007, 2006 and 2005, respectively.

⁽²⁾ At December 31, 2009, September 30, 2009 and September 30, 2008, included $105.8 million, $108.2 million and $111.5 million of loans collateralized by non-owner occupied properties, all of which were located in our market area, respectively.

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Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at September 30, 2009. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.

	One- to four-family residential				Multi-family				Commercial real estate				Construction loans
	Amount		Weighted Average Rate		Amount		Weighted Average Rate		Amount		Weighted Average Rate		Amount		Weighted Average Rate
	(Dollars in thousands)
Due During the Years Ending September 30,
2010	$	616	4.61	%	$	—	—	%	$	1,219	5.47	%	$	10,851	5.42	%
2011		2,432	6.00			—	—			49	6.70			5,685	5.35
2012		835	5.10			92	7.60			2,183	6.34			—	—
2013 to 2014		3,815	5.72			319	6.87			3,373	5.76			—	—
2015 to 2019		20,979	5.73			7,906	6.08			2,041	5.79			—	—
2020 to 2024		28,585	5.44			3,835	4.75			10,847	6.06			—	—
2025 and beyond		180,167	5.70			28,814	5.78			44,149	6.15			—	—
Total	$	237,429	5.67	%	$	40,966	5.75	%	$	63,861	6.10	%	$	16,536	5.40	%

	Consumer loans				Commercial loans				Total
	Amount		Weighted Average Rate		Amount		Weighted Average Rate		Amount		Weighted Average Rate
	(Dollars in thousands)
Due During the Years Ending September 30,
2010	$	147	9.27	%	$	793	4.82	%	$	13,626	5.39	%
2011		318	7.88			208	7.66			8,692	5.69
2012		630	9.80			216	7.41			3,956	6.72
2013 to 2014		730	7.04			1,823	6.69			10,060	6.04
2015 to 2019		369	5.36			1,611	6.56			32,906	5.85
2020 to 2024		—	—			93	8.50			43,360	5.54
2025 and beyond		329	15.98			86	17.46			253,545	5.80
Total	$	2,523	8.88	%	$	4,830	6.64	%	$	366,145	5.78	%

The following table sets forth the scheduled repayments of fixed- and adjustable-rate loans at September 30, 2009 that are contractually due after September 30, 2010.

	Due After September 30, 2010
	Fixed		Adjustable		Total
	(In thousands)
Mortgage loans:
One- to four-family residential	$	110,186	$	126,627	$	236,813
Multi-family		6,618		34,348		40,966
Commercial real estate		7,972		54,670		62,642
Construction		—		5,685		5,685
Consumer loans		1,966		410		2,376
Commercial loans		2,532		1,505		4,037
Total loans	$	129,274	$	223,245	$	352,519

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One- to Four-Family Residential Mortgage Loans. At December 31, 2009, $249.1 million, or 66.0% of our total loan portfolio, consisted of one- to four-family residential mortgage loans. We offer fixed-rate and adjustable-rate residential mortgage loans with maturities of up to 30 years.

Much of the housing stock in our primary lending market area is comprised of two-, three- and four-unit properties, all of which are classified as one- to four-family residential mortgage loans. At December 31, 2009, of the $249.1 million of one- to four-family residential mortgage loans in our portfolio, $105.8 million, or 42.5% of this amount, were comprised of non-owner occupied properties.

One- to four-family residential mortgage loans are generally underwritten according to Fannie Mae and Freddie Mac guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” We generally originate both fixed- and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Office of Federal Housing Enterprise Oversight, which is generally $417,000, but is $523,750 for single single-family homes located in the Boston metropolitan area. We also originate loans above this amount, which are referred to as “jumbo loans.” Our maximum loan amount for these loans is generally $3.5 million. We generally underwrite jumbo loans in a manner similar to conforming loans. Jumbo loans are common in our market area.

We originate our adjustable-rate one- to four-family residential mortgage loans with initial interest rate adjustment periods of one, three and five years, based on changes in a designated market index. These loans are limited to a 2.00% increase on their interest rate annually, with a maximum upward adjustment of 5.00% over the life of the loan. We determine whether a borrower qualifies for an adjustable-rate mortgage loan based on secondary market guidelines.

We will originate one- to four-family residential mortgage loans with loan-to-value ratios up to 90% without private mortgage insurance. We will originate loans with loan-to-value ratios of up to 95% with private mortgage insurance and where the borrower’s debt ratio does not exceed 44% of the borrower’s monthly cash-flow. During the year ended September 30, 2009, we originated no one- to four-family residential mortgage loans with loan-to-value ratios in excess of 90%.

Generally, we sell into the secondary market most of the conforming fixed-rate loans with maturities of 20 years or greater that we originate. We retain the servicing on all such loans that we sell to Fannie Mae or Freddie Mac, and we release the servicing on all such loans that are sold to other mortgage investors. For the year ended September 30, 2009, we received servicing fees of $28,000 on loans that we previously sold. At December 31, 2009, the principal balance of loans serviced for others totaled $56.1 million.

We do not offer “interest only” mortgage loans on one- to four-family residential properties nor do we offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on their loan, resulting in an increased principal balance during the life of the loan. Additionally, we generally do not offer “subprime loans” (loans that are made with low down-payments to borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (traditionally defined as loans having less than full documentation). Although we participate in Fannie Mae’s Expanded Approval program and Freddie Mac’s A Minus program, which previously did not require income verification, we still verified income for these types of loans, as well as for all mortgage loans that we make.

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In addition to traditional one- to four-family residential mortgage loans, we offer home equity loans and home equity lines of credit that are secured by the borrower’s primary residence, secondary residence or one- to four-family investment properties. Home equity lines of credit have a maximum term of 20 years and are originated with adjustable rates of interest that are based, generally, upon the Prime Rate. The borrower is permitted to draw against the line during the initial 10 years of the line. Our home equity loans are originated with fixed rates of interest with terms of up to 15 years.

Home equity loans and lines of credit are generally underwritten with the same criteria that we use to underwrite one- to four-family residential mortgage loans. For a borrower’s primary residence, home equity loans may be originated with loan-to-value ratios of up to 75% when combined with the principal balance of the existing mortgage loan, while the maximum loan-to-value ratio on secondary residences and investment properties is 70%, when combined with the principal balance of the existing mortgage loan. We require appraisals on home equity loans and lines of credit when the aggregate loan amount exceeds 75% of the property’s tax assessed value or when the home equity loan or line of credit is $250,000 or greater. At the time we close a home equity loan or line of credit, we record a mortgage to perfect our security interest in the underlying collateral. We generally impose a limitation of $250,000 on a home equity line of credit and may exceed such limitation on a case by case basis. At December 31, 2009 our largest home equity line of credit was for $2.2 million and had an outstanding balance of $2.1 million. At December 31, 2009 this loan was performing in accordance with its repayment terms.

Multi-Family Real Estate Loans. At December 31, 2009, $40.0 million, or 10.6% of our total loan portfolio, consisted of multi-family (which we consider to be five or more units) real estate loans.

We will originate multi-family real estate loans with either fixed rates (up to 15 years) or adjustable rates (up to 30 years) with initial principal balances of up to $4.0 million and with a maximum loan to value ratio of 75%. Additionally, in evaluating a proposed multi-family real estate loan, we emphasize the ratio of the property’s projected net cash flow to the loan’s debt service requirement (generally requiring a minimum ratio of 125%), computed after deduction for a vacancy factor and property expenses we deem appropriate. Personal guarantees are usually obtained from multi-family real estate borrowers.

Appraisals on properties securing multi-family real estate loans are performed by an outside independent appraiser designated by us or internal evaluations, where permitted by regulation. All appraisals on multi-family real estate loans are reviewed by our management. Our underwriting procedures include considering the borrower’s expertise and require verification of the borrower’s credit history, income and financial statements, banking relationships, references and income projections for the property. We generally obtain personal guarantees on these loans.

The borrower’s financial information on multi-family loans is monitored on an ongoing basis by requiring periodic financial statement updates, payment history reviews and periodic face-to-face meetings with the borrower. We require such borrowers to provide annually updated financial statements and federal tax returns. These requirements also apply to the principals of our corporate borrowers.

Multi-family real estate loans generally present a higher level of risk than our loans which are secured by one- to four-family residences. This greater risk is due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effects of general economic conditions on income-producing properties and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by multi-family residential real estate is typically dependent upon the successful operation of the related real estate project. If the cash flow from the project is reduced (for example, if leases are not obtained or renewed), the borrower’s ability to repay the loan may be impaired.

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At December 31, 2009, our largest multi-family real estate loan had a balance of $2.6 million and was secured by a real estate mortgage on a 34-unit apartment building in our primary market area. At December 31, 2009, this loan was performing in accordance with its repayment terms. At December 31, 2009, we had one multi-family loan that was between 30-89 days delinquent with a balance of $222,000 and one multi-family loan that was 90 days or more delinquent with a balance of $258,000.

Commercial Real Estate Loans. At December 31, 2009, $63.9 million, or 16.9% of our total loan portfolio, consisted of commercial real estate loans, which we define as loans that are secured by properties that are occupied primarily (50% or more) by commercial entities. Similar to our multi-family lending, we will originate commercial real estate loans with either fixed rates (up to 15 years) or adjustable rates (up to 30 years) with initial principal balances of up to $4.0 million or less with a maximum loan to value ratio of 75%.

In the underwriting of commercial real estate loans, we generally lend up to the lesser of 75% of the property’s appraised value or purchase price. We base our decision to lend primarily on the economic viability of the property and the creditworthiness of the borrower. In evaluating a proposed commercial real estate loan, we emphasize the ratio of the property’s projected net cash flow to the loan’s debt service requirement (generally requiring a minimum ratio of 125%), computed after deduction for a vacancy factor and property expenses we deem appropriate. Personal guarantees are usually obtained from commercial real estate borrowers. We require title insurance, fire and extended coverage casualty insurance, and, if appropriate, flood insurance, in order to protect our security interest in the underlying property.

Commercial real estate loans generally carry higher interest rates and have shorter terms than one- to four-family residential mortgage loans. Commercial real estate loans, however, entail greater credit risks compared to one- to four-family residential mortgage loans, as they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment of loans secured by income-producing properties typically depends on the successful operation of the property, as repayment of the loan generally is dependent, in large part, on sufficient income from the property to cover operating expenses and debt service. Changes in economic conditions that are not in the control of the borrower or lender could affect the value of the collateral for the loan or the future cash flow of the property. Additionally, any decline in real estate values may be more pronounced for commercial real estate than residential properties.

Repayment of commercial real estate loans is normally expected from the property’s eventual rental income, income from the borrower’s operating entity, the personal resources of the guarantor, or the sale of the subject property.

At December 31, 2009, our largest commercial real estate loan was for $3.6 million, was collateralized by a retail store and apartment building in our market area, and was performing in accordance with its repayment terms.

Construction Loans. We also originate construction loans for one- to four-family residential properties, multi-family properties and commercial properties. At December 31, 2009, $17.3 million, or 4.6% of our total loan portfolio, consisted of construction loans, $7.1 million of which were secured by one- to four-family residential real estate, $4.0 million of which were secured by multi-family real estate, and $6.2 million of which were secured by commercial real estate.

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Construction loans for commercial real estate are originated with initial principal balances of up to $4.5 million with a maximum loan to value ratio of 75%. At December 31, 2009, our largest construction loan had a principal balance of $3.4 million and was secured by a hotel. This loan was performing in accordance with its terms at December 31, 2009.

Construction loans to individuals are “interest-only” loans during the construction period which typically does not exceed 12 months and convert to permanent, amortizing financing following the completion of construction. Depending on the complexity of the construction project, the term of an “interest-only” construction loan may be extended to up to 24 months. At December 31, 2009, the additional unadvanced portion of these construction loans totaled $6.6 million.

We make construction loans for commercial properties, including commercial “mixed-use” buildings and homes built by developers on speculative, undeveloped property. Advances on construction loans are made in accordance with a schedule reflecting the cost of construction, but are generally limited to 75% loan-to-completed-appraised-value ratio. Repayment of construction loans on residential properties is normally expected from the property’s eventual rental income, income from the borrower’s operating entity, the personal resources of the guarantor, or the sale of the subject property. In the case of income-producing property, repayment is usually expected from permanent financing upon completion of construction. We typically provide the permanent mortgage financing on our construction loans on income-producing property.

Generally, before making a commitment to fund a construction loan, we require an appraisal of the property by a state-certified or state-licensed appraiser. We review and inspect properties before disbursement of funds during the term of the construction loan.

Construction financing generally involves greater credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost is inaccurate, we may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property. Moreover, if the estimated value of the completed project is inaccurate, the borrower may hold a property with a value that is insufficient to assure full repayment of the construction loan upon the sale of the property. In the event we make a land acquisition loan on property that is not yet approved for the planned development, there is the risk that approvals will not be granted or will be delayed. Construction loans also expose us to the risk that improvements will not be completed on time in accordance with specifications and projected costs. In addition, the ultimate sale or rental of the property may not occur as anticipated.

Consumer Loans. To date, our consumer lending has been quite limited. At December 31, 2009, we had $2.5 million of consumer loans outstanding, representing 0.7% of the total loan portfolio. Consumer loans consist of loans secured by deposits, auto loans, overdraft lines of credit and various personal installment loans. We offer a reduced interest rate on certain consumer loans for those customers who direct us to make automatic withdrawals from their Peoples Federal accounts for the monthly payments on their consumer loans.

Consumer loans may entail greater credit risk than residential mortgage loans, particularly in the case of consumer loans that are unsecured or are secured by rapidly depreciable assets, such as

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automobiles. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. At December 31, 2009, we had $7,000 of consumer loans that were non-performing.

In recent years we have added capability for customers to access information pertaining to, and to apply for, consumer loans through our online banking. We expect our customers’ utilization of our online banking to continue to grow.

Commercial Loans. We originate commercial term loans and variable lines of credit to small- and medium-sized companies in our primary market area. Our commercial loans are generally used for working capital purposes or for acquiring equipment, inventory or furniture. These loans are secured by business assets other than real estate, such as business equipment and inventory or accounts receivable. The commercial business loans that we offer are floating-rate loans indexed to the prime rate as published in The Wall Street Journal and fixed-rate loans with terms ranging from one to seven years. Our commercial business loan portfolio consists primarily of secured loans.

At December 31, 2009, we had $4.5 million of commercial business loans outstanding, representing 1.2% of the total loan portfolio.

When making commercial business loans, we consider the financial statements of the borrower, the lending history of the borrower, the debt service capabilities of the borrower, the projected cash flows of the business and the value of the collateral, if any. Virtually all of our loans are guaranteed by the principals of the borrower.

Commercial business loans generally have a greater credit risk than residential mortgage loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment and other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial business loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business. We seek to minimize these risks through our underwriting standards.

At December 31, 2009, our largest commercial business loan outstanding was a $574,000 line of credit secured by a construction crane. At December 31, 2009, this loan was performing in accordance with its terms.

Loan Originations, Purchases, Sales, Participations and Servicing. Loans that we originate are generally underwritten pursuant to our policies and procedures, which incorporate standard underwriting guidelines, including those of Freddie Mac and Fannie Mae, to the extent applicable. We originate both adjustable-rate and fixed-rate loans. Our loan origination and sales activity may be adversely affected by a rising interest rate environment that typically results in decreased loan demand. Most of our one- to four-family residential mortgage loan originations are generated by our branch managers and employees located in our banking offices and our additional commissioned loan officers located in our corporate headquarters. We also advertise throughout our market area.

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During fiscal 2008 and 2009 and through December 31, 2009, we purchased approximately $98.6 million of one- to four-family residential mortgage loans from other local financial institutions and other lenders. All of these loans were underwritten pursuant to our origination policies and were all collateralized by properties in our market area. This purchase strategy was a component of our decision to grow the Bank in a conservative and cost-efficient method. Of these loans, $72.0 million were jumbo, fixed-rate loans and $32.0 million were jumbo, adjustable-rate loans. We expect to continue to purchase loans up to approximately $12.0 million per year on a going-forward basis, consistent with our growth strategy and underwriting standards as opportunities present themselves.

In recent years, in an effort to manage interest rate risk in what has been a relatively low interest rate environment, we have sold the overwhelming majority of the conforming, fixed-rate one- to four-family residential mortgage loans with maturities of 20 years or greater that we have originated. We retain the servicing on all such loans that we sell to Fannie Mae or Freddie Mac, and we release the servicing on all such loans that are sold to other mortgage investors. We intend to continue this practice in the future, subject to the pricing of retaining such servicing rights. For the year ended September 30, 2009, we received net servicing income of $28,000 on loans that we sold. At December 31, 2009, the principal balance of loans serviced for others totaled $56.1 million.

We sell our loans without recourse, except for normal representations and warranties provided in sales transactions. Loan servicing includes collecting and remitting loan payments, accounting for principal and interest, contacting delinquent borrowers, supervising foreclosures and property dispositions in the event of unremedied defaults, making certain insurance and tax payments on behalf of the borrowers and generally administering the loans. We retain a portion of the interest paid by the borrower on the loans we service as consideration for our servicing activities.

From time to time, we will purchase participations or whole loans from other banks. In these circumstances, we will generally follow our customary loan underwriting and approval policies. We will also, on occasion, sell participations in loans to other banks. At December 31, 2009, we held $12.1 million of multi-family and commercial real estate loans in our portfolio which were participations loans from other lenders.

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The following table shows our loan originations, loan purchases and sales and principal repayment activity for loans originated for our portfolio during the periods indicated. Loans are presented net of loans in process. The following table does not reflect loans that are originated for sale to Freddie Mac.

	Three Months Ended December 31,						Years Ended September 30,
	2009			2008			2009			2008			2007			2006			2005
	(In thousands)
Total loans at beginning of period	$	366,145		$	376,681		$	376,681		$	289,059		$	286,633		$	285,244		$	265,361
Loans originated:
Mortgage loans:
One- to four-family residential		8,303			4,268			32,696			23,385			21,209			40,140			50,317
Multi-family		—			2,543			4,411			4,076			10,790			10,794			13,063
Commercial real estate		1,593			1,679			14,522			5,858			18,681			16,931			10,353
Land		—			—			—			—			450			262			562
Construction		1,950			2,875			11,785			12,775			9,853			10,038			39,628
Total mortgage loans		11,846			11,365			63,414			46,094			60,983			78,165			113,923
Consumer loans		317			563			1,417			1,166			1,276			2,064			2,394
Home equity loans and lines of credit		2,159			1,640			9,349			9,680			7,669			—			—
Commercial loans		382			245			610			2,777			2,066			2,064			603
Total loans originated		14,704			13,813			74,790			59,717			71,994			82,293			116,920
Purchases
One- to four-family residential		20,587			—			—			78,034			7,849			—			4,610
Total loans originated and purchased		35,291			13,813			74,790			137,751			79,843			82,293			121,530
Deduct:
Principal repayments		(24,074	)		(22,778	)		(85,326	)		(50,129	)		(77,417	)		(80,904	)		(101,647	)
Net loan activity		11,217			(8,965	)		(10,536	)		87,622			2,426			1,389			19,883
Total loans at end of period	$	377,362		$	367,716		$	366,145		$	376,681		$	289,059		$	286,633		$	285,244

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Loan Approval Procedures and Authority. Our lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by our board of directors. The loan approval process is intended to assess the borrower’s ability to repay the loan and to value of the property that will secure the loan. To assess the borrower’s ability to repay, we review the borrower’s employment and credit history and information on the historical and projected income and expenses of the borrower. We require “full documentation” on all of our loan applications.

Our policies and loan approval limits are established by the board of directors. Aggregate lending relationships in amounts up to $1.0 million can be approved by designated individual officers or officers acting together with specific lending approval authority. Relationships in excess of $1.0 million require the approval of the President and the Chief Executive Officer and are then ratified by the Investment Committee and the Board of Directors.

We require appraisals of all real property securing one- to four-family residential mortgage loans, multi-family loans and commercial real estate loans. In limited circumstances, the use of a detailed appraisal may be waived by the Chief Lending Officer or the President of the Bank for loans where new money borrowed is less than $250,000. All appraisers are independent, state-licensed or state-certified appraisers and are approved by the board of directors annually.

Non-Performing and Problem Assets

When a residential mortgage loan or home equity line of credit is 15 days past due, a late payment notice is generated and mailed to the borrower. For those borrowers who are seldom or never late in payment and for new customers of the Bank, we will attempt personal, direct contact with the borrower to determine when payment will be made. On the first day of the following month, we mail a letter reminding the borrower of the delinquency and will attempt to contact the borrower by telephone. If no contact is made, a property inspection is made to determine the condition of the property. Thereafter we will send an additional letter when a loan is 60 days or more past due. By the 60^th day of delinquency, unless the borrower has made arrangements to bring the loan current on its payments, we will refer the loan to legal counsel to commence foreclosure proceedings. Upon the recommendation of Chief Lending Officer or the President we may shorten these time frames. Upon Board approval, foreclosure activity is initiated by our counsel once a loan is 90 days delinquent. If necessary, subsequent late charges are issued and the account will be monitored on a regular basis thereafter.

Commercial business loans, commercial real estate loans and consumer loans are generally handled in the same manner as residential mortgage loans or home equity lines of credit. All commercial business loans that are 15 days past due are immediately referred to our senior lending officer. Because of the nature of the collateral securing consumer loans, we may commence collection procedures faster for consumer loans than for residential mortgage loans or home equity lines of credit.

Loans are placed on non-accrual status when payment of principal or interest is more than 90 days delinquent. Loans are also placed on non-accrual status if collection of principal or interest in full is in doubt. When loans are placed on a non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received. The loan may be returned to accrual status if both principal and interest payments are brought current and full payment of principal and interest is expected.

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Non-Performing Assets. The table below sets forth the amounts and categories of our non-performing assets at the dates indicated.

	At December 31, 2009			At September 30,
				2009			2008			2007			2006			2005
	(Dollars in thousands)
Non-accrual loans:
Mortgage loans:
One- to four-family residential	$	1,570		$	1,632		$	2,009		$	1,020		$	586		$	—
Multi-family		258			258			—			—			—			—
Commercial real estate		1,842			1,911			—			—			—			—
Construction		1,541			1,540			1,500			206			—			—
Consumer loans		7			—			—			13			8			29
Commercial loans		19			—			47			16			—			—
Total non-performing loans		5,237			5,341			3,556			1,255			594			29
Loans delinquent 90 days or greater and still accruing:
Mortgage loans:
One- to four-family residential		—			384			—			—			—			—
Multi-family		—			—			—			—			—			—
Commercial real estate		—			—			—			—			—			—
Construction		—			—			—			—			—			—
Consumer loans		—			—			—			—			—			—
Commercial loans		—			—			—			1			1			—
Total loans delinquent 90 days or greater and still accruing		—			384			—			1			1			—
Total non-performing loans		5,237			5,725			3,556			1,256			595			29
Other real estate owned:		—			—			—			—			—			—
Total non-performing assets	$	5,237		$	5,725		$	3,556		$	1,256		$	595		$	29
Ratios:
Non-performing loans to total loans		1.39	%		1.56	%		0.94	%		0.43	%		0.21	%		0.01	%
Non-performing assets to total assets		1.08	%		1.19	%		0.81	%		0.35	%		0.16	%		0.01	%

For the three months ended December 31, 2009 and for the fiscal year ended September 30, 2009, gross interest income that would have been recorded had our non-accruing loans been current in accordance with their original terms was $81,000 and $376,000, respectively. Interest income recognized on such loans for the three months ended December 31, 2009 and for the fiscal year ended September 30, 2009 was $38,000 and $91,000, respectively.

Troubled Debt Restructurings. We periodically modify loans to extend the term or make other concessions to help a borrower stay current on their loan and to avoid foreclosure. We do not forgive principal or interest on loans or modify the interest rates on loans to rates that are below market rates. At December 31, 2009 we had $2.1 million of troubled debt restructurings related to a commercial real estate loan collateralized by a property in our market area that management believes is more than adequately collateralized at December 31, 2009.

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Delinquent Loans. The following table sets forth our loan delinquencies by type and by amount at the dates indicated.

	Loans Delinquent For
	30-89 Days				90 Days and Over			Total
	Number		Amount		Number	Amount		Number	Amount
	(Dollars in thousands)
At December 31, 2009
Mortgage loans:
One- to four-family residential		11	$	2,223	6	$	1,570	17	$	3,793
Multi-family		1		222	1		258	2		480
Commercial real estate		4		1,371	2		1,842	6		3,213
Construction		1		42	1		1,541	2		1,583
Consumer loans		9		54	3		7	12		61
Commercial loans		1		9	2		19	3		28
Total loans		27	$	3,921	15	$	5,237	42	$	9,158
At September 30, 2009
Mortgage loans:
One- to four-family residential		10	$	1,720	8	$	2,016	18	$	3,736
Multi-family		1		226	1		258	2		484
Commercial real estate		1		642	2		1,911	3		2,553
Construction		—		—	1		1,540	1		1,540
Consumer loans		6		31	—		—	6		31
Commercial loans		1		1	—		—	1		1
Total loans	$	19	$	2,620	12	$	5,725	31	$	8,345
At September 30, 2008
Mortgage loans:
One- to four-family residential		5	$	456	11	$	2,009	16	$	2,465
Multi-family		—		—	—		—	—		—
Commercial real estate		—		—	—		—	—		—
Construction		—		—	1		1,500	1		1,500
Consumer loans		5		14	—		—	5		14
Commercial loans		1		2	1		47	2		49
Total loans		11	$	472	13	$	3,556	24	$	4,028
At September 30, 2007
Mortgage loans:
One- to four-family residential		15	$	2,174	5	$	1,020	20	$	3,194
Multi-family		—		—	—		—	—		—
Commercial real estate		—		—	—		—	—		—
Construction		—		—	1		206	1		206
Consumer loans		11		25	3		13	14		38
Commercial loans		1		50	3		17	4		67
Total loans		27	$	2,249	12	$	1,256	39	$	3,505
At September 30, 2006
Mortgage loans:
One- to four-family residential		12	$	1,700	2	$	586	14	$	2,286
Multi-family		—		—	—		—	—		—
Commercial real estate		—		—	—		—	—		—
Construction		1		207	—		—	1		207
Consumer loans		8		20	5		8	13		28
Commercial loans		1		1	1		1	2		2
Total loans		22	$	1,928	8	$	595	30	$	2,523
At September 30, 2005
Mortgage loans:
One- to four-family residential		10	$	1,062	—	$	—	10	$	1,062
Multi-family		—		—	—		—	—		—
Commercial real estate		1		87	—		—	1		87
Construction		—		—	—		—	—		—
Consumer loans		16		46	8		29	24		75
Commercial loans		1		8	—		—	1		8
Total loans		28	$	1,203	8	$	29	36	$	1,232

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Other Real Estate Owned. Real estate acquired by us as a result of foreclosure or by deed in lieu of foreclosure is classified as other real estate owned. When property is acquired it is recorded at estimated fair market value at the date of foreclosure less the cost to sell, establishing a new cost basis. Estimated fair value generally represents the sales price a buyer would be willing to pay on the basis of current market conditions, including normal terms from other financial institutions. Holding costs and declines in estimated fair market value result in charges to expense after acquisition. We had no other real estate owned at December 31, 2009, or at September 30, 2009, 2008, 2007, 2006 and 2005.

Classification of Assets. Our policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that are considered to be of lesser quality as substandard, doubtful, or loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those assets characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Assets (or portions of assets) classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted. Assets that do not expose us to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve our close attention, are required to be designated as special mention. As of December 31, 2009, we had $3.6 million of assets designated as special mention.

We maintain an allowance for loan losses at an amount estimated to equal all credit losses incurred in our loan portfolio that are both probable and reasonable to estimate at a balance sheet date. Our determination as to the classification of our assets and the amount of our loss allowances is subject to review by our principal federal regulator, the Office of Thrift Supervision, which can require that we establish additional loss allowances. We regularly review our asset portfolio to determine whether any assets require classification in accordance with applicable regulations.

The following table sets forth our amounts of classified assets, assets designated as special mention and criticized assets (classified assets and loans designated as special mention) as of December 31, 2009 and September 30, 2009, 2008, 2007, 2006 and 2005. The classified assets total at December 31, 2009 includes $4.6 million of nonperforming loans.

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	At December 31,		At September 30,
	2009		2009		2008		2007		2006		2005
	(In thousands)
Classified assets:
Substandard	$	6,242	$	6,223	$	3,150	$	1,745	$	2,748	$	169
Doubtful		—		—		—		—		—		—
Loss		—		—		—		—		—		—
Total classified assets		6,242		6,223		3,150		1,745		2,748		169
Special mention		3,612		4,754		2,735		1,788		1,385		2,054
Total criticized assets	$	9,854	$	10,977	$	5,885	$	3,533	$	4,133	$	2,223

At December 31, 2009, we had $6.2 million of substandard assets, of which $1.9 million were one- to four-family residential mortgage loans; $2.5 million were commercial real estate loans; $1.5 million was a construction loan for a multi-family project; and $227,000 were multi-family mortgage loans. At December 31, 2009, special mention assets consisted of $559,000 of one-to four –family residential mortgage loans; $2.8 million of commercial real estate loans and $222,000 of multi-family mortgage loans.

See “Allowance for Loan Losses” for a discussion of these substandard loans as they relate to the allowance for loan losses.

Allowance for Loan Losses

We provide for loan losses based upon the consistent application of our documented allowance for loan loss methodology. All loan losses are charged to the allowance for loan losses and all recoveries are credited to it. Additions to the allowance for loan losses are provided by charges to income based on various factors which, in our judgment, deserve current recognition in estimating probable losses. We regularly review the loan portfolio and make provisions for loan losses in order to maintain the allowance for loan losses in accordance with GAAP. The allowance for loan losses consists primarily of two components:

(1) specific allowances established for impaired loans (as defined by GAAP). The amount of impairment provided for as a specific allowance is represented by the deficiency, if any, between the estimated fair value of the loan, or the loan’s observable market price, if any, or the fair value of the underlying collateral, if the loan is collateral dependent, and the carrying value of the loan. Impaired loans for which the estimated fair value of the loan, or the loan’s observable market price or the fair value of the underlying collateral if the loan is collateral dependent, exceeds the carrying value of the loan are not considered in establishing specific allowances for loan losses; and

(2) general allowances established for loan losses on a portfolio basis for loans that do not meet the definition of impaired loans. The portfolio is grouped into similar risk characteristics, primarily loan type and regulatory classification. We apply an estimated loss rate to each loan group. The loss rates applied are based upon our loss experience adjusted, as appropriate, for the environmental factors discussed below. This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant revisions based upon changes in economic and real estate market conditions.

Actual loan losses may be significantly more than the allowance for loan losses we have established, which could have a material negative effect on our financial results.

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The adjustments to historical loss experience are based on our evaluation of several qualitative and environmental factors, including:

• changes in any concentration of credit (including, but not limited to, concentrations by geography, industry or collateral type);

• changes in the number and amount of non-accrual loans, watch list loans and past due loans;

• changes in national, state and local economic trends;

• changes in the types of loans in the loan portfolio;

• changes in the experience and ability of personnel and management in the mortgage loan origination and loan servicing departments;

• changes in the value of underlying collateral for collateral dependent loans;

• changes in lending strategies; and

• changes in lending policies and procedures.

In addition, we may establish an unallocated allowance to provide for probable losses that have been incurred as of the reporting date but are not reflected in the allocated allowance.

Historically, we have experienced limited loan losses and, therefore, have relied on industry data to determine loss factors for calculating our allowance for loan losses. More recently, as we have experienced increased loan losses, we have utilized our own historical loss experience in determining applicable portions of the allowance for loan losses. During the fiscal year ended September 30, 2009, we adjusted our historical loss experience to reflect worsening economic conditions which increased our calculation of the required allowance for loan losses. See “—Comparison of Operating Results for the Fiscal Years Ended September 30, 2009 and 2008—Provision for Loan Losses.”

We evaluate the allowance for loan losses based upon the combined total of the specific and general components. Generally when the loan portfolio increases, absent other factors, the allowance for loan loss methodology results in a higher dollar amount of estimated probable losses than would be the case without the increase. Generally when the loan portfolio decreases, absent other factors, the allowance for loan loss methodology results in a lower dollar amount of estimated probable losses than would be the case without the decrease.

We evaluate the loan portfolio on a quarterly basis and the allowance is adjusted accordingly. While we use the best information available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the information used in making the evaluations. In addition, as an integral part of their examination process, the Office of Thrift Supervision will periodically review the allowance for loan losses. The Office of Thrift Supervision may require us to recognize additions to the allowance based on their analysis of information available to them at the time of their examination.

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The following table sets forth activity in our allowance for loan losses at and for the periods indicated.

	At or For the Three Months Ended December 31,						At or For the Years Ended September 30,
	2009			2008			2009			2008			2007			2006			2005
	(Dollars in thousands)
Balance at beginning of period	$	3,204		$	3,208		$	3,208		$	3,314		$	3,318		$	3,097		$	3,085
Charge-offs:
Mortgage loans:
One- to four-family residential		(54	)		—			(127	)		(17	)		—			—			—
Multi-family		—			—			—			—			—			—			—
Commercial real estate		—			—			—			—			—			—			—
Construction		—			—			—			—			—			—			—
Consumer loans		—			—			(9	)		(79	)		(2	)		(62	)		(67	)
Commercial loans		—			—			—			(77	)		(25	)		—			—
Total charge-offs		(54	)		—			(136	)		(173	)		(27	)		(62	)		(67	)
Recoveries:
Mortgage loans:
One- to four-family residential		—			—			—			—			—			—			—
Multi-family		—			—			—			—			—			—			—
Commercial real estate		—			—			—			—			—			—			—
Construction		—			—			—			—			—			—			—
Consumer loans		—			—			5			67			2			38			19
Commercial loans		—			—			—			—			1			—			—
Total recoveries		—			—			5			67			3			38			19
Net charge-offs		(54	)		—			(131	)		(106	)		(24	)		(24	)		(48	)
Provision for loan losses		—			—			127			—			20			245			60
Balance at end of year	$	3,150		$	3,208		$	3,204		$	3,208		$	3,314		$	3,318		$	3,097
Ratios:
Net charge-offs to average loans outstanding		0.01	%		—	%		0.04	%		0.03	%		0.01	%		0.01	%		0.02	%
Allowance for loan losses to non-performing loans at end of period		60.15	%		110.43	%		55.97	%		90.21	%		263.85	%		557.65	%		10,679.31	%
Allowance for loan losses to total loans at end of period		0.83	%		0.87	%		0.88	%		0.85	%		1.15	%		1.16	%		1.09	%

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Allocation of Allowance for Loan Losses. The following tables set forth the allowance for loan losses allocated by loan category and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

	At December 31, 2009				At September 30,
					2009				2008
	Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans		Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans		Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Mortgage loans:
One- to four-family residential	$	1,692	66.0	%	$	$1,726	64.9	%	$	1,738	66.3	%
Multi-family		349	10.6			356	11.2			332	12.4
Commercial real estate		430	16.9			438	17.4			415	14.4
Construction		295	4.6			219	4.5			282	5.0
Consumer loans		39	0.7			38	0.7			35	0.6
Commercial loans		115	1.2			127	1.3			127	1.3
Unallocated		239	—			299	—			279	—
Total	$	3,159	100.0	%	$	3,203	100.0	%	$	3,208	100.0	%
	At September 30,
	2007				2006				2005
	Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans		Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans		Allowance for Loan Losses		Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Mortgage loans:
One- to four-family residential	$	1,775	58.8	%	$	1,764	60.2	%	$	1,766	62.8	%
Multi-family		366	15.5			364	13.9			364	10.8
Commercial real estate		451	18.6			448	15.3			448	12.7
Construction		226	4.8			224	8.3			225	11.9
Consumer loans		37	0.8			47	1.0			51	1.2
Commercial loans		107	1.5			92	1.3			43	0.6
Unallocated		352	—			379	—			200	—
Total	$	3,314	100.0	%	$	3,318	100.0	%	$	3,097	100.0	%

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Investments

Our Asset/Liability (“ALCO”) Committee, which is comprised of our President and Chief Operating Officer, Executive Vice President and Chief Financial Officer, has primary responsibility for establishing and overseeing our investment policy. The general investment strategies are developed and authorized by the ALCO Committee. Our Chief Financial Officer is responsible for the execution of specific investment actions, and is authorized to execute investment transactions of up to $3.0 million per transaction without the ALCO Committee’s prior approval provided the transactions are within the scope of the established investment policy. The investment policy is reviewed annually by the ALCO Committee, and any changes to the policy are subject to approval by the full board of directors. The overall objectives of the Investment Policy are to maintain a portfolio of high quality and diversified investments to maximize interest income over the long term and to minimize risk, to provide collateral for borrowings, to provide additional earnings when loan production is low, to manage liquidity and to reduce our tax liability. The policy dictates that investment decisions give consideration to the safety of principal, liquidity requirements and potential returns. All gains and losses on securities transactions are reported to the Board of Directors on a monthly basis.

Our current investment policy permits investments in securities issued by the United States Government and federal government agencies; municipal bonds; mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae; asset-backed securities (collateralized by assets other than conforming residential first mortgages); repurchase agreements; and federal funds sold. The investment policy also permits, with certain limitations, investments in certificates of deposit, including CDARS, collateralized mortgage obligations, auction rate/money market preferred securities, mutual funds (limited to adjustable rate mortgage funds) and equities (limited to agency and FHLB stock).

Our current investment policy does not permit investment in stripped mortgage-backed securities, complex securities and derivatives as defined in federal banking regulations and other high-risk securities. As of December 31, 2009, we held no asset-backed securities other than mortgage-backed securities.

Our investment policy expressly prohibits the use of our investment portfolio for market-oriented trading activities or speculative purposes unless otherwise approved by our Board of Directors. Although we maintain a trading account, it is not our intention to profit in our investment account from short-term securities price movements.

ASC 320, “Investments—Debt and Equity Securities” requires that, at the time of purchase, we designate a security as either held to maturity, available-for-sale, or trading, based upon our ability and intent. Securities available-for-sale and trading securities are reported at market value and securities held to maturity are reported at amortized cost. We do not maintain a trading portfolio. A periodic review and evaluation of the available-for-sale and held-to-maturity securities portfolios is conducted to determine if the fair value of any security has declined below its carrying value and whether such decline is other-than-temporary. For securities classified as available-for-sale, unrealized gains and losses are excluded from earnings and are reported as an increase or decrease to earnings through other comprehensive income/(loss). If such decline is deemed to be other-than-temporary, the security is written down to a new cost basis and the resulting loss is charged against earnings.

Generally, mortgage-backed securities are more liquid than individual mortgage loans since there is an active trading market for such securities. In addition, mortgage-backed securities may be used to collateralize our borrowings. Investments in mortgage-backed securities involve a risk that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or accretion of any discount relating to such interests, thereby affecting the net yield on our securities. Current prepayment speeds determine whether prepayment estimates require modification that could cause amortization or accretion adjustments.

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Securities. At December 31, 2009, our securities portfolio consisted entirely of mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae and had a fair market value of $955,000, or 0.2% of assets and an amortized cost of $914,000. At December 31, 2009, none of the underlying collateral consisted of subprime or Alt-A (traditionally defined as loans having less than full documentation) loans. At December 31, 2009, we held no common or preferred stock of Fannie Mae or Freddie Mac. See “Management’s Discussion of Financial Condition and Results of Operations—Balance Sheet Analysis—Securities” for a discussion of the recent performance of our securities portfolio.

The following table sets forth the amortized cost and estimated fair value of our securities portfolios (excluding Federal Home Loan Bank of Boston stock) at the dates indicated.

					At September 30,
	At December 31, 2009				2009				2008				2007
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Securities held-to-maturity:
Mortgage-backed securities	$	—	$	—	$	—	$	—	$	—	$	—	$	5,271	$	5,154
Total securities held-to-maturity	$	—	$	—	$	—	$	—	$	—	$	—	$	5,271	$	5,154
					At September 30,
	At December 31, 2009				2009				2008				2007
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Securities available-for-sale:
United States Government and agency debt securities	$	—	$	—	$	—	$	—	$	6,000	$	5,956	$	18,001	$	18,033
State and state agency debt securities		—		—		—		—		—		—		200		202
Mortgage-backed securities		914		955		6,037		6,328		16,303		16,193		2,462		2,448
Total securities available-for-sale	$	914	$	955	$	6,037	$	6,328	$	22,303	$	22,149	$	20,663	$	20,683

At December 31, 2009, we had no investments in a single company or entity that had an aggregate book value in excess of 10% of our consolidated equity.

Bank Owned Life Insurance. We invest in bank owned life insurance to provide us with a funding source for our benefit plan obligations. Bank owned life insurance also generally provides us non-interest income that is non-taxable. Federal regulations generally limit our investment in bank owned life insurance to 25% of our Tier 1 capital plus our allowance for loan losses. At December 31, 2009, this limit was $12.9 million, and we had invested $11.3 million in bank owned life insurance at that date.

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Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at December 31, 2009 are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. No tax-equivalent adjustments have been made, as we did not hold any tax-free investment securities at December 31, 2009.

	One Year or Less				More than One Year through Five Years				More than Five Years through Ten Years				More than Ten Years				Total Securities
	Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Fair Value		Weighted Average Yield
	(Dollars in thousands)
Securities available-for-sale:
Mortgage-backed securities	$	345	4.00	%	$	78	4.80	%	$	—	—	%	$	491	6.06	%	$	914	$	955	5.17	%
Total securities available for sale	$	345	4.00	%	$	78	4.80	%	$	—	—		$	491	6.06	%	$	914	$	955	5.17	%

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Sources of Funds

General. Deposits traditionally have been our primary source of funds for our investment and lending activities. We also borrow from the Federal Home Loan Bank of Boston (the “FHLB of Boston”) to supplement cash flow needs, to lengthen the maturities of liabilities for interest rate risk management purposes and to manage our cost of funds. Our additional sources of funds are scheduled payments and prepayments of principal and interest on loans and investment securities and fee income and proceeds from the sales of loans and securities.

Deposits. We accept deposits primarily from the areas in which our offices are located. We rely on our competitive pricing and products, convenient locations and quality customer service to attract and retain deposits. We offer a variety of deposit accounts with a range of interest rates and terms. Our deposit accounts consist of passbook and statement savings accounts, certificates of deposit, NOW accounts and regular checking accounts. Deposit rates and terms are based primarily on current operating strategies and market interest rates, liquidity requirements and our deposit growth goals. Historically, other than deposits that we have accepted through the Certificate of Deposit Account Registry Service (“CDARS”) program, which are classified as brokered deposits for regulatory purposes, we have not accepted brokered deposits. At December 31, 2009, CDARS deposits totaled $1.8 million.

Beginning in 2008, to support the growth of the Bank that resulted, in part, from the purchase of approximately $104.0 million in one- to four-family loans, the Bank significantly increased its money market accounts, primarily through competitive pricing in a low interest rate environment where many customers did not want a longer-term, fixed-rate certificate of deposit account. Money market accounts increased $91.2 million, or 159.7%, from $57.1 million at September 30, 2008 to $148.3 million at September 30, 2009. We chose to fund this growth through these accounts rather than increase our borrowings due in part to our concern about the adequate capitalization, viability and dividend-paying capacity during fiscal 2009 of the FHLB-Boston, although we expect to continue to rely on FHLB advances as a funding source.

At December 31, 2009, we had a total of $109.3 million in certificates of deposit, of which $89.2 million had remaining maturities of one year or less. Based on historical experience and our current pricing strategy, we believe we will retain a large portion of these accounts upon maturity.

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The following tables set forth the distribution of our average total deposit accounts (including interest-bearing and non-interest bearing deposits), by account type, for the periods indicated.

	For the Three Months Ended December 31, 2009						For the Year Ended September 30, 2009
	Average Balance		Percent		Weighted Average Rate		Average Balance		Percent		Weighted Average Rate
	(Dollars in thousands)
Deposit type:
Demand deposits	$	31,890	8.6	%	—	%	$	32,150	10.0	%	—	%
NOW deposits		30,257	8.1		0.19			31,210	9. 7		0.22
Money market deposits		154,850	41.7		1.56			89,519	27.7		2.30
Savings		44,374	11.9		1.00			43,058	13.3		1.07
Certificates of deposit		110,468	29.7		2.14			126,822	39.3		2.85
Total deposits	$	371,839	100.0	%	1.42	%	$	322,759	100.0	%	1.92	%
	For the Years Ended September 30,
	2008						2007
	Balance		Percent		Weighted Average Rate		Balance		Percent		Weighted Average Rate
	(Dollars in thousands)
Deposit type:
Demand deposits	$	34,757	11.7	%	—	%	$	25,914	9.0	%	—	%
NOW deposits		32,496	11.0		0.23			37,885	13.1		0.49
Money market deposits		47,791	16.2		1.42			39,530	13.7		3.57
Savings		43,802	14.8		1.05			46,319	16.0		0.64
Certificates of deposit		137,099	46.3		4.67			139,477	48.2		4.36
Total deposits	$	295,945	100.0	%	2.57	%	$	289,125	100.0	%	2.76	%

The following table sets forth certificates of deposit classified by interest rate as of the dates indicated.

	At December 31, 2009		At September 30,
			2009		2008		2007
	(In thousands)
Interest Rate
Less than 2.00%	$	70,353	$	54,767	$	965	$	707
2.00% -2.99%		20,886		34,545		64,321		1,582
3.00% -3.99%		13,733		16,857		39,828		13,669
4.00% -4.99%		4,287		6,151		27,444		82,656
5.00% -5.99%		27		26		6,069		38,053
Total	$	109,286	$	112,346	$	138,627	$	136,667

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The following table sets forth, by interest rate ranges, information concerning our certificates of deposit.

	At September 30, 2009
	Period to Maturity
	Less Than or Equal to One Year		More Than One to Two Years		More Than Two to Three Years		More Than Three Years		Total		Percent of Total
	(Dollars in thousands)
Interest Rate Range:
Less than 2.00%	$	51,263	$	3,476	$	28	$	—	$	54,767	48.75	%
2.00% to 2.99%		26,194		5,888		1,336		1,127		34,545	30.75
3.00% to 3.99%		10,952		2,706		1,608		1,591		16,857	15.00
4.00% to 4.99%		4,383		1,684		76		8		6,151	5.48
5.00% to 5.99%		26		—		—		—		26	0.02
Total	$	92,818	$	13,754	$	3,048	$	2,726	$	112,346	100.00	%

As of December 31, 2009, the aggregate amount of outstanding certificates of deposit in amounts greater than or equal to $100,000 was approximately $37.5 million. The following table sets forth the maturity of those certificates as of December 31, 2009.

	At December 31, 2009
	(In thousands)
Three months or less	$	11,016
Over three months through six months		7,589
Over six months through one year		11,646
Over one year to three years		5,795
Over three years		1,484
Total	$	37,530

Borrowings. Our borrowings consist of advances from the Federal Home Loan Bank of Boston. At December 31, 2009, we had access to additional Federal Home Loan Bank advances of up to $45.5 million. The following table sets forth information concerning balances and interest rates on our Federal Home Loan Bank advances at the dates and for the periods indicated. Advances from the Federal Home Loan Bank of Boston are secured by our investment in the common stock of the Federal Home Loan Bank of Boston as well as by a blanket pledge on our assets not otherwise pledged.

During the year ended September 30, 2009, our borrowings decreased $22.1 million, or 27.6%. The decrease was the result of the Bank’s strategy to emphasize the growth of its money market accounts as a funding source and to de-emphasize FHLB borrowing reflecting our concern about the adequate capitalization, viability and dividend-paying capacity during fiscal 2009 of the FHLB-Boston. FHLB advances, however, remain an important funding source of our ongoing asset/liability management strategy.

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The following table sets forth information concerning balances and interest rates on our FHLB advances at the dates and for the periods indicated.

	At or For the Three Months Ended December 31,						At or For the Years Ended September 30,
	2009			2008			2009			2008			2007
	(Dollars in thousands)
Balance at end of period	$	54,000		$	76,039		$	58,000		$	80,060		$	28,639
Average balance during period	$	55,935		$	76,493		$	70,687		$	40,318		$	34,951
Maximum outstanding at any month end	$	58,000		$	76,053		$	76,053		$	80,060		$	41,209
Weighted average interest rate at end of period		3.35	%		3.46	%		3.43	%		3.54	%		4.84	%
Average interest rate during period		3.38	%		3.53	%		3.52	%		4.09	%		4.81	%

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Properties

We operate from our main office and five full-service branches located in the Brighton, Allston, West Roxbury, Jamaica Plain, Brookline and Norwood, Massachusetts. The net book value of our premises, land and equipment was $3.4 million at December 31, 2009. The following table sets forth information with respect to our full-service banking offices, including the expiration date of leases with respect to leased facilities.

Address	Leased or Owned		Year Acquired or Leased
Main Office:
435 Market Street Brighton, Massachusetts 02135	Owned		1977
Full Service Branches:
ALLSTON 229 North Harvard Street Allston, Massachusetts 02134	Owned		1996
BROOKLINE 264 Washington Street Brookline, Massachusetts 02445	Owned		1955
JAMAICA PLAIN 725 Centre Street Jamaica Plain, Massachusetts 02130	Leased	(1)	2001
NORWOOD 61 Lenox Street Norwood, Massachusetts 02062	Owned		2005
WEST ROXBURY 1905 Centre Street West Roxbury, Massachusetts 02132	Owned		1997

(1) Lease expires in 2011, with an additional five-year option.

Legal Proceedings

We are not involved in any pending legal proceedings as a plaintiff or a defendant other than routine legal proceedings occurring in the ordinary course of business. At December 31, 2009, we were not involved in any legal proceedings the outcome of which we believe would be material to our financial condition or results of operations.

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Expense and Tax Allocation

Peoples Federal Savings Bank will enter into an agreement with Peoples Federal Bancshares, Inc. to provide it with certain administrative support services, whereby Peoples Federal Savings Bank will be compensated at not less than the fair market value of the services provided. In addition, Peoples Federal Savings Bank and Peoples Federal Bancshares, Inc. will enter into an agreement to establish a method for allocating and for reimbursing the payment of their consolidated tax liability.

Personnel

As of December 31, 2009, we had 62 full-time employees and 12 part-time employees. Our employees are not represented by any collective bargaining group. Management believes that we have a good working relationship with our employees.

Subsidiary Activity

Upon completion of the Conversion, Peoples Federal Savings Bank will become the wholly owned subsidiary of Peoples Federal Bancshares, Inc. Additionally, it is expected that Peoples Federal Bancshares, Inc. will form another subsidiary, the sole purpose of which will be to fund the loan to Peoples Federal Savings Bank’s employee stock ownership plan.

People Federal Savings Bank has no subsidiaries.

SUPERVISION AND REGULATION

General

Peoples Federal Savings Bank is supervised and examined by the Office of Thrift Supervision and is subject to examination by the Federal Deposit Insurance Corporation. This regulation and supervision establishes a comprehensive framework of activities in which an institution may engage and is intended primarily for the protection of the Federal Deposit Insurance Corporation’s deposit insurance funds and depositors, and not for the protection of security holders. Under this system of federal regulation, financial institutions are periodically examined to ensure that they satisfy applicable standards with respect to their capital adequacy, assets, management, earnings, liquidity and sensitivity to market interest rates. Peoples Federal Savings Bank also is a member of and owns stock in the Federal Home Loan Bank of Boston, which is one of the twelve regional banks in the Federal Home Loan Bank System. Peoples Federal Savings Bank also is regulated to a lesser extent by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), governing reserves to be maintained against deposits and other matters. The Office of Thrift Supervision examines Peoples Federal Savings Bank and prepares reports for the consideration of its Board of Directors on any operating deficiencies. Peoples Federal Savings Bank’s relationship with its depositors and borrowers also is regulated to a great extent by federal law and, to a much lesser extent, state law, especially in matters concerning the ownership of deposit accounts and the form and content of Peoples Federal Savings Bank’s loan documents.

Any change in these laws or regulations, whether by the Federal Deposit Insurance Corporation, the Office of Thrift Supervision or Congress, could have a material adverse impact on Peoples Federal Bancshares, Inc., Peoples Federal Savings Bank and their operations.

As a savings and loan holding company following the conversion, Peoples Federal Bancshares, Inc. will be required to file certain reports with, will be subject to examination by, and otherwise must

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comply with the rules and regulations of the Office of Thrift Supervision. Peoples Federal Bancshares, Inc. will also be subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

Certain of the regulatory requirements that are or will be applicable to Peoples Federal Savings Bank and Peoples Federal Bancshares, Inc. are described below. This description of statutes and regulations is not intended to be a complete description of such statutes and regulations and their effects on Peoples Federal Savings Bank and Peoples Federal Bancshares, Inc., and is qualified in its entirety by reference to the actual statutes and regulations.

Federal Banking Regulation

Business Activities. A federal savings bank derives its lending and investment powers from the Home Owners’ Loan Act, as amended, and the regulations of the Office of Thrift Supervision. Under these laws and regulations, Peoples Federal Savings Bank may invest in mortgage loans secured by residential and commercial real estate, commercial business and consumer loans, certain types of debt securities and certain other assets, subject to applicable limits. Peoples Federal Savings Bank also may establish subsidiaries that may engage in activities not otherwise permissible for Peoples Federal Savings Bank, including real estate investment and securities and insurance brokerage.

Capital Requirements. Office of Thrift Supervision regulations require savings banks to meet three minimum capital standards: a 1.5% tangible capital ratio, a 4% leverage ratio (3% for savings banks receiving the highest rating on the CAMELS rating system) and an 8% risk-based capital ratio.

The risk-based capital standard for savings banks requires the maintenance of Tier 1 (core) and total capital (which is defined as core capital and supplementary capital) to risk-weighted assets of at least 4% and 8%, respectively. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 100%, assigned by the Office of Thrift Supervision, based on the risks believed inherent in the type of asset. Core capital is defined as common stockholders’ equity (including retained earnings), certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries, less intangibles other than certain mortgage servicing rights and credit card relationships. The components of supplementary capital include cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock, the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Overall, the amount of supplementary capital included as part of total capital cannot exceed 100% of core capital. Additionally, a savings bank that retains credit risk in connection with an asset sale may be required to maintain additional regulatory capital because of the purchaser’s recourse against the savings bank. In assessing an institution’s capital adequacy, the Office of Thrift Supervision takes into consideration not only these numeric factors but also qualitative factors as well, and has the authority to establish higher capital requirements for individual associations where necessary.

At December 31, 2009, Peoples Federal Savings Bank’s capital exceeded all applicable requirements. See “Historical and Pro Forma Regulatory Capital Compliance.”

Loans-to-One Borrower. Generally, a federal savings bank may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus. An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include real estate. As of December 31, 2009,

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Peoples Federal Savings Bank’s largest lending relationship with a single or related group of borrowers totaled $6.8 million, which represented 12.4% of unimpaired capital and surplus. Therefore, Peoples Federal Savings Bank was in compliance with the loans-to-one borrower limitations.

Qualified Thrift Lender Test. As a federal savings bank, Peoples Federal Savings Bank must satisfy the qualified thrift lender, or “QTL,” test. Under the QTL test, Peoples Federal Savings Bank must maintain at least 65% of its “portfolio assets” in “qualified thrift investments” (primarily residential mortgages and related investments, including mortgage-backed securities) in at least nine months of the most recent 12-month period. “Portfolio assets” generally means total assets of a savings bank, less the sum of specified liquid assets up to 20% of total assets, goodwill and other intangible assets, and the value of property used in the conduct of the savings bank’s business.

Peoples Federal Savings Bank also may satisfy the QTL test by qualifying as a “domestic building and loan association” as defined in the Internal Revenue Code.

A savings bank that fails the qualified thrift lender test must either convert to a commercial bank charter or operate under specified restrictions set forth in the Home Owners’ Loan Act. At December 31, 2009, Peoples Federal Savings Bank maintained approximately 84.5% of its portfolio assets in qualified thrift investments and, therefore, satisfied the QTL test.

Capital Distributions. Office of Thrift Supervision regulations govern capital distributions by a federal savings bank, which include cash dividends, stock repurchases and other transactions charged to the savings bank’s capital account. A savings bank must file an application for approval of a capital distribution if:

• the total capital distributions for the applicable calendar year exceed the sum of the savings bank’s net income for that year to date plus the savings bank’s retained net income for the preceding two years;

• the savings bank would not be at least adequately capitalized following the distribution;

• the distribution would violate any applicable statute, regulation, agreement or Office of Thrift Supervision-imposed condition; or

• the savings bank is not eligible for expedited treatment of its filings.

Even if an application is not otherwise required, every savings bank that is a subsidiary of a holding company must still file a notice with the Office of Thrift Supervision at least 30 days before the Board of Directors declares a dividend or approves a capital distribution.

The Office of Thrift Supervision may disapprove a notice or application if:

• the savings bank would be undercapitalized following the distribution;

• the proposed capital distribution raises safety and soundness concerns; or

• the capital distribution would violate a prohibition contained in any statute, regulation or agreement.

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In addition, the Federal Deposit Insurance Act provides that an insured depository institution shall not make any capital distribution, if after making such distribution the institution would be undercapitalized. Also, a federal savings bank may not make a capital distribution that would reduce its regulatory capital below the amount required for the liquidation account that is established in the savings bank in connection with its conversion to stock form.

Liquidity. A federal savings bank is required to maintain a sufficient amount of liquid assets to ensure its safe and sound operation. We anticipate that our liquidity levels will increase following the completion of the stock offering.

Community Reinvestment Act and Fair Lending Laws. All federal savings banks have a responsibility under the Community Reinvestment Act and related regulations of the Office of Thrift Supervision to help meet the credit needs of their communities, including low- and moderate-income borrowers. In connection with its examination of a federal savings bank, the Office of Thrift Supervision is required to assess the savings bank’s record of compliance with the Community Reinvestment Act. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. A savings bank’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as branches or mergers, or in restrictions on its activities. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the Office of Thrift Supervision, as well as other federal regulatory agencies and the Department of Justice. Peoples Federal Savings Bank received an “outstanding” Community Reinvestment Act rating in its most recent federal examination. The Community Reinvestment Act requires all Federal Deposit Insurance-insured institutions to publicly disclose their rating.

Transactions with Related Parties. A federal savings bank’s authority to engage in transactions with its affiliates is limited by Office of Thrift Supervision regulations and by Sections 23A and 23B of the Federal Reserve Act and its implementing Regulation W promulgated by the Board of Governors of the Federal Reserve System. An affiliate is generally a company that controls, is controlled by, or is under common control with an insured depository institution such as Peoples Federal Savings Bank. Peoples Federal Bancshares, Inc. is an affiliate of Peoples Federal Savings Bank. In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative and collateral requirements. In addition, Office of Thrift Supervision regulations prohibit a savings bank from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary. Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates. The Office of Thrift Supervision requires savings banks to maintain detailed records of all transactions with affiliates.

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Peoples Federal Savings Bank’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board. Among other things, these provisions require that extensions of credit to insiders:

(i) be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and

(ii) not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Peoples Federal Savings Bank’s capital.

In addition, extensions of credit in excess of certain limits must be approved by Peoples Federal Savings Bank’s Board of Directors.

Enforcement. The Office of Thrift Supervision has primary enforcement responsibility over federal savings banks and has the authority to bring enforcement action against all “institution-affiliated parties,” including directors, officers, stockholders, and attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on a federal savings bank. Formal enforcement action by the Office of Thrift Supervision may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institution, and the appointment of a receiver or conservator. Civil penalties cover a wide range of violations and actions, and range from up to $25,000 per day, to circumstances involving a finding of reckless disregard, in which case penalties may be as high as $1 million per day. The Federal Deposit Insurance Corporation also has the authority to terminate deposit insurance or to recommend to the Director of the Office of Thrift Supervision that enforcement action be taken with respect to a particular savings institution. If action is not taken by the Director, the Federal Deposit Insurance Corporation has authority to take action under specified circumstances.

Standards for Safety and Soundness. Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions. These standards relate to, among other things, internal controls, information systems and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, compensation, and other operational and managerial standards as the agency deems appropriate. Interagency guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. If an institution fails to meet these standards, the appropriate federal banking agency may require the institution to implement an acceptable compliance plan. Failure to implement such a plan can result in further enforcement action, including the issuance of a cease and desist order or the imposition of civil money penalties.

Prompt Corrective Action Regulations. Under prompt corrective action regulations, the Office of Thrift Supervision is authorized and, under certain circumstances, required to take supervisory actions against undercapitalized savings banks. For this purpose, a savings bank is placed in one of the following five categories based on the savings bank’s capital:

• well-capitalized (at least 5% leverage capital, 6% Tier 1 risk-based capital and 10% total risk-based capital and is not subject to any written agreement, order, capital directive or prompt corrective action directive issued by the Office of Thrift Supervision);

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• adequately capitalized (at least 4% leverage capital or 3% in certain circumstances and is not “well capitalized”, 4% Tier 1 risk-based capital and 8% total risk-based capital);

• undercapitalized (less than 4% leverage capital or less than 3% leverage capital in certain circumstances, or 4% Tier 1 risk-based capital or 8% total risk-based capital);

• significantly undercapitalized (less than 3% leverage capital, 3% Tier 1 risk-based capital or 6% total risk-based capital); and

• critically undercapitalized (less than 2% tangible capital total equity).

Generally, the Office of Thrift Supervision is required to appoint a receiver or conservator for a savings bank that is “critically undercapitalized” within specific time frames. The regulations also provide that a capital restoration plan must be filed with the Office of Thrift Supervision within 45 days of the date a savings bank receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Any holding company of the savings bank that is required to submit a capital restoration plan must guarantee the lesser of an amount equal to 5% of the savings bank’s assets at the time it was notified or deemed to be undercapitalized by the Office of Thrift Supervision, or the amount necessary to restore the savings bank to adequately capitalized status. This guarantee remains in place until the Office of Thrift Supervision notifies the savings bank that it has maintained adequately capitalized status for each of four consecutive calendar quarters, and the Office of Thrift Supervision has the authority to require payment and collect payment under the guarantee. Failure by a holding company to provide the required guarantee will result in certain operating restrictions on the savings bank, such as restrictions on the ability to declare and pay dividends, pay executive compensation and management fees, and increase assets or expand operations. The Office of Thrift Supervision may also take any one of a number of discretionary supervisory actions against undercapitalized savings banks, including the issuance of a capital directive and the replacement of senior executive officers and directors.

At December 31, 2009, Peoples Federal Savings Bank met the criteria for being considered “well-capitalized.”

Insurance of Deposit Accounts. Peoples Federal Savings Bank is a member of the Deposit Insurance Fund, which is administered by the Federal Deposit Insurance Corporation (“FDIC”). Deposit accounts at Peoples Federal Savings Bank are insured by the FDIC, generally up to a maximum of $100,000 for each separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts. However, the FDIC increased the deposit insurance available on all deposit accounts to $250,000, effective until December 31, 2013. In addition, certain noninterest-bearing transaction accounts maintained with financial institutions participating in the FDIC’s Temporary Liquidity Guarantee Program , Transaction Account Guarantee Program were fully insured regardless of the dollar amount until June 30, 2010. We opted to participate in this part of the FDIC’s Temporary Liquidity Guarantee Program. See “—Temporary Liquidity Guarantee Program.”

The FDIC imposes an assessment against all depository institutions for deposit insurance. This assessment is based on the risk category of the institution and, prior to 2009, ranged from five to 43 basis points of the institution’s deposits. On February 27, 2009, the FDIC published a final rule raising the current deposit insurance assessment rates to a range from 12 to 45 basis points beginning April 1, 2009.

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On May 22, 2009, the FDIC adopted a final rule imposing a 5 basis point special assessment on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009. The amount of the special assessment for any institution will not exceed 10 basis points times the institution’s assessment base for the second quarter 2009. Our total expense for the special assessment was $205,000.

The deposit insurance assessment rates are in addition to the assessments for payments on the bonds issued in the late 1980s by the Financing Corporation, or FICO, to recapitalize the now defunct Federal Savings and Loan Insurance Corporation. The FICO payments will continue until the FICO bonds mature in 2017 through 2019. Excluding the special assessment noted above, our expense for the assessment of deposit insurance and the FICO payments was $587,000 for the fiscal year ended September 30, 2009 and $155,000 for the fiscal year ended September 30, 2008. The FDIC also established 1.25% of estimated insured deposits as the designated reserve ratio of the DIF. The FDIC is authorized to change the assessment rates as necessary, subject to the previously discussed limitations, to maintain the required reserve ratio of 1.25%.

The FDIC also approved a One-Time Assessment Credit to institutions that were in existence on December 31, 1996 and paid deposit insurance assessments prior to that date, or are a successor to such an institution. Peoples Federal Savings Bank received a $116,000 One-Time Assessment Credit, all of which was used to offset substantially all of our deposit insurance assessment, excluding the FICO payments, for the period from January 1, 2007 through March 31, 2008.

The Company is participating in the FDIC’s Temporary Account Guarantee (“TAG”) program, which is a part of the FDIC’s TLG program. The purpose of the TLG is to strengthen confidence and encourage liquidity in the banking system. Under the TAG, funds in non-interest-bearing accounts, in interest-bearing transaction accounts with interest rate of 0.50% or less and in Interest on Lawyers Trust Accounts will have a temporary unlimited guarantee from the FDIC until June 30, 2010. The coverage of the TAG is in addition to and separate from coverage available under the FDIC’s general deposit insurance rules, which insure accounts up to $250,000.

Temporary Liquidity Guarantee Program. On October 14, 2008, the FDIC announced a new program – the Temporary Liquidity Guarantee Program, which guarantees newly issued senior unsecured debt of a participating organization, up to certain limits established for each institution, issued between October 14, 2008 and December 31, 2009. The FDIC will pay the unpaid principal and interest on FDIC-guaranteed debt instruments upon the uncured failure of the participating entity to make timely payments of principal or interest in accordance with the terms of the instrument. The guarantee will remain in effect until June 30, 2012. In return for the FDIC’s guarantee, participating institutions will pay the FDIC a fee based on the amount and maturity of the debt. We opted not to participate in this part of the Temporary Liquidity Guarantee Program.

The other component of the Temporary Liquidity Guarantee Program, the Transaction Account Guarantee Program, provides full federal deposit insurance coverage for non-interest bearing transaction deposit accounts, regardless of dollar amount, until June 30, 2010. An annualized 10 basis point assessment on balances in noninterest-bearing transaction accounts that exceed the existing deposit insurance limit of $250,000 will be assessed on a quarterly basis to insured depository institutions that have not opted out of this component of the Temporary Liquidity Guarantee Program. We opted to participate in this component of the Temporary Liquidity Guarantee Program.

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Prohibitions Against Tying Arrangements. Federal savings banks are prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.

Federal Home Loan Bank System. Peoples Federal Savings Bank is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions as well as other entities involved in home mortgage lending. As a member of the Federal Home Loan Bank of Boston, Peoples Federal Savings Bank is required to acquire and hold shares of capital stock in the Federal Home Loan Bank. As of December 31, 2009, Peoples Federal Savings Bank was in compliance with this requirement.

Other Regulations

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

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

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

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

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

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

• Truth in Savings Act; and

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

The operations of Peoples Federal Savings Bank also are subject to the:

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

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

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

• The USA PATRIOT Act, which requires savings banks to, among other things, establish broadened anti-money laundering compliance programs, and due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement and extend existing compliance requirements that also apply to financial institutions under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and

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

Holding Company Regulation

General. Upon completion of the conversion, Peoples Federal Bancshares, Inc. will be a non-diversified savings and loan holding company within the meaning of the Home Owners’ Loan Act. As such, Peoples Federal Bancshares, Inc. will be registered with the Office of Thrift Supervision and will be subject to Office of Thrift Supervision regulations, examinations, supervision and reporting requirements. In addition, the Office of Thrift Supervision will have enforcement authority over Peoples Federal Bancshares, Inc. and its subsidiaries. Among other things, this authority permits the Office of Thrift Supervision to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution. Unlike bank holding companies, federal savings and loan holding companies are not subject to any regulatory capital requirements or to supervision by the Federal Reserve Board.

Permissible Activities. Under present law, the business activities of Peoples Federal Bancshares, Inc. will be generally limited to those activities permissible for financial holding companies under Section 4(k) of the Bank Holding Company Act of 1956, as amended, or for multiple savings and loan holding companies. A financial holding company may engage in activities that are financial in nature, including underwriting equity securities and insurance as well as activities that are incidental to financial activities or complementary to a financial activity. A multiple savings and loan holding company is generally limited to activities permissible for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, subject to the prior approval of the Office of Thrift Supervision, and certain additional activities authorized by Office of Thrift Supervision regulations.

Federal law prohibits a savings and loan holding company, including Peoples Federal Bancshares, Inc., directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings institution or holding company thereof, without prior written approval of the Office of Thrift Supervision. It also prohibits the acquisition or retention of, with certain exceptions, more than 5% of a nonsubsidiary company engaged in activities that are not closely related to banking or financial in nature, or acquiring or retaining control of an institution that is not federally insured. In evaluating applications by holding companies to acquire savings institutions, the Office of Thrift Supervision must consider the financial and managerial resources, future prospects of the company and institution involved, the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors.

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The Office of Thrift Supervision is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions:

(i) the approval of interstate supervisory acquisitions by savings and loan holding companies; and

(ii) the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisition.

The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

Federal Securities Laws

We have filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 for the registration of the shares of common stock to be issued pursuant to the stock offering. Upon completion of the stock offering, our common stock will be registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934. We will be subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

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

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Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. As directed by the Sarbanes-Oxley Act, our Chief Executive Officer and Chief Financial Officer will be required to certify that our quarterly and annual reports do not contain any untrue statement of a material fact. The rules adopted by the Securities and Exchange Commission under the Sarbanes-Oxley Act have several requirements, including having these officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal control over financial reporting; they have made certain disclosures to our auditors and the audit committee of the Board of Directors about our internal control over financial reporting; and they have included information in our quarterly and annual reports about their evaluation and whether there have been changes in our internal control over financial reporting or in other factors that could materially affect internal control over financial reporting. We will be subject to further reporting and audit requirements beginning with the fiscal year ending September 30, 2011 under the requirements of the Sarbanes-Oxley Act. We will prepare policies, procedures and systems designed to ensure compliance with these regulations.

TAXATION

Federal Taxation

General. Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize material federal income tax matters and is not a comprehensive description of the tax rules applicable to Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank.

Method of Accounting. For federal income tax purposes, Peoples Federal Savings Bank will file a consolidated tax return with Peoples Federal Bancshares, Inc. and will report its income and expenses on the accrual method of accounting and use a tax year ending September 30th for filing their consolidated federal income tax returns. The Small Business Protection Act of 1996 eliminated the use of the reserve method of accounting for bad debt reserves by savings institutions, effective for taxable years beginning after 1995.

Minimum Tax. The Internal Revenue Code of 1986, as amended, imposes an alternative minimum tax at a rate of 20% on a base of regular taxable income plus certain tax preferences, referred to as “alternative minimum taxable income.” The alternative minimum tax is payable to the extent alternative minimum taxable income is in excess of an exemption amount. Net operating losses can, in general, offset no more than 90% of alternative minimum taxable income. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years. Peoples Federal MHC, Peoples Federal Bancorp, Inc. and Peoples Federal Savings Bank have not been subject to the alternative minimum tax and have no such amounts available for credits against regular future tax liabilities.

Net Operating Loss Carryovers. A financial institution may carry back net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. At December 31, 2009, Peoples Federal MHC, Peoples Federal Bancorp, Inc. and Peoples Federal Savings Bank had no net operating loss carryforward for federal income tax purposes.

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Corporate Dividends. Peoples Federal Bancshares, Inc. will be able to exclude from its income 100% of dividends received from Peoples Federal Savings Bank as a member of the same affiliated group of corporations.

Audit of Tax Returns. Peoples Federal MHC, Peoples Federal Bancorp, Inc., and Peoples Federal Savings Bank’s federal income tax returns, as applicable, have not been audited in the most recent five-year period.

State Taxation

For tax years beginning on or after January 1, 2009, Massachusetts generally requires corporations engaged in a unitary business to calculate their income on a combined basis with corporations which are under common control. Accordingly, Peoples Federal MHC, Peoples Federal Bancorp, Inc. and Peoples Federal Savings Bank currently file combined annual income tax returns. Upon consummation of the conversion, Peoples Federal Bancshares, Inc. would be required to file a combined annual Massachusetts income tax return with Peoples Federal Savings Bank unless an exemption from such a combined filing applies. A corporation that qualifies, and elects to be treated for purposes of Massachusetts taxation, as a Massachusetts Security Corporation will be excluded from such a combined group.

A financial institution or business corporation is generally entitled to special tax treatment as a “security corporation” under Massachusetts law provided that: (a) its activities are limited to buying, selling, dealing in or holding securities on its own behalf and not as a broker; and (b) it has applied for, and received, classification as a “security corporation” by the Commissioner of the Massachusetts Department of Revenue. A security corporation that is not a bank holding company under the Internal Revenue Code must pay a tax equal to 1.32% of its gross income. An election to be treated as a security corporation would have the effect of reducing Peoples Federal Bancshares, Inc.’s Massachusetts tax liability to 0.33% of its net income.

Peoples Federal Bancshares, Inc. is considering whether to seek to qualify as a security corporation. To do so, it would need to (a) apply for, and receive, security corporation classification by the Massachusetts Department of Revenue; and (b) not conduct any activities deemed impermissible under the governing statutes and the various regulations, directives, letter rulings and administrative pronouncements issued by the Massachusetts Department of Revenue. In order to qualify as a security corporation, it would need to establish a subsidiary for the purpose of making the loan to the employee stock ownership plan, since making such a loan directly could disqualify it from classification as a security corporation.

Peoples Federal Savings Bank files Massachusetts financial institution income tax returns and is subject to an annual Massachusetts tax at a rate of 10.5% of its net income, adjusted for certain items. Massachusetts net income is defined as gross income, other than 95% of dividends received in any taxable year beginning on or after January 1, 1999 from or on account of the ownership of any class of stock if the institution owns 15% or more of the voting stock of the institution paying the dividend, less the deductions, but not the credits allowable under the provisions of the Internal Revenue Code, as amended and in effect for the taxable year. The dividends must meet the qualifications under Massachusetts law. Deductions with respect to the following items, however, shall not be allowed except as otherwise provided: (a) dividends received, except as otherwise provided; (b) losses sustained in other taxable years; (c) taxes on or measured by income, franchise taxes measured by net income, franchise taxes for the privilege of doing business and capital stock taxes imposed by any state; or (d) the deduction allowed by section 168(k) of the Code.

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None of the state tax returns of Peoples Federal MHC, Peoples Federal Bancorp, Inc, or Peoples Federal Savings Bank is currently under audit, nor have any of these tax returns been audited during the past five years.

As a Maryland business corporation, Peoples Federal Bancshares, Inc. will be required to file annual returns and pay annual fees to the State of Maryland.

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MANAGEMENT OF PEOPLES FEDERAL BANCSHARES, INC.

Shared Management Structure

The directors of Peoples Federal Bancshares, Inc. are the same persons who are the directors of Peoples Federal Savings Bank. In addition, each executive officer of Peoples Federal Bancshares, Inc. is also an executive officer of Peoples Federal Savings Bank. We expect that Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank will continue to have common executive officers until there is a business reason to establish separate management structures.

Executive Officers of Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank

The following table sets forth information regarding the executive officers of Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank as of December 31, 2009.

Name	Age	Position with
		Peoples Federal Bancshares, Inc.	Peoples Federal Savings Bank
Maurice H. Sullivan, Jr.	64	Chairman and Chief Executive Officer	Chairman
Thomas J. Leetch, Jr.	61	President and Chief Operating Officer	President and Chief Executive Officer
James J. Gavin	46	Executive Vice President	Executive Vice President; Chief Lending Officer and Chief Operations Officer
Christopher Lake	46	Senior Vice President and Chief Financial Officer	Senior Vice President and Chief Financial Officer
Lee Ann Coté	35	Vice President	Senior Vice President-Retail Banking and Human Resources

The executive officers of Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank are elected annually.

Directors of Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank

Peoples Federal Bancshares, Inc. has eleven directors. Directors serve three-year staggered terms so that approximately one-third of the directors are elected at each annual meeting. Directors of Peoples Federal Savings Bank will be elected by Peoples Federal Bancshares, Inc. as its sole stockholder.

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The following table states our directors’ names, their ages as of December 31, 2009, the years when they began serving as directors of Peoples Federal Savings Bank and when their current term expires:

Name	Position(s) Held With Peoples Federal Bancshares, Inc.	Age	Director Since	Current Term Expires
Maurice H. Sullivan, Jr.	Chairman of the Board, Chief Executive Officer and Director	64	1971	2013
Thomas J. Leetch, Jr.	President and Director	61	1980	2011
D. Randolph Berry	Director	62	2007	2012
Myron Fox	Director	65	2007	2013
Hugh Gallagher	Director	80	1988	2012
William Giudice	Director	55	2009	2013
Vincent Mannering	Director	58	2003	2011
Norman Posner	Director	63	2007	2011
John F. Reen, Jr.	Director	68	2003	2013
Frederick Taw	Director	59	2007	2012
Maurice H. Sullivan, III	Director	38	1999	2011

Director Qualifications

In considering and identifying individual candidates for Director, our Nominating Committee and our Board of Directors takes into account several factors which they believe are important to the operations of the Company as a community banking institution. With respect to specific candidates, the Board and Committee assess the specific qualities and experience that such individuals possess, including: 1) overall familiarity and experience with the market area served by the Company and the community groups located in such communities; 2) knowledge of the local real estate markets and real estate professionals; 3) contacts with and knowledge of local businesses operating in the Company’s market area; 4) professional and educational experience, with particular emphasis on real estate, legal, accounting or financial services; 5) experience with the local governments and agencies and political activities; 6) any adverse regulatory or legal actions involving the individual or entity controlled by the individual; 7) the integrity, honesty and reputation of the individual; 8) experience or involvement with other local financial services companies and potential conflicts that may develop; 9) the past service with the Company or its subsidiaries and contributions to their operations; and 10) the independence of the individual. While the Board of Directors and the Committee do not maintain a written policy on diversity which specifies the qualities or factors the Board or Committee must consider when assessing Board members individually or in connection with assessing the overall composition of the Board, the Board and Committee take into account: 1) the effectiveness of the existing Board of Directors or additional qualifications that may be required when selecting new Board members; 2) the requisite expertise and sufficiently diverse backgrounds of the Board of Directors’ overall membership composition; and 3) the number of independent outside Directors and other possible conflicts of interest of existing and potential members of the Board of Directors. Additionally, the charter of the Nominating Committee includes a statement that it and the Board of Directors believe that diversity is an important component of a board of directors, including such factors as background, skills, experience, expertise, gender, race and culture.

Our directors have historically had long tenures with the Company or its subsidiaries and all directors have been long-term residents of, or maintained business operating in, a community located within the market area of Peoples Federal Savings Bank. The current Bylaws of Peoples Federal Savings Bank and Peoples Federal MHC contain provisions which require that all of their directors meet certain residency and integrity requirements. The current Bylaws of Peoples Bancshares, Inc. also contain a provision that at least a majority of our Board members must be residents of Massachusetts. Subsequent

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to the conversion, the Board of Directors of Peoples Federal Bancshares, Inc. will be reviewing the standards for director qualifications contained in its Bylaws and expects to amend such provisions whereby the Bylaws will require that: 1) all directors meet a local residency requirement; 2) directors may not be affiliated with competing financial institutions; and 3) directors must meet strict integrity provisions.

Board Independence

The Board of Directors has determined that each of our directors, with the exception of Messrs. Sullivan, Jr., Sullivan, III and Leetch, is “independent” as defined in the listing standards of the Nasdaq Stock Market. Messrs. Sullivan, Jr. and Leetch are not independent because they are each one of our executive officers. Director Maurice H. Sullivan, III is not considered independent under the Nasdaq listing standards because he is the son of Maurice H. Sullivan, Jr., our Chairman and Chief Executive Officer.

In determining the independence of the directors listed above, the Board of Directors reviewed the following transactions, none of which are required to be reported under “—Transactions With Certain Related Persons,” below. During the fiscal year ended September 30, 2009, Peoples Federal Savings Bank paid approximately $50,000 in legal fees to the law firm of Rollins, Rollins & Fox of which director Myron Fox is the proprietor. In addition, all of Peoples Federal Savings Bank’s directors have deposit accounts at Peoples Federal Savings Bank.

The Business Background of Our Directors and Executive Officers

Directors:

The business experience for the past five years of each of our directors and executive officers is set forth below. Unless otherwise indicated, directors and executive officers have held their positions for the past five years.

Maurice H. Sullivan, Jr. is our Chairman and Chief Executive Officer. Mr. Sullivan has served as a board member of Peoples Federal Savings Bank since 1971, has served as Chairman of the Board since 1987 and has served as the Chairman and Chief Executive Officer of Peoples Federal MHC and Peoples Federal Bancorp, Inc. since their formation in 2005. Mr. Sullivan was a practicing attorney from 1971 until his retirement from legal practice in 2007. Mr. Sullivan is the father of board member Maurice H. Sullivan, III. As a practicing attorney in the local market, Mr. Sullivan represented local businesses and individuals and handled real estate, litigation and business transaction matters for Peoples Federal Savings Bank. Mr. Sullivan’s legal experience, local contacts with customers and businesses and institutional knowledge of the development of Peoples Federal Savings Bank provides the Board with valuable perspective as to the operations of the Company and with respect to business generation and product offerings.

Thomas J. Leetch, Jr. is our President and Chief Operating Officer and is the President and Chief Executive Officer of Peoples Federal Savings Bank, positions he has held at the Bank since his initial hire in 1980. Prior to joining Peoples Federal Savings Bank in 1980, Mr. Leetch worked as a senior manager in the Audit Banking Division of a certified public accounting firm as well as serving as Executive Vice President and Treasurer of a Massachusetts-based savings bank. Mr. Leetch has over 35 years of experience in banking. Mr. Leetch’s significant local banking experience, auditing background and continued participation in the financial industry trade associations provides the Board with a perspective on the day to day operations of Peoples Federal Savings Bank and assists the Board in assessing the trends and developments in the financial institutions industry on a local and national basis.

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D. Randolph Berry is a private investor and consulting engineer. He has been associated with Foster-Miller, Inc, (a subsidiary of QinetiQ, a world-wide technology development firm) since 1970. Mr. Berry’s significant investing experience assists the Board in analyzing financial transactions and assessing securities investment and asset management strategies. Additionally, his experience with technology matters assists the Board in assessing the technology needs of the Company with respect to its operations and the delivery of its products and services to its customers.

Myron Fox is a practicing attorney and is the proprietor of the law firm Rollins, Rollins & Fox, Wellesley, Massachusetts. Mr. Fox joined Rollins, Rollins & Fox one year after his graduation from Boston College Law School in 1969 and became the firm’s proprietor in 1975. As a practicing attorney in the local market, Mr. Fox represents local businesses and individuals and handles a variety of real estate transaction matters. Mr. Fox’s legal experience provides the Board with insight on legal matters involving the Company and his local contacts with customers and businesses assists the Company with business generation and product offerings.

Hugh Gallagher is the owner of Center Realty, Inc., a real estate development firm located in Brighton, Massachusetts. Mr. Gallagher’s experience as a local real estate developer provides the Board with assistance in assessing local real estate values, trends and developments and in identifying potential new lending customers and assessing the relative risk of projects and properties securing loans made by the Company and its subsidiaries.

William Giudice is President and Chief Executive Officer of Xikota Devices, Inc., a semiconductor company that develops high performance components for wireless applications, located in Waltham, Massachusetts. From 2003 until 2007, Mr. Giudice was Vice President and General Manager of Analog Devices. Mr. Giudice has more than 30 years of technology-industry experience. Mr. Giudice’s general experience in managing the operations of a technology company provides the Board with general business acumen and his specific experience in the area technology assists the Board in assessing technological matters related to the operations of the Company and the delivery of its services and products to its customers.

Vincent Mannering is an Executive Director of the Boston Water & Sewer Commission, a position he has held since 1995. From 1992 until 1995, Mr. Mannering was a State Representative for the Commonwealth of Massachusetts. Mr. Mannering practiced law in private practice from 1985 until 1995, and prior to this, Mr. Mannering was an Assistant District Attorney for the Commonwealth of Massachusetts from 1978 until 1985. Mr. Mannering’s former experience as a State Representative and current position with the Boston Water & Sewer Commission, his knowledge of the local municipalities and contacts with local community leaders and politicians provides the Board with insight into dealing with such municipalities and assists the Board in assessing local government actions which may affect the Company or its subsidiaries.

Norman Posner is a certified public accountant and is the managing partner of Samet & Company, PC, a certified public accounting firm, located in Chestnut Hill, Massachusetts. Mr. Posner has been a certified public accountant since 1972. Mr. Posner has significant expertise and background with regard to accounting matters, the application of generally accepted accounting principles and matters of business finance and business transactions. Mr. Posner’s professional and business experience provides the Board with valuable insight into the accounting and public reporting issues faced by the Company and in assessing strategic transactions involving the Company.

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John F. Reen, Jr. is the Owner of Lehman & Reen Funeral Home, a funeral home located in Brighton, Massachusetts which Mr. Reen has owned since its establishment in 1974. Mr. Reen’s experience as a local business owner and operator provides the board with insight into product offerings aimed at local small businesses. Additionally, through Mr. Reen’s active participation in local community service organizations, Mr. Reen provides the Board with assistance in the areas of potential business generation and community outreach efforts.

Frederick Taw is an owner of Golden Temple restaurant in Brookline, Massachusetts. As an active member of the local Asian community and participant in Asian community service organizations, Mr. Taw provides the Board with insight into the banking and service needs of the various Asian communities served by the Company and assistance in the areas of potential business generation and community outreach efforts.

Maurice H. Sullivan, III is a partner in the Boston, Massachusetts office of Bingham McCutchen, LLP, an international law firm. Mr. Sullivan’s primary practice area is commercial real estate. Mr. Sullivan is the son of Maurice H. Sullivan, Jr., our Chairman and Chief Executive Officer. Mr. Sullivan’s legal experience assists the Board in assessing legal and regulatory matters involving the Company and his specific expertise in the area of commercial real estate provides the Board insight into the local real estate market in general and, more specifically, insight into the values, trends and developments in the Boston metropolitan area commercial real estate market.

Executive Officers Who Are Not Also Directors:

James J. Gavin is our Executive Vice President and is the Executive Vice President/Chief Operating Officer and Chief Lending Officer of Peoples Federal Savings Bank. He has been employed at Peoples Federal Savings Bank since 1994. Prior to his employment at Peoples Federal Savings Bank, from 1986 until 1994, Mr. Gavin was an Examiner-in-Charge at the Federal Home Loan Bank Board which became the Office of Thrift Supervision in 1989.

Christopher Lake is the Senior Vice President and Chief Financial Officer of Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank. He has been employed at Peoples Federal Savings Bank since 2000. Prior to his employment with Peoples Federal Savings Bank, from 1988 until 1994 Mr. Lake was an Examiner-in-Charge at the Federal Home Loan Bank Board which became the Office of Thrift Supervision in 1989. Thereafter, Mr. Lake was employed with another community banking institution as well as KPMG, where he served from 1997 until 2000 as a senior consultant.

Lee Ann Coté is our Senior Vice President – Retail Banking and Human Resources. She has been employed at Peoples Federal Savings Bank since 1994 when she began her employment at Peoples Federal Savings Bank as a part-time teller. Ms. Coté began her full-time employment with Peoples Federal Savings Bank upon being graduated from Emmanuel College in 1996. Additionally, Ms. Coté holds a Masters of Science from Boston College which she received in 1998.

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Meetings and Committees of the Board of Directors

We conduct business through meetings of our Board of Directors and its committees. During the fiscal year ended September 30, 2009, the Board of Directors of Peoples Federal Savings Bank met 12 times. The Board of Directors of Peoples Federal Bancshares, Inc. has established standing committees, including a Compensation Committee, a Nominating and Corporate Governance Committee and an Audit Committee. Each of these committees operates under a written charter, which governs its composition, responsibilities and operations.

The table below sets forth the directors of each of the listed standing committees, and the number of meetings held by the comparable committee of Peoples Federal Savings Bank. Director Posner will be designated as an “Audit Committee Financial Expert” for the Audit Committee, as that term is defined by the rules and regulations of the Securities and Exchange Commission. Pursuant to Nasdaq and SEC rules which require certain board committees of listed companies to be comprised entirely of independent directors, Messrs. Sullivan, Jr. and Sullivan, III will not serve on either of the Compensation Committee or the Audit Committee of Peoples Federal Bancshares, Inc.

	Nominating and Corporate Governance	Compensation	Audit
	Hugh Gallagher	Hugh Gallagher*	Norman Posner*
	Norman Posner	William Giudice	Vincent Mannering
	D. Randolph Berry	John Reen	Maurice H. Sullivan, Jr
		Frederick Taw	Frederick Taw
		Maurice H. Sullivan, III
Number of Meetings in Fiscal 2009:	1	2	4

* Denotes committee chair.

Directors’ Compensation

The following table sets forth the compensation paid to our directors who are not also employees during the year ended September 30, 2009. Information with respect to director fees and other director compensation paid to Messrs. Sullivan, Jr. and Leetch is included below in “Executive Officer Compensation – Summary Compensation Table.” Each of our directors served on the boards of Peoples Federal MHC, Peoples Federal Bancorp, Inc. and Peoples Federal Savings Bank.

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Director Compensation For the Year Ended September 30, 2009
Name	Fees earned or paid in cash 4 ($)		All other compensation ($)	Total ($)
D. Randolph Berry	24,000		3,906	27,906
Bernard Burke 1	5,501		4,251	9,752
John Fallon2	6,000		3,750	9,750
Myron Fox	19,500		3,855	23,355
Hugh Gallagher	31,000		3,777	34,777
William Giudice3	2,500		—	2,500
Vincent Mannering	20,000	5	3,906	23,906
Norman Posner	23,750		3,906	27,656
John F. Reen, Jr.	25,000		3,855	28,855
Maurice H. Sullivan, III	23,000		3,906	26,906
Frederick Taw	19,000		3,906	22,906

¹ Retired as of December 31, 2008 and appointed to our advisory board.

² Mr. Fallon served on the boards until his death in December 2008.

³ Mr. Giudice was appointed to the boards of directors in August 2009.

⁴ See table below for breakdown of fees earned in the fiscal year ended September 30, 2009.

⁵ Mr. Mannering, deferred $15,000 of his board fees to the Voluntary Deferred Compensation Plan for Directors.

	Fees Earned or Paid in Cash
Name	Bank Board Fee ($)		MHC Board Fee ($)	Bancorp Board Fee ($)	Investment Committee ($)	Audit Committee ($)	Building Committee ($)	Compensation Committee ($)
D. Randolph Berry	15,000		1,500	1,500	6,000		—	—
Bernard Burke 1	4,251		375	375	—	500	—	—
John Fallon 2	3,750		375	375	1,500	—	—	—
Myron Fox	16,500		1,500	1,500	—	—	—	—
Hugh Gallagher	15,000		1,500	1,500	6,000	—	6,000	1,000
William Giudice	2,500		—	—	—		—	—
Vincent Mannering	15,000	3	1,500	1,500	—	2,000	—	—
Norman Posner	15,000		1,500	1,500	—	2,000	—	—
John F. Reen, Jr.	15,000		1,500	1,500	6,000	—	—	1,000
Maurice H. Sullivan, III	15,000		1,500	1,500	4,000	—	—	1,000
Frederick Taw	15,000		1,500	1,500	—	—	—	1,000

¹ Retired as of December 31, 2008 and appointed to our advisory board.

² Mr. Fallon served on the boards until his death in December 2008.

³ Mr. Mannering, deferred $15,000 of his board fees to the Voluntary Deferred Compensation Plan for Directors.

Fees. In the fiscal year ended September 30, 2009, Peoples Federal Savings Bank paid each director a fee of $1,250 for each board meeting attended, provided that a director could miss one board meeting per year and receive fees for such meeting. The chairman of the board and board secretary of Peoples Federal Savings Bank earn $2,083 and $1,417, respectively, per meeting attended. Our directors received $500 for each committee meeting attended. Each of Peoples Federal Bancorp, Inc. and Peoples Federal MHC pays $375 quarterly to each director, or $1,500 annually.

Voluntary Deferred Compensation Plan for Directors. Peoples Federal Savings Bank adopted a Voluntary Deferred Compensation Plan for Directors, effective January 1, 2006. A director may elect to become a participant by submitting to the Compensation Committee a written election to defer a percentage or a specified dollar amount that would otherwise be earned by the individual in the following calendar year. Amounts deferred by a director will be deemed invested in investments designated as available by the Compensation Committee. The director may direct that the amounts credited to his account be applied in the proportions he may designate in each deemed investment made available by the Compensation Committee and may elect to change his investment direction. Each director’s account will be deemed credited at the end of each calendar quarter, or other dates designated by the Compensation

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Committee, with the earnings or losses the account would have experienced had the account actually been invested in the deemed investment. Directors are vested in all amounts in their accounts at all times. Payments under the plan will commence upon a fixed date selected by the director at the time of the deferral, which may be either the last day of a calendar quarter ending at least two years from the end of the calendar year in which the deferred compensation would otherwise become payable, but no later than the end of the calendar quarter in which the director attains age 75, or the last day of any calendar quarter ending after the director’s separation of service. The director will select the form of payment at the time the director elects to defer compensation from the forms of payment available under the plan. To the extent permitted by the Compensation Committee, a director may request a distribution in the event of an unforeseeable emergency. In the event the director dies before payments have commenced, the amount allocated to the director’s account will be paid to the director’s beneficiary. If payments of a deferred amount have already commenced in the form of installments at the time of the director’s death, the payments will continue to be made in the same form to the director’s beneficiary.

Director Retirement Agreements. In 2004, Peoples Federal Savings Bank entered into Director Retirement Agreements with Messrs. Vincent Mannering, John F. Reen, Maurice H. Sullivan, III and Maurice H. Sullivan, Jr. The agreements provide that upon termination of service on or after normal retirement age (age 70 for Messrs. Mannering, Reen and Sullivan, III, and age 65 for Mr. Sullivan, Jr.) for reasons other than death, the director will receive annual benefits of $14,609 (for Mr. Mannering), $9,869 (for Mr. Reen), $32,011 (for Mr. Sullivan, III) and $73,390 (for Mr. Sullivan, Jr.) payable in monthly installments commencing on the first day of the month following the director’s normal retirement date. If a director terminates service before attaining his normal retirement age for reasons other than death, disability, termination for cause or following a change in control, the director will receive annual benefits of $5,816, $7,192, $9,265, and $73,390 for Messrs. Mannering, Reen, Sullivan, III and Sullivan, Jr., respectively, assuming such termination had occurred as of September 30, 2009, payable in monthly installments commencing on the first day of the month following the director’s attainment of normal retirement age. Upon a change in control followed by the director’s termination of service within 12 months, the director will receive annual benefits of $14,609, $9,869, $32,011 and $73,390 for Messrs. Mannering, Reen, Sullivan, III and Sullivan, Jr., respectively, payable in monthly installments commencing on the first day of the month following the director’s termination of service. The annual retirement benefit will be paid to each of Messrs. Mannering, Reen and Sullivan, III over a period of 10 years and to Mr. Sullivan, Jr., over a period of 20 years. The agreements include a 12-month non-compete provision, provided that the non-compete provision is not applicable following a change in control. In the event any benefit under the agreements would create an excise tax under Section 280G of the Internal Revenue Code, the benefit will be reduced to the maximum benefit that would not result in any such excise tax.

Executive Officer Compensation

Summary Compensation Table. The following table sets forth the total compensation paid to or earned by our Chief Executive Officer and Chairman of the Board, Maurice H. Sullivan, Jr., our President and Chief Operating Officer, Thomas J. Leetch, Jr. (Mr. Leetch is also President and Chief Executive Officer of Peoples Federal Savings Bank) and James J. Gavin, our Executive Vice President (Mr. Gavin is also Executive Vice President, Chief Operating Officer and Chief Lending Officer of Peoples Federal Savings Bank) for the fiscal year ended September 30, 2009. We refer to these individuals as “Named Executive Officers.”

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Name and principal position with Peoples Federal Savings Bank	Fiscal Year Ended	Salary ($)	Bonus ($)		All other compensation(3) ($)	Total ($)
Maurice H. Sullivan, Jr., Chairman	2009	321,800	89,176		42,846	453,822
Thomas J. Leetch, Jr. President and Chief Executive Officer	2009	321,800	82,926	(1)	15,644	420,370
James J. Gavin, Executive Vice President, Chief Operating Officer and Chief Lending Officer	2009	191,200	49,271	(2)	7,855	248,326

⁽¹⁾ Mr. Leetch, Jr. deferred $24,360 of his bonus to the Peoples Federal Savings Bank Voluntary Deferred Compensation Plan for Executives.

⁽²⁾ Mr. Gavin deferred $1,000 of his bonus to the Peoples Federal Savings Bank Voluntary Deferred Compensation Plan for Executives.

⁽³⁾ The amounts in this column reflect what we have paid for, or reimbursed, the applicable Named Executive Officer for various benefits and perquisites that we provide. A break-down of the various elements of compensation in this column is set forth in the table immediately following.

	All Other Compensation
	Mr. Sullivan, Jr.		Mr. Leetch, Jr.		Mr. Gavin
Employer 401(k) Matching Contribution	$	—	$	6,436	$	5,743
Director Fees		27,400		3,000		—
Personal Use of Auto		448		503		—
STD, LTD & Group Life		2,149		2,149		2,112
Split Dollar Life Insurance (tax gross-up)		1,362		978		—
In lieu of 401(k) match		6,611		—		—
Other Tax Gross-ups:		4,876		2,578		—
Total	$	42,846	$	15,644	$	7,855

Employment Agreements. Peoples Federal Savings Bank has entered into separate employment agreements with Messrs. Thomas J. Leetch, Jr. and James J. Gavin as well as with two other senior executives. In addition, Peoples Federal MHC has entered into an employment agreement with Maurice H. Sullivan, Jr. (Messrs. Leetch, Gavin and Sullivan are referred to below as the “executives” or “executive”). Upon completion of the conversion, Peoples Federal Bancshares, Inc. will enter into separate employment agreements with each executive (the employment agreement between Mr. Sullivan and Peoples Federal MHC will be replaced by an agreement with Peoples Federal Bancshares, Inc.). The employment agreements with Peoples Federal Bancshares, Inc. will have essentially identical provisions as the Peoples Federal Savings Bank agreements, except that the employment agreements with Peoples Federal Bancshares, Inc. will provide that Peoples Federal Bancshares, Inc. will provide for daily, rather than annual renewal, will make any payments not made by Peoples Federal Savings Bank under its agreements with the executives (provided that the executives will not receive any duplicate payments) and will not require an automatic cut-back of severance benefits on a termination of employment in connection with a change in control in order to avoid an excess parachute payment. Our continued success depends to a significant degree on the skills and competence of these officers, and the employment agreements are intended to ensure that we maintain a stable management base following the offering. The discussion below addresses the employment agreement for each executive with Peoples Federal Savings Bank or Peoples Federal MHC and those to be implemented by Peoples Federal Bancshares, Inc.

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The Peoples Federal MHC employment agreement with Mr. Sullivan and the Peoples Federal Saving Bank employment agreements with Messrs. Leetch and Gavin each provide for three-year terms, subject to annual renewal by the board of directors for an additional year beyond the then-current expiration date. The current base salaries under the employment agreements are $386,160 for Mr. Sullivan and $386,160 for Mr. Leetch and $237,100 for Mr. Gavin. The agreements also provide for participation in incentive compensation programs, employee benefit plans and programs, regular vacation and paid legal holidays, and certain fringe benefits as described in the agreements. The employment agreement for Mr. Leetch provides for the use of an automobile owned by Peoples Federal Savings Bank and a cellular phone the business use of which will be paid or reimbursed by Peoples Federal Savings Bank. In addition, the employment agreements for each of Mr. Leetch and Sullivan provide that, in the event the executive terminates employment on or after age 65, he and his wife will be entitled to participation in a supplemental medical retiree insurance plan and a prescription drug benefit plan for the remainder of their lives, at no cost to either of them.

Upon termination of an executive’s employment for cause, as defined in each of the agreements, the executive will receive no further compensation or benefits under the agreement. If we terminate the executive without cause or if the executive terminates voluntarily under specified circumstances that constitute good reason (as defined in the agreement), the executive will be entitled to the base salary and incentive compensation and the value of all employee benefits that would have been provided for the remaining term of the agreement had the executive’s employment not terminated. Such amounts would be paid in a lump sum payment. In addition, the executive will be entitled to participate in any life insurance, non-taxable medical, health, or dental arrangement, subject to the same premium contribution until the earlier of his death, his employment by another employer other than one in which he is the majority owner, or the remaining term of the agreement. In the event of a change in control, followed by the executive’s dismissal or resignation following a demotion, loss of title, office or significant authority, or relocation by more than 25-miles, the executive will be entitled to the greater of the payments set forth above or three times his average annual compensation over the last five years, payable in a lump sum, plus, continued welfare benefits either provided under the Peoples Federal Savings Bank plans for a period of up to 36 months or by payment of a cash lump sum payment equal to the cost of providing such benefits for 36 months. In addition, any memberships or automobile use shall be continued during the remaining unexpired term of the agreement. The payments required under the Peoples Federal Savings Bank employment agreements but not under the Peoples Federal Bancshares, Inc. employment agreements in connection with a change in control will be reduced to the extent necessary to avoid an excess parachute payment.

Upon any termination of employment that would entitle a severance payment (other than a termination in connection with a change in control), each executive will be required to adhere to a one-year non-competition provision. The executive will be required to release us from any and all claims in order to receive any payments and benefits under their agreements. We will agree to pay all reasonable costs and legal fees of the executives in relation to the enforcement of the employment agreements, provided the executives succeed on the merits in a legal judgment, arbitration proceeding or settlement. The employment agreements also provide for indemnification of the executives to the fullest extent legally permissible.

Salary Continuation Agreements. Peoples Federal Savings Bank entered into Salary Continuation Agreements with Mr. Thomas J. Leetch, Jr., effective in May 2006, and with Mr. James J. Gavin, effective in December 2004. In addition, Peoples Federal MHC entered into a Salary Continuation Agreement with Mr. Maurice H. Sullivan, Jr. in May 2006. The Salary Continuation Agreements are substantially similar.

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The agreements for each executive provide that upon normal retirement (e.g., age 65 and completion of 15 years of service), the executive will receive an annual benefit, payable in monthly installments over a period of 20 years. The annual benefits will be $150,890 for Mr. Leetch, $77,500 for Mr. Sullivan and $91,638 for Mr. Gavin. In the event of early termination before age 65 (but after completion of at least 15 years of service in the case of Messrs. Leetch and Gavin), for reasons other than death, disability, termination for cause or within 12 months following a change in control, the executive will be entitled to an annual benefit based on his age at the time of termination, payable in monthly installments over a period of 20 years. If such termination had occurred on September 30, 2009, the annual benefit payable to Messrs. Leetch, Sullivan, Jr. and Gavin, would have been $83,215, $62,515 and $30,584, respectively. Such benefit would commence at the executive’s normal retirement age of 65. In the event of a change in control followed within 12 months by the executive’s separation from service, the executive will receive an annual benefit payable in monthly installments commencing on the first day of the month following separation from service, over a period of 20 years. The benefit payable on a change in control will be $150,890 for Mr. Leetch, $77,500 for Mr. Sullivan, Jr. and $91,638 for Mr. Gavin. The executives (or their beneficiaries) will also be entitled to certain benefits in the event of the executive’s disability or death. The agreements also include a one-year noncompetition obligation in the event of the executive’s separation from service (except in the event of separation from service following a change in control).

Split Dollar Plans. Peoples Federal Savings Bank entered into endorsement split dollar life insurance plans for the benefit of several senior executives, including Messrs. Sullivan, Jr., Leetch and Gavin, effective December 1, 2004. The split dollar plans divide the death proceeds payable under certain life insurance policies owned by Peoples Federal Savings Bank that insure the lives of the participating employees between Peoples Federal Savings Bank and the designated beneficiary of each insured participating employee. The plans were amended, effective July 6, 2006, and                     , 2008. The amounts of death proceeds available for the beneficiaries of the participating employees range from $50,000 to $150,000. The death benefit payable to the beneficiaries of each of Messrs. Sullivan, Jr., Leetch and Gavin, is $150,000, provided that such benefit cannot exceed the net death proceeds under the applicable policy (e.g., the total death proceeds reduced by the greater of (i) the cash surrender value or (ii) the aggregate premiums paid by Peoples Federal Savings Bank). Peoples Federal Savings Bank will pay the premiums due on all the policies and will gross-up the income of Messrs. Sullivan, Jr. and Leetch (but not Gavin) to reimburse the executives for the taxes paid on the additional term insurance protection received for such year. A participant’s rights under the split dollar plan will automatically cease upon the participant’s termination for cause. In the event Peoples Federal Savings Bank decides to maintain the policy after the participant’s termination of participation in the plan, Peoples Federal Savings Bank will be the direct beneficiary of the entire death proceeds of the policy.

Voluntary Deferred Compensation Plan for Executives. Peoples Federal Savings Bank adopted a Voluntary Deferred Compensation Plan for Executives, effective January 1, 2006. An executive designated as eligible to participate in the plan may elect to become a participant by submitting to the Compensation Committee a written election to defer a percentage or a specified dollar amount that would otherwise be earned in the following calendar year. Amounts deferred by the executive will be deemed invested in investments designated as available by the Compensation Committee. The executive may direct that the amounts credited to his account be applied in the proportions he may designate in each deemed investment and may elect to change his investment direction. Each executive’s account will be deemed credited at the end of each calendar quarter, or other dates designated by the Compensation Committee, with the earnings or losses the account would have experienced had the account actually been invested in the deemed investment. Executives are vested in all amounts in their accounts at all times.

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Payments under the plan will commence upon a fixed date selected by the executive at the time of the deferral, which may be either the last day of a calendar quarter ending at least two years from the end of the calendar year in which the deferred compensation would otherwise become payable, but no later than the end of the calendar quarter in which the executive attains age 75, or the last day of any calendar quarter ending after the executive’s separation of service. The executive will select the form of payment at the time the executive elects to defer compensation from the forms of payment available under the plan. To the extent permitted by the Compensation Committee, an executive may request a distribution in the event of an unforeseeable emergency. In the event the executive dies before payments have commenced, the amount allocated to the executive’s account will be paid to the executive’s beneficiary. If payments of a deferred amount have already commenced in the form of installments at the time of the executive’s death, the payments will continue to be made in the same form to the executive’s beneficiary.

In connection with the conversion and stock offering, Peoples Federal Savings Bank intends to amend and restate the Voluntary Deferred Compensation Plan for Executives to include a supplemental employee stock ownership feature (referred to herein as the “supplemental ESOP” portion of the plan). The supplemental ESOP portion of the plan will provide additional cash benefits at retirement or other termination of employment to participants whose benefits under the tax-qualified employee stock ownership plan, described below, are limited by tax law limitations applicable to tax-qualified plans. Messrs. Sullivan III, Leetch and Gavin are expected to be the initial participants in this portion of the plan. The supplemental ESOP will credit each participant who also participates in the tax-qualified employee stock ownership plan with an annual amount equal to the sum of the difference (expressed in dollars) between “(a)” and “(b)” where “(a)” is the number of shares of common stock of Peoples Federal Bancshares, Inc. that would have been allocated to the participant’s account in the tax-qualified employee stock ownership plan, but for the tax law limitations, and “(b)” is the actual number of shares allocated to the participant’s account in the tax-qualified employee stock ownership plan. In each case, the number of shares will be multiplied by the fair market value of the shares on the allocation date to determine the annual allocation amount. Each participant will be permitted to invest the annual amount credited to his or her account among an investment selected by the Compensation Committee of the board of directors, which has been selected to administer the plan. Each participant’s account value will be based on the value of the investments in which the participant invests, or is deemed to invest, his account.

Tax Qualified Plans

401(k) Plan. Peoples Federal Savings Bank participates in the Pentegra Defined Contribution Plan for Financial Institutions, a multiple employer tax-qualified 401(k) plan, for the benefit of employees of Peoples Federal Savings Bank who have satisfied the 401(k) plan’s eligibility requirements. All eligible employees can begin participation in the 401(k) plan on the earliest date that coincides with or next follows the date the employee completes one year of employment and attains age 21. A participant may contribute from 1% to 15% of his or her salary, which includes basic salary, plus overtime and bonus, to the 401(k) plan on a pre-tax basis, subject to the limitations imposed by the Internal Revenue Code. For 2010, the salary deferral contribution limit is $16,500, provided, however, that a participant over age 50 may contribute an additional $5,500 to the 401(k) plan as a “catch-up” contribution. A participant is always 100% vested in his or her salary deferral and catch-up contributions. In addition, the 401(k) plan provides that Peoples Federal Savings Bank will make matching contributions to the account of a participant in an amount equal to 50% of the participant’s contributions on the first six percent of the participant’s compensation for the year. A participant will become fully vested in his or her matching contributions upon completion of the participant’s third year of credited service. A participant also becomes 100% vested in his or her matching contributions upon the participant’s death, disability or attainment of age 65 while employed with Peoples Federal Savings Bank. Failure to complete three years

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of employment will result in a forfeiture of the participant’s matching contributions and earnings thereon credited to the participant’s account. Unless elected otherwise by the participant, the benefits under the 401(k) plan are generally distributed in the form of a lump sum payment following the participant’s termination of employment.

Each participant has an individual account under the 401(k) plan and may direct the investment of his or her account among a variety of investment options available under the plan. In connection with the conversion, Peoples Federal Saving Bank will transfer the assets attributable to Peoples Federal Savings Bank’s employees from the Pentegra multiple employer plan to a single employer plan and will add the Peoples Federal Bancshares, Inc. Stock Fund as an investment alternative. This change will permit Peoples Federal Savings Bank 401(k) Plan participants to invest their account balances in the Peoples Federal Bancshares, Inc. Stock Fund, both in the offering and afterwards. An independent trustee will purchase the common stock in the offering on behalf of plan participants, to the extent that shares are available. A participant will have the right to direct the trustee regarding the voting of shares purchased for his or her plan account.

Defined Benefit Plan. Peoples Federal Savings Bank participates in the Pentegra Defined Benefit Plan for Financial Institutions, a multiple employer plan. Employees who are hired prior to July 1, 2010 by Peoples Federal Savings Bank and who have completed one year of employment and have attained age 21 are eligible to participate in the plan, except for employees compensated on an hourly basis. Employees of Brookline Co-operative Bank on September 10, 2007, the date we acquired Brookline Co-operative, received credit under the plan for their service with Brookline Co-operative for purposes of meeting the eligibility requirements of the plan and for purposes of vesting. No employees hired on or after July 1, 2010 are eligible to participate in the plan. A participant becomes vested in his or her retirement benefit upon completion of five years of employment, provided that a participant who has reached age 65 becomes 100% vested, regardless of the number of completed years of employment.

Upon termination of employment at or after age 65, a participant will be entitled to an annual normal retirement benefit equal to 2% of the participant’s average annual salary for the five highest paid consecutive years of benefit service multiplied by the number of years of benefit service. A participant who terminates employment prior to age 65 who has become vested in a benefit will be entitled to an annual early retirement benefit, which may commence at age 45. The early retirement benefit is equal to the vested amount of the normal retirement benefit accrued at the participant’s termination date. Payment of the early retirement benefit can begin as early as 45, in which case the accrued benefit will be reduced by applying an early retirement factor of 3% per year for each year that payments begin prior to age 65. Normal and early retirement benefits are generally payable over the lifetime of the participant, or the participant and a beneficiary, and include a death benefit upon the participant’s death. Other optional forms of distribution under the plan include various annuities, including a higher lifetime benefit with no death benefit or a joint and 50% survivor annuity, among other things. In the event a participant dies while in active service, the participant’s beneficiary will be entitled to a death benefit equal to 100% of the participant’s last 12 months’ salary, plus an additional 10% of such salary for each year of benefit service until a maximum of 300% of such salary is reached for 20 or more years, plus a refund of your own contributions, if any, plus interest. Messrs. Leetch and Gavin have approximately 33 and 16 years, respectively, of credited service under the plan.

Stock-Based Benefit Plans

Employee Stock Ownership Plan. In connection with the conversion and offering, Peoples Federal Savings Bank plans to adopt an employee stock ownership plan for eligible employees. An employee stock ownership plan is a tax-qualified retirement plan that primarily invests in the common

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stock of Peoples Federal Bancshares, Inc. Eligible employees who have attained age 21 and who are employed for one year will begin participation in the employee stock ownership plan on the later of the effective date of the employee stock ownership plan or upon the first entry date commencing on or after the eligible employee’s completion of 1,000 hours of service during a continuous 12-month period.

The employee stock ownership plan trustee is expected to purchase, on behalf of the employee stock ownership plan, 8% of the total number of shares of Peoples Federal Bancshares, Inc. common stock issued in the offering, including shares contributed to the charitable foundation. We anticipate that the employee stock ownership plan will fund its stock purchase with a loan from Peoples Federal Bancshares, Inc. or a subsidiary of Peoples Federal Bancshares, Inc. equal to the aggregate purchase price of the common stock. The loan will be repaid principally through Peoples Federal Saving Bank’s contribution to the employee stock ownership plan and dividends payable on common stock held by the employee stock ownership plan over the anticipated 20-year term of the loan. The interest rate for the employee stock ownership plan loan is expected to be an adjustable rate equal to the prime rate, as published in The Wall Street Journal, on the closing date of the offering. Thereafter the interest rate will adjust annually and will be the prime rate on the first business day of the calendar year, retroactive to January 1 of such year. See “Pro Forma Data.”

The trustee will hold the shares purchased by the employee stock ownership plan in an unallocated suspense account, and shares will be released from the suspense account on a pro-rata basis as Peoples Federal Savings Bank repays the loan. The trustee will allocate the shares released among participants on the basis of each participant’s proportional share of compensation relative to all participants. A participant becomes vested in his or her account balance at the rate of 20% per year over a 5-year period. Participants who were employed by Peoples Federal Savings Bank immediately prior to the offering will receive credit for vesting purposes for years of service prior to adoption of the employee stock ownership plan. Participants also will become fully vested automatically upon normal retirement, death or disability, a change in control, or termination of the employee stock ownership plan. Generally, participants will receive distributions from the employee stock ownership plan upon separation from service. The employee stock ownership plan reallocates any unvested shares forfeited upon termination of employment among the remaining participants.

The employee stock ownership plan permits participants to direct the trustee as to how to vote the shares of common stock allocated to their accounts. The trustee votes unallocated shares and allocated shares for which participants do not provide instructions on any matter in the same ratio as those shares for which participants provide instructions, subject to fulfillment of the trustee’s fiduciary responsibilities.

Under applicable accounting requirements, Peoples Federal Savings Bank will record a compensation expense for the employee stock ownership plan at the fair market value of the shares as they are committed to be released from the unallocated suspense account to participants’ accounts. The compensation expense resulting from the release of the common stock from the suspense account and allocation to plan participants will result in a corresponding reduction in Peoples Federal Bancshares, Inc.’s earnings.

Employee Severance Compensation Plan

Employee Severance Compensation Plan. In connection with the conversion and stock offering, Peoples Federal Savings Bank expects to adopt the Peoples Federal Savings Bank Employee Severance Compensation Plan to provide severance benefits to eligible full-time employees whose employment terminates in connection with a change in control of Peoples Federal Savings Bank or Peoples Federal Bancshares, Inc. Employees become eligible for severance benefits under the plan if they have a

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minimum of one year of service with Peoples Federal Savings Bank and are deemed full-time employees. Individuals who enter into employment or change in control-related severance agreements with Peoples Federal Savings Bank or Peoples Federal Bancshares, Inc. will not participate in the severance plan. Under the severance plan, if, within 12 months of a change in control, Peoples Federal Savings Bank or Peoples Federal Bancshares, Inc. or their successors terminate an employee’s employment or if the individual voluntarily terminates employment upon the occurrence of events specified in the severance plan, then that individual will receive a severance payment equal to one month of base compensation for each year of credited service with Peoples Federal Savings Bank, up to a maximum payment of twenty-four month’s of the employee’s base compensation. The plan provides that all Vice Presidents and above who are not covered by an employment or change in control agreement will be eligible for a minimum severance benefit of one-year of base compensation as well as one year of health insurance coverage.

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Benefits to be Considered Following Completion of the Stock Offering

Following the stock offering, Peoples Federal Bancshares, Inc. intends to adopt a new stock-based incentive plan that will provide for grants of stock options and restricted common stock awards. Applicable regulations require that if we were to adopt such a plan within one year after the Conversion, the amount of stock options and a number of shares of restricted stock, may not exceed 10% and 4%, respectively, of the shares issued in the offering, including shares contributed to the charitable foundation. These 10% and 4% limitations will not apply if the plan is implemented more than one year after the conversion.

The stock-based incentive plan will not be established sooner than six months after the stock offering and, if adopted within one year after the stock offering, would require the approval by stockholders owning a majority of the outstanding shares of Peoples Federal Bancshares, Inc. common stock eligible to be cast. If the stock-based incentive plan is established after one year after the stock offering, it would require the approval of our stockholders by a majority of votes cast.

The following additional restrictions would apply to our stock-based incentive plan only if the plan is adopted within one year of the consummation of the conversion and stock offering:

• non-employee directors in the aggregate may not receive more than 30% of the options and restricted stock awards authorized under the plan;

• any non-employee director may not receive more than 5% of the options and restricted stock awards authorized under the plan;

• any officer or employee may not receive more than 25% of the options and restricted stock awards authorized under the plan;

• the options and restricted stock awards may not vest more rapidly than 20% per year, beginning on the first anniversary of stockholder approval of the plan; and

• accelerated vesting is not permitted except for death, disability or upon a change in control of Peoples Federal Savings Bank or Peoples Federal Bancshares, Inc.

These restrictions do not apply to plans adopted after one year following the completion of the stock offering.

We have not yet determined whether we will present the stock-based incentive plan for stockholder approval within one year following the completion of the conversion or whether we will present this plan for stockholder approval more than one year after the completion of the conversion. In the event of changes in applicable regulations or policies regarding stock-based incentive plans, including any regulations or policies restricting the size of awards and vesting of benefits as described above, the restrictions described above may not be applicable.

We may obtain the shares needed for our stock-based benefit plans by issuing additional shares of common stock from authorized but unissued shares or through stock repurchases.

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The actual value of restricted stock grants will be determined based on their fair value (the closing market price of shares of common stock of Peoples Federal Bancshares, Inc.) as of the date grants are made. The following table presents the total value of all shares to be available for awards of restricted stock under the stock-based benefit plan, assuming the shares for the plan are purchased or issued in a range of market prices from $8.00 per share to $14.00 per share at the time of the grant.

Share Price	183,600 Shares Awarded at Minimum of Offering Range		216,000 Shares Awarded at Midpoint of Offering Range		248,400 Shares Awarded at Maximum of Offering Range		285,660 Shares Awarded at Maximum of Offering Range, As Adjusted
(In thousands, except share price information)
$  8.00	$	1,469	$	1,728	$	1,987	$	2,285
10.00		1,836		2,160		2,484		2,857
12.00		2,203		2,592		2,981		3,428
14.00		2,570		3,024		3,478		3,999

The grant-date fair value of the stock options granted under the stock-based benefit plans will be based, in part, on the closing price of shares of common stock of Peoples Federal Bancshares, Inc. on the date the options are granted. The fair value will also depend on the various assumptions utilized in the option-pricing model ultimately adopted.

The following table presents the total estimated value of the stock options to be available for grant under the stock-based benefit plans, assuming the range of market prices for the shares are $8.00 per share to $14.00 per share at the time of the grant.

Exercise Price	Grant-Date Fair Value Per Option		459,000 Options at Minimum of Range		540,000 Options at Midpoint of Range		621,000 Options at Maximum of Range		714,150 Options at Maximum of Range, As Adjusted
(In thousands, except exercise price and fair value information)
$  8.00	$	4.35	$	1,997	$	2,349	$	2,701	$	3,107
10.00		5.44		2,497		2,938		3,378		3,885
12.00		6.53		2,997		3,526		4,055		4,663
14.00		7.62		3,498		4,115		4,732		5,442

The tables presented above are provided for informational purposes only. There can be no assurance that our stock price will not trade below $10.00 per share. Before you make an investment decision, we urge you to carefully read this prospectus, including, but not limited to, the section entitled “Risk Factors” beginning on page 15.

Transactions with Certain Related Persons

The Sarbanes-Oxley Act of 2002 generally prohibits us from making loans to our executive officers and directors, but it contains a specific exemption from such prohibition for loans made by Peoples Federal Savings Bank to our executive officers and directors in compliance with federal banking regulations.

At December 31, 2009, all of our loans to directors and executive officers were made in the ordinary course of business, were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to Peoples Federal Savings Bank, and did not involve more than the normal risk of collectability or present other unfavorable features. These loans were performing according to their original terms at December 31, 2009, and were made in compliance with federal banking regulations.

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SUBSCRIPTIONS BY DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information regarding intended common stock subscriptions by each of the directors and executive officers of Peoples Federal Savings Bank and their associates, and by all directors and executive officers as a group. However, there can be no assurance that any individual director or executive officer, or the directors and executive officers as a group, will purchase any specific number of shares of our common stock. In the event the individual maximum purchase limitation is increased, persons subscribing for the maximum amount may increase their purchase order. Directors and executive officers will purchase shares of common stock at the same $10.00 purchase price per share and on the same terms as other purchasers in the offering. This table excludes shares of common stock to be purchased by the employee stock ownership plan, as well as any stock awards or stock option grants that may be made no earlier than six months after the completion of the offering. The directors and officers have indicated their intention to subscribe in the offering for an aggregate of $2,175,000 of shares of common stock, equal to 5.2% of the number of shares of common stock to be sold in the offering at the minimum of the offering range, assuming shares are available. Purchases by directors, executive officers and their associates will be included in determining whether the required minimum number of shares has been subscribed for in the offering. The shares being acquired by the directors, executive officers and their associates are being acquired for investment purposes, and not with a view towards resale. Subscriptions by management through our 401(k) plan will be counted as part of the maximum number of shares such individuals’ may subscribe for in the stock offering.

Name and Title	Number of Shares	Aggregate Purchase Price		Percent at Minimum of Offering Range
Maurice H. Sullivan, Jr.	27,500	$	275,000	*	%
Thomas J. Leetch, Jr.	25,000		250,000	*
D. Randolph Berry	30,000		300,000	*
Myron J. Fox	30,000		300,000	*
Hugh Gallagher	5,000		50,000	*
William Giudice	10,000		100,000	*
Vincent G. Mannering	10,000		100,000	*
Norman Posner	25,000		250,000	*
John F. Reen, Jr.	5,000		50,000	*
Maurice H. Sullivan, III	5,000		50,000	*
Frederick Taw	11,000		110,000	*
James J. Gavin	22,500		225,000	*
Christopher Lake	8,000		80,000	*
Lee Ann Coté	3,500		35,000	*
All directors and executive officers as a group (14 persons)	217,500		$2,175,000	5.2%

* Less than 1%.

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THE CONVERSION; PLAN OF DISTRIBUTION

The Board of Directors of Peoples Federal MHC has approved the plan of conversion and reorganization. The plan of conversion and reorganization must also be approved by Peoples Federal MHC’s members. A special meeting of members has been called for this purpose. The Office of Thrift Supervision has conditionally approved the plan of conversion and reorganization; however, such approval does not constitute a recommendation or endorsement of the plan of conversion and reorganization by that agency.

General

The Board of Directors of Peoples Federal MHC adopted the plan of conversion and reorganization on February 16, 2010, as amended on March 11, 2010. Pursuant to the plan of conversion and reorganization, Peoples Federal MHC will convert from the mutual form of organization to the fully stock form and we will sell shares of common stock to the public in our offering. In the conversion, we will organize a new Maryland stock holding company named Peoples Federal Bancshares, Inc. When the conversion is completed, all of the capital stock of Peoples Federal Savings Bank will be owned by Peoples Federal Bancshares, Inc., and all of the common stock of Peoples Federal Bancshares, Inc. will be owned by public stockholders including our employee stock ownership plan and our new charitable foundation.

We intend to retain between $16.7 million and $22.9 million of the net proceeds of the offering, or $26.4 million if the offering range is increased by 15%, and to contribute the balance of the net proceeds to Peoples Federal Savings Bank. The conversion will be consummated only upon the sale of at least 4,250,000 shares of our common stock offered (not including shares that we will contribute to our charitable foundation) pursuant to the plan of conversion and reorganization.

The plan of conversion and reorganization provides that we will offer shares of common stock for sale in the subscription offering to eligible account holders, our tax-qualified employee benefit plans, including our employee stock ownership plan and 401(k) plan, supplemental eligible account holders and other members. If all shares are not subscribed for in the subscription offering, we may, in our discretion, offer common stock for sale in a community offering to members of the general public, with a preference given to natural persons residing in the Massachusetts counties of Norfolk, Suffolk and Middlesex.

We have the right to accept or reject, in whole or in part, any orders to purchase shares of the common stock received in the community offering. The community offering, if any, may begin at the same time as, during, or after the subscription offering, and must be completed within 45 days after the completion of the subscription offering unless otherwise extended by us with the approval of the Office of Thrift Supervision. See “—Community Offering.”

We determined the number of shares of common stock to be offered in the offering based upon an independent valuation of the estimated consolidated pro forma market value of Peoples Federal Bancshares, Inc. All shares of common stock to be sold in the offering will be sold at $10.00 per share. Investors will not be charged a commission to purchase shares of common stock. The independent valuation will be updated and the final number of the shares of common stock to be issued in the offering will be determined at the completion of the offering. See “—Determination of Share Price and Number of Shares to be Issued” for more information as to the determination of the estimated pro forma market value of the common stock.

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The following is a brief summary of the conversion. We recommend reading the plan of conversion and reorganization in its entirety for more information. A copy of the plan of conversion and reorganization is available for inspection at each branch office of Peoples Federal Savings Bank and at the Northeast Regional Office, the Washington, D.C. Office of the Office of Thrift Supervision and at the public reference facilities of the Securities and Exchange Commission. The plan of conversion and reorganization is also filed as an exhibit to Peoples Federal MHC’s application to convert from mutual to stock form of which this prospectus is a part, copies of which may be obtained from the Office of Thrift Supervision. The plan of conversion and reorganization is also filed as an exhibit to the registration statement we have filed with the Securities and Exchange Commission, of which this prospectus is a part, copies of which may be obtained from the Securities and Exchange Commission or online at the Securities and Exchange Commission’s website. See “Where You Can Find Additional Information.”

Reasons for the Conversion

Our primary reasons for converting and raising additional capital through the offering are:

• to improve our capital position during a period of significant economic uncertainty, especially for the financial industry (although, as of December 31, 2009, Peoples Federal Savings Bank was considered “well capitalized” for regulatory purposes and is not subject to a directive or a recommendation from the Office of Thrift Supervision to raise capital);

• to support our internal growth through lending in communities we serve or may serve in the future and through the establishment of de novo branch offices;

• to assist us in managing interest rate risk;

• to provide additional financial resources to pursue future acquisitions of banks, thrifts and other financial services companies, and branch offices, although we have no current arrangements or agreements with respect to any such acquisitions;

• to provide better capital management tools, including the ability to pay dividends and to repurchase shares of our common stock, subject to market conditions; and

• to retain and attract qualified personnel by establishing stock-based benefit plans for management and employees.

In the stock holding company structure, we will have greater flexibility in structuring mergers and acquisitions. Our current mutual structure prevents us from offering shares of our common stock as consideration for a merger or acquisition. Potential sellers often want stock for at least part of the acquisition consideration. Our new stock holding company structure will enable us to offer stock or cash consideration, or a combination thereof, and will therefore enhance our ability to compete with other bidders when acquisition opportunities arise.

We have no current arrangements or agreements to acquire other banks, thrifts, credit unions, financial service companies or branch offices. However, we have had, and intend to continue to have, discussions with local financial institutions to determine whether they would be interested in exploring the possibility of future acquisitions.

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We believe that the additional capital raised in the offering may enable us to take advantage of business opportunities that may not otherwise be available to us. We are not subject to a directive or a recommendation from the Office of Thrift Supervision to raise capital.

Approvals Required

The affirmative vote of a majority of the total eligible votes of members of Peoples Federal MHC at the special meeting of members is required to approve the plan of conversion and reorganization and to approve the formation and funding of the charitable foundation. The plan of conversion and reorganization also must be approved by the Office of Thrift Supervision, which has given its conditional approval to the plan of conversion and reorganization. The charitable foundation will only be established and funded if both the plan of conversion and the establishment and funding of the charitable foundation are approved by the members. If the charitable foundation is not approved, the Board of Directors will retain the ability to complete the conversion and stock offering without the establishment and funding of the charitable foundation, or it may determine to terminate the conversion and stock offering.

A special meeting of members to consider and vote upon the plan of conversion and reorganization has been set for June     , 2010.

Effects of Conversion on Depositors, Borrowers and Members

Continuity. While the conversion is being accomplished, our normal business of accepting deposits and making loans will continue without interruption. We will continue to be a federally chartered savings bank and will continue to be regulated by the Office of Thrift Supervision. After the conversion, we will continue to offer existing services to depositors, borrowers and other customers. The directors serving Peoples Federal Savings Bank at the time of the conversion will be the directors of Peoples Federal Savings Bank and of Peoples Federal Bancshares, Inc. after the conversion.

Effect on Deposit Accounts. Pursuant to the plan of conversion and reorganization, each depositor of Peoples Federal Savings Bank at the time of the conversion will automatically continue as a depositor after the conversion, and the deposit balance, interest rate and other terms of such deposit accounts will not change as a result of the conversion. Each such account will be insured by the Federal Deposit Insurance Corporation to the same extent as before the conversion. Depositors will continue to hold their existing certificates and other evidences of their accounts.

Effect on Loans. No loan outstanding from Peoples Federal Savings Bank will be affected by the conversion, and the amount, interest rate, maturity and security for each loan will remain as it was contractually fixed prior to the conversion.

Effect on Voting Rights of Members. At present, all of our depositors and certain of our borrowers are members of, and have voting rights in, Peoples Federal MHC as to all matters requiring membership action. Upon completion of the conversion, depositors and borrowers will cease to be members of Peoples Federal MHC and will no longer have voting rights. Upon completion of the conversion, all voting rights in Peoples Federal Savings Bank will be vested in Peoples Federal Bancshares, Inc. as the sole stockholder of Peoples Federal Savings Bank. The stockholders of Peoples Federal Bancshares, Inc. will possess exclusive voting rights with respect to Peoples Federal Bancshares, Inc. common stock.

Tax Effects. We will receive an opinion of counsel or tax advisor with regard to federal and state income tax consequences of the conversion to the effect that the conversion will not be taxable for federal

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or state income tax purposes to Peoples Federal Savings Bank, Peoples Federal Bancorp, Inc., Peoples Federal Bancshares, Inc. and Peoples Federal MHC or its members. See “—Material Income Tax Consequences.”

Effect on Liquidation Rights. Each depositor in Peoples Federal Savings Bank has both a deposit account in Peoples Federal Savings Bank and a corresponding pro rata ownership interest in the net worth of Peoples Federal MHC based upon the deposit balance in his or her account. This ownership interest is tied to the depositor’s account and has no tangible market value separate from the deposit account. This ownership interest may only be realized in the event of a complete liquidation of Peoples Federal MHC and Peoples Federal Savings Bank. Any depositor who opens a deposit account at Peoples Federal Savings Bank obtains such pro rata ownership interest in Peoples Federal MHC without any additional payment beyond the amount of the deposit. A depositor who reduces or closes his or her deposit account receives deposited funds but nothing for his or her ownership interest in the net worth of Peoples Federal MHC, which is lost to the extent that the balance in the account is reduced or closed. Consequently, depositors in a stock subsidiary of a mutual holding company normally have no way of realizing the value of their ownership interest, which is realizable only in the unlikely event that Peoples Federal MHC and Peoples Federal Savings Bank are liquidated. If this were to occur, the Peoples Federal Savings Bank depositors of record at that time, as owners, would share pro rata in any residual surplus and reserves of Peoples Federal MHC after other claims, including claims of depositors to the amounts of their deposits, are paid.

Under the plan of conversion, however, the depositors of Peoples Federal Savings Bank will receive rights in a liquidation account established by Peoples Federal Bancshares, Inc. (and in a parallel liquidation account established in Peoples Federal Savings Bank) which will represent the amount of (i) Peoples Federal MHC’s ownership interest in the total stockholders equity of People Federal Bancorp, Inc. as of the date of the latest statement of financial condition used in this prospectus plus (ii) the value of the net assets of Peoples Federal MHC as of the date of the latest statement of financial condition of Peoples Federal MHC prior to the consummation of the conversion (excluding its ownership interest in Peoples Federal Bancorp, Inc.). Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank shall hold the liquidation account for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders who continue to maintain deposits in Peoples Federal Savings Bank after the conversion. The liquidation account is designed to provide payments to depositors of their liquidation interests, if any, in the event of a liquidation of Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank.

For further information, see “—Liquidation Rights.”

Determination of Share Price and Number of Shares to be Issued

The plan of conversion and reorganization and federal regulations require that the aggregate purchase price of the common stock sold in the offering be based on the appraised pro forma market value of the common stock, as determined by an independent valuation. We have retained RP Financial, LC. to prepare an independent valuation appraisal. For its services in preparing the initial valuation, RP Financial, LC. will receive a fee of $45,000, and will be reimbursed for its expenses. RP Financial, LC. will receive an additional fee of $5,000 for each update to the valuation appraisal. We have agreed to indemnify RP Financial, LC. and its employees and affiliates against specified losses, including any losses in connection with claims under the federal securities laws, arising out of its services as independent appraiser, except where such liability results from its negligence or bad faith.

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The independent valuation appraisal considered the pro forma impact of the offering. Consistent with the Office of Thrift Supervision appraisal guidelines, the appraisal applied three primary methodologies: the pro forma price-to-book value approach applied to both reported book value and tangible book value; the pro forma price-to-earnings approach applied to reported and core earnings; and the pro forma price-to-assets approach. The market value ratios applied in the three methodologies were based upon the current market valuations of the peer group companies identified by RP Financial, LC., subject to valuation adjustments applied by RP Financial, LC. to account for differences between us and our peer group.

The independent valuation was prepared by RP Financial, LC. in reliance upon the information contained in this prospectus, including our consolidated financial statements. RP Financial, LC. also considered the following factors, among others:

• our present and projected results and financial condition;

• the economic and demographic conditions in our existing market area;

• certain historical, financial and other information relating to us;

• a comparative evaluation of our operating and financial characteristics with those of other similarly situated publicly traded savings institutions;

• the impact of the conversion and the offering on our equity and earnings potential;

• our potential to pay cash dividends;

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

• the contribution of shares to the charitable foundation.

Included in the independent valuation were certain assumptions as to our pro forma earnings after the conversion that were utilized in determining the appraised value. These assumptions included estimated expenses, an assumed after-tax rate of return on the net offering including shares contributed to the charitable foundation proceeds and purchases in the open market of 4% of the common stock issued in the offering (including shares contributed to the charitable foundation) by the stock-based benefit plan at the $10.00 purchase price. See “Pro Forma Data” for additional information concerning these assumptions. The use of different assumptions may yield different results.

The independent valuation states that as of February 26, 2010, the estimated pro forma market value of Peoples Federal Bancshares, Inc. ranged from $45.9 million to $62.1 million, with a midpoint of $54.0 million. Our Board of Directors decided to offer the shares of common stock for a price of $10.00 per share primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions. The number of shares offered for sale will be equal to the aggregate offering price of the shares divided by the price per share. Based on the valuation range and the $10.00 price per share, the minimum of the offering range will be 4,250,000 shares, the midpoint of the offering range will be 5,000,000 shares and the maximum of the offering range will be 5,750,000 shares, or 6,612,500 shares if the maximum amount is adjusted because of demand for shares or changes in market conditions.

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The appraisal is based in part on our financial condition and results of operations, the effect of the additional capital raised by the sale of shares of common stock in the offering and an analysis of a peer group of 10 publicly traded savings bank and thrift holding companies that RP Financial, LC. considered comparable to us.

The appraisal peer group consists of the following companies.

Company Name	Ticker Symbol	Exchange	Headquarters	Total Assets
				(in millions)
Beacon Federal Bancorp	BFED	NASDAQ	East Syracuse, NY	$	1,070	(1)
ESSA Bancorp, Inc.	ESSA	NASDAQ	Stroudsburg, PA		1,034
Elmira Savings Bank	ESBK	NASDAQ	Elmira, NY		506	(1)
LSB Corporation	LSBX	NASDAQ	N. Andover, MA		807	(1)
Mayflower Bancorp, Inc.	MFLR	NASDAQ	Middleboro, MA		246
Newport Bancorp, Inc.	NFSB	NASDAQ	Newport, RI		459
Rome Bancorp, Inc.	ROME	NASDAQ	Rome, NY		330
TF Financial Corporation	WVFC	NASDAQ	Pittsburgh, PA		392
Westfield Financial, Inc.	WFD	AMEX	Westfield, MA		1,191

(1) As of September 30, 2009.

The following table presents a summary of selected pricing ratios for Peoples Federal Bancshares, Inc. and the peer group companies identified by RP Financial, LC. Ratios are based on earnings for the twelve months ended December 31, 2009 and book value as of December 31, 2009. Tangible book value is total equity, less intangible assets. Compared to the median pricing of the peer group, our pro forma pricing ratios at the maximum of the offering range indicated a discount of 30.1% on a price-to-book value basis, a discount of 32.1% on a price-to-tangible book value basis and a premium of 156.6% on a price-to- earnings basis. The price ratios also reflect recent volatile market conditions, particularly for stock of financial institution holding companies, and the effect of such conditions on the trading market for recent mutual-to-stock conversions. Our Board of Directors, in reviewing and approving the valuation, considered our pro forma earnings and the range of price-to-book value ratios and price-to-tangible book value ratios at the different amounts of shares to be sold in the offering. The appraisal did not consider one valuation approach to be more important than the other.

	Price-to-earnings multiple		Price-to-book value ratio		Price-to-tangible book value ratio
Peoples Federal Bancshares, Inc. (pro forma)
Maximum, as adjusted	36.61	x	65.23	%	65.23
Maximum	30.54		61.01		61.01
Midpoint	25.65		56.79		56.79
Minimum	21.09		51.95		51.95
Valuation of peer group companies using stock prices as of February 26, 2010
Averages	14.73	x	84.34	%	89.61	%
Medians	11.90		87.23		89.87

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Since December 31, 2007, the stock pricing of the peer group upon which the appraisal is based has declined. The median price to tangible book value was 112.34% at December 31, 2007 compared to 89.87% at February 26, 2010. The median price-to-earnings per share was 20.00x at December 31, 2007 compared to 11.90x at February 26, 2010. In the absence of other factors, these changes would result in the appraisal for our offering being lower than if the appraisal were prepared as of December 31, 2007. December 31, 2007 information excludes the peer group company that has since converted from a publicly traded mutual holding company to a fully converted stock holding company.

Our Board of Directors reviewed the independent valuation and, in particular, considered the following:

• our financial condition and results of operations;

• comparison of our financial performance ratios to those of other financial institutions of similar size; and

• market conditions generally and, in particular, for financial institutions.

All of these factors are set forth in the independent valuation. Our Board of Directors also reviewed the methodology and the assumptions used by RP Financial, LC. in preparing the independent valuation and believes that such assumptions were reasonable. The offering range may be amended with the approval of the Office of Thrift Supervision, if required, as a result of subsequent developments in our financial condition or market conditions generally. In the event the independent valuation is updated to amend our pro forma market value to less than $45.9 million or more than $71.4 million, the appraisal will be filed with the Securities and Exchange Commission by a post-effective amendment to our registration statement.

The independent valuation is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing shares of our common stock. RP Financial, LC. did not independently verify our consolidated financial statements and other information that we provided to them, nor did RP Financial, LC. independently value our assets or liabilities. The independent valuation considers Peoples Federal Savings Bank as a going concern and should not be considered as an indication of the liquidation value of Peoples Federal Savings Bank. Moreover, because the valuation is necessarily based upon estimates and projections of a number of matters, all of which may change from time to time, no assurance can be given that persons purchasing our common stock in the offering will thereafter be able to sell their shares at prices at or above the $10.00 offering price per share.

Following commencement of the subscription offering, the maximum of the valuation range, including shares to be contributed to the charitable foundation, may be increased by up to 15%, or up to $71.4 million, without resoliciting subscribers, which would result in a corresponding increase of up to 15% in the maximum of the offering range of shares to be sold in the offering to up to 6,612,500 shares, to reflect changes in the market and financial conditions or demand for the shares. We will not decrease the minimum of the valuation range and the minimum of the offering range without a resolicitation of subscribers. The subscription price of $10.00 per share will remain fixed. See “—Limitations on Common Stock Purchases” as to the method of distribution and allocation of additional shares that may be issued in the event of an increase in the offering range to fill unfilled orders in the offering.

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If the update to the independent valuation at the conclusion of the offering results in an increase in the maximum of the valuation range to more than $71.4 million and a corresponding increase in the offering of shares to be sold to more than 6,612,500 shares, or a decrease in the minimum of the valuation range to less than $45.9 million and a corresponding decrease in the offering range of shares to be sold to fewer than 4,250,000 shares, in each not including shares that will be contributed to the charitable foundation, then we will promptly return with interest at our current statement savings rate of interest all funds previously delivered to us to purchase shares of common stock and cancel deposit account withdrawal authorizations, and, after consulting with the Office of Thrift Supervision, we may terminate the plan of conversion and reorganization. Alternatively, we may hold a new offering, establish a new offering range, extend the offering period and commence a resolicitation of subscribers or take other actions as permitted by the Office of Thrift Supervision in order to complete the conversion and the offering. In the event that a resolicitation is commenced, we will notify subscribers of the extension of time and of the rights of subscribers to place a new stock order for a specified period of time. Any resolicitation following the conclusion of the subscription and community offerings would not exceed 45 days unless further extended by the Office of Thrift Supervision for periods of up to 90 days.

An increase in the number of shares to be issued in the offering would decrease both a subscriber’s ownership interest and our pro forma earnings and stockholders’ equity on a per share basis while increasing pro forma earnings and stockholders’ equity on an aggregate basis. A decrease in the number of shares to be issued in the offering would increase both a subscriber’s ownership interest and our pro forma earnings and stockholders’ equity on a per share basis, while decreasing pro forma earnings and stockholders’ equity on an aggregate basis. For a presentation of the effects of these changes, see “Pro Forma Data.”

Copies of the independent valuation appraisal report of RP Financial, LC. and the detailed memorandum setting forth the method and assumptions used in the appraisal report are available for inspection at our main office and as specified under “Where You Can Find Additional Information.”

Subscription Offering and Subscription Rights

In accordance with the plan of conversion and reorganization, rights to subscribe for shares of common stock in the subscription offering have been granted in the following descending order of priority. The filling of all subscriptions that we receive will depend on the availability of common stock after satisfaction of all subscriptions of all persons having prior rights in the subscription offering and to the maximum, minimum and overall purchase limitations set forth in the plan of conversion and reorganization and as described below under “—Limitations on Common Stock Purchases.”

Priority 1: Eligible Account Holders. Each depositor with aggregate deposit account balances of $50.00 or more (a “Qualifying Deposit”) on December 31, 2008 (an “Eligible Account Holder”) will receive, without payment therefor, nontransferable subscription rights to purchase, subject to the overall purchase limitations, up to the greater of 25,000 shares of our common stock, 0.10% of the total number of shares of common stock issued in the offering, or 15 times the number of subscription shares offered multiplied by a fraction of which the numerator is the aggregate Qualifying Deposit account balances of the Eligible Account Holder and the denominator is the aggregate Qualifying Deposit account balances of all Eligible Account Holders, subject to the overall purchase limitations. See “—Limitations on Common Stock Purchases.” If there are not sufficient shares available to satisfy all subscriptions, shares will first be allocated so as to permit each Eligible Account Holder to purchase a number of shares sufficient to make his or her total allocation equal to the lesser of 100 shares or the number of shares for which he or she subscribed. Thereafter, unallocated shares will be allocated to each Eligible Account Holder whose subscription remains unfilled in the proportion that the amount of his or her Qualifying Deposit bears to

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the total amount of Qualifying Deposits of all subscribing Eligible Account Holders whose subscriptions remain unfilled. If an amount so allocated exceeds the amount subscribed for by any one or more Eligible Account Holders, the excess shall be reallocated (one or more times as necessary) among those Eligible Account Holders whose subscriptions are not fully satisfied until all available shares have been allocated.

To ensure proper allocation of shares of our common stock, each Eligible Account Holder must list on his or her stock order and certification form all deposit accounts in which he or she has an ownership interest on December 31, 2008. In the event of oversubscription, failure to list an account could result in fewer shares being allocated than if all accounts had been disclosed. In the event of an oversubscription, the subscription rights of Eligible Account Holders who are also our directors or executive officers or their associates will be subordinated to the subscription rights of other Eligible Account Holders to the extent attributable to increased deposits during the year preceding December 31, 2008.

Priority 2: Tax-Qualified Plans. Our tax-qualified employee benefit plans, including our employee stock ownership plan and 401(k) plan, will receive, without payment therefor, nontransferable subscription rights to purchase in the aggregate up to 10% of the shares of common stock issued in the offering including shares contributed to the charitable foundation. We expect our employee stock ownership plan to purchase 8% of the shares of common stock issued in the offering including shares contributed to the charitable foundation. The amount of the subscription requests by the 401(k) plan will be determined by its participants, who will have the right to invest all or a portion of their 401(k) plan accounts in our common stock.

Priority 3: Supplemental Eligible Account Holders. To the extent that there are sufficient shares of common stock remaining after satisfaction of subscriptions by Eligible Account Holders and our tax-qualified employee benefit plans, each depositor with a Qualifying Deposit on March 31, 2010 who is not an Eligible Account Holder (“Supplemental Eligible Account Holder”) will receive, without payment therefor, nontransferable subscription rights to purchase up to the greater of 25,000 shares of common stock, 0.10% of the total number of shares of common stock issued in the offering, or 15 times the number of subscription shares offered multiplied by a fraction of which the numerator is the aggregate Qualifying Deposit account balances of the Supplemental Eligible Account Holder and the denominator is the aggregate Qualifying Deposit account balances of all Supplemental Eligible Account Holders, subject to the overall purchase limitations. See “—Limitations on Common Stock Purchases.” If there are not sufficient shares available to satisfy all subscriptions, shares will be allocated so as to permit each Supplemental Eligible Account Holder to purchase a number of shares sufficient to make his or her total allocation equal to the lesser of 100 shares of common stock or the number of shares for which he or she subscribed. Thereafter, unallocated shares will be allocated to each Supplemental Eligible Account Holder whose subscription remains unfilled in the proportion that the amount of his or her Qualifying Deposit bears to the total amount of Qualifying Deposits of all Supplemental Eligible Account Holders whose subscriptions remain unfilled. If an amount so allocated exceeds the amount subscribed for by any one or more Supplemental Eligible Account Holders, the excess shall be reallocated (one or more times as necessary) among those Supplemental Eligible Account Holders whose subscriptions are not fully satisfied until all available shares have been allocated.

To ensure proper allocation of common stock, each Supplemental Eligible Account Holder must list on the stock order and certification form all deposit accounts in which he or she has an ownership interest at March 31, 2010. In the event of oversubscription, failure to list an account could result in fewer shares being allocated than if all accounts had been disclosed.

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Priority 4: Other Members. To the extent that there are shares of common stock remaining after satisfaction of subscriptions by Eligible Account Holders, our tax-qualified employee benefit plans and Supplemental Eligible Account Holders, each depositor on the voting record date of [other member date] who is not an Eligible Account Holder or Supplemental Eligible Account Holder, and each borrower as of January 19, 1983 whose borrowings as of that date remain outstanding as of [other member date] who is not an Eligible Account Holder or Supplemental Eligible Account Holder (“Other Members”) will receive, without payment therefor, nontransferable subscription rights to purchase up to the greater of 25,000 shares of common stock or 0.10% of the total number of shares of common stock issued in the offering, subject to the overall purchase limitations. See “—Limitations on Common Stock Purchases.” If there are not sufficient shares available to satisfy all subscriptions, available shares will be allocated so as to permit each Supplemental Eligible Account Holder to purchase a number of shares sufficient to make his or her total allocation equal to the lesser of 100 shares of common stock or the number of shares for which he or she subscribed. Thereafter, unallocated shares will be allocated to each Other Member whose subscription remains unfilled in the proportion that the amount of his or her subscription bears to the total amount of subscriptions of all Other Members whose subscriptions remain unfilled.

Expiration Date. The Subscription Offering will expire at 3:00 p.m., Eastern Time, on [expiration date], unless extended by us for up to 45 days or such additional periods with the approval of the Office of Thrift Supervision, if necessary. Subscription rights will expire whether or not each eligible depositor or borrower can be located. We may decide to extend the expiration date of the subscription offering for any reason, whether or not subscriptions have been received for shares at the minimum, midpoint or maximum of the offering range. Subscription rights that have not been exercised prior to the expiration date will become void.

We will not execute orders until we have received orders to purchase at least the minimum number of shares of common stock. If we have not received orders to purchase at least 4,250,000 shares within 45 days after the expiration date and the Office of Thrift Supervision has not consented to an extension, all funds delivered to us to purchase shares of common stock in the offering will be returned promptly to the subscribers with interest at our current statement savings rate and all deposit account withdrawal authorizations will be canceled. If an extension beyond [extension date] is granted by the Office of Thrift Supervision, we will resolicit subscribers, giving them an opportunity to change or cancel their orders. We will notify subscribers of the extension of time and of the rights of subscribers to place a new stock order for a specified period of time. If a subscriber does not respond, we will cancel his or her stock order and return his or her subscription funds, with interest, and cancel any authorization to withdraw funds from deposit accounts for the purchase of shares of common stock. Extensions may not go beyond [final date], which is two years after the special meeting of our members to vote on the conversion.

Community Offering

To the extent that shares of common stock remain available for purchase after satisfaction of all subscriptions of the Eligible Account Holders, our tax-qualified employee benefit plans, Supplemental Eligible Account Holders and Other Members, we may offer shares pursuant to the plan of conversion and reorganization to members of the general public in a community offering. Shares may be offered with a preference to natural persons residing in the Massachusetts counties of Suffolk, Norfolk and Middlesex.

Subscribers in the community offering may purchase up to 25,000 shares of common stock, subject to the overall purchase limitations. See “—Limitations on Common Stock Purchases.” The opportunity to purchase shares of common stock in the community offering category is subject to

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our right, in our sole discretion, to accept or reject any such orders in whole or in part either at the time of receipt of an order or as soon as practicable following the expiration date of the offering. We have not established any set criteria for determining whether to accept or reject a purchase order in the community offering, and, accordingly, any determination to accept or reject purchase orders in the community offering will be based on the facts and circumstances known to us at the time.

If we do not have sufficient shares of common stock available to fill the orders of natural persons residing in the Massachusetts counties of Suffolk, Norfolk and Middlesex, we will allocate the available shares among those persons in a manner that permits each of them, to the extent possible, to purchase the lesser of 100 shares, or the number of shares subscribed for by such person. Thereafter, unallocated shares will be allocated among natural persons residing in the Massachusetts counties of Suffolk, Norfolk and Middlesex, whose orders remain unsatisfied on an equal number of shares basis per order. If, after the allocation of shares to natural persons residing in the Massachusetts counties of Suffolk, Norfolk and Middlesex, we do not have sufficient shares of common stock available to fill the orders of other members of the general public, we will allocate the available shares among those persons in a manner that permits each of them, to the extent possible, to purchase the lesser of 100 shares, or the number of shares subscribed for by such person. In addition, unless otherwise permitted by the Office of Thrift Supervision, orders received for shares in the Community Offering will be filled up to a maximum of two percent (2.0%) of the shares sold in the offering, and thereafter, unallocated shares will be allocated among members of the general public whose orders remain unsatisfied on an equal number of shares basis per order.

The term “residing” or “resident” as used in this prospectus means any person who occupies a dwelling within the Massachusetts counties of Suffolk, Norfolk and Middlesex, has a present intent to remain within the community for a period of time and manifests the genuineness of that intent by establishing an ongoing physical presence within the community, together with an indication that this presence within the community is something other than merely transitory in nature. We may utilize deposit or loan records or other evidence provided to us to decide whether a person is a resident. In all cases, however, the determination shall be in our sole discretion.

Expiration Date. The community offering may begin at the same time as, during or after the subscription offering. It is currently expected to terminate at the same time as the subscription offering, although it must terminate no more than 45 days following the subscription offering. We may decide to extend the community offering for any reason and are not required to give purchasers notice of any such extension unless such period extends beyond [extension date]. If an extension beyond [extension date] is granted by the Office of Thrift Supervision, we will cancel stock orders accepted in the community offering and return purchase funds, with interest, and cancel any authorization to withdraw funds from deposit accounts for the purchase of shares of common stock. We will then resolicit persons whose orders we accept in the community offering, giving them an opportunity to place a new order. These extensions may not go beyond [final date], which is two years after the special meeting of our members to vote on the conversion.

Syndicated Community Offering

The plan of conversion and reorganization provides that, if necessary, all shares of common stock not purchased in the subscription offering and community offering may be offered for sale to the general public in a syndicated community offering to be managed by Sandler O’Neill & Partners, L.P., acting as our agent. In such capacity, Sandler O’Neill & Partners, L.P. may form a syndicate of other broker-dealers. Neither Sandler O’Neill & Partners, L.P. nor any registered broker-dealer will have any obligation to take or purchase any shares of the common stock in the syndicated community offering;

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however, Sandler O’Neill & Partners, L.P. has agreed to use its best efforts in the sale of shares in any syndicated community offering. The syndicated community offering would terminate no later than [extension date], unless extended by us, with approval of the Office of Thrift Supervision. See “—Community Offering” above for a discussion of rights of persons who place orders in the syndicated community offering in the event an extension is granted.

The opportunity to order shares of common stock in the syndicated community offering is subject to our right to reject orders, in whole or in part, either at the time of receipt of an order or as soon as practicable following the expiration date of the offering. If your order is rejected in part, you will not have the right to cancel the remainder of your order. We have not established any set criteria for determining whether to accept or reject a purchase order in the syndicated community offering, and, accordingly, any determination to accept or reject purchase orders in the syndicated community offering will be based on the facts and circumstances known to us at the time.

Purchasers in the syndicated community offering are eligible to purchase up to 25,000 shares of common stock, subject to the overall purchase limitations. See “—Limitations on Common Stock Purchases.” We may begin the syndicated community offering at any time following the commencement of the subscription offering.

If we are unable to find purchasers from the general public for all unsubscribed shares, we will make other purchase arrangements, if feasible. Other purchase arrangements must be approved by the Office of Thrift Supervision and may provide for purchases by directors, officers, their associates and other persons in excess of the limitations provided in the plan of conversion and reorganization and in excess of the proposed director purchases discussed earlier, although no purchases are currently intended. If other purchase arrangements cannot be made, we may do any of the following: terminate the offering and promptly return all funds; set a new offering range, notify all subscribers and give them the opportunity to confirm, cancel or change their orders; or take such other actions as may be permitted by the Office of Thrift Supervision.

Limitations on Common Stock Purchases

The plan of conversion and reorganization includes the following limitations on the number of shares of common stock that may be purchased in the offering:

• No person or entity together with any associate or group of persons acting in concert may purchase more than 35,000 shares of common stock in the offering, except that our tax-qualified employee benefit plans, including our employee stock ownership plan and 401(k) plan, may purchase in the aggregate up to 10% of the shares of common stock issued in the offering including shares contributed to the charitable foundation (including shares issued in the event of an increase in the offering range of up to 15%);

• The maximum number of shares of common stock that may be purchased in all categories of the offering by our executive officers and directors and their associates, in the aggregate, may not exceed 26% of the shares issued in the offering; and

• The minimum purchase by each person purchasing shares in the offering is 25 shares, to the extent those shares are available.

Depending upon market or financial conditions, our Board of Directors, with the approval of the Office of Thrift Supervision and without further approval of our members, may decrease or increase the

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purchase limitations. If a purchase limitation is increased, subscribers in the subscription offering who ordered the maximum amount will be, and, in our sole discretion, some other large subscribers may be, given the opportunity to increase their subscriptions up to the then-applicable limit. The effect of this type of resolicitation would be an increase in the number of shares of common stock owned by subscribers who choose to increase their subscriptions.

In the event of an increase in the offering range of up to 15% of the total number of shares of common stock offered in the offering, shares will be allocated in the following order of priority in accordance with the plan of conversion and reorganization:

(1) to fill our tax-qualified employee benefit plans’ subscriptions for up to 10% of the total number of shares of common stock issued in the offering;

(2) in the event that there is an oversubscription at the Eligible Account Holder, Supplemental Eligible Account Holder or Other Member levels, to fill unfulfilled subscriptions of these subscribers according to their respective priorities; and

(3) to fill unfulfilled subscriptions in the community offering, with preference given first to natural persons residing in the Massachusetts counties of Suffolk, Norfolk and Middlesex.

The term “associate” of a person means:

(1) any corporation or organization, other than Peoples Federal MHC, Peoples Federal Bancorp, Inc., Peoples Federal Savings Bank, Peoples Federal Bancshares, Inc. or a majority-owned subsidiary of these entities, of which the person is a senior officer, partner or 10% beneficial stockholder;

(2) any trust or other estate in which the person has a substantial beneficial interest or serves as a trustee or in a fiduciary capacity, excluding any employee stock benefit plan in which the person has a substantial beneficial interest or serves as trustee or in a fiduciary capacity; and

(3) any blood or marriage relative of the person, who either lives in the same home as the person or who is a director or officer of Peoples Federal Savings Bank or Peoples Federal Bancshares, Inc.

The term “acting in concert” means:

(1) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement; or

(2) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise.

A person or company that acts in concert with another person or company (“other party”) shall also be deemed to be acting in concert with any person or company who is also acting in concert with that other party, except that any tax-qualified employee stock benefit plan will not be deemed to be acting in concert with its trustee or a person who serves in a similar capacity solely for the purpose of determining whether common stock held by the trustee and common stock held by the employee stock benefit plan will be aggregated.

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Our directors are not treated as associates of each other solely because of their membership on the Board of Directors. We have the right to determine whether prospective purchasers are associates or acting in concert. Shares of common stock purchased in the offering will be freely transferable except for shares purchased by our executive officers and directors and except as described below. Any purchases made by any associate of Peoples Federal Savings Bank or Peoples Federal Bancshares, Inc. for the explicit purpose of meeting the minimum number of shares of common stock required to be sold in order to complete the offering shall be made for investment purposes only and not with a view toward redistribution. In addition, under the guidelines of the Financial Industry Regulatory Authority (“FINRA”), members of FINRA and their associates are subject to certain restrictions on transfer of securities purchased in accordance with subscription rights and to certain reporting requirements upon purchase of these securities. For a further discussion of limitations on purchases of shares of our common stock at the time of conversion and thereafter, see “—Certain Restrictions on Purchase or Transfer of Our Shares After Conversion” and “Restrictions on Acquisition of Peoples Federal Bancshares, Inc.”

Marketing and Distribution; Compensation

Offering materials have been initially distributed to certain persons by mail, with additional copies made available through our Conversion Center.

We have engaged Sandler O’Neill & Partners, L.P., a broker-dealer registered with the Financial Industry Regulatory Authority, as a financial advisor in connection with the offering of our common stock. In its role as financial advisor, Sandler O’Neill & Partners, L.P., will:

• provide advice on the financial and securities market implications of the plan of conversion and reorganization and related corporate documents, including our business plan;

• assist in structuring our stock offering, including developing and assisting in implementing a market strategy for the stock offering;

• review all offering documents, including this prospectus, stock order forms and related offering materials (we are responsible for the preparation and filing of such documents);

• assist us in preparing for and scheduling meetings with potential investors and broker-dealers, as necessary;

• assist us in analyzing proposals from outside vendors retained in connection with the stock offering, including printers, transfer agents and appraisal firms;

• assist us in the drafting and distribution of press releases as required or appropriate in connection with the stock offering;

• meet with the board of directors and management to discuss any of these services; and

• provide such other financial advisory and investment banking services in connection with the stock offering as may be agreed upon by Sandler O’Neill & Partners, L.P. and us.

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For these services, Sandler O’Neill & Partners, L.P. will receive a fee of 1.0% of the aggregate dollar amount of the common stock sold in the subscription offering and community offering, in each case only if the conversion is consummated, excluding shares purchased by our directors, officers and employees and members of their immediate families, our employee stock ownership plan or other tax-qualified plans (except individual retirement accounts) and excluding shares contributed to our charitable foundation, of which $25,000 has been paid as of the date of this prospectus.

The plan of conversion and reorganization provides that, if necessary, all shares of common stock not purchased in the subscription offering and community offering may be offered for sale to the general public in a syndicated community offering to be managed by Sandler O’Neill & Partners, L.P. In such capacity, Sandler O’Neill & Partners, L.P. may form a syndicate of other broker-dealers. Neither Sandler O’Neill & Partners, L.P. nor any registered broker-dealer will have any obligation to take or purchase any shares of common stock in the syndicated community offering; however, Sandler O’Neill & Partners, L.P. has agreed to use its best efforts in the sale of shares in any syndicated community offering. If there is a syndicated community offering, the total fees paid to Sandler O’Neill & Partners, L.P. will and other FINRA member firms will not exceed 6.00% of the aggregate dollar amount of the common stock sold in the syndicated community offering. This fee will be in addition to the fee earned by Sandler O’Neill & Partners, L.P. in connection with the subscription and community offerings set forth above. Of this amount, Sandler O’Neill & Partners, L.P. will pass on to selected broker-dealers, who assist in the syndicated community offering, an amount competitive with gross underwriting discounts charged at such time for comparable amounts of stock sold at a comparable price per share in a similar market environment.

We also will reimburse Sandler O’Neill & Partners, L.P. for its reasonable out-of-pocket expenses associated with its marketing efforts, not to exceed $170,000 (including legal fees to its counsel). If the plan of conversion and reorganization is terminated or if Sandler O’Neill & Partners, L.P.’s engagement is terminated in accordance with the provisions of the agreement, Sandler O’Neill & Partners, L.P. will only receive reimbursement of its reasonable out-of-pocket expenses, including legal fees to its counsel. We will indemnify Sandler O’Neill & Partners, L.P. against liabilities and expenses (including legal fees) related to or arising out of Sandler O’Neill & Partners, L.P.’s engagement as our financial advisor and performance of services as our financial advisor.

We have also engaged Sandler O’Neill & Partners, L.P. to act as our conversion agent in connection with the stock offering. In its role as conversion agent, Sandler O’Neill & Partners, L.P. will, among other things:

• consolidate accounts and develop a central file;

• prepare proxy forms and proxy materials;

• tabulate proxies and ballots;

• act as inspector of election at the special meeting of members;

• assist us in establishing and managing the Conversion Center;

• assist our financial printer with labeling of stock offering materials;

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• process stock order forms and certification forms and produce daily reports and analysis;

• assist our transfer agent with the generation and mailing of stock certificates;

• advise us on interest and refund calculations; and

• create tax forms for interest reporting.

For these services, Sandler O’Neill & Partners, L.P. will receive a fee of $15,000, of which $5,000 has been paid as of the date of this prospectus. We also will reimburse Sandler O’Neill & Partners, L.P. for its reasonable out-of-pocket expenses associated with its acting as conversion agent. If the plan of conversion and reorganization is terminated or if Sandler O’Neill & Partners, L.P.’s engagement is terminated in accordance with the provisions of the agreement, Sandler O’Neill & Partners, L.P. will be entitled to the advance payment and also receive reimbursement of its reasonable out-of-pocket expenses. We will indemnify Sandler O’Neill & Partners, L.P. against liabilities and expenses (including legal fees) related to or arising out of Sandler O’Neill & Partners, L.P.’s engagement as our conversion agent and performance of services as our conversion agent.

Our directors and executive officers may participate in the solicitation of offers to purchase common stock. These persons will be reimbursed for their reasonable out-of-pocket expenses incurred in connection with the solicitation. Other trained employees of Peoples Federal Savings Bank or its affiliates may assist in the offering in ministerial capacities, providing clerical work in effecting a sales transaction or answering questions of a ministerial nature. No offers or sales may be made by tellers or at the teller counters. All sales activity will be conducted in a segregated or separately identifiable area of our main office facility apart from the area accessible to the general public. Other questions of prospective purchasers will be directed to executive officers or registered representatives of Sandler O’Neill & Partners, L.P. Our other employees have been instructed not to solicit offers to purchase shares of common stock or provide advice regarding the purchase of common stock. We will rely on Rule 3a4-1 under the Securities Exchange Act of 1934, as amended, and sales of common stock will be conducted within the requirements of Rule 3a4-1, so as to permit officers, directors and employees to participate in the sale of common stock. None of our officers, directors or employees will be compensated in connection with their participation in the offering by the payment of commissions or other remuneration based either directly or indirectly on the transactions in the shares of common stock.

The offering will comply with the requirements of Rule 10b-9 under the Securities Exchange Act of 1934.

Procedure for Purchasing Shares

Expiration Date. The offering will expire at 3:00 p.m., Eastern Time, on [expiration date], unless we extend it for up to 45 days. This extension may be approved by us, in our sole discretion, without further approval or additional notice to purchasers in the offering. Any extension of the subscription and/or community offering beyond [extension date] would require the Office of Thrift Supervision’s approval. If an extension beyond [extension date] is granted by the Office of Thrift Supervision, we will cancel all stock orders and return subscription funds, with interest, and cancel any authorization to withdraw funds from deposit accounts for the purchase of shares of common stock. We will then resolicit subscribers/persons who place orders, giving them an opportunity to place new orders. We will notify these persons of the extension of time and of the rights to place a new stock order for a specified period of time. If we have not received orders to purchase the minimum number of shares offered in the offering

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by the expiration date or any extension thereof, we may terminate the offering and promptly refund all funds received for shares of common stock. If the number of shares offered is reduced below the minimum of the offering range, or increased above the adjusted maximum of the offering range, subscribers may be resolicited with the approval of the Office of Thrift Supervision.

To ensure that each purchaser receives a prospectus at least 48 hours before [expiration date], the expiration date of the offering, in accordance with Rule 15c2-8 of the Securities Exchange Act of 1934, as amended, no prospectus will be mailed any later than five days prior to the expiration date or hand delivered any later than two days prior to the expiration date. Execution of an order form will confirm receipt of delivery in accordance with Rule 15c2-8. Order forms will be distributed only with a prospectus. Subscription funds will be maintained in a segregated account at Peoples Federal Savings Bank or at another insured depository institution and will earn interest at our current statement savings rate from the date of receipt.

We reserve the right in our sole discretion to terminate the offering at any time and for any reason, in which case we will cancel any deposit account withdrawal orders and promptly return all funds delivered to us, with interest at our current statement savings rate from the date of receipt.

We have the right to reject any order submitted in the offering by a person who we believe is making false representations or who we otherwise believe, either alone or acting in concert with others, is violating, evading, circumventing, or intends to violate, evade or circumvent the terms and conditions of the plan of conversion and reorganization.

Use of Order Forms. In order to purchase shares of common stock in the subscription offering and community offering, you must complete an order form and remit full payment. We will not be required to accept incomplete order forms, unsigned order forms, orders submitted on photocopied or facsimiled order forms. We must receive all order forms prior to 3:00 p.m., Eastern Time, on [expiration date]. We are not required to accept order forms that are not received by that time, are executed defectively or are received without full payment or without appropriate withdrawal instructions. A postmark prior to [expiration date] will not entitle you to purchase shares of common stock unless we receive the envelope by [expiration date]. We are not required to notify subscribers of incomplete or improperly executed order forms. We have the right to permit the correction of incomplete or improperly executed order forms or waive immaterial irregularities. We do not represent, however, that we will do so and we have no affirmative duty to notify any prospective subscriber of any such defects. You may submit your order form and payment by mail using the return envelope provided, by bringing your order form to our Conversion Center or by overnight delivery to the indicated address on the order form. We will not accept stock order forms at our branch offices. Once tendered, an order form cannot be modified or revoked without our consent. We reserve the absolute right, in our sole discretion, to reject orders received in the community offering, in whole or in part, at the time of receipt or at any time prior to completion of the offering. If you are ordering shares, you must represent that you are purchasing shares for your own account and that you have no agreement or understanding with any person for the sale or transfer of the shares. Our interpretation of the terms and conditions of the plan of conversion and reorganization and of the acceptability of the order forms will be final, subject to the authority of the Office of Thrift Supervision.

By signing the order form, you will be acknowledging that the common stock is not a deposit or savings account and is not federally insured or otherwise guaranteed by Peoples Federal Savings Bank, Peoples Federal Bancshares, Inc., the Federal Deposit Insurance Corporation or the federal government, and that you received a copy of this prospectus. However, signing the order form will not result in you waiving your rights under the Securities Act of 1933 or the Securities Exchange Act of 1934.

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Payment for Shares. Payment for all shares of common stock will be required to accompany all completed order forms for the purchase to be valid. Payment for shares may be made by:

(1) personal check, bank check or money order, payable to Peoples Federal Bancshares, Inc.; or

(2) authorization of withdrawal from Peoples Federal Savings Bank deposit accounts designated on the order form.

Appropriate means for designating withdrawals from deposit accounts at Peoples Federal Savings Bank are provided in the order forms. The funds designated must be available in the account(s) at the time the order form is received. A hold will be placed on these funds, making them unavailable to the depositor. Funds authorized for withdrawal will continue to earn interest within the account at the contract rate until the offering is completed, at which time the designated withdrawal will be made. Interest penalties for early withdrawal applicable to certificate accounts will not apply to withdrawals authorized for the purchase of shares of common stock; however, if a withdrawal results in a certificate account with a balance less than the applicable minimum balance requirement, the certificate will be canceled at the time of withdrawal without penalty and the remaining balance will be transferred to a savings account and earn interest at our current statement savings rate subsequent to the withdrawal. In the case of payments made by check or money order, these funds must be available in the account(s) and will be immediately cashed and placed in a segregated account at Peoples Federal Savings Bank and/or another insured depository institution and will earn interest at our current statement savings rate from the date payment is received until the offering is completed or terminated.

You may not use a check drawn on a Peoples Federal Savings Bank line of credit, and we will not accept third-party checks (a check written by someone other than you) payable to you and endorsed over to Peoples Federal Bancshares, Inc. If you request that we place a hold on your checking account for the subscription amount, we reserve the right to interpret that as your authorization to treat those funds as if we had received a check for the designated amount, and we will immediately withdraw the amount from your checking account. Once we receive your executed order form, it may not be modified, amended or rescinded without our consent, unless the offering is not completed by the expiration date, in which event purchasers may be given the opportunity to increase, decrease or rescind their orders for a specified period of time.

If you are interested in using your individual retirement account funds to purchase shares of common stock, you must do so through a self-directed individual retirement account such as a brokerage firm individual retirement account. By regulation, Peoples Federal Savings Bank’s individual retirement accounts are not self-directed, so they cannot be invested in shares of our common stock. Therefore, if you wish to use your funds that are currently in a Peoples Federal Savings Bank individual retirement account, you may not designate on the order form that you wish funds to be withdrawn from the account for the purchase of common stock. The funds you wish to use for the purchase of common stock will have to be transferred to a brokerage account. It may take several weeks to transfer your Peoples Federal Savings Bank individual retirement account to an independent trustee, so please allow sufficient time to take this action. There will be no early withdrawal or Internal Revenue Service interest penalties for these transfers. Depositors interested in using funds in an individual retirement account or any other retirement account to purchase shares of common stock should contact our Conversion Center as soon as possible, preferably at least two weeks prior to the end of the offering period, because processing such transactions takes additional time, and whether such funds can be used may depend on limitations imposed by the institutions where such funds are currently held. We cannot guarantee that you will be able to use such funds.

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We will have the right, in our sole discretion, to permit institutional investors to submit irrevocable orders together with the legally binding commitment for payment and to thereafter pay for the shares of common stock for which they subscribe in the syndicated community offering at any time prior to the completion of the offering. This payment may be made by wire transfer.

Our employee stock ownership plan will not be required to pay for any shares purchased in the offering until consummation of the offering, provided there is a loan commitment from an unrelated financial institution or Peoples Federal Bancshares, Inc. (or a subsidiary of Peoples Federal Bancshares, Inc.) to lend to the employee stock ownership plan the necessary amount to fund the purchase.

Regulations prohibit Peoples Federal Savings Bank from knowingly lending funds or extending credit to any persons to purchase shares of common stock in the offering.

Delivery of Stock Certificates. Certificates representing shares of common stock issued in the offering and Peoples Federal Savings Bank checks representing any applicable refund and/or interest paid on subscriptions made by check or money order will be mailed to the persons entitled thereto at the certificate registration address noted on the order form, as soon as practicable following consummation of the offering and receipt of all necessary regulatory approvals. Any certificates returned as undeliverable will be held by the transfer agent until claimed by persons legally entitled thereto or otherwise disposed of in accordance with applicable law. Until certificates for the shares of common stock are available and delivered to purchasers, purchasers may not be able to sell the shares of common stock that they ordered, even though the common stock will have begun trading.

Other Restrictions. Notwithstanding any other provision of the plan of conversion and reorganization, no person is entitled to purchase any shares of common stock to the extent the purchase would be illegal under any federal or state law or regulation, including state “blue sky” regulations, or would violate regulations or policies of the Financial Industry Regulatory Authority, particularly those regarding free riding and withholding. We may ask for an acceptable legal opinion from any purchaser as to the legality of his or her purchase and we may refuse to honor any purchase order if an opinion is not timely furnished. In addition, we are not required to offer shares of common stock to any person who resides in a foreign country.

Restrictions on Transfer of Subscription Rights and Shares

Office of Thrift Supervision regulations prohibit any person with subscription rights, including the Eligible Account Holders, Supplemental Eligible Account Holders and Other Members, from transferring or entering into any agreement or understanding to transfer the legal or beneficial ownership of the subscription rights issued under the plan of conversion and reorganization or the shares of common stock to be issued upon their exercise. These rights may be exercised only by the person to whom they are granted and only for his or her account. Each person exercising subscription rights will be required to certify that he or she is purchasing shares solely for his or her own account and that he or she has no agreement or understanding regarding the sale or transfer of such shares. The regulations also prohibit any person from offering or making an announcement of an offer or intent to make an offer to purchase subscription rights or shares of common stock to be issued upon their exercise prior to completion of the offering.

We intend to pursue any and all legal and equitable remedies in the event we become aware of the transfer of subscription rights, and we will not honor orders that we believe involve the transfer of subscription rights.

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With the exception of IRA stock purchases, the subscription rights of a qualifying account may not be transferred to an account that is in a different form of ownership. Adding or deleting a name or otherwise altering the form of beneficial ownership of a qualifying account will result in the loss of your subscription rights.

Conversion Center

If you have any questions regarding the offering, please visit call our Conversion Center, toll free, at [stock info #], Monday through Friday between 10:00 a.m. and 4:00 p.m., Eastern Time, or visit the Conversion Center located at 435 Market Street, Brighton, Massachusetts, Monday through Friday between 10:00 a.m. and 4:00 p.m., Eastern Time. The Conversion Center will be closed weekends and bank holidays.

Liquidation Rights

Liquidation prior to the conversion. In the unlikely event that Peoples Federal MHC is liquidated prior to the conversion, all claims of creditors of Peoples Federal MHC would be paid first. Thereafter, if there were any assets of Peoples Federal MHC remaining, these assets would first be distributed to certain depositors of Peoples Federal Savings Bank under such depositors’ liquidation rights. The amount received by such depositors would be equal to their pro rata interest in the remaining value of Peoples Federal MHC, after the claims of creditors, based on the relative size of their deposit accounts.

Liquidation following the conversion. The plan of conversion provides for the establishment, upon the completion of the conversion, of a liquidation account by Peoples Federal Bancshares, Inc. for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders in an amount equal to (i) Peoples Federal MHC’s ownership interest in Peoples Federal Bancorp, Inc.’s total stockholder’s equity as of the date of the latest statement of financial condition used in this prospectus, plus (ii) the value of the net assets of Peoples Federal MHC as of the date of the latest statement of financial condition of Peoples Federal MHC prior to consummation of the conversion (excluding its ownership of Peoples Federal Bancorp, Inc.). The plan of conversion also provides for the establishment of a parallel bank liquidation account in Peoples Federal Savings Bank to support the Peoples Federal Bancshares, Inc. liquidation account.

In the unlikely event that Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank were to liquidate after the conversion, all claims of creditors, including those of Peoples Federal Savings Bank depositors, would be paid first. However, except with respect to the liquidation account established by Peoples Federal Bancshares, Inc., a depositor’s claim would be solely for the principal amount of his or her deposit accounts plus accrued interest. Depositors generally would not have an interest in the value of the assets of Peoples Federal Savings Bank or Peoples Federal Bancshares, Inc. above that amount.

The liquidation account established by Peoples Federal Bancshares, Inc. is designed to provide payments to depositors of their liquidation interest (exchanged for the liquidation rights such persons had in Peoples Federal MHC) in the event of a liquidation of Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank or of Peoples Federal Savings Bank by itself. Specifically, in the unlikely event that Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank were to completely liquidate after the conversion, all claims of creditors, including those of Peoples Federal Savings Bank depositors, would be paid first, followed by distribution to Eligible Account Holders and Supplemental Eligible Account Holders of their interests in the liquidation account maintained by Peoples Federal Bancshares, Inc. In a complete liquidation of both entities, or of Peoples Federal Savings Bank by itself, when

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Peoples Federal Bancshares, Inc. has insufficient assets to fund the distribution due to Eligible Account Holders and Supplemental Eligible Account Holders and Peoples Federal Savings Bank has positive net worth, Peoples Federal Savings Bank shall make a distribution to fund Peoples Federal Bancshares, Inc.’s remaining obligations under the liquidation account. If Peoples Federal Bancshares, Inc. is sold or liquidated apart from a sale or liquidation of Peoples Federal Savings Bank, then of the Peoples Federal Bancshares, Inc. liquidation account will cease to exist and Eligible Account Holders and Supplemental Eligible Account Holders will receive an equivalent interest in the bank liquidation account, subject to the same rights and terms as the liquidation account at Peoples Federal Bancshares, Inc.

Pursuant to the plan of conversion, after two years from the date of conversion and upon the written request of the OTS, Peoples Federal Bancshares, Inc. will transfer the liquidation account (and the depositors’ interests in such account) to Peoples Federal Savings Bank and the liquidation account shall thereupon become the liquidation account of Peoples Federal Savings Bank. Also, under the rules and regulations of the Office of Thrift Supervision, a post-conversion merger, consolidation, or similar combination or transaction with another depository institution in which Peoples Federal Bancshares, Inc. or Peoples Federal Savings Bank is not the surviving institution would not be considered a liquidation. In such a transaction, the liquidation account would be assumed by the surviving institution.

Each Eligible Account Holder and Supplemental Eligible Account Holder would have an initial pro rata interest in the liquidation account for each deposit account, including savings accounts, transaction accounts such as negotiable order of withdrawal accounts, money market deposit accounts, and certificates of deposit, with a balance of $50.00 or more held in Peoples Federal Savings Bank on December 31, 2008 or March 31, 2010 equal to the proportion that the balance of each Eligible Account Holder and Supplemental Account Holder deposit accounts on December 31, 2008 and March 31, 2010, respectively, bears to the balance of all Eligible Account Holder and Supplemental Account Holder deposit accounts in Peoples Federal Savings Bank on such date.

If, however, on any September 30 annual liquidation account closing date commencing after the effective date of the conversion, the amount in any such deposit account is less than the amount in the deposit account on December 31, 2008 or March 31, 2010, respectively, or any other September 30 annual liquidation account closing date, then the interest in the liquidation account relating to such deposit account would be reduced from time to time by the proportion of any such reduction, and such interest will cease to exist if such deposit account is closed. In addition, no interest in the liquidation account would ever be increased despite any subsequent increase in the related deposit account. Payment pursuant to liquidation rights of Eligible Account Holders and Supplemental Eligible Account Holders would be separate and apart from the payment of any insured deposit accounts to such depositor. Any assets remaining after the above liquidation rights of Eligible Account Holders and Supplemental Eligible Account Holders are satisfied would be available for distribution to stockholders.

Material Income Tax Consequences

Completion of the conversion is subject to the prior receipt of an opinion of counsel or tax advisor with respect to federal and Massachusetts tax consequences of the conversion to Peoples Federal MHC, Peoples Federal Bancorp, Inc., Peoples Federal Savings Bank, Peoples Federal Bancshares, Inc., Eligible Account Holders and Supplemental Eligible Account Holders. We have received an opinion of counsel Luse Gorman Pomerenk & Schick, P.C. as to the federal tax consequences of the conversion and have received an opinion of Shatswell, MacLeod & Company, P.C. as to the income tax consequences under Massachusetts law. Unlike private letter rulings, opinions of counsel or tax advisors are not binding on the Internal Revenue Service or any state taxing authority, and such authorities may disagree with such opinions. In the event of such disagreement, there can be no assurance that Peoples Federal Bancshares, Inc. or Peoples Federal Savings Bank would prevail in a judicial proceeding.

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Luse Gorman Pomerenk & Schick, P.C., has issued an opinion to Peoples Federal MHC, Peoples Federal Bancorp, Inc., Peoples Federal Savings Bank and Peoples Federal Bancshares, Inc. that for federal income tax purposes:

1. The merger of Peoples Federal MHC with and into Peoples Federal Bancorp, Inc. will qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code.

2. The constructive exchange of Eligible Account Holders’ and Supplemental Eligible Account Holders’ liquidation interests in Peoples Federal MHC for liquidation interests in Peoples Federal Bancorp, Inc. will satisfy the continuity of interest requirement of Section 1.368-1(b) of the Federal Income Tax Regulations.

3. None of Peoples Federal MHC, Peoples Federal Savings Bank, Eligible Account Holders nor Supplemental Eligible Account Holders, will recognize any gain or loss on the transfer of the assets of Peoples Federal MHC to Peoples Federal Bancorp, Inc. in constructive exchange for a liquidation interest established in Peoples Federal Bancorp, Inc. for the benefit of such persons who remain depositors of Peoples Federal Savings Bank.

4. The basis of the assets of Peoples Federal MHC and the holding period of such assets to be received by Peoples Federal Bancorp, Inc. will be the same as the basis and holding period in such assets in the hands of Peoples Federal MHC immediately before the exchange. (Sections 362(b) and 1223(2) of the Internal Revenue Code.)

5. The merger of Peoples Federal Bancorp, Inc. with and into Peoples Federal Bancshares, Inc. will constitute a mere change in identity, form or place of organization within the meaning of Section 368(a)(1)(F) of the Code and therefore will qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the Code. Neither Peoples Federal Bancorp, Inc. nor Peoples Federal Bancshares, Inc. will recognize gain or loss as a result of such merger. (Sections 361(a) and 1032(a) of the Internal Revenue Code).

6. The basis of the assets of Peoples Federal Bancorp, Inc. and the holding period of such assets to be received by Peoples Federal Bancshares, Inc. will be the same as the basis and holding period in such assets in the hands of Peoples Federal Bancorp, Inc. immediately before the exchange. (Sections 362(b) and 1223(2) of the Internal Revenue Code.)

7. Eligible Account Holders and Supplemental Eligible Account Holders will not recognize any gain or loss upon their constructive exchange of their liquidation interests in Peoples Federal Bancorp, Inc. for the liquidation accounts in Peoples Federal Bancshares, Inc.

8. The constructive exchange of the Eligible Account Holders and Supplemental Eligible Account Holders liquidation interests in Peoples Federal Bancorp, Inc. for interests in a liquidation account established in Peoples Federal Bancshares, Inc. will satisfy the continuity of interest requirement of Section 1.368-1(b) of the Federal Income Tax Regulations.

9. It is more likely than not that the fair market value of the nontransferable subscription rights to purchase Peoples Federal Bancshares, Inc. common stock is zero. Accordingly, no gain or loss will be recognized by Eligible Account Holders, Supplemental Eligible

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Account Holders or Other Members upon distribution to them of nontransferable subscription rights to purchase shares of Peoples Federal Bancshares, Inc. common stock. Eligible Account Holders, Supplemental Eligible Account Holders and Other Members will not realize any taxable income as the result of the exercise by them of the nontransferable subscriptions rights.

10. It is more likely than not that the fair market value of the benefit provided by the liquidation account of Peoples Federal Savings Bank supporting the payment of the Peoples Federal Bancshares, Inc. liquidation account in the event Peoples Federal Bancshares, Inc. lacks sufficient net assets is zero. Accordingly, it is more likely than not that no gain or loss will be recognized by Eligible Account Holders, Supplemental Eligible Account Holders and Other Members upon the constructive distribution to them of such rights in the Peoples Federal Savings Bank liquidation account as of the effective date of the merger of Peoples Federal Bancorp, Inc. with and into Peoples Federal Bancshares, Inc. (Section 356(a) of the Code.)

11. It is more likely than not that the basis of the shares of Peoples Federal Bancshares, Inc. common stock purchased in the offering by the exercise of nontransferable subscription rights will be the purchase price. The holding period of the Peoples Federal Bancshares, Inc. common stock purchased pursuant to the exercise of nontransferable subscription rights will commence on the date on which the right to acquire such stock was exercised.

12. No gain or loss will be recognized by Peoples Federal Bancshares, Inc. on the receipt of money in exchange for Peoples Federal Bancshares, Inc. common stock sold in the offering.

We believe that the tax opinions summarized above address all material federal income tax consequences that are generally applicable to Peoples Federal MHC, Peoples Federal Bancorp, Inc., Peoples Federal Savings Bank, Peoples Federal Bancshares, Inc. and persons receiving subscription rights and shareholders of Peoples Federal Bancorp, Inc. The tax opinion as to items 7 and 9 above is based on the position that subscription rights to be received by Eligible Account Holders, Supplemental Eligible Account Holders and Other Members do not have any economic value at the time of distribution or the time the subscription rights are exercised. In this regard, Luse Gorman Pomerenk & Schick, P.C. noted that the subscription rights will be granted at no cost to the recipients, are legally non-transferable and of short duration, and will provide the recipient with the right only to purchase shares of common stock at the same price to be paid by members of the general public in any community offering. The firm also noted that the Internal Revenue Service has not in the past concluded that subscription rights have value. Based on the foregoing, Luse Gorman Pomerenk & Schick, P.C. believes that it is more likely than not that the nontransferable subscription rights to purchase shares of common stock have no value. However, the issue of whether or not the nontransferable subscription rights have value is based on all the facts and circumstances. If the subscription rights granted to Eligible Account Holders, Supplemental Eligible Account Holders and Other Members are deemed to have an ascertainable value, receipt of these rights could result in taxable gain to those Eligible Account Holders, Supplemental Eligible Account Holders and Other Members who exercise the subscription rights in an amount equal to the ascertainable value, and we could recognize gain on a distribution. Eligible Account Holders, Supplemental Eligible Account Holders and Other Members are encouraged to consult with their own tax advisors as to the tax consequences in the event that subscription rights are deemed to have an ascertainable value.

We also have received a letter from RP Financial, LC, stating its belief that the subscription rights do not have any ascertainable fair market value and that the price at which the subscription rights are exercisable will not be more or less than the fair market value of the shares on the date of the exercise. This position is based on the fact that these rights are acquired by the recipients without cost, are nontransferable and of short duration, and afford the recipients the right only to purchase the common stock at the same price as will be paid by members of the general public in any community offering.

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The tax opinion as to item 10 above is based on the position that the benefit provided by the Peoples Federal Savings Bank liquidation account supporting the payment of the liquidation account in the event Peoples Federal Bancshares, Inc. lacks sufficient net assets has a fair market value of zero. We understand that: (i) no holder of an interest in a liquidation account has ever received a payment attributable to a liquidation account; (ii) the interests in the liquidation accounts are not transferable; (iii) the amounts due under the liquidation account with respect to each Eligible Account Holder and Supplemental Eligible Account Holder will be reduced as their deposits in Peoples Federal Savings Bank are reduced; and (iv) the Peoples Federal Savings Bank liquidation account payment obligation arises only if Peoples Federal Bancshares, Inc. lacks sufficient net assets to fund the liquidation account.

In addition, we have received a letter from RP Financial, LC stating its belief that the benefit provided by the Peoples Federal Savings Bank liquidation account supporting the payment of the liquidation account in the event Peoples Federal Bancshares, Inc. lacks sufficient net assets does not have any economic value at the time of the conversion. Based on the foregoing, Luse Gorman Pomerenk & Schick, P.C. believes it is more likely than not that such rights in the Peoples Federal Savings Bank liquidation account have no value. If such rights are subsequently found to have an economic value, income may be recognized by each Eligible Account Holder and Supplemental Eligible Account Holder in the amount of such fair market value as of the date of the conversion.

We do not plan to apply for a private letter ruling from the Internal Revenue Service concerning the transactions described herein. Unlike private letter rulings issued by the Internal Revenue Service, opinions of counsel are not binding on the Internal Revenue Service or any state tax authority, and such authorities may disagree with such opinions. In the event of such disagreement, there can be no assurance that the conclusions reached in an opinion of counsel would be sustained by a court if contested by the Internal Revenue Service.

The federal tax opinion has been filed with the Securities and Exchange Commission as an exhibit to Peoples Federal Bancshares, Inc.’s registration statement. An opinion regarding the Massachusetts state income tax consequences consistent with the federal tax opinion has also been filed as an exhibit to Peoples Federal Bancshares, Inc.’s registration statement.

Restrictions on Purchase or Transfer of Our Shares after Conversion

The shares being acquired by the directors, executive officers and their associates are being acquired for investment purposes, and not with a view towards resale. All shares of common stock purchased in the offering by a director or an officer of Peoples Federal Savings Bank generally may not be sold for a period of one year following the closing of the conversion, except in the event of the death of the director or officer. Each certificate for restricted shares will bear a legend giving notice of this restriction on transfer, and instructions will be issued to the effect that any transfer within this time period of any certificate or record ownership of the shares other than as provided above is a violation of the restriction. Any shares of common stock issued at a later date as a stock dividend, stock split or otherwise with respect to the restricted stock will be similarly restricted. The directors and executive officers of Peoples Federal Bancshares, Inc. also will be restricted by the insider trading rules promulgated pursuant to the Securities Exchange Act of 1934.

Purchases of shares of our common stock by any of our directors, officers and their associates, during the three-year period following the closing of the conversion may be made only through a broker

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or dealer registered with the Securities and Exchange Commission, except with the prior written approval of the Office of Thrift Supervision. This restriction does not apply, however, to negotiated transactions involving more than 1% of our outstanding common stock, to purchases of our common stock to fund stock options by one or more stock-based benefit plans or to any of our tax-qualified employee stock benefit plans or nontax-qualified employee stock benefit plans, including any stock-based benefit plans.

Office of Thrift Supervision regulations prohibit Peoples Federal Bancshares, Inc. from repurchasing its shares of common stock during the first year following conversion unless compelling business reasons exist for such repurchases. After one year, the Office of Thrift Supervision does not impose any repurchase restrictions.

PEOPLES FEDERAL SAVINGS BANK CHARITABLE FOUNDATION

General

In 2005, reflecting our belief that the success of our bank is enhanced by our maintaining close ties to our community, we formed the Peoples Federal Savings Bank Foundation. At December 31, 2009, the Peoples Federal Savings Bank Foundation had total assets of $434,000. In furtherance of our commitment to our local community, the plan of conversion and reorganization provides that we will establish a new charitable foundation, Peoples Federal Savings Bank Charitable Foundation, as a non-stock, nonprofit Delaware corporation in connection with the stock offering. The new charitable foundation will be funded with shares of our common stock, as further described below. We will form a new foundation rather than making this contribution to Peoples Federal Savings Bank Foundation based on certain Internal Revenue Service regulations that may limit our ability to make a contribution of Peoples Federal Bancshares, Inc. common stock to an existing foundation.

By further enhancing our visibility and reputation in our local community, we believe that the new charitable foundation will enhance the long-term value of Peoples Federal Savings Bank’s community banking franchise. The stock offering presents us with a unique opportunity to provide a substantial and continuing benefit to our communities through the Peoples Federal Savings Bank Charitable Foundation.

Purpose of the Charitable Foundation

In connection with the closing of the stock offering, we intend to contribute a number of shares equal to 8.0% of our shares of common stock sold in the offering to Peoples Federal Savings Bank Charitable Foundation, for a maximum contribution of 5,290,000 shares of common stock, at the adjusted maximum of the offering range. The purpose of the charitable foundation is to provide financial support to charitable organizations in the communities in which we operate and to enable our communities to share in our long-term growth. Peoples Federal Savings Bank Charitable Foundation will be dedicated completely to community activities and the promotion of charitable causes, and may be able to support such activities in ways that are not presently available to us. Peoples Federal Savings Bank Charitable Foundation will also support our ongoing obligations to the community under the Community Reinvestment Act. Peoples Federal Savings Bank received an “outstanding” rating in its most recent Community Reinvestment Act examination by the OTS.

Funding Peoples Federal Savings Bank Charitable Foundation with shares of our common stock is also intended to allow our communities to share in our potential growth and success after the stock offering is completed because Peoples Federal Savings Bank Charitable Foundation will benefit directly from any increases in the value of our shares of common stock. In addition, Peoples Federal Savings Bank Charitable Foundation will maintain close ties with Peoples Federal Savings Bank, thereby forming a partnership within the communities in which Peoples Federal Savings Bank operates.

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Structure of the Charitable Foundation

Peoples Federal Savings Bank Charitable Foundation will be incorporated under Delaware law as a non-stock, nonprofit corporation. The certificate of incorporation of Peoples Federal Savings Bank Charitable Foundation will provide that the corporation is organized exclusively for charitable purposes as set forth in Section 501(c)(3) of the Internal Revenue Code. Peoples Federal Savings Bank Charitable Foundation’s certificate of incorporation will further provide that no part of the net earnings of the charitable foundation will inure to the benefit of, or be distributable to, its members, directors or officers or to private individuals.

The charitable foundation will be governed by a board of directors, initially consisting of Maurice H. Sullivan, Jr., our Chairman and Chief Executive Officer, Thomas J. Leetch, Jr., our President, Chief Operating Officer and director, James J. Gavin, our Executive Vice President, Christopher Lake, our Chief Financial Officer and one individual who is not affiliated with us. Office of Thrift Supervision regulations require that we select one person to serve on the initial board of directors who is not one of our officers or directors and who has experience with local charitable organizations and grant making, and we have selected                      as a director to satisfy these requirements. While there are no plans to change the size of the initial board of directors during the year following the completion of the stock offering, following the first anniversary of the stock offering, the charitable foundation may alter the size and composition of its board of directors. For five years after the stock offering, one seat on the charitable foundation’s board of directors will be reserved for a person from our local community who has experience with local community charitable organizations and grant making and who is not one of our officers, directors or employees, and at least one seat on the charitable foundation’s board of directors will be reserved for one of Peoples Federal Savings Bank’s directors. Except as described below in “—Regulatory Requirements Imposed on the Charitable Foundation,” on an annual basis, directors of the charitable foundation elect one third of the board to serve for three-year terms.

The business experience of our current directors and executive officers who will serve as board members of the charitable foundation is described in “Management.”                      is [insert outside director’s biography].

The board of directors of Peoples Federal Savings Bank Charitable Foundation will be responsible for establishing its grant and donation policies, consistent with the purposes for which it was established. As directors of a nonprofit corporation, directors of Peoples Federal Savings Bank Charitable Foundation will at all times be bound by their fiduciary duty to advance the charitable foundation’s charitable goals, to protect its assets and to act in a manner consistent with the charitable purposes for which the charitable foundation is established. The directors of Peoples Federal Savings Bank Charitable Foundation also will be responsible for directing the activities of the charitable foundation, including the management and voting of the shares of our common stock held by the charitable foundation. However, as required by Office of Thrift Supervision regulations, all shares of our common stock held by Peoples Federal Savings Bank Charitable Foundation must be voted in the same ratio as all other shares of our common stock on all proposals considered by our stockholders.

Peoples Federal Savings Bank Charitable Foundation’s initial place of business will be located at our corporate headquarters. The board of directors of Peoples Federal Savings Bank Charitable Foundation will appoint such officers and employees as may be necessary to manage its operations. To the extent applicable, we will comply with the affiliates restrictions set forth in Sections 23A and 23B of the Federal Reserve Act and the Office of Thrift Supervision regulations governing transactions between Peoples Federal Savings Bank and the charitable foundation.

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Peoples Federal Savings Bank has an existing foundation that it will merge in to Peoples Federal Savings Bank Charitable Foundation, which will receive working capital from the cash received from the existing foundation of approximately $434,000. Additional capital for the charitable foundation will come from:

(1) any dividends that may be paid on our shares of common stock in the future;

(2) within the limits of applicable federal and state laws, loans collateralized by the shares of common stock; or

(3) the proceeds of the sale of any of the shares of common stock in the open market from time to time.

As a private foundation under Section 501(c)(3) of the Internal Revenue Code, Peoples Federal Savings Bank Charitable Foundation will be required to distribute annually in grants or donations a minimum of 5% of the average fair market value of its net investment assets. One of the conditions imposed on the gift of shares of common stock is that the amount of shares of common stock that may be sold by Peoples Federal Savings Bank Charitable Foundation in any one year may not exceed 5% of the average market value of the assets held by Peoples Federal Savings Bank Charitable Foundation, except where the board of directors of the charitable foundation determines that the failure to sell an amount of common stock greater than such amount would result in a long-term reduction of the value of its assets and/or would otherwise jeopardize its capacity to carry out its charitable purposes.

Tax Considerations

We believe that an organization created for the above purposes should qualify as a Section 501(c)(3) exempt organization under the Internal Revenue Code and should be classified as a private foundation. Peoples Federal Savings Bank Charitable Foundation will submit a timely request to the Internal Revenue Service to be recognized as an exempt organization. As long as Peoples Federal Savings Bank Charitable Foundation files its application for tax-exempt status within 27 months of the last day of the month in which it was organized, and provided the Internal Revenue Service approves the application, its effective date as a Section 501(c)(3) organization will be the date of its organization. We have not received a tax opinion as to whether Peoples Federal Savings Bank Charitable Foundation’s tax exempt status will be affected by the regulatory requirement that all shares of our common stock held by Peoples Federal Savings Bank Charitable Foundation must be voted in the same ratio as all other outstanding shares of our common stock on all proposals considered by our stockholders.

Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank are authorized by federal law to make charitable contributions. We believe that the stock offering presents a unique opportunity to establish and fund a charitable foundation given the substantial amount of additional capital being raised. In making such a determination, we considered the dilutive impact to our stockholders of the contribution of shares of common stock to Peoples Federal Savings Bank Charitable Foundation. We believe that the contribution to Peoples Federal Savings Bank Charitable Foundation of an amount of common stock that may be in excess of the 10% annual limitation on charitable deductions described below is justified given Peoples Federal Savings Bank’s capital position and its earnings, the substantial additional capital being raised in the stock offering and the potential benefits of Peoples Federal Savings Bank Charitable Foundation to our community. See “Capitalization,” “Regulatory Capital Compliance,” and “Comparison of Valuation and Pro Forma Information With and Without the Charitable Foundation.”

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We believe that our contribution of shares of our common stock to Peoples Federal Savings Bank Charitable Foundation should not constitute an act of self-dealing and that we should be entitled to a federal tax deduction in the amount of the fair market value of the stock at the time of the contribution less the nominal amount (par value) that Peoples Federal Savings Bank Charitable Foundation is required to pay us for such stock. We are permitted to deduct for charitable purposes only an amount equal to 10% of our annual taxable income in any one year. We are permitted under the Internal Revenue Code to carry the excess contribution over the five-year period following the contribution to Peoples Federal Savings Bank Charitable Foundation. We estimate that substantially all of the contribution should be deductible for federal tax purposes over the six-year period (i.e., the year in which the contribution is made and the succeeding five-year period). However, we do not have any assurance that the Internal Revenue Service will grant tax-exempt status to the charitable foundation. In such event, our contribution to Peoples Federal Savings Bank Charitable Foundation would be expensed without a tax benefit, resulting in a reduction in earnings in the year in which the Internal Revenue Service makes such a determination. Furthermore, even if the contribution is deductible, we may not have sufficient earnings to be able to use the deduction in full. Any such decision to continue to make additional contributions to Peoples Federal Savings Bank Charitable Foundation in the future would be based on an assessment of, among other factors, our financial condition at that time, the interests of our stockholders and depositors, and the financial condition and operations of the foundation.

As a private foundation, earnings and gains, if any, from the sale of common stock or other assets are exempt from federal and state income taxation. However, investment income, such as interest, dividends and capital gains, is generally taxed at a rate of 2%. Peoples Federal Savings Bank Charitable Foundation will be required to file an annual return with the Internal Revenue Service within four and one-half months after the close of its fiscal year. Peoples Federal Savings Bank Charitable Foundation will be required to make its annual return available for public inspection. The annual return for a private foundation includes, among other things, an itemized list of all grants made or approved, showing the amount of each grant, the recipient, any relationship between a grant recipient and the foundation’s managers and a concise statement of the purpose of each grant.

Regulatory Requirements Imposed on the Charitable Foundation

Office of Thrift Supervision regulations require that, before our board of directors adopted the plan of conversion and reorganization, the board of directors had to identify its members that will serve on the charitable foundation’s board, and these directors could not participate in our board’s discussions concerning contributions to the charitable foundation, and could not vote on the matter. Our board of directors complied with this regulation in adopting the plan of stock issuance.

Office of Thrift Supervision regulations provide that the Office of Thrift Supervision will generally not object if a well-capitalized savings bank contributes to a charitable foundation an aggregate amount of 8% or less of the shares or proceeds issued in a stock offering. Peoples Federal Savings Bank qualifies as a well-capitalized savings bank for purposes of this limitation, and the contribution to the charitable foundation will not exceed this limitation.

Office of Thrift Supervision regulations impose the following additional requirements on the establishment of the charitable foundation:

• the Office of Thrift Supervision may examine the charitable foundation at the foundation’s expense;

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• the charitable foundation must comply with all supervisory directives imposed by the Office of Thrift Supervision;

• the charitable foundation must provide annually to the Office of Thrift Supervision a copy of the annual report that the charitable foundation submits to the Internal Revenue Service;

• the charitable foundation must operate according to written policies adopted by its board of directors, including a conflict of interest policy;

• the charitable foundation may not engage in self-dealing and must comply with all laws necessary to maintain its tax-exempt status under the Internal Revenue Code; and

• the charitable foundation must vote its shares of our common stock in the same ratio as all of the other shares voted on each proposal considered by our stockholders.

Within six months of completing the stock offering, Peoples Federal Savings Bank Charitable Foundation must submit to the Office of Thrift Supervision a three-year operating plan.

RESTRICTIONS ON ACQUISITION OF PEOPLES FEDERAL BANCSHARES, INC.

Although the Board of Directors of Peoples Federal Bancshares, Inc. is not aware of any effort that might be made to obtain control of Peoples Federal Bancshares, Inc. after the conversion, the Board of Directors believes that it is appropriate to include certain provisions as part of Peoples Federal Bancshares, Inc.’s articles of incorporation to protect the interests of Peoples Federal Bancshares, Inc. and its stockholders from takeovers which our Board of Directors might conclude are not in the best interests of Peoples Federal Savings Bank, Peoples Federal Bancshares, Inc. or Peoples Federal Bancshares, Inc.’s stockholders.

The following discussion is a general summary of the material provisions of Peoples Federal Bancshares, Inc.’s articles of incorporation and bylaws, Peoples Federal Savings Bank’s charter and bylaws, Maryland corporate law and certain other regulatory provisions that may be deemed to have an “anti-takeover” effect. The following description of certain of these provisions is necessarily general and, with respect to provisions contained in Peoples Federal Bancshares, Inc.’s articles of incorporation and bylaws and Peoples Federal Savings Bank’s stock charter and bylaws, reference should be made in each case to the document in question, each of which is part of Peoples Federal Savings Bank’s application for conversion with the Office of Thrift Supervision and Peoples Federal Bancshares, Inc.’s registration statement filed with the Securities and Exchange Commission. See “Where You Can Find Additional Information.”

Peoples Federal Bancshares, Inc.’s Articles of Incorporation and Bylaws

Peoples Federal Bancshares, Inc.’s articles of incorporation and bylaws contain a number of provisions relating to corporate governance and rights of stockholders that might discourage future takeover attempts. As a result, stockholders who might desire to participate in such transactions may not have an opportunity to do so. In addition, these provisions will also render the removal of the Board of Directors or management of Peoples Federal Bancshares, Inc. more difficult.

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Director and Director Qualifications. The Board of Directors will be divided into three classes. The members of each class will be elected for a term of three years and only one class of directors will be elected annually. Thus, it would take at least two annual elections to replace a majority of our directors.

The current bylaws of Peoples Federal MHC and Peoples Federal Savings Bank establish qualifications for board members, including residency requirements for all board members and restrictions based upon prior legal or regulatory violations. The current bylaws of Peoples Federal Bancshares, Inc. contain similar provisions but only require that a majority of the Board meet such residency requirements. Subsequent to the Conversion, the Board expects to review and amend the bylaws of Peoples Federal Bancshares, Inc. to impose additional or revised director requirements. Such requirements are expected to include provisions which would: 1) require that Board members meet a residency requirement whereby such individual must reside within a city or county in which the Company or any of its subsidiaries maintains an office, or a contiguous county, 2) require that members may not have been named as having violated any banking or securities law or regulation, or have been a party to any past regulatory order or sanction, and 3) require that members may not serve on the board or be an officer of or own a material interest in a competing financial institution. Further, the bylaws impose notice and information requirements in connection with the nomination by stockholders of candidates for election to the Board of Directors or the proposal by stockholders of business to be acted upon at an annual meeting of stockholders. Such notice and information requirements are applicable to all stockholder business proposals and nominations, and are in addition to any requirements under the federal securities laws.

Evaluation of Offers. The articles of incorporation of Peoples Federal Bancshares, Inc. provide that its Board of Directors, when evaluating a transaction that would or may involve a change in control of Peoples Federal Bancshares, Inc. (whether by purchases of its securities, merger, consolidation, share exchange, dissolution, liquidation, sale of all or substantially all of its assets, proxy solicitation or otherwise), may, in connection with the exercise of its business judgment in determining what is in the best interests of Peoples Federal Bancshares, Inc. and its stockholders and in making any recommendation to the stockholders, give due consideration to all relevant factors, including, but not limited to:

• the economic effect, both immediate and long-term, upon Peoples Federal Bancshares, Inc.’s stockholders, including stockholders, if any, who do not participate in the transaction;

• the social and economic effect on the present and future employees, creditors and customers of, and others dealing with, Peoples Federal Bancshares, Inc. and its subsidiaries and on the communities in which Peoples Federal Bancshares, Inc. and its subsidiaries operate or are located;

• whether the proposal is acceptable based on the historical, current or projected future operating results or financial condition of Peoples Federal Bancshares, Inc.;

• whether a more favorable price could be obtained for Peoples Federal Bancshares, Inc.’s stock or other securities in the future;

• the reputation and business practices of the other entity to be involved in the transaction and its management and affiliates as they would affect the employees of Peoples Federal Bancshares, Inc. and its subsidiaries;

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• the future value of the stock or any other securities of Peoples Federal Bancshares, Inc. or the other entity to be involved in the proposed transaction;

• any antitrust or other legal and regulatory issues that are raised by the proposal;

• the business and historical, current or expected future financial condition or operating results of the other entity to be involved in the transaction, including, but not limited to, debt service and other existing financial obligations, financial obligations to be incurred in connection with the proposed transaction, and other likely financial obligations of the other entity to be involved in the proposed transaction; and

• the ability of Peoples Federal Bancshares, Inc. to fulfill its objectives as a financial institution holding company and on the ability of its subsidiary financial institution(s) to fulfill the objectives of a federally insured financial institution under applicable statutes and regulations.

If the Board of Directors determines that any proposed transaction should be rejected, it may take any lawful action to defeat such transaction.

Restrictions on Call of Special Meetings. The bylaws provide that, unless approved by unaffiliated directors, special meetings of stockholders can be called by only the Chairman of the Board, a majority of the total number of directors that Peoples Federal Bancshares, Inc. would have if there were no vacancies on the Board of Directors (the “whole board”), or the Secretary upon the written request of stockholders entitled to cast at least a majority of all votes entitled to vote at the meeting.

Prohibition of Cumulative Voting. The articles of incorporation prohibit cumulative voting for the election of directors.

Limitation of Voting Rights. The articles of incorporation provide that in no event will any person who beneficially owns more than 10% of the then-outstanding shares of common stock, be entitled or permitted to vote any of the shares of common stock held in excess of the 10% limit; provided that such 10% limit shall not apply if a majority of the unaffiliated directors approve the acquisition of shares in excess of the 10% limit prior to such acquisition.

Restrictions on Removing Directors from Office. The articles of incorporation provide that directors may be removed only for cause, and only by the affirmative vote of the holders of a majority of the voting power of all of our then-outstanding capital stock entitled to vote generally in the election of directors (after giving effect to the limitation on voting rights discussed above in “—Limitation of Voting Rights”), voting together as a single class.

Authorized but Unissued Shares. After the conversion, Peoples Federal Bancshares, Inc. will have authorized but unissued shares of common and preferred stock. See “Description of Capital Stock.” The articles of incorporation authorize 50,000,000 shares of serial preferred stock. Peoples Federal Bancshares, Inc. is authorized to issue preferred stock from time to time in one or more series subject to applicable provisions of law, and the board of directors is authorized to fix the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of such shares. In addition, the articles of incorporation provide that a majority of the whole board may, without action by the stockholders, amend the articles of incorporation to increase or decrease the aggregate number of shares of stock of any class or series that Peoples Federal Bancshares, Inc. has the authority to issue. In the event of a proposed merger, tender offer or other

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attempt to gain control of Peoples Federal Bancshares, Inc. that the board of directors does not approve, it would be possible for the board of directors to authorize the issuance of a series of preferred stock with rights and preferences that would impede the completion of the transaction. An effect of the possible issuance of preferred stock therefore may be to deter a future attempt to gain control of Peoples Federal Bancshares, Inc. The board of directors has no present plan or understanding to issue any preferred stock.

Amendments to Articles of Incorporation and Bylaws. Except as provided under “— Authorized but Unissued Shares,” above, regarding the amendment of the articles of incorporation by the Board of Directors to increase or decrease the number of shares authorized for issuance, or as otherwise allowed by law, any amendment to the articles of incorporation must be approved by our Board of Directors and also by a majority of the outstanding shares of our voting stock; provided, however, that approval by at least 80% of the outstanding voting stock is generally required to amend the following provisions:

(i) The limitation on voting rights of persons who directly or indirectly beneficially own more than 10% of the outstanding shares of common stock;

(ii) The division of the board of directors into three staggered classes;

(iii) The ability of the board of directors to fill vacancies on the board;

(iv) The requirement that at least 80% of stockholders must vote to remove directors, and can only remove directors for cause;

(v) The ability of the board of directors to amend and repeal the bylaws;

(vi) The ability of the board of directors to evaluate a variety of factors in evaluating offers to purchase or otherwise acquire Peoples Federal Bancshares, Inc.;

(vii) The authority of the board of directors to provide for the issuance of preferred stock;

(viii) The validity and effectiveness of any action lawfully authorized by the affirmative vote of the holders of a majority of the total number of outstanding shares of common stock;

(ix) The number of stockholders constituting a quorum or required for stockholder consent;

(x) The indemnification of current and former directors and officers, as well as employees and other agents, by Peoples Federal Bancshares, Inc.;

(xi) The limitation of liability of officers and directors to Peoples Federal Bancshares, Inc. for money damages; and

(xii) The provision of the articles of incorporation requiring approval of at least 80% of the outstanding voting stock to amend the provisions of the articles of incorporation provided in (i) through (xi) of this list.

The articles of incorporation also provide that the bylaws may be amended by the affirmative vote of a majority of our directors or by the stockholders by the affirmative vote of at least 80% of the total votes eligible to be voted at a duly constituted meeting of stockholders. Any amendment of this supermajority requirement for amendment of the bylaws would also require the approval of 80% of the outstanding voting stock.

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Maryland Corporate Law

Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, statutory share exchange or, in circumstances specified in the statute, certain transfers of assets, certain stock issuances and transfers, liquidation plans and reclassifications involving interested stockholders and their affiliates or issuance or reclassification of equity securities. Maryland law defines an interested stockholder as: (i) any person who beneficially owns 10% or more of the voting power of a corporation’s voting stock after the date on which the corporation had 100 or more beneficial owners of its stock; or (ii) an affiliate or associate of the corporation at any time after the date on which the corporation had 100 or more beneficial owners of its stock who, within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then-outstanding voting stock of the corporation. A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.

After the five-year prohibition, any business combination between the Maryland corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least: (i) 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation and (ii) two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder. These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.

Conversion Regulations

Office of Thrift Supervision regulations prohibit any person from making an offer, announcing an intent to make an offer or participating in any other arrangement to purchase stock or acquiring stock or subscription rights in a converting institution or its holding company from another person prior to completion of its conversion. Further, without the prior written approval of the Office of Thrift Supervision, no person may make an offer or announcement of an offer to purchase shares or actually acquire shares of a converted institution or its holding company for a period of three years from the date of the completion of the conversion if, upon the completion of such offer, announcement or acquisition, the person would become the beneficial owner of more than 10% of the outstanding stock of the institution or its holding company. The Office of Thrift Supervision has defined “person” to include any individual, group acting in concert, corporation, partnership, association, joint stock company, trust, unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of securities of an insured institution. However, offers made exclusively to a bank or its holding company, or an underwriter or member of a selling group acting on the converting institution’s or its holding company’s behalf for resale to the general public are excepted. The regulation also provides civil penalties for willful violation or assistance in any such violation of the regulation by any person connected with the management of the converting institution or its holding company or who controls more than 10% of the outstanding shares or voting rights of a converted institution or its holding company.

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Peoples Federal Savings Bank’s Federal Stock Charter

The federal stock charter of Peoples Federal Savings Bank will provide that for a period of five years from the closing of the conversion, no person other than Peoples Federal Bancshares, Inc. may offer directly or indirectly to acquire the beneficial ownership of more than 10% of any class of equity security of Peoples Federal Savings Bank. This provision does not apply to any tax-qualified employee benefit plan of Peoples Federal Savings Bank or Peoples Federal Bancshares, Inc. or to underwriters in connection with a public offering. In addition, during this five-year period, all shares owned over the 10% limit may not be voted on any matter submitted to stockholders for a vote.

Change in Control Regulations

Under the Change in Bank Control Act, no person may acquire control of an insured federal savings bank or its parent holding company unless the Office of Thrift Supervision has been given 60 days’ prior written notice and has not issued a notice disapproving the proposed acquisition. In addition, Office of Thrift Supervision regulations provide that no company may acquire control of a savings bank without the prior approval of the Office of Thrift Supervision. Any company that acquires such control becomes a “savings and loan holding company” subject to registration, examination and regulation by the Office of Thrift Supervision.

Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the institution’s directors, or a determination by the Office of Thrift Supervision that the acquirer has the power to direct, or directly or indirectly to exercise a controlling influence over, the management or policies of the institution. Acquisition of more than 10% of any class of a savings bank’s voting stock, if the acquirer is also subject to any one of eight “control factors,” constitutes a rebuttable determination of control under the regulations. Such control factors include the acquirer being one of the two largest stockholders. The determination of control may be rebutted by submission to the Office of Thrift Supervision, prior to the acquisition of stock or the occurrence of any other circumstances giving rise to such determination, of a statement setting forth facts and circumstances which would support a finding that no control relationship will exist and containing certain undertakings. The regulations provide that persons or companies that acquire beneficial ownership exceeding 10% or more of any class of a savings bank’s stock who do not intend to participate in or seek to exercise control over a savings bank’s management or policies may qualify for a safe harbor by filing with the Office of Thrift Supervision a certification form that states, among other things, that the holder is not in control of such institution, is not subject to a rebuttable determination of control and will take no action which would result in a determination or rebuttable determination of control without prior notice to or approval of the Office of Thrift Supervision, as applicable. There are also rebuttable presumptions in the regulations concerning whether a group “acting in concert” exists, including presumed action in concert among members of an “immediate family.”

The Office of Thrift Supervision may prohibit an acquisition of control if it finds, among other things, that:

• the acquisition would result in a monopoly or substantially lessen competition;

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• the financial condition of the acquiring person might jeopardize the financial stability of the institution;

• the competence, experience or integrity of the acquiring person indicates that it would not be in the interest of the depositors or the public to permit the acquisition of control by such person; or

• the acquisition would have an adverse effect on the Deposit Insurance Fund.

DESCRIPTION OF CAPITAL STOCK

General

At the effective date, Peoples Federal Bancshares, Inc. will be authorized to issue 100,000,000 shares of common stock, par value of $0.01 per share, and 50,000,000 shares of preferred stock, par value $0.01 per share. Peoples Federal Bancshares, Inc. currently expects to issue in the offering up to 7,141,500 shares of common stock. Peoples Federal Bancshares, Inc. will not issue shares of preferred stock in the conversion. Each share of Peoples Federal Bancshares, Inc. common stock will have the same relative rights as, and will be identical in all respects to, each other share of common stock. Upon payment of the subscription price for the common stock, in accordance with the plan of conversion and reorganization, all of the shares of common stock will be duly authorized, fully paid and nonassessable.

The shares of common stock of Peoples Federal Bancshares, Inc. will represent nonwithdrawable capital, will not be an account of an insurable type, and will not be insured by the Federal Deposit Insurance Corporation or any other government agency.

Common Stock

Dividends. Peoples Federal Bancshares, Inc. can pay dividends on its common stock if, after giving effect to the distribution, it would be able to pay its indebtedness as the indebtedness comes due in the usual course of business and its total assets exceed the sum of its liabilities and the amount needed, if Peoples Federal Bancshares, Inc. were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of any holders of capital stock who have a preference in the event of dissolution. The holders of common stock of Peoples Federal Bancshares, Inc. will be entitled to receive and share equally in dividends as may be declared by our Board of Directors out of funds legally available therefor. If Peoples Federal Bancshares, Inc. issues shares of preferred stock, the holders thereof may have a priority over the holders of the common stock with respect to dividends.

Voting Rights. Upon consummation of the conversion, the holders of common stock of Peoples Federal Bancshares, Inc. will have exclusive voting rights in Peoples Federal Bancshares, Inc. They will elect Peoples Federal Bancshares, Inc.’s Board of Directors and act on other matters as are required to be presented to them under Maryland law or as are otherwise presented to them by the Board of Directors. Generally, each holder of common stock will be entitled to one vote per share and will not have any right to cumulate votes in the election of directors. Any person who beneficially owns more than 10% of the then-outstanding shares of Peoples Federal Bancshares, Inc.’s common stock, however, will not be entitled or permitted to vote any shares of common stock held in excess of the 10% limit. If Peoples Federal Bancshares, Inc. issues shares of preferred stock, holders of the preferred stock may also possess voting rights. Certain matters require an 80% stockholder vote.

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As a federal stock savings bank, corporate powers and control of Peoples Federal Savings Bank are vested in its Board of Directors, who elect the officers of Peoples Federal Savings Bank and who fill any vacancies on the Board of Directors. Voting rights of Peoples Federal Savings Bank are vested exclusively in the owners of the shares of capital stock of Peoples Federal Savings Bank, which will be Peoples Federal Bancshares, Inc., and voted at the direction of Peoples Federal Bancshares, Inc.’s Board of Directors. Consequently, the holders of the common stock of Peoples Federal Bancshares, Inc. will not have direct control of Peoples Federal Savings Bank.

Liquidation. In the event of any liquidation, dissolution or winding up of Peoples Federal Savings Bank, Peoples Federal Bancshares, Inc., as the holder of 100% of Peoples Federal Savings Bank’s capital stock, would be entitled to receive all assets of Peoples Federal Savings Bank available for distribution, after payment or provision for payment of all debts and liabilities of Peoples Federal Savings Bank, including all deposit accounts and accrued interest thereon, and after distribution of the balance in the liquidation account to Eligible Account Holders and Supplemental Eligible Account Holders. In the event of liquidation, dissolution or winding up of Peoples Federal Bancshares, Inc., the holders of its common stock would be entitled to receive, after payment or provision for payment of all its debts and liabilities, all of the assets of Peoples Federal Bancshares, Inc. available for distribution. If preferred stock is issued, the holders thereof may have a priority over the holders of the common stock in the event of liquidation or dissolution.

Preemptive Rights. Holders of the common stock of Peoples Federal Bancshares, Inc. will not be entitled to preemptive rights with respect to any shares that may be issued, unless such preemptive rights are approved by the Board of Directors. The common stock is not subject to redemption.

Preferred Stock

None of the shares of Peoples Federal Bancshares, Inc.’s authorized preferred stock will be issued as part of the offering or the conversion. Preferred stock may be issued with preferences and designations as our Board of Directors may from time to time determine. Our Board of Directors may, without stockholder approval, issue shares of preferred stock with voting, dividend, liquidation and conversion rights that could dilute the voting strength of the holders of the common stock and may assist management in impeding an unfriendly takeover or attempted change in control.

TRANSFER AGENT

The transfer agent and registrar for Peoples Federal Bancshares, Inc.’s common stock is Registrar and Transfer Company, Cranford, New Jersey.

EXPERTS

The consolidated financial statements of Peoples Federal MHC and subsidiary as of September 30, 2009 and 2008 and for each of the years in the two-year period ended September 30, 2009 included in this Prospectus and in the registration statement have been so included in reliance upon the report of Shatswell, MacLeod & Company, P.C., an independent registered public accounting firm, appearing elsewhere herein and in the registration statement, given on the authority of said firm as experts in auditing and accounting.

RP Financial, LC. has consented to the publication herein of the summary of its report to Peoples Federal Bancshares, Inc. setting forth its opinion as to the estimated pro forma market value of the shares of common stock upon completion of the conversion and offering and its letters with respect to subscription rights and liquidation accounts.

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LEGAL MATTERS

Luse Gorman Pomerenk & Schick, P.C., Washington, D.C., counsel to Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank, will issue to Peoples Federal Bancshares, Inc. its opinions regarding the legality of the common stock and the federal income tax consequences of the conversion. Luse Gorman Pomerenk & Schick, P.C. has consented to the references in this prospectus to its opinions. Shatswell, MacLeod & Company, P.C. will issue to Peoples Federal MHC, Peoples Federal Bancorp, Inc., Peoples Federal Bancshares, Inc. and Peoples Federal Savings Bank its opinion regarding the Massachusetts income tax consequences of the conversion. Shatswell, MacLeod & Company, P.C. has consented to the reference in this prospectus to its opinion. Certain legal matters will be passed upon for Sandler O’Neill & Partners, L.P. by Bingham McCutchen, LLP, Boston, Massachusetts.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

Peoples Federal Bancshares, Inc. has filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 with respect to the shares of common stock offered hereby. As permitted by the rules and regulations of the Securities and Exchange Commission, this prospectus does not contain all the information set forth in the registration statement. Such information, including the appraisal report which is an exhibit to the registration statement, can be examined without charge at the public reference facilities of the Securities and Exchange Commission located at 100 F Street, N.E., Washington, D.C. 20549, and copies of such material can be obtained from the Securities and Exchange Commission at prescribed rates. The Securities and Exchange Commission telephone number is 1-800-SEC-0330. In addition, the Securities and Exchange Commission maintains a web site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission, including Peoples Federal Bancshares, Inc. The statements contained in this prospectus as to the contents of any contract or other document filed as an exhibit to the registration statement are, of necessity, brief descriptions of the material terms of, and should be read in conjunction with, such contract or document.

Peoples Federal Savings Bank has filed with the Office of Thrift Supervision an Application on Form AC with respect to the conversion. This prospectus omits certain information contained in the application. The application may be examined at the principal office of the Office of Thrift Supervision, 1700 G Street, N.W., Washington, D.C. 20552, and at the Northeast Regional Office of the Office of Thrift Supervision, located at Harborside Financial Center, Plaza Five, Suite 1600, Jersey City, New Jersey 07311. Our plan of conversion and reorganization is available, upon request, at each of our branch offices.

In connection with the offering, Peoples Federal Bancshares, Inc. will register its common stock under Section 12(b) of the Securities Exchange Act of 1934 and, upon such registration, Peoples Federal Bancshares, Inc. and the holders of its common stock will become subject to the proxy solicitation rules, reporting requirements and restrictions on common stock purchases and sales by directors, officers and greater than 10% stockholders, the annual and periodic reporting and certain other requirements of the Securities Exchange Act of 1934. Under the plan of conversion and reorganization, Peoples Federal Bancshares, Inc. has undertaken that it will not terminate such registration for a period of at least three years following the offering.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF

PEOPLES FEDERAL MHC

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at December 31, 2009 (unaudited) and at September 30, 2009 and 2008	F-3
Consolidated Statements of Income for the three months ended December  31, 2009 and 2008 (unaudited) and for the fiscal years ended September 30, 2009 and 2008	F-4
Consolidated Statements of Changes in Equity for the three months ended December  31, 2009 (unaudited) and the fiscal years ended September 30, 2009 and 2008	F-5
Consolidated Statements of Cash Flows for the three months ended December  31, 2009 and 2008 (unaudited) and for the fiscal years ended September 30, 2009 and 2008	F-6
Notes to Consolidated Financial Statements	F-8

***

Separate financial statements for Peoples Federal Bancshares, Inc. have not been included in this prospectus because Peoples Federal Bancshares, Inc. has not engaged in any significant activities, has no significant assets, and has not contingent liabilities, revenue or expenses.

All financial statement schedules have been omitted as the required information either is not applicable or is included in the financial statements or related notes.

All financial information as of and for the three months ended December 31, 2009 and 2008 is unaudited.

F-1

The Board of Directors

Peoples Federal MHC

Brighton, Massachusetts

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the accompanying consolidated balance sheets of Peoples Federal MHC and Subsidiary as of September 30, 2009 and 2008 and the related consolidated statements of income, changes in equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Peoples Federal MHC and Subsidiary as of September 30, 2009 and 2008, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

SHATSWELL, MacLEOD & COMPANY, P.C.

West Peabody, Massachusetts

November 20, 2009

F-2

PEOPLES FEDERAL MHC AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

	December 31, 2009		September 30,
			2009		2008
	(In Thousands)
	(unaudited)
ASSETS
Cash and due from banks	$	23,464	$	9,491	$	7,744
Interest-bearing demand deposits with other banks and money market mutual funds		21,282		13,954		2,171
Federal funds sold		370		14,980		2,416
Federal Home Loan Bank - overnight deposit		35,071		50,209		5,008
Total cash and cash equivalents		80,187		88,634		17,339
Investments in available-for-sale securities (at fair value)		955		6,328		22,149
Federal Home Loan Bank stock, at cost		4,339		4,339		4,339
Loans, net of allowance for loan losses of $3,150 as of December 31, 2009 (unaudited), $3,204 as of September 30, 2009 and $3,208 as of September 30, 2008		374,172		362,667		373,309
Premises and equipment		3,438		3,473		3,578
Accrued interest receivable		1,545		1,544		1,735
Cash surrender value of life insurance policies		11,349		11,249		10,858
Deferred income tax asset, net		3,420		3,394		3,294
Other assets		3,353		1,200		1,022
Total assets	$	482,758	$	482,828	$	437,623
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing	$	29,267	$	30,489	$	33,052
Interest-bearing		341,241		335,975		269,902
Total deposits		370,508		366,464		302,954
Federal Home Loan Bank advances		54,000		58,000		80,060
Other liabilities		6,598		7,421		6,335
Total liabilities		431,106		431,885		389,349
Commitments and contingencies (Note 10)
Equity:
Retained earnings		51,628		50,770		48,366
Accumulated other comprehensive income (loss)		24		173		(92	)
Total equity		51,652		50,943		48,274
Total liabilities and equity	$	482,758	$	482,828	$	437,623

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

F-3

PEOPLES FEDERAL MHC AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended December 31,				Years Ended September 30,
	2009		2008		2009		2008
	(In Thousands)
	(unaudited)
Interest and dividend income:
Interest and fees on loans	$	5,131	$	5,721	$	21,962	$	20,060
Interest on debt securities:
Taxable		59		230		599		1,114
Tax-exempt		—		—		—		7
Other interest		17		7		30		780
Dividends on Federal Home Loan Bank stock		—		23		23		135
Total interest and dividend income		5,207		5,981		22,614		22,096
Interest expense:
Interest on deposits		1,320		1,679		6,200		7,622
Interest on Federal Home Loan Bank advances		473		675		2,487		1,650
Total interest expense		1,793		2,354		8,687		9,272
Net interest and dividend income		3,414		3,627		13,927		12,824
Provision for loan losses		—		—		127		—
Net interest and dividend income after provision for loan losses		3,414		3,627		13,800		12,824
Noninterest income:
Customer service fees		209		215		813		796
Loan servicing fees		26		15		28		31
Net gain on sales of mortgage loans		73		1		307		24
Net gain on sales of available-for-sale securities		210		—		208		43
Income on cash surrender value of life insurance		100		102		391		419
Other income		33		21		69		96
Total noninterest income		651		354		1,816		1,409
Noninterest expense:
Salaries and employee benefits		1,746		1,607		7,079		6,843
Occupancy expense		192		173		766		828
Equipment expense		105		106		400		434
Professional fees		125		103		465		408
Advertising expense		42		76		185		257
Data processing expense		118		156		832		843
Deposit insurance expense		115		46		587		155
Other expense		208		178		949		1,098
Total noninterest expense		2,651		2,445		11,263		10,866
Income before income taxes		1,414		1,536		4,353		3,367
Income taxes		556		602		1,681		1,294
Net income	$	858	$	934	$	2,672	$	2,073

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

F-4

PEOPLES FEDERAL MHC AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three Months Ended December 31, 2009 (unaudited) and the Years Ended September 30, 2009 and 2008

(In Thousands)

	Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance, September 30, 2007	$	46,293		$	12		$	46,305
Comprehensive income:
Net income		2,073			—			—
Net change in unrealized holding gain on available-for-sale securities, net of tax effect		—			(104	)		—
Comprehensive income		—			—			1,969
Balance, September 30, 2008		48,366			(92	)		48,274
Comprehensive income:
Net income		2,672			—			—
Net change in unrealized holding loss on available-for-sale securities, net of tax effect		—			265			—
Comprehensive income		—			—			2,937
Cumulative effect of a change in accounting principle - initial application of ASC 715-60		(268	)		—			(268	)
Balance, September 30, 2009		50,770			173			50,943
Comprehensive income:
Net income		858			—			—
Net change in unrealized holding gain on available-for-sale securities, net of tax effect		—			(149	)		—
Comprehensive income		—			—			709
Balance, December 31, 2009 (unaudited)	$	51,628		$	24		$	51,652

Reclassification disclosure:

	Three Months Ended December 31,						Years Ended September 30,
	2009			2008			2009			2008
	(In Thousands)
	(unaudited)
Net unrealized (losses) gains on available-for-sale securities	$	(40	)	$	541		$	653		$	(131	)
Reclassification adjustment for realized gains in net income		(210	)		—			(208	)		(43	)
Other comprehensive (loss) income before income tax effect		(250	)		541			445			(174	)
Income tax benefit (expense)		101			(219	)		(180	)		70
Other comprehensive (loss) income, net of tax	$	(149	)	$	322		$	265		$	(104	)

Accumulated other comprehensive income (loss) as of December 31, 2009 (unaudited), September 30, 2009 and 2008 consists of net unrealized holding gains (losses) on available-for-sale securities, net of taxes.

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

F-5

PEOPLES FEDERAL MHC AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended December 31,						Years Ended September 30,
	2009			2008			2009			2008
	(In Thousands)
	(unaudited)
Cash flows from operating activities:
Net income	$	858		$	934		$	2,672		$	2,073
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Amortization (accretion) of securities, net		1			(4	)		11			14
Net gain on sales of available-for-sale securities		(210	)		—			(208	)		(43	)
Provision for loan losses		—			—			127			—
Change in net deferred loan fees		(234	)		(19	)		110			(675	)
Depreciation and amortization		99			101			392			476
Gain on sale of other real estate owned		—			—			(33	)		—
(Increase) decrease in accrued interest receivable		(1	)		90			191			30
Income on cash surrender value of life insurance		(100	)		(102	)		(391	)		(419	)
Increase in other assets		(2,237	)		(335	)		(94	)		(63	)
(Decrease) increase in accrued expenses and other liabilities		(1,027	)		299			977			1,009
Decrease (increase) in prepaid income taxes		84			—			(84	)		354
Increase (decrease) in taxes payable		204			522			(159	)		159
Deferred income tax expense (benefit)		75			(22	)		(280	)		(64	)
Net cash (used in) provided by operating activities		(2,488	)		1,464			3,231			2,851
Cash flows from investing activities:
Purchases of available-for-sale securities		—			—			—			(21,025	)
Proceeds from sales of available-for-sale securities		4,839			—			8,490			8,243
Proceeds from maturities, payments and calls of available-for-sale securities		493			2,830			7,973			21,812
Purchases of held-to-maturity securities		—			—			—			(7,722	)
Proceeds from maturities, payments and calls of held-to-maturity securities		—			—			—			2,352
Purchases of Federal Home Loan Bank stock		—			—			—			(1,579	)
Loan originations and principal collections, net		9,316			8,648			10,413			(9,761	)
Loans purchased		(20,587	)		—			—			(78,034	)
Recoveries of loans previously charged off		—			—			5			67
Capital expenditures		(64	)		(183	)		(287	)		(170	)
Proceeds from sale of other real estate owned		—			—			20			—
Net cash (used in) provided by investing activities		(6,003	)		11,295			26,614			(85,817	)

F-6

PEOPLES FEDERAL MHC AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(continued)

	Three Months Ended December 31,						Years Ended September 30,
	2009			2008			2009			2008
	(In Thousands)
	(unaudited)
Cash flows from financing activities:
Net increase in demand deposits, NOW and savings accounts		7,104			910			89,791			18,921
Net (decrease) increase in time deposits		(3,060	)		(1,473	)		(26,281	)		1,960
Proceeds from Federal Home Loan Bank advances		2,000			6,000			12,000			60,000
Repayment of Federal Home Loan Bank advances		(6,000	)		(4,021	)		(28,060	)		(14,579	)
Net change in short-term advances		—			(6,000	)		(6,000	)		6,000
Net cash provided by (used in) financing activities		44			(4,584	)		41,450			72,302
Net (decrease) increase in cash and cash equivalents		(8,447	)		8,175			71,295			(10,664	)
Cash and cash equivalents at beginning of period		88,634			17,339			17,339			28,003
Cash and cash equivalents at end of period	$	80,187		$	25,514		$	88,634		$	17,339
Supplemental disclosures:
Interest paid	$	1,823		$	2,325		$	8,748		$	9,321
Income taxes paid		193			102			2,204			845
Transfers of securities from held-to-maturity to available-for-sale		—			—			—			10,641
Supplemental schedule of non cash investing activities:
Transfers from loans to other real estate owned		—			—			367			—
Loan originated from sale of other real estate owned		—			—			380			—

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

F-7

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

NOTE 1 - NATURE OF OPERATIONS

Peoples Federal MHC (the Company), a federally chartered mutual holding company, and its wholly-owned subsidiary, Peoples Federal Bancorp, Inc. (the Bancorp), a federally chartered holding company, were formed on May 17, 2005. The Bancorp owns 100 percent of Peoples Federal Savings Bank (the Bank).

The Bank is a federally chartered bank which was incorporated in 1888 and is headquartered in Brighton, Massachusetts. The Bank operates its business from six banking offices located in Brighton, Allston, West Roxbury, Jamaica Plain, Brookline and Norwood. The Bank is engaged principally in the business of providing a variety of financial services to individuals and small businesses primarily in the form of various deposit products and residential and commercial mortgage lending products.

NOTE 2 - ACCOUNTING POLICIES

The accounting and reporting policies of the Company and its subsidiary conform to accounting principles generally accepted in the United States of America and predominant practices within the banking industry. The consolidated financial statements were prepared using the accrual basis of accounting. The significant accounting policies are summarized below to assist the reader in better understanding the consolidated financial statements and other data contained herein.

USE OF ESTIMATES:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

BASIS OF PRESENTATION:

The consolidated financial statements include the accounts of Peoples Federal MHC and its wholly-owned subsidiary, Peoples Federal Bancorp, Inc. and its wholly-owned subsidiary, Peoples Federal Savings Bank. All significant intercompany accounts and transactions have been eliminated in the consolidation.

CASH AND CASH EQUIVALENTS:

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, cash items, due from banks, interest-bearing demand deposits with other banks, money market mutual funds, federal funds sold and Federal Home Loan Bank—overnight deposit.

Cash and due from banks as of December 31, 2009 and September 30, 2009 and 2008 includes $2,304,000 (unaudited), $3,017,000 and $1,437,000, respectively, which is subject to withdrawals and usage restrictions to satisfy the reserve requirements of the Federal Reserve Bank.

As of December 31, 2009, the Company has $35,463,000 (unaudited) on deposit with the Federal Home Loan Bank of Boston, representing 68.66 percent of total equity of the Company.

F-8

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

As of September 30, 2009, the Company has $50,877,000 on deposit with the Federal Home Loan Bank of Boston, representing approximately 100 percent of total equity of the Company.

SECURITIES:

Investments in debt securities are adjusted for amortization of premiums and accretion of discounts computed utilizing the interest method. Gains or losses on sales of investment securities are computed on a specific identification basis.

The Company classifies debt and equity securities into one of three categories: held-to-maturity, available-for-sale, or trading. These security classifications may be modified after acquisition only under certain specified conditions. In general, securities may be classified as held-to-maturity only if the Company has the positive intent and ability to hold them to maturity. Trading securities are defined as those bought and held principally for the purpose of selling them in the near term. All other securities must be classified as available-for-sale.

• Held-to-maturity securities are measured at amortized cost in the consolidated balance sheets. Unrealized holding gains and losses are not included in earnings or in a separate component of equity. They are merely disclosed in the notes to the consolidated financial statements.

• Available-for-sale securities are carried at fair value on the consolidated balance sheets. Unrealized holding gains and losses are not included in earnings, but are reported as a net amount (less expected tax) in a separate component of equity until realized.

• Trading securities are carried at fair value on the consolidated balance sheets. Unrealized holding gains and losses for trading securities are included in earnings. Interest and dividends are included in net interest and dividend income.

Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses.

On December 8, 2008, the Federal Home Loan Bank of Boston announced a moratorium on the repurchase of excess stock held by its members. The moratorium will remain in effect indefinitely.

LOANS HELD-FOR-SALE:

Loans held-for-sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses are provided for in a valuation allowance by charges to operations.

LOANS:

Loans receivable that management has the intent and ability to hold until maturity or payoff are reported at their outstanding principal balances adjusted for amounts due to borrowers on unadvanced loans, any charge-offs, the allowance for loan losses and any deferred fees or costs on originated loans, or unamortized premiums or discounts on purchased loans.

Interest on loans is recognized on a simple interest basis.

Loan origination and commitment fees and certain direct origination costs are deferred, and the net amount amortized as an adjustment of the related loan’s yield. The Company is amortizing these amounts over the contractual lives of the related loans.

F-9

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

Residential real estate loans are generally placed on nonaccrual when reaching 90 days past due or in process of foreclosure. All closed-end consumer loans 90 days or more past due and any equity line reaching 90 days past due or in the process of foreclosure are placed on nonaccrual status. Secured consumer loans are written down to realizable value and unsecured consumer loans are charged off upon reaching 120 or 180 days past due depending on the type of loan. Commercial real estate loans and commercial business loans and leases which are 90 days or more past due are generally placed on nonaccrual status, unless secured by sufficient cash or other assets immediately convertible to cash. When a loan has been placed on nonaccrual status, previously accrued and uncollected interest is reversed against interest on loans. A loan can be returned to accrual status when collectibility of principal is reasonably assured and the loan has performed for a period of time, generally six months.

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

ALLOWANCE FOR LOAN LOSSES:

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

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

A loan is considered impaired when, based on current information and events, it is probable that the Bank 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. Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment disclosures.

F-10

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

SERVICING:

Servicing assets are recognized as separate assets when rights are acquired through purchase or through sale of financial assets. Generally, purchased servicing rights are capitalized at the cost to acquire the rights. For sales of mortgage loans, a portion of the cost of originating the loan is allocated to the servicing right based on relative fair value. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. Capitalized servicing rights are reported in other assets and are amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets.

Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights into tranches based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual tranche, to the extent that fair value is less than the capitalized amount for the tranche. If the Company later determines that all or a portion of the impairment no longer exits for a particular tranche, a reduction of the allowance may be recorded as an increase to income.

Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal, or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income.

PREMISES AND EQUIPMENT:

Premises and equipment are stated at cost, less accumulated depreciation and amortization. Cost and related allowances for depreciation and amortization of premises and equipment retired or otherwise disposed of are removed from the respective accounts with any gain or loss included in income or expense. Depreciation and amortization are calculated principally on the straight-line method over the estimated useful lives of the asset. Useful lives are 3 to 42 years for bank buildings and land improvements and 1 to 10 years for furniture and equipment.

OTHER REAL ESTATE OWNED AND IN-SUBSTANCE FORECLOSURES:

Other real estate owned includes properties acquired through foreclosure, properties purchased by the Company but not currently used in operating its business and properties classified as in-substance foreclosures in accordance with ASC 310-40, “Receivables-Troubled Debt Restructurings by Creditors.” These properties are carried at the lower of cost or estimated fair value less estimated costs to sell. Any writedown from cost to estimated fair value required at the time of foreclosure or classification as in-substance foreclosure is charged to the allowance for loan losses. Expenses incurred in connection with maintaining these assets, subsequent writedowns and gains or losses recognized upon sale are included in other expense.

In accordance with ASC 310-10-35, “Receivables-Overall-Subsequent Measurement,” the Company classifies loans as in-substance repossessed or foreclosed if the Company receives physical possession of the debtor’s assets regardless of whether formal foreclosure proceedings take place.

ADVERTISING:

The Company directly expenses costs associated with advertising as they are incurred.

F-11

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

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 tax rates expected to be in effect when the amounts related to such temporary differences are realized or settled.

FAIR VALUES OF FINANCIAL INSTRUMENTS:

ASC 825, “Financial Instruments,” requires that the Company disclose estimated fair value for its financial instruments. Fair value methods and assumptions used by the Company in estimating its fair value disclosures are as follows:

Cash and cash equivalents: The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets’ fair values.

Securities (including mortgage-backed securities): Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

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

Accrued interest receivable: The carrying amount of accrued interest receivable approximates its fair value.

Deposit liabilities: The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Federal Home Loan Bank Advances: Fair values for Federal Home Loan Bank of Boston advances are estimated using a discounted cash flow technique that applies interest rates currently being offered on advances to a schedule of aggregated expected monthly maturities on Federal Home Loan Bank of Boston advances.

Off-balance sheet instruments: The fair value of commitments to originate loans is estimated using the fees currently charged to enter similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments and the unadvanced portion of loans, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligation with the counterparties at the reporting date.

RECENT ACCOUNTING PRONOUNCEMENTS:

In June 2009, the Financial Accounting Standards Board (“FASB”) issued an update to Accounting Standard Codification 105-10, “Generally Accepted Accounting Principles.” This standard establishes the FASB Accounting Standard Codification (“Codification” or “ASC”) as the source of authoritative U.S. GAAP recognized by the FASB for nongovernmental entities. The Codification is effective for interim and annual periods ending after September 15, 2009. The Codification is a reorganization of existing U.S. GAAP and does not change existing U.S. GAAP. The Company adopted this standard during the third quarter of 2009. The adoption had no impact on the Company’s financial position or results of operations.

F-12

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets”, and SFAS No. 167, “Amendments to FASB Interpretation No. 46(R).” These standards are effective for the first interim reporting period of 2010. SFAS No. 166 amends the guidance in ASC 860 to eliminate the concept of a qualifying special-purpose entity (“QSPE”) and changes some of the requirements for derecognizing financial assets. SFAS No. 167 amends the consolidation guidance in ASC 810-10. Specifically, the amendments will (a) eliminate the exemption for QSPEs from the new guidance, (b) shift the determination of which enterprise should consolidate a variable interest entity (“VIE”) to a current control approach, such that an entity that has both the power to make decisions and right to receive benefits or absorb losses that could potentially be significant, will consolidate a VIE, and (c) change when it is necessary to reassess who should consolidate a VIE. The Company is evaluating the impact that these standards will have on its financial statements.

In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, “Measuring Liabilities at Fair Value”, which updates ASC 820-10, “Fair Value Measurements and Disclosures.” The updated guidance clarifies that the fair value of a liability can be measured in relation to the quoted price of the liability when it trades as an asset in an active market, without adjusting the price for restrictions that prevent the sale of the liability. This guidance is effective beginning October 1, 2009. The adoption of this guidance did not change the Company’s valuation techniques for measuring liabilities at fair value.

In May 2009, the FASB updated ASC 855, “Subsequent Events.” ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The Company adopted this guidance during 2009. In accordance with the update, the Company evaluates subsequent events through the date its financial statements are issued. The adoption of this guidance did not have an impact on the Company’s financial position or results of operations.

In April 2009, the FASB updated ASC 320-10, “Investments – Debt and Equity Securities.” The guidance amends the other-than-temporary impairment (“OTTI”) guidance for debt securities. If the fair value of a debt security is less than its amortized cost basis at the measurement date, the updated guidance requires the Company to determine whether it has the intent to sell the debt security or whether it is more likely than not it will be required to sell the debt security before the recovery of its amortized cost basis. If either condition is met, an entity must recognize full impairment. For all other debt securities that are considered other-than-temporarily impaired and do not meet either condition, the guidance requires that the credit loss portion of impairment be recognized in earnings and the temporary impairment related to all other factors be recorded in other comprehensive income. In addition, the guidance requires additional disclosures regarding impairments on debt and equity securities. The Company adopted this guidance effective April 1, 2009. The adoption of this guidance did not have an impact on the Company’s financial position or results of operations.

In April 2009, the FASB updated ASC 820-10, “Fair Value Measurements and Disclosures” to provide guidance on determining fair value when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly. This issuance provides guidance on estimating fair value when there has been a significant decrease in the volume and level of activity for the asset or liability and for identifying transactions that may not be orderly. The guidance requires entities to disclose the inputs and valuation techniques used to measure fair value and to discuss changes in valuation techniques and related inputs, if any, in both interim and annual periods. The Company adopted this guidance during 2009 and the adoption did not have a material impact on the Company’s financial position and results of operations. The enhanced disclosures related to this guidance are included in Note 11, “Fair Value Measurements,” to the Consolidated Financial Statements.

In April 2009, the FASB updated ASC 825-10 “Financial Instruments.” This update amends the fair value disclosure guidance in ASC 825-10-50 and requires an entity to disclose the fair value of its financial instruments in interim reporting periods as well as in annual financial statements. The methods and significant assumptions used to estimate the fair value of financial instruments and any changes in methods and assumptions used during the reporting period are also required to be disclosed both on an interim and annual basis. The Company adopted this guidance during 2009. The required disclosures have been included in Note 11, “Fair Value Measurements,” to the Consolidated Financial Statements.

F-13

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

In March 2008, the FASB updated ASC 815, “Derivatives and Hedging.” This guidance changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under ASC 815 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The guidance in ASC 815 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This guidance encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The adoption of this guidance did not have a material impact on the Company’s financial condition and results of operations.

In February 2008, the FASB updated ASC 860, “Transfers and Servicing.” This guidance clarifies how the transferor and transferee should separately account for a transfer of a financial asset and a related repurchase financing if certain criteria are met. This guidance will be effective October 1, 2009. The adoption of this guidance did not have a material effect on the Company’s results of operations or financial position.

In December 2007, the FASB updated ASC 805, “Business Combinations.” The updated guidance will significantly change the accounting for business combinations. Under ASC 805, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. It also amends the accounting treatment for certain specific items including acquisition costs and non controlling minority interests and includes a substantial number of new disclosure requirements. ASC 805 applies prospectively to business combinations for which the acquisition date is on or after October 1, 2009. The adoption of this statement did not have a material impact on the Company’s financial condition and results of operations.

NOTE 3 - INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES

Debt and equity securities have been classified in the consolidated balance sheets according to management’s intent. The amortized cost of investment securities and their approximate fair values are as follows:

	Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In Thousands)
December 31, 2009 (unaudited):
Mortgage-backed securities	$	914	$	41	$	—	$	955
	$	914	$	41	$	—	$	955
September 30, 2009:
Mortgage-backed securities	$	6,037	$	291	$	—	$	6,328
	$	6,037	$	291	$	—	$	6,328
September 30, 2008:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	$	6,000	$	—	$	44	$	5,956
Mortgage-backed securities		16,303		26		136		16,193
	$	22,303	$	26	$	180	$	22,149

As of December 31, 2009 (unaudited), September 30, 2009 and 2008, all mortgage-backed securities held by the Company were issued by the FHLMC, GNMA and FNMA.

F-14

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

The scheduled maturities of debt securities were as follows as of December 31, 2009 (unaudited) and September 30, 2009. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	December 31, 2009		September 30, 2009
	Fair Value		Fair Value
	(In Thousands)
	(Unaudited)
Within one year	$	348	$	416
Over one through five years		80		1,054
After five through ten years		—		2,206
Over ten years		527		2,652
	$	955	$	6,328

For the three months ended December 31, 2009 (unaudited), proceeds from sales of securities available-for-sale amounted to $4,839,000. Gross realized gains on those sales amounted to $210,000 with no gross realized losses (unaudited). There were no sales during the three months ended December 31, 2008. For the year ended September 30, 2009, proceeds from sales of securities available-for-sale amounted to $8,490,000. Gross realized gains on those sales amounted to $208,000 with no gross realized losses. For the year ended September 30, 2008, proceeds from sales of securities available-for-sale amounted to $8,243,000. Gross realized gains on those sales amounted to $47,000 and gross realized losses amounted to $4,000. The tax expense applicable to these net realized gains for the three months ended December 31, 2009 (unaudited) amounted to $86,000 and for the years ended September 30, 2009 and 2008 amounted to $85,000 and $18,000, respectively.

There were no securities of issuers with an amortized cost basis and fair value which exceeded 10% of equity as of December 31, 2009 (unaudited), September 30, 2009 and 2008.

As of December 31, 2009 (unaudited), September 30, 2009 and 2008 securities with carrying amounts totaling $955,000, $6,328,000 and $22,149,000, respectively were pledged to secure FHLB borrowings.

The Company does not have any impaired investments as of December 31, 2009 (unaudited) and September 30, 2009.

The aggregate fair value and unrealized losses of securities that have been in a continuous unrealized loss position for less than twelve months and for twelve months or more, and are not other than temporarily impaired, are as follows:

	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
September 30, 2008:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	$	5,956	$	44	$	—	$	—	$	5,956	$	44
Mortgage-backed securities		12,337		133		800		3		13,137		136
Total temporarily impaired securities	$	18,293	$	177	$	800	$	3	$	19,093	$	180

F-15

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

NOTE 4 - LOANS

Loans consisted of the following:

	December 31, 2009			September 30,
				2009			2008
	(In Thousands)
	(unaudited)
Mortgage loans:
Residential loans:
One-to-four family	$	249,114		$	237,429		$	249,833
Multi-family		40,018			40,966			46,659
Commercial real estate		63,850			63,861			54,062
Construction loans		17,312			16,536			18,890
Total mortgage loans		370,294			358,792			369,444
Consumer loans		2,532			2,523			2,239
Commercial loans		4,536			4,830			4,998
		377,362			366,145			376,681
Deferred loan origination fees, net		(40	)		(274	)		(164	)
Allowance for loan losses		(3,150	)		(3,204	)		(3,208	)
Loans, net	$	374,172		$	362,667		$	373,309

Certain directors and executive officers of the Company and companies in which they have significant ownership interest were customers of the Bank during the three months ended December 31, 2009. Total loans to such persons and their companies amounted to $2,138,000 as of December 31, 2009 (unaudited). During the three months ended December 31, 2009 (unaudited), $8,000 of principal advances were made and principal payments totaled $29,000.

Certain directors and executive officers of the Company and companies in which they have significant ownership interest were customers of the Bank during the year ended September 30, 2009. Total loans to such persons and their companies amounted to $2,159,000 as of September 30, 2009. During the year ended September 30, 2009, $909,000 of principal advances were made and principal payments totaled $947,000.

Changes in the allowance for loan losses were as follows:

	Three Months Ended December 31,					Years Ended September 30,
	2009			2008		2009			2008
	(In Thousands)
	(unaudited)
Balance at beginning of period	$	3,204		$	3,208	$	3,208		$	3,314
Loans charged off		(54	)		—		(136	)		(173	)
Recoveries of loans previously charged off		—			—		5			67
Provision for loan losses		—			—		127			—
Balance at end of period	$	3,150		$	3,208	$	3,204		$	3,208

The following table sets forth information regarding nonaccrual loans and accruing loans 90 days or more overdue:

	December 31, 2009		September 30,
			2009		2008
	(In Thousands)
	(unaudited)
Nonaccrual loans	$	5,237	$	5,341	$	3,556
Accruing loans which are 90 days or more overdue	$	—	$	384	$	—

F-16

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

Information about loans that meet the definition of an impaired loan in ASC 310-10-35, “Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality – Subsequent Measurement,” is as follows:

	December 31,				September 30,
	2009				2009				2008
	Recorded Investment In Impaired Loans		Related Allowance For Credit Losses		Recorded Investment In Impaired Loans		Related Allowance For Credit Losses		Recorded Investment In Impaired Loans		Related Allowance For Credit Losses
	(unaudited)
	(In Thousands)
Loans for which there is a related allowance for credit losses	$	1,540	$	40	$	1,540	$	40	$	—	$	0
Loans for which there is no related allowance for credit loss		4,942		—		4,958		—		1,986		—
Totals	$	6,482	$	40	$	6,498	$	40	$	1,986	$	0
Average recorded investment in impaired loans during the three months ended December 31, 2009, and the years ended September 30, 2009 and 2008	$	6,490			$	3,354			$	938
Related amount of interest income recognized during the time, in the three months ended December 31, 2009 and in the years ended September 30, that the loans were impaired
Total recognized	$	38			$	91			$	12
Amount recognized using a cash-basis method of accounting	$	38			$	80			$	12

Restructured loans included in total impaired loans above amounted to $2,067,000 and $2,076,000 as of December 31, 2009 (unaudited) and September 30, 2009, respectively. The Company has no commitments to lend additional funds to borrowers whose loans are impaired.

As of December 31, 2009 (unaudited), September 30, 2009 and 2008 the Company serviced loans for others with unpaid principal balances of $56,100,000, $55,743,000 and $52,655,000, respectively.

In the three months ended December 31, 2009 (unaudited) the Company capitalized mortgage servicing rights totaling $41,000 and amortized $15,000. In the three months ended December 31, 2008 (unaudited), the Company capitalized mortgage servicing rights totaling $7,000 and amortized $17,000. In the year ending September 30, 2009 the Company capitalized mortgage servicing rights totaling $162,000 and amortized $89,000. In the year ending September 30, 2008 the Company capitalized mortgage servicing rights totaling $17,000 and amortized $93,000. The balance of capitalized mortgage servicing rights included in other assets at December 31, 2009 (unaudited), September 30, 2009 and 2008 was $160,000, $136,000 and $68,000, respectively. The fair value of those rights was $196,000, $166,000 and $161,000 as of December 31, 2009 (unaudited), September 30, 2009 and 2008, respectively.

F-17

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

Following is an analysis of the aggregate changes in the valuation allowance for mortgage servicing rights:

	Three Months Ended December 31,				Years Ended September 30,
	2009		2008		2009			2008
	(In Thousands)
	(unaudited)
Balance, beginning of period	$	6	$	1	$	1		$	—
Additions		2		21		23			4
Reductions		—		—		(18	)		(3	)
Balance, end of period	$	8	$	22	$	6		$	1

NOTE 5 - PREMISES AND EQUIPMENT

The following is a summary of premises and equipment:

	December 31, 2009			September 30,
				2009			2008
	(In Thousands)
	(unaudited)
Land	$	566		$	566		$	566
Buildings and building improvements		5,928			5,928			5,858
Furniture and equipment		2,290			2,226			2,251
Leasehold improvements		320			320			577
		9,104			9,040			9,252
Accumulated depreciation and amortization		(5,666	)		(5,567	)		(5,674	)
	$	3,438		$	3,473		$	3,578

NOTE 6 - DEPOSITS

Deposits consisted of the following:

	December 31, 2009		September 30,
			2009		2008
	(In Thousands)
	(unaudited)
Non-interest bearing deposits:
Demand accounts	$	29,267	$	30,489	$	33,052
Interest-bearing deposits:
NOW accounts		30,887		30,735		30,816
Savings accounts		45,268		44,625		43,352
Money market deposit accounts		155,800		148,269		57,107
Time deposits		109,286		112,346		138,627
Total interest-bearing deposits		341,241		335,975		269,902
Total deposits	$	370,508	$	366,464	$	302,954

The aggregate amount of time deposit accounts in denominations of $100,000 or more as of December 31, 2009 (unaudited), September 30, 2009 and 2008 was $37,530,000, $37,549,000 and $50,352,000, respectively. Generally, deposits in excess of $250,000 are not federally insured.

F-18

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

For time deposits as of December 31, 2009, the scheduled maturities for each of the following years ended December 31 are as follows:

	(In Thousands)
	(unaudited)
2010	$	89,206
2011		13,448
2012		3,701
2013		2,931
Total	$	109,286

For time deposits as of September 30, 2009, the scheduled maturities for each of the following years ended September 30 are as follows:

	(In Thousands)
2010	$	93,472
2011		13,140
2012		3,077
2013		2,657
Total	$	112,346

Deposits from related parties held by the Company as of December 31, 2009 (unaudited), September 30, 2009 and 2008 amounted to $3,088,000, $2,948,000 and $3,356,000, respectively.

Interest expense by major category of interest-bearing deposits is summarized as follows:

	Three Months Ended December 31,				Years Ended September 30,
	2009		2008		2009		2008
	(In Thousands)
	(unaudited)
NOW accounts	$	14	$	15	$	69	$	74
Savings accounts		113		114		459		462
Money market deposit accounts		603		380		2,060		677
Time deposits		590		1,170		3,612		6,409
	$	1,320	$	1,679	$	6,200	$	7,622

NOTE 7 - FEDERAL HOME LOAN BANK ADVANCES

Advances consist of funds borrowed from the Federal Home Loan Bank of Boston (FHLB).

Maturities of advances from the FHLB for the years ending after December 31, 2009 are summarized as follows:

	(In Thousands)
	(unaudited)
2010	$	38,000
2011		7,000
2012		4,000
2013		5,000
	$	54,000

F-19

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

Maturities of advances from the FHLB for the years ending after September 30, 2009 are summarized as follows:

	(In Thousands)
2010	$	35,000
2011		15,000
2012		3,000
2013		1,000
2014		4,000
	$	58,000

As of December 31, 2009, the following advance from the FHLB was redeemable at par at the option of the FHLB:

MATURITY DATE	OPTIONAL REDEMPTION DATE	AMOUNT
		(In Thousands)
		(unaudited)
August 19, 2013	February 19, 2010 and quarterly thereafter	$	1,000

As of September 30, 2009, the following advance from the FHLB was redeemable at par at the option of the FHLB:

MATURITY DATE	OPTIONAL REDEMPTION DATE	AMOUNT
		(In Thousands)
August 19, 2013	November 19, 2009 and quarterly thereafter	$	1,000

At December 31, 2009 (unaudited), the interest rates on FHLB advances ranged from 1.99% to 5.49%. At December 31, 2009 (unaudited), the weighted average interest rate on FHLB advances was 3.36%. At September 30, 2009, the interest rates on FHLB advances ranged from 2.16% to 5.49%. At September 30, 2009, the weighted average interest rate on FHLB advances was 3.43%.

Amortizing advances are being repaid in equal monthly payments and are being amortized from the date of the advance to the maturity date on a direct reduction basis.

Borrowings from the FHLB are secured by a blanket lien on qualified collateral, consisting primarily of loans with first mortgages secured by one to four family properties and other qualified assets.

NOTE 8 - LEASE COMMITMENTS

As of December 31, 2009 (unaudited) and September 30, 2009, the Bank was obligated under a non-cancelable operating lease for bank premises expiring in February 2011. The lease is reported under the operating method of accounting for leases, whereby the lease payments are expensed as incurred under the terms of the agreement. Lease expense, excluding applicable real estate taxes and operating cost charges, was approximately $15,000 for the three months ended December 31, 2009 and 2008 (unaudited), and $60,000 and $93,000 during fiscal years 2009 and 2008, respectively.

The required future minimum rental payments under the terms of the lease are as follows at December 31, 2009:

Years Ending December 31,	(In Thousands)
	(unaudited)
2010	$	60
2011		10
	$	70

F-20

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

The required future minimum rental payments under the terms of the lease are as follows at September 30, 2009:

Years Ending September 30,	(In Thousands)
2010	$	60
2011		25
	$	85

NOTE 9 - INCOME TAXES

The components of income tax expense are as follows:

	Three Months Ended December 31,					Years Ended September 30,
	2009		2008			2009			2008
	(In Thousands)
	(unaudited)
Current:
Federal	$	341	$	450		$	1,394		$	978
State		140		174			567			380
		481		624			1,961			1,358
Deferred:
Federal		57		(19	)		(330	)		(70	)
State		18		(3	)		50			6
		75		(22	)		(280	)		(64	)
Total	$	556	$	602		$	1,681		$	1,294

The reasons for the differences between the statutory federal income tax rate and the effective tax rates are summarized as follows:

	Three Months Ended December 31,				Years Ended September 30,
	2009		2008		2009		2008
	% of Income		% of Income		% of Income		% of Income
	(In Thousands)
	(unaudited)
Federal income tax at statutory rate	34.0	%	34.0	%	34.0	%	34.0	%
State tax, net of federal tax benefit	7.4		7.4		9.4		7.6
Cash surrender value of life insurance	(2.4	)	(2.2	)	(3.1	)	(4.2	)
Other	0.3		—		(1.7	)	1.0
Effective tax rates	39.3	%	39.2	%	38.6	%	38.4	%

F-21

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

The Company had gross deferred tax assets and gross deferred tax liabilities as follows:

	December 31, 2009			September 30,
				2009			2008
	(In Thousands)
	(unaudited)
Deferred tax assets:
Accumulated depreciation	$	439		$	441		$	496
Allowance for loan losses		1,258			1,280			1,313
Deferred loan fees		16			125			83
Director and executive retirement agreements and deferred compensation plan		1,527			1,493			1,245
Other		261			227			123
Net unrealized holding loss on available-for-sale securities		—			—			62
Gross deferred tax assets		3,501			3,566			3,322
Deferred tax liabilities:
Mortgage servicing rights		(64	)		(54	)		(28	)
Net unrealized holding gain on available-for-sale securities		(17	)		(118	)		—
Gross deferred tax liabilities		(81	)		(172	)		(28	)
Net deferred tax asset	$	3,420		$	3,394		$	3,294

The federal income tax reserve for loan losses at the Company’s base year is approximately $3,444,000. If any portion of the reserve is used for purposes other than to absorb loan losses, approximately 150% of the amount actually used, limited to the amount of the reserve, would be subject to taxation in the fiscal year in which used. As the Bank intends to use the reserve to absorb only loan losses, a deferred tax liability of approximately $1,376,000 has not been provided.

NOTE 10 - OFF-BALANCE SHEET ACTIVITIES

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 originate loans, standby letters of credit and unadvanced funds on loans. The instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amounts of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to originate loans are agreements to lend to a customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held varies, but may include secured interests in mortgages, accounts receivable, inventory, property, plant and equipment and income-producing properties.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance by a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. As of December 31, 2009 (unaudited), September 30, 2009 and 2008 there were no financial and standby letters of credit outstanding.

F-22

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

Notional amounts of financial instrument liabilities with off-balance sheet credit risk are as follows:

	December 31, 2009		September 30,
			2009		2008
	(In Thousands)
	(unaudited)
Commitments to originate loans	$	2,717	$	1,184	$	1,787
Unadvanced portions of loans:
Construction loans		6,569		9,170		11,436
Commercial real estate lines of credit		4,135		4,296		4,678
Home equity lines of credit		21,453		20,275		20,709
Consumer loans		617		600		655
Commercial loans		3,111		2,933		3,000
Other		—		—		11
	$	38,602	$	38,458	$	42,276

There is no material difference between the notional amount and the estimated fair value of the off-balance sheet liabilities.

NOTE 11 - FAIR VALUE MEASUREMENTS

During 2008, the Company adopted ASC 820-10, “Fair Value Measurements and Disclosures,” which provides a framework for measuring fair value under generally accepted accounting principles. This guidance also allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. The Company did not elect fair value treatment for any financial assets or liabilities upon adoption.

In accordance with ASC 820-10, the Company groups its financial assets and financial 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.

Level 1 - Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 1 also includes U.S. Treasury, other U.S. Government and agency mortgage-backed securities that are traded by dealers or brokers in active markets. 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 are 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 financial assets and financial liabilities carried at fair value for December 31, 2009 (unaudited) and September 30, 2009.

F-23

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

The Company’s cash instruments are generally classified within level 1 or level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

The Company’s investment in mortgage-backed securities available-for-sale is 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 2 inputs based upon appraisals of similar properties obtained from a third party.

The following summarizes assets measured at fair value for the period ending December 31, 2009 (unaudited) and September 30, 2009.

ASSETS MEASURED AT FAIR VALUE ON A RECURRING BASIS

	Fair Value Measurements at Reporting Date Using:
	December 31, 2009		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
(In Thousands)
(unaudited)
Trading securities	$	658	$	658	$	—	$	—
Securities available-for-sale		955		—		955		—
Totals	$	1,613	$	658	$	955	$	—
	Fair Value Measurements at Reporting Date Using:
	September 30, 2009		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
(In Thousands)
Securities available-for-sale	$	6,328	$	—	$	6,328	$	—
Totals	$	6,328	$	—	$	6,328	$	—

F-24

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

ASSETS MEASURED AT FAIR VALUE ON A NONRECURRING BASIS

Under certain circumstances we make adjustments to fair value for our assets and liabilities although they are not measured at fair value on an ongoing basis. The following table presents the financial instruments carried on the consolidated balance sheet by caption and by level in the fair value hierarchy at December 31, 2009 (unaudited) and September 30, 2009, for which a nonrecurring change in fair value has been recorded:

	Fair Value Measurements at Reporting Date Using:
	December 31, 2009		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
(In Thousands)
(unaudited)
Impaired loans	$	1,500	$	—	$	1,500	$	—
Totals	$	1,500	$	—	$	1,500	$	—
	Fair Value Measurements at Reporting Date Using:
	September 30, 2009		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
(In Thousands)
Impaired loans	$	1,500	$	—	$	1,500		—
Totals	$	1,500	$	—	$	1,500	$	—

The estimated fair values, and related carrying amounts, of the Company’s financial instruments are as follows:

					September 30,
	December 31, 2009				2009				2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In Thousands)
	(unaudited)
Financial assets:
Cash and cash equivalents	$	80,187	$	80,187	$	88,634	$	88,634	$	17,339	$	17,339
Trading securities		658		658		637		637		553		553
Available-for-sale securities		955		955		6,328		6,328		22,149		22,149
Federal Home Loan Bank stock		4,339		4,339		4,339		4,339		4,339		4,339
Loans, net		374,172		378,333		362,667		358,003		373,309		371,013
Accrued interest receivable		1,545		1,545		1,544		1,544		1,735		1,735
Financial liabilities:
Deposits		370,508		371,252		366,464		367,209		302,954		303,460
Federal Home Loan Bank advances		54,000		54,896		58,000		59,354		80,060		80,127

The carrying amounts of financial instruments shown in the above table are included in the consolidated balance sheets under the indicated captions, except for trading securities which are included in other assets. Accounting policies related to financial instruments are described in Note 2.

NOTE 12 - SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK

Most of the Company’s business activity is with customers located within the Commonwealth of Massachusetts. There are no concentrations of credit to borrowers that have similar economic characteristics. The majority of the Bank’s loan portfolio is comprised of loans collateralized by real estate located in the Commonwealth of Massachusetts.

F-25

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

NOTE 13 - REGULATORY MATTERS

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier capital (as defined in the regulations) to risk-weighted assets (as defined), of Core capital (as defined) to adjusted total assets (as defined) and Tangible capital (as defined) to adjusted tangible assets (as defined). Management believes, as of December 31, 2009 (unaudited), September 30, 2009 and 2008, that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2009 (unaudited) and September 30, 2009, the most recent notification from the Office of Thrift Supervision categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based and core capital ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Bank’s actual capital amounts and ratios are also presented in the table.

	Actual				For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio			Amount		Ratio
	(Dollar amounts in thousands)
As of December 31, 2009 (unaudited):
Total Capital (to Risk Weighted Assets)	$	54,570	17.27	%	$	25,285	³	8.00	%	$	31,606	³	10.00	%
Tier 1 Capital (to Risk Weighted Assets)		51,510	16.30			12,642	³	4.00			18,964	³	6.00
Core Capital (to Adjusted Total Assets)		51,510	10.68			14,474	³	3.00			24,123	³	5.00
Tangible Capital (to Adjusted Tangible Assets)		51,510	10.68			7,237	³	1.50			N/A		N/A
As of September 30, 2009:
Total Capital (to Risk Weighted Assets)		53,676	16.93			25,359	³	8.00			31,699	³	10.00
Tier 1 Capital (to Risk Weighted Assets)		50,573	15.95			12,680	³	4.00			19,019	³	6.00
Core Capital (to Adjusted Total Assets)		50,573	10.48			14,478	³	3.00			24,130	³	5.00
Tangible Capital (to Adjusted Tangible Assets)		50,573	10.48			7,239	³	1.50			N/A		N/A
As of September 30, 2008:
Total Capital (to Risk Weighted Assets)		50,864	16.13			25,229	³	8.00			31,537	³	10.00
Tier 1 Capital (to Risk Weighted Assets)		47,656	15.11			12,615	³	4.00			18,922	³	6.00
Core Capital (to Adjusted Total Assets)		47,656	10.89			13,124	³	3.00			21,874	³	5.00
Tangible Capital (to Adjusted Tangible Assets)		47,656	10.89			6,562	³	1.50			N/A		N/A

F-26

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

The following table shows the reconciliation of the Bank’s total equity as of December 31, 2009 (unaudited) to the regulatory capital ratios disclosed in the table above:

	Total Capital			Tier 1 Capital
	(In Thousands)
Total Bank equity at December 31, 2009	$	51,551		$	51,551
Accumulated other comprehensive income		(24	)		(24	)
Allowable allowance for loan losses		3,060			—
Mortgage servicing asset disallowed		(17	)		(17	)
	$	54,570		$	51,510

The following table shows the reconciliation of the Bank’s total equity as of September 30, 2009 to the regulatory capital ratios disclosed in the table above:

	Total Capital			Tier 1 Capital
	(In Thousands)
Total Bank equity at September 30, 2009	$	50,759		$	50,759
Accumulated other comprehensive income		(173	)		(173	)
Allowable allowance for loan losses		3,103			—
Mortgage servicing asset disallowed		(13	)		(13	)
	$	53,676		$	50,573

NOTE 14 - EMPLOYEE BENEFIT PLANS

The Company provides pension benefits for its employees through participation in the Financial Institutions Retirement Fund, a non-contributory multi-employer defined benefit plan (Plan). The Plan covers all salaried employees who are at least twenty-one years of age with at least one year of employment with the Company. The Plan is funded by contributions based on actuarial calculations, using the projected unit credit method and the one-year term cost method. As is the case with multi-employer plans, separate actuarial valuations are not made with respect to each employer. The actuarial cost method used to value all benefits, except pre-retirement death and disability benefits, is the projected unit credit method. For the pre-retirement death and disability benefits, the one-year term cost method is used.

The Company’s pension cost under the Plan was $97,000 and $52,000 for the three months ended December 31, 2009 and 2008, respectively (unaudited), and $473,000 and $397,000 for the years ended September 30, 2009 and 2008, respectively.

In addition, the Company offers a 401(k) savings plan through the Financial Institutions Thrift Plan. This plan allows an employee to contribute a percentage of his or her wages to the plan on a tax-deferred basis subject to federal limitations. The Company matches the employee’s contribution at an amount equal to 50% of the contribution for the first 6% of the employee’s compensation.

The Company’s cost under the 401(k) plan was $20,000 and $18,000 for the three months ended December 31, 2009 and 2008, respectively, (unaudited) and $77,000 and $79,000 for the years ended September 30, 2009 and 2008, respectively.

The Company provides a nonqualified deferred compensation plan to a select group of management and directors providing an opportunity to defer a specified amount of their cash compensation. The Company’s obligations under this plan are non-funded for tax purposes and for purposes of Title I of ERISA, and they are unsecured general obligations of the Company to pay in the future the value of the deferred compensation adjusted to reflect the performance, whether positive or negative, of selected investment options chosen by each participant during the deferral period.

F-27

PEOPLES FEDERAL MHC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Three Months Ended December 31, 2009 and 2008 (unaudited) and

Years Ended September 30, 2009 and 2008

The Company has an investment in a Rabbi Trust in connection with the deferred compensation plan. The assets in the Rabbi Trust have been included in the Company’s consolidated balance sheets in other assets as of December 31, 2009 (unaudited), September 30, 2009 and 2008 and are available to the general creditors of the Company in the event of the Company’s insolvency. The assets of the Rabbi Trust are mutual funds classified as trading securities, and totaled $658,000, $637,000 and $553,000 as of December 31, 2009 (unaudited), September 30, 2009 and 2008, respectively. The Company contributed $21,000 and $32,000 to the Rabbi Trust for the three months ended December 31, 2009 and 2008, respectively (unaudited) and $78,000 and $57,000 to the Rabbi Trust for the years ended September 30, 2009 and 2008, respectively.

The Company entered into Director Retirement Agreements and Salary Continuation Agreements with certain directors and senior executives. The agreements require the payment of specified benefits upon retirement over periods of ten or twenty years as described in each agreement. The total liability for the Director Retirement Agreements and the Salary Continuation Agreements included in other liabilities was $2,634,000, $2,478,000 and $1,812,000 at December 31, 2009 (unaudited), September 30, 2009 and September 30, 2008, respectively, and expenses under these agreements were $156,000 and $162,000 in the three months ended December 31, 2009 and 2008, respectively (unaudited), and $666,000 in fiscal year 2009 and $627,000 in fiscal year 2008. There were no benefit payments made to beneficiaries under these agreements during the three months ended December 31, 2009 and 2008 (unaudited) and fiscal 2009 and 2008.

The Company has a supplemental retirement plan with a former executive whereby the amounts paid under this plan commenced upon the executive’s retirement and continue for his lifetime. The Company has purchased life insurance contracts in connection with this agreement. The charge to employee benefits expense in connection with this plan amounted to $8,000 and $12,000 for the three months ended December 31, 2009 and 2008, respectively (unaudited), and $35,000 and $23,000 for the years ended September 30, 2009 and 2008, respectively. The liability for this supplemental retirement plan was $648,000, $704,000 and $729,000 at December 31, 2009 (unaudited), September 30, 2009 and 2008, respectively.

The Company provided postretirement medical benefits for executives, one retired, effective December 31, 2009, under separate individual agreements. The total liability as of December 31, 2009 (unaudited) and September 30, 2009 amounted to $85,000. The related expense was $0 for the three months ended December 31, 2009 (unaudited) and $85,000 for the year ended September 30, 2009.

In 2009, the Company adopted ASC 715-60, “Compensation—Retirement Benefits—Defined Benefit Plans—Other Postretirement,” and recognized a liability for the Company’s future postretirement benefit obligations under the endorsement split-dollar life insurance arrangements. The Company recognized this change in accounting principle as a cumulative effect adjustment to retained earnings in the amount of $268,000. The total liability for the arrangements included in other liabilities was $286,000 at December 31, 2009 (unaudited) and September 30, 2009. Expense under this arrangement was $0 for the three months ended December 31, 2009 (unaudited) and $18,000 for the year ending September 30, 2009.

NOTE 15 - CHANGE IN CONTROL AGREEMENTS

The Company entered into employment agreements (“Agreements”) with five executive officers. Under the terms of the Agreements, upon the occurrence of a change in control, as defined in the Agreements, followed by executive termination of employment, the Company shall pay the executive, as severance pay or liquidated damages, or both, the greater of (1) the executive’s base salary and incentive compensation that would have been paid to executive for the remaining term of the Agreement plus the value of all employee benefits that would have been provided to executive for the remaining term of the Agreement, or (2) three times the executive’s average annual compensation over the five most recently completed calendar years ending with the year immediately preceding the effective date of the change in control.

NOTE 16 - RECLASSIFICATION

Certain amounts in the prior year have been reclassified to be consistent with the current year’s statement presentation.

F-28

You should rely only on the information contained in this document or that to which we have referred you. No person has been authorized to give any information or to make any representation other than as contained in this prospectus and, if given or made, such other information or representation must not be relied upon as having been authorized by Peoples Federal Bancshares, Inc. or Peoples Federal Savings Bank. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby to any person in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. Neither the delivery of this prospectus nor any sale hereunder shall under any circumstances create any implication that there has been no change in the affairs of Peoples Federal Bancshares, Inc. or Peoples Federal Savings Bank since any of the dates as of which information is furnished herein or since the date hereof.

PEOPLES FEDERAL BANCSHARES, INC.

(Proposed Holding Company for

Peoples Federal Savings Bank)

Up to 5,750,000 Shares of

Common Stock

Par value $0.01 per share

(Subject to Increase to up to 6,612,500 Shares)

PROSPECTUS

Sandler O’Neill & Partners, L.P.

[prospectus date]

Until [expiration date] or 25 days after commencement of the syndicated community offering, if any, whichever is later, all dealers effecting transactions in the registered securities, whether or not participating in this distribution, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver the prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II: INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

		Amount (1)
*	Registrant’s Legal Fees and Expenses	$	600,000
*	Registrant’s Accounting Fees and Expenses		150,000
*	Conversion Agent and Data Processing Fees		15,000
*	Marketing Agent Fees (1)		685,000
*	Marketing Agent Expenses (Including Legal Fees and Expenses)		170,000
*	Appraisal Fees and Expenses		55,000
*	Printing, Postage, Mailing and EDGAR Fees		100,000
*	Filing Fees (OTS, Nasdaq, FINRA and SEC)		74,800
*	Transfer Fees and Expenses		15,000
*	Stock Certificate Printer Fees and Expenses		7,500
*	Business Plan Fees and Expenses		40,000
*	Other		47,700
*	Total	$	1,800,000

* Estimated

(1) Peoples Federal Bancshares, Inc. has retained Sandler O’Neill & Partners, L.P. to assist in the sale of common stock on a best efforts basis in the offerings. Fees are estimated at the adjusted maximum of the offering range.

Item 14. Indemnification of Directors and Officers

Articles 10 and 11 of the Articles of Incorporation of Peoples Federal Bancshares, Inc. (the “Corporation”) set forth circumstances under which directors, officers, employees and agents of the Corporation may be insured or indemnified against liability which they incur in their capacities as such:

ARTICLE 10. Indemnification, etc. of Directors and Officers.

A. Indemnification. The Corporation shall indemnify (1) its current and former directors and officers, whether serving the Corporation or at its request any other entity, to the fullest extent required or permitted by the MGCL now or hereafter in force, including the advancement of expenses under the procedures and to the fullest extent permitted by law, and (2) other employees and agents to such extent as shall be authorized by the Board of Directors and permitted by law; provided, however, that, except as provided in Section B of this Article 10 with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.

B. Procedure. If a claim under Section A of this Article 10 is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall also be entitled to be reimbursed the expense of prosecuting or defending such suit. It shall be a defense to any action for advancement of expenses that the Corporation has not received both (i) an undertaking as required by law to repay such advances in the event it shall ultimately be determined that the standard of conduct has not been met and (ii) a written affirmation by the indemnitee of his good faith belief that the standard of conduct necessary for indemnification by the Corporation has been met. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met the applicable standard

II-1

for indemnification set forth in the MGCL. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the MGCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article 10 or otherwise shall be on the Corporation.

C. Non-Exclusivity. The rights to indemnification and to the advancement of expenses conferred in this Article 10 shall not be exclusive of any other right that any Person may have or hereafter acquire under any statute, these Articles, the Corporation’s Bylaws, any agreement, any vote of stockholders or the Board of Directors, or otherwise.

D. Insurance. The Corporation may maintain insurance, at its expense, to insure itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such Person against such expense, liability or loss under the MGCL.

E. Miscellaneous. The Corporation shall not be liable for any payment under this Article 10 in connection with a claim made by any indemnitee to the extent such indemnitee has otherwise actually received payment under any insurance policy, agreement, or otherwise, of the amounts otherwise indemnifiable hereunder. The rights to indemnification and to the advancement of expenses conferred in Sections A and B of this Article 10 shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director or officer and shall inure to the benefit of the indemnitee’s heirs, executors and administrators.

Any repeal or modification of this Article 10 shall not in any way diminish any rights to indemnification or advancement of expenses of such director or officer or the obligations of the Corporation arising hereunder with respect to events occurring, or claims made, while this Article 10 is in force.

ARTICLE 11. Limitation of Liability. An officer or director of the Corporation, as such, shall not be liable to the Corporation or its stockholders for money damages, except (A) to the extent that it is proved that the Person actually received an improper benefit or profit in money, property or services, for the amount of the benefit or profit in money, property or services actually received; or (B) to the extent that a judgment or other final adjudication adverse to the Person is entered in a proceeding based on a finding in the proceeding that the Person’s action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding; or (C) to the extent otherwise provided by the MGCL. If the MGCL is amended to further eliminate or limit the personal liability of officers and directors, then the liability of officers and directors of the Corporation shall be eliminated or limited to the fullest extent permitted by the MGCL, as so amended.

Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such repeal or modification.

Item 15. Recent Sales of Unregistered Securities

Not Applicable.

II-2

Item 16. Exhibits and Financial Statement Schedules:

The exhibits and financial statement schedules filed as part of this registration statement are as follows:

(a) List of Exhibits

1.1 Engagement Letter between Peoples Federal MHC, Peoples Federal Bancorp, Inc., Peoples Federal Savings Bank and Sandler O’Neill & Partners, L.P.

1.2 Form of Agency Agreement between Peoples Federal MHC, Peoples Federal Bancorp, Inc., Peoples Federal Savings Bank and Peoples Federal Bancshares, Inc., and Sandler O’Neill & Partners, L.P. *

2 Plan of Conversion and Reorganization

3.1 Articles of Incorporation of Peoples Federal Bancshares, Inc.

3.2 Bylaws of Peoples Federal Bancshares, Inc.

4 Form of Common Stock Certificate of Peoples Federal Bancshares, Inc.

5 Opinion of Luse Gorman Pomerenk & Schick, P.C. regarding legality of securities being registered

8.1 Form of Federal Tax Opinion of Luse Gorman Pomerenk & Schick, P.C.

8.2 Form of State Tax Opinion of Shatswell, MacLeod & Company, P.C.

10.1 Amended and Restated Employment Agreement with Maurice H. Sullivan, Jr.

10.2 Amended and Restated Employment Agreement with Thomas J. Leetch, Jr.

10.3 Amended and Restated Employment Agreement with James J. Gavin

10.4 Proposed Employment Agreement

10.5 Salary Continuation Agreement for Maurice H. Sullivan, Jr., as amended

10.6 Salary Continuation Agreement for Thomas J. Leetch, Jr., as amended

10.7 Salary Continuation Agreement for James J. Gavin, as amended

10.8 Voluntary Deferred Compensation Plan for Executives, as amended

10.9 Proposed Amended and Restated Voluntary Deferred Compensation and Supplemental Employee Stock Ownership Plan

10.10 Voluntary Deferred Compensation Plan for Directors, as amended

10.11 Director Retirement Agreement for Maurice H. Sullivan, Jr., as amended

10.12 Director Retirement Agreement for Vincent Mannering, as amended

10.13 Director Retirement Agreement for John Reen, as amended

10.14 Director Retirement Agreement for Maurice H. Sullivan, III, as amended

10.15 Split Dollar Insurance Agreement, as amended

21 Subsidiaries of Registrant

23.1 Consent of Luse Gorman Pomerenk & Schick, P.C. (contained in Opinions included as Exhibits 5 and 8)

23.2 Consent of Shatswell, MacLeod & Company, P.C.

23.3 Consent of RP Financial, LC.

24 Power of Attorney (set forth on signature page)

99.1 Appraisal Agreement between Peoples Federal Savings Bank and RP Financial, LC.

99.2 Letter of RP Financial, LC. with respect to Subscription Rights

99.3 Appraisal Report of RP Financial, LC. **

99.4 Marketing Materials

99.5 Stock Order and Certification Form

99.6 Business Plan Agreement with FinPro, Inc.

99.7 Conversion Agent Agreement between Sandler O’Neill & Partners, L.P. and Peoples Federal MHC

99.8 Letter of RP Financial, LC. with respect to Liquidation Account

* To be filed supplementally

** Supporting financial schedules filed in paper format only pursuant to Rule 202 of Regulation S-T. Available for inspection during business hours at the principal offices of the SEC in Washington, D.C.

II-3

(b) Financial Statement Schedules

No financial statement schedules are filed because the required information is not applicable or is included in the consolidated financial statements or related notes.

Item 17. Undertakings

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which it offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

(6) That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

II-4

(7) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(8) The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§230.424 of this chapter);

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Brighton, Commonwealth of Massachusetts on March 16, 2010.

PEOPLES FEDERAL BANCSHARES, INC.
By:	/s/ Maurice H. Sullivan, Jr.
	Maurice H. Sullivan, Jr. Chairman of the Board and Chief Executive Officer (Duly Authorized Representative)

POWER OF ATTORNEY

We, the undersigned directors and officers of Peoples Federal Bancshares, Inc. (the “Company”) hereby severally constitute and appoint Maurice H. Sullivan, Jr. as our true and lawful attorney and agent, to do any and all things in our names in the capacities indicated below which said Maurice H. Sullivan, Jr. may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with the registration statement on Form S-1 relating to the offering of the Company’s common stock, including specifically, but not limited to, power and authority to sign for us in our names in the capacities indicated below the registration statement and any and all amendments (including post-effective amendments) thereto; and we hereby approve, ratify and confirm all that said Maurice H. Sullivan, Jr. shall do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signatures	Title	Date
/s/ Maurice H. Sullivan, Jr. Maurice H. Sullivan, Jr.	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	March 16, 2010
/s/ Thomas J. Leetch, Jr. Thomas J. Leetch, Jr.	President and Director	March 16, 2010
/s/ Christopher Lake Christopher Lake	Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	March 16, 2010
D. Randolph Berry D. Randolph Berry	Director	March 16, 2010
/s/ Myron Fox Myron Fox	Director	March 16, 2010
/s/ Hugh Gallagher Hugh Gallagher	Director	March 16, 2010

/s/ William Giudice William Giudice	Director	March 16, 2010
/s/ Vincent Mannering Vincent Mannering	Director	March 16, 2010
/s/ Norman Posner Norman Posner	Director	March 16, 2010
/s/ John F. Reen, Jr. John F. Reen, Jr.	Director	March 16, 2010
/s/ Frederick Taw Frederick Taw	Director	March 16, 2010
/s/ Maurice H. Sullivan, III Maurice H. Sullivan, III	Director	March 16, 2010

EXHIBIT INDEX

1.1 Engagement Letter between Peoples Federal MHC, Peoples Federal Bancorp, Inc., Peoples Federal Savings Bank and Sandler O’Neill & Partners, L.P.

1.2 Form of Agency Agreement between Peoples Federal MHC, Peoples Federal Bancorp, Inc., Peoples Federal Savings Bank and Peoples Federal Bancshares, Inc., and Sandler O’Neill & Partners, L.P. *

2 Plan of Conversion and Reorganization

3.1 Articles of Incorporation of Peoples Federal Bancshares, Inc.

3.2 Bylaws of Peoples Federal Bancshares, Inc.

4 Form of Common Stock Certificate of Peoples Federal Bancshares, Inc.

5 Opinion of Luse Gorman Pomerenk & Schick, P.C. regarding legality of securities being registered

8.1 Form of Federal Tax Opinion of Luse Gorman Pomerenk & Schick, P.C.

8.2 Form of State Tax Opinion of Shatswell, MacLeod & Company, P.C.

10.1 Amended and Restated Employment Agreement with Maurice H. Sullivan, Jr.

10.2 Amended and Restated Employment Agreement with Thomas J. Leetch, Jr.

10.3 Amended and Restated Employment Agreement with James J. Gavin

10.4 Proposed Employment Agreement

10.5 Salary Continuation Agreement for Maurice H. Sullivan, Jr., as amended

10.6 Salary Continuation Agreement for Thomas J. Leetch, Jr., as amended

10.7 Salary Continuation Agreement for James J. Gavin, as amended

10.8 Voluntary Deferred Compensation Plan for Executives, as amended

10.9 Proposed Amended and Restated Voluntary Deferred Compensation and Supplemental Employee Stock Ownership Plan

10.10 Voluntary Deferred Compensation Plan for Directors, as amended

10.11 Director Retirement Agreement for Maurice H. Sullivan, Jr., as amended

10.12 Director Retirement Agreement for Vincent Mannering, as amended

10.13 Director Retirement Agreement for John Reen, as amended

10.14 Director Retirement Agreement for Maurice H. Sullivan, III, as amended

10.15 Split Dollar Insurance Agreement, as amended

21 Subsidiaries of Registrant

23.1 Consent of Luse Gorman Pomerenk & Schick, P.C. (contained in Opinions included as Exhibits 5 and 8)

23.2 Consent of Shatswell, MacLeod & Company, P.C.

23.3 Consent of RP Financial, LC.

24 Power of Attorney (set forth on signature page)

99.1 Appraisal Agreement between Peoples Federal Savings Bank and RP Financial, LC.

99.2 Letter of RP Financial, LC. with respect to Subscription Rights

99.3 Appraisal Report of RP Financial, LC. **

99.4 Marketing Materials

99.5 Stock Order and Certification Form

99.6 Business Plan Agreement with FinPro, Inc.

99.7 Conversion Agent Agreement between Sandler O’Neill & Partners, L.P. and Peoples Federal MHC

99.8 Letter of RP Financial, LC. with respect to Liquidation Account

* To be filed supplementally

** Supporting financial schedules filed in paper format only pursuant to Rule 202 of Regulation S-T. Available for inspection during business hours at the principal offices of the SEC in Washington, D.C.

EX-1.1

Exhibit 1.1

January 22, 2010

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp Inc.

Peoples Federal Savings Bank

435 Market Street

Brighton, Massachusetts 02135

Ladies and Gentlemen:

We understand that the Boards of Directors of Peoples Federal MHC (“MHC”) and its subsidiaries, Peoples Federal Bancorp Inc. (“PFB”) and Peoples Federal Savings Bank (the “Bank” and, collectively with MHC and PFB and any successor company formed in connection with the conversion, the “Company”), are considering the adoption of a Plan of Conversion (the “Plan”) pursuant to which the Company will be converted from mutual holding company to full stock holding company form, and shares of the common stock (the “Common Stock”) of PFB (or successor stock holding company) will be offered and sold to the Bank’s eligible account holders in a Subscription Offering and, under certain circumstances, to members of the Bank’s community in a Direct Community Offering and to the general public in a Syndicated Community Offering (collectively, the “Offering”). Sandler O’Neill & Partners, L.P. (“Sandler O’Neill”) is pleased to assist the Company with the Offering. This letter is to confirm the terms and conditions of our engagement.

OFFERING SERVICES

Sandler O’Neill will act as exclusive marketing agent for the Company in the Offering. We will work with the Company and its management, counsel, accountants and other advisors on the Offering and anticipate that our services will include the following, each as may be necessary and as the Company may reasonably request:

1. Consulting as to the financial and securities market implications of the Plan and any related corporate documents;

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp Inc.

Peoples Federal Savings Bank

January 22, 2010

Page 2

2. Reviewing with the Board the financial impact of the Offering on the Company, based upon the independent appraiser’s appraisal of the Common Stock;

3. Reviewing all offering documents, including the Prospectus, stock order forms and related offering materials (it being understood that preparation and filing of such documents will be the responsibility of the Company and its counsel);

4. Assisting in the design and implementation of a marketing strategy for the Offering;

5. Assisting management in scheduling and preparing for meetings with potential investors and/or other broker-dealers in connection with the Offering; and

6. Providing such other general advice and assistance as may be requested to promote the successful completion of the Offering.

SUBSCRIPTION AND COMMUNITY OFFERING FEES

If the Offering is consummated, the Company agrees to pay Sandler O’Neill for its services a fee of one and one percent (1.00%) of the aggregate Actual Purchase Price of the shares of Common Stock sold in the Subscription Offering and Direct Community Offering, excluding in each case shares purchased by or on behalf of (i) any employee benefit plan or trust of the Company established for the benefit of their respective directors, officers and employees, (ii) any charitable foundation established by the Company (or any shares contributed to such a charitable foundation), and (iii) any director, officer or employee of the Company or members of their immediate families. For purposes of this letter, the term “Actual Purchase Price” shall mean the price at which the shares of the Common Stock are sold in the Offering.

If (a) Sandler O’Neill’s engagement hereunder is terminated for any of the reasons provided for under the second paragraph of the section of this letter captioned “Definitive Agreement,” or (b) the Offering is terminated by the Company, no fees shall be payable by the Company to Sandler O’Neill hereunder; however, the Company shall reimburse Sandler O’Neill for its reasonable out-of-pocket expenses (including legal fees) incurred in connection with its engagement hereunder and for any fees and expenses incurred by Sandler O’Neill on behalf of the Company pursuant to the second paragraph under the section captioned “Costs and Expenses” below.

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp Inc.

Peoples Federal Savings Bank

January 22, 2010

Page 3

All fees payable to Sandler O’Neill hereunder shall be payable in cash at the time of the closing of the Offering, or upon the termination of Sandler O’Neill’s engagement hereunder or termination of the Offering, as the case may be. In recognition of the long lead times involved in the stock offering process, the Company agrees to make an advance payment to Sandler O’Neill in the amount of $25,000, payable upon execution of this letter, which shall be credited against any fees or reimbursement of expenses payable hereunder. In the event that the advance payment exceeds the amount due in payment of fees and reimbursement of expenses hereunder, the excess shall be refunded to the Company.

SYNDICATED COMMUNITY OFFERING

If any shares of Common Stock remain available after the expiration of the Subscription Offering and Direct Community Offering, at the request of the Company and subject to the continued satisfaction of the conditions set forth in the second paragraph under the caption “Definitive Agreement” below, Sandler O’Neill will seek to form a syndicate of registered dealers to assist in the sale of such Common Stock in a Syndicated Community Offering on a best efforts basis, subject to the terms and conditions to be set forth in a selected dealers agreement. With respect to any shares of the Common Stock sold by Sandler O’Neill or any other NASD member firm under any selected dealers agreements in a Syndicated Community Offering, the Company agrees to pay: (a) the sales commission payable to the selected dealer under such agreement and (b) a management fee to Sandler O’Neill of one percent (1.00%) of the aggregate Actual Purchase Price of the shares of Common Stock sold in the Syndicated Community Offering. Sandler O’Neill will endeavor to limit the aggregate fees to be paid by the Company under any such selected dealers agreements to an amount competitive with gross underwriting discounts charged at such time for underwritings of comparable amounts of stock sold at a comparable price per share in a similar market environment, which shall not exceed 6% of the aggregate Actual Purchase Price of the shares sold under such agreements. Sandler O’Neill will endeavor to distribute the Common Stock among dealers in a fashion that best meets the distribution objectives of the Company and the requirements of the Plan, which may result in limiting the allocation of stock to certain selected dealers. It is understood that in no event shall Sandler O’Neill be obligated to act as a selected dealer or to take or purchase any shares of the Common Stock in the Offering.

COSTS AND EXPENSES

In addition to any fees that may be payable to Sandler O’Neill hereunder and the expenses to be borne by the Company pursuant to the following paragraph, the Company agrees to reimburse

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp Inc.

Peoples Federal Savings Bank

January 22, 2010

Page 4

Sandler O’Neill, upon request made from time to time, for its reasonable out-of-pocket expenses incurred in connection with its engagement hereunder, regardless of whether the Offering is consummated, including, without limitation, legal fees and expenses, advertising, syndication and travel expenses, up to a maximum of $170,000; provided, however, that Sandler O’Neill shall document such expenses to the reasonable satisfaction of the Company. The provisions of this paragraph are not intended to apply to or in any way impair the indemnification provisions of this letter.

As is customary, the Company will bear all other expenses incurred in connection with the Offering, including, without limitation, (i) the cost of obtaining all securities and bank regulatory approvals, including any required NASD filing fees; (ii) the cost of printing and distributing the offering materials; (iii) the costs of blue sky qualification (including fees and expenses of blue sky counsel) of the shares in the various states; (iv) listing fees; and (v) all fees and disbursements of the Company’s counsel, accountants, conversion agent and other advisors. In the event Sandler O’Neill incurs any such fees and expenses on behalf of the Company, the Company will reimburse Sandler O’Neill for such fees and expenses whether or not the Offering is consummated.

DUE DILIGENCE REVIEW

Sandler O’Neill’s obligation to perform the services contemplated by this letter shall be subject to the satisfactory completion of such investigation and inquiries relating to the Company and its directors, officers, agents and employees as Sandler O’Neill and its counsel in their sole discretion may deem appropriate under the circumstances. In this regard, the Company agrees that, at its expense, it will make available to Sandler O’Neill all information that Sandler O’Neill requests, and will allow Sandler O’Neill the opportunity to discuss with the Company’s management the financial condition, business and operations of the Company. The Company acknowledges that Sandler O’Neill will rely upon the accuracy and completeness of all information received from the Company and its directors, trustees, officers, employees, agents, independent accountants and counsel.

BLUE SKY MATTERS

Sandler O’Neill and the Company agree that the Company’s counsel shall serve as counsel with respect to blue sky matters in connection with the Offering. The Company will cause such counsel to prepare a Blue Sky Memorandum related to the Offering, including Sandler O’Neill’s participation therein, and shall furnish Sandler O’Neill a copy thereof addressed to Sandler O’Neill or upon which such counsel shall state Sandler O’Neill may rely.

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp Inc.

Peoples Federal Savings Bank

January 22, 2010

Page 5

CONFIDENTIALITY

Except as contemplated in connection with the performance of its services under this agreement, as authorized by the Company or as required by law, regulation or legal process, Sandler O’Neill agrees that it will treat as confidential all material, non-public information relating to the Company obtained in connection with its engagement hereunder (the “Confidential Information”); provided, however, that Sandler O’Neill may disclose such information to its agents and advisors who are assisting or advising Sandler O’Neill in performing its services hereunder and who have agreed to be bound by the terms and conditions of this paragraph. As used in this paragraph, the term “Confidential Information” shall not include information which (a) is or becomes generally available to the public other than as a result of a disclosure by Sandler O’Neill, (b) was available to Sandler O’Neill on a non-confidential basis prior to its disclosure to Sandler O’Neill by the Company, or (c) becomes available to Sandler O’Neill on a non-confidential basis from a person other than the Company who is not otherwise known to Sandler O’Neill to be bound not to disclose such information pursuant to a contractual, legal or fiduciary obligation.

The Company hereby acknowledges and agrees that the financial models and presentations used by Sandler O’Neill in performing its services hereunder have been developed by and are proprietary to Sandler O’Neill and are protected under applicable copyright laws. The Company agrees that it will not reproduce or distribute all or any portion of such models or presentations without the prior written consent of Sandler O’Neill.

INDEMNIFICATION

Since Sandler O’Neill will be acting on behalf of the Company in connection with the Offering, the Company agrees to indemnify and hold Sandler O’Neill and its affiliates and their respective partners, directors, officers, employees, agents and controlling persons within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934 (Sandler O’Neill and each such person being an “Indemnified Party”) harmless from and against any and all losses, claims, damages and liabilities, joint or several, to which such Indemnified Party may become subject under applicable federal or state law, or otherwise, related to or arising out of the Offering or the engagement of Sandler O’Neill pursuant to, or the performance by Sandler O’Neill of the services contemplated by, this letter, and will reimburse any Indemnified Party for all expenses

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp Inc.

Peoples Federal Savings Bank

January 22, 2010

Page 6

(including reasonable legal fees and expenses) as they are incurred, including expenses incurred in connection with the investigation of, preparation for or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, liability or expense (i) arises out of or is based upon any untrue statement of a material fact or the omission of a material fact required to be stated therein or necessary to make not misleading any statements contained in any final prospectus, or any amendment or supplement thereto, made in reliance on and in conformity with written information furnished to the Company by Sandler O’Neill expressly for use therein, or (ii) is primarily attributable to the gross negligence, willful misconduct or bad faith of Sandler O’Neill. If the foregoing indemnification is unavailable for any reason, the Company agrees to contribute to such losses, claims, damages, liabilities and expenses in the proportion that its financial interest in the Offerings bears to that of Sandler O’Neill.

The Company agrees to notify Sandler O’Neill promptly of the assertion against it or any other person of any claim or the commencement of any action or proceeding relating to any transaction contemplated by this agreement.

DEFINITIVE AGREEMENT

Sandler O’Neill and the Company agree that (a) except as set forth in clause (b), the foregoing represents the general intention of the Company and Sandler O’Neill with respect to the services to be provided by Sandler O’Neill in connection with the Offering, which will serve as a basis for Sandler O’Neill commencing activities, and (b) the only legal and binding obligations of the Company and Sandler O’Neill with respect to the Offering shall be (1) the Company’s obligation to reimburse costs and expenses pursuant to the section captioned “Costs and Expenses”, (2) those set forth under the captions “Confidentiality” and “Indemnification,” and (3) as set forth in a duly negotiated and executed definitive Agency Agreement to be entered into prior to the commencement of the Offering relating to the services of Sandler O’Neill in connection with the Offering. Such Agency Agreement shall be in form and content satisfactory to Sandler O’Neill and the Company and their respective counsel and shall contain standard indemnification and contribution provisions consistent herewith.

Sandler O’Neill’s execution of such Agency Agreement shall also be subject to (i) Sandler O’Neill’s satisfaction with its investigation of the Company’s business, financial condition and results of operations, (ii) preparation of offering materials that are satisfactory to Sandler O’Neill, (iii) compliance with all relevant legal and regulatory requirements to the reasonable satisfaction of

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp Inc.

Peoples Federal Savings Bank

January 22, 2010

Page 7

Sandler O’Neill, (iv) agreement that the price established by the independent appraiser is reasonable, and (v) market conditions at the time of the proposed offering. Sandler O’Neill may terminate this agreement if such Agency Agreement is not entered into prior to March 31, 2011.

This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and can be altered only by written consent signed by the parties. This Agreement shall be construed and enforced in accordance with the laws of the State of New York, without regard to the conflicts of laws principles thereof.

Please confirm that the foregoing correctly sets forth our agreement by signing and returning to Sandler O’Neill the duplicate copy of this letter enclosed herewith.

		Very truly yours,
		Sandler O’Neill & Partners, L.P.
		By:	Sandler O’Neill & Partners Corp., the sole general partner
		By:	/s/ Catherine A. Lawton
			Catherine A. Lawton
			An Officer of the Corporation
Accepted and agreed to as of the date first above written:
Peoples Federal MHC
Peoples Federal Bancorp Inc.		Peoples Federal Savings Bank
By:	/s/ Maurice H. Sullivan, Jr.	By:	/s/ Thomas J. Leetch
	Maurice H. Sullivan, Jr.		Thomas J. Leetch
	Chairman and Chief Executive Officer		President and Chief Executive Officer

EX-2

Exhibit 2

PLAN OF CONVERSION AND REORGANIZATION

OF

PEOPLES FEDERAL MHC

(AS ADOPTED FEBRUARY 16, 2010 AND AMENDED ON MARCH 11, 2010)

TABLE OF CONTENTS

1.      INTRODUCTION	1
2.      DEFINITIONS	1
3.      PROCEDURES FOR CONVERSION	6
4.      HOLDING COMPANY APPLICATIONS AND APPROVALS	8
5.      SALE OF SHARES	8
6.      PURCHASE PRICE AND NUMBER OF SUBSCRIPTION SHARES	9
7.      RETENTION OF OFFERING PROCEEDS BY THE HOLDING COMPANY	9
8.      SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS (FIRST PRIORITY)	10
9.      SUBSCRIPTION RIGHTS OF EMPLOYEE PLANS (SECOND PRIORITY)	10
10.    SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS (THIRD PRIORITY)	11
11.    SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY)	11
12.    COMMUNITY OFFERING	12
13.    SYNDICATED COMMUNITY OFFERING	12
14.    LIMITATION ON PURCHASES	13
15.    PAYMENT FOR SUBSCRIPTION SHARES	14
16.    MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER FORMS	15
17.    UNDELIVERED, DEFECTIVE OR LATE ORDER FORM; INSUFFICIENT PAYMENT	16
18.    RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES	17
19.    ESTABLISHMENT OF LIQUIDATION ACCOUNT	17
20.    ESTABLISHMENT AND FUNDING OF CHARITABLE FOUNDATION	19
21.    VOTING RIGHTS OF STOCKHOLDERS	20
22.    RESTRICTIONS ON RESALE OR SUBSEQUENT DISPOSITION	20
23.    REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS FOLLOWING THE CONVERSION	21
24.    TRANSFER OF DEPOSIT ACCOUNTS	21
25.    REGISTRATION AND MARKETING	21
26.    TAX RULINGS OR OPINIONS	21
27.    STOCK BENEFIT PLANS AND EMPLOYMENT AGREEMENTS	22
28.    RESTRICTIONS ON ACQUISITION OF BANK AND HOLDING COMPANY	22
29.    PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK	23
30.    CONSUMMATION OF CONVERSION AND EFFECTIVE DATE	23
31.    EXPENSES OF CONVERSION	23
32.    AMENDMENT OR TERMINATION OF PLAN	24
33.    CONDITIONS TO CONVERSION	24
34.    INTERPRETATION	24

i

EXHIBIT A	AGREEMENT OF MERGER BETWEEN PEOPLES FEDERAL MHC AND PEOPLES FEDERAL BANCORP, INC.
EXHIBIT B	AGREEMENT OF MERGER BETWEEN PEOPLES FEDERAL BANCSHARES, INC.

ii

PLAN OF CONVERSION AND REORGANIZATION OF

PEOPLES FEDERAL MHC

1. INTRODUCTION

This Plan of Conversion and Reorganization (this “Plan”) provides for the conversion of Peoples Federal MHC, a federal mutual holding company (the “Mutual Holding Company”), into the capital stock form of organization. The Mutual Holding Company currently owns 100% of the common stock of Peoples Federal Bancorp, Inc., a federal stock corporation (the “Mid-Tier Holding Company”), which owns 100% of the common stock of Peoples Federal Savings Bank (the “Bank”), a federal stock savings bank that is headquartered in Brighton, Massachusetts. A new stock holding company (the “Holding Company”) will be established as part of the Conversion and will succeed to all the rights and obligations of the Mutual Holding Company and the Mid-Tier Holding Company and will issue Common Stock in the Conversion. The purpose of the Conversion is to convert the Mutual Holding Company to the capital stock form of organization and to raise capital in the Offering. The Holding Company will offer its Common Stock in the Offering upon the terms and conditions set forth herein. The subscription rights granted to Participants in the Subscription Offering are set forth in Sections 8 through 11 hereof. All sales of Common Stock in the Community Offering or the Syndicated Community Offering will be at the sole discretion of the Board of Directors of the Mutual Holding Company and the Holding Company.

The Conversion will have no impact on depositors, borrowers or customers of the Bank. After the Conversion, the Bank’s insured deposits will continue to be insured by the FDIC to the extent provided by applicable law.

This Plan has been adopted by the Boards of Directors of the Mutual Holding Company, and the Mid-Tier Holding Company and the Bank and will be approved by the Board of the Holding Company. This Plan also must be approved by a majority of the total number of outstanding votes entitled to be cast by Voting Members of the Mutual Holding Company at a Special Meeting of Members to be called for that purpose. The OTS must approve this Plan before it is presented to Voting Members for their approval.

2. DEFINITIONS

For the purposes of this Plan, the following terms have the following meanings:

Account Holder – Any Person holding a Deposit Account in the Bank.

Acting in Concert – The term Acting in Concert means (i) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement; or (ii) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. A person or company which acts in concert with another person or company (“other party”) shall also be deemed to be acting in concert with any person or company who is also acting in concert with that other party, except that any Tax-qualified Employee Stock Benefit Plan will not be deemed to be Acting in Concert with its trustee or a person who serves in a similar capacity solely for the purpose of determining whether stock held by the trustee and stock held by the plan will be aggregated.

Affiliate – Any Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with another Person.

Appraised Value Range – The range of the estimated consolidated pro forma market value of the Holding Company, which shall also be equal to the estimated pro forma market value of the total number of Subscription Shares to be issued in the Conversion, as determined by the Independent Appraiser prior to the Subscription Offering and as it may be amended from time to time thereafter. The maximum and minimum of the Appraised Value Range may vary as much as 15% above and 15% below, respectively, the midpoint of the Appraised Value Range. The maximum of the Appraisal Value Range may be adjusted by up to 15% subsequent to the commencement of the Subscription Offering to reflect changes in market or financial conditions or demand for the Common Stock.

Associate – The term Associate when used to indicate a relationship with any Person, means (i) any corporation or organization (other than the Mid-Tier Holding Company, Mutual Holding Company, Holding Company, the Bank or a majority-owned subsidiary of any such party) if the Person is a senior officer or partner or beneficially owns, directly or indirectly, 10% or more of any class of equity securities of the corporation or organization, (ii) any trust or other estate, if the Person has a substantial beneficial interest in the trust or estate or is a trustee or fiduciary of the trust or estate except that for the purposes of this Plan relating to subscriptions in the Offering and the sale of Subscription Shares following the Conversion, a Person who has a substantial beneficial interest in any Non-Tax-Qualified Employee Stock Benefit Plan or any Tax-Qualified Employee Stock Benefit Plan, or who is a trustee or fiduciary of such plan, is not an Associate of such plan, and except that, for purposes of aggregating total shares that may be held by Officers and Directors the term “Associate” does not include any Tax-Qualified Employee Stock Benefit Plan, and (iii) any Person who is related by blood or marriage to such Person and who lives in the same home as such Person or who is a Director or Officer of the Mid-Tier Holding Company, MHC, the Bank or the Holding Company, or any of its parents or subsidiaries.

Bank – Peoples Federal Savings Bank, Brighton, Massachusetts.

Bank Liquidation Account – The account established in the Bank representing the liquidation interests received by Eligible Account Holders and Supplemental Eligible Account Holders in connection with the Conversion.

Code – The Internal Revenue Code of 1986, as amended.

Common Stock – The common stock, par value $0.01 per share, of the Holding Company. The Common Stock is not insured by the FDIC.

Community – The Massachusetts counties of Norfolk, Suffolk and Middlesex.

Community Offering – The offering for sale to certain members of the general public directly by the Holding Company of shares not subscribed for in the Subscription Offering.

2

Control – (including the terms “controlling,” “controlled by,” and “under common control with”) means the direct or indirect power to direct or exercise a controlling influence over the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise as described in 12 C.F.R. Part 574.

Conversion – The conversion and reorganization of the Mutual Holding Company to stock form pursuant to this Plan, and all steps incident or necessary thereto, including the Offering.

Deposit Account – Any withdrawable account, including, without limitation, savings, time, demand, NOW accounts, money market, certificate and passbook accounts.

Director – A member of the Board of Directors of the Bank, the Mid-Tier Holding Company, the Holding Company or the Mutual Holding Company, as appropriate in the context.

Eligible Account Holder – Any Person holding a Qualifying Deposit on the Eligibility Record Date for purposes of determining subscription rights and establishing subaccount balances in the Liquidation Account.

Eligibility Record Date – The date for determining Eligible Account Holders of the Bank, which is December 31, 2008.

Employees – All Persons who are employed by the Bank, Mid-Tier Holding Company, Holding Company or Mutual Holding Company.

Employee Plans – Any one or more Tax-Qualified Employee Stock Benefit Plans of the Bank or the Holding Company, including any ESOP and 401(k) Plan.

ESOP – The Bank’s Employee Stock Ownership Plan and related trust.

FDIC – The Federal Deposit Insurance Corporation.

Foundation – Any new and/or existing charitable foundation intended to qualify as an exempt organization under Section 501(c)(3) of the Code that will receive Holding Company Common Stock and/or cash in connection with the Offering.

Holding Company – The corporation formed for the purpose of acquiring all of the shares of capital stock of the Bank in connection with the Conversion. Shares of Common Stock will be issued in the Conversion to Participants and others in the Offering.

Independent Appraiser – The independent appraiser retained by the Mutual Holding Company, the Mid-Tier Holding Company and the Bank to prepare an appraisal of the pro forma market value of the Subscription Shares.

Liquidation Account – The account established by the Holding Company representing the liquidation interests received by Eligible Account Holders and Supplemental Eligible Account Holders in connection with the Conversion in exchange for their interests in the Mutual Holding Company immediately prior to the Conversion.

3

Member – Any Person or entity who qualifies as a member of the Mutual Holding Company pursuant to its charter and bylaws.

MHC Merger – The merger of Mutual Holding Company with and into the Mid-Tier Holding Company, which shall occur immediately prior to completion of the Conversion, as set forth in this Plan.

Mid-Tier Holding Company – Peoples Federal Bancorp, Inc., the federal corporation that owns 100% of the Bank’s Common Stock and any successor thereto.

Mid-Tier Merger — The merger of Mid-Tier Holding Company with Holding Company, with Holding Company as the resulting entity, which shall occur immediately prior to completion of the Conversion, as set forth in this Plan.

Mutual Holding Company – Peoples Federal MHC, the mutual holding company of the Mid-Tier Holding Company.

Offering – The offering and issuance, pursuant to this Plan, of Common Stock in a Subscription Offering, Community Offering or Syndicated Community Offering, as the case may be.

Offering Range – The range of the number of shares of Common Stock offered for sale in the Offering. The Offering Range shall be equal to the Appraised Value Range divided by the Subscription Price.

Officer – Means the chairman of the board, president, vice president, treasurer, secretary, or comptroller of any company, or any other person who participates in its major policy decisions.

Order Form – Any form (together with any cover letter and acknowledgments) sent to any Participant or Person containing among other things a description of the alternatives available to such Person under this Plan and by which any such Person may make elections regarding subscriptions for Subscription Shares.

Other Member – Any person holding a Deposit Account on the Voting Record Date who is not an Eligible Account Holder or Supplemental Eligible Account Holder, or any borrower who qualifies as a Voting Member.

OTS – The Office of Thrift Supervision, a bureau of The United States Department of Treasury.

Participant – Any Eligible Account Holder, Employee Plan, Supplemental Eligible Account Holder, or Other Member.

Person – An individual, a corporation, a partnership, an association, a joint-stock company, a limited liability company, a trust, an unincorporated organization, or a government or political subdivision of a government.

4

Plan – This Plan of Conversion and Reorganization of the Mutual Holding Company as it exists on the date hereof and as it may hereafter be amended in accordance with its terms.

Prospectus – The one or more documents used in offering the Subscription Shares.

Qualifying Deposit – The aggregate balance of all Deposit Accounts in the Bank of (i) an Eligible Account Holder at the close of business on the Eligibility Record Date, provided such aggregate balance is not less than $50, and (ii) a Supplemental Eligible Account Holder at the close of business on the Supplemental Eligibility Record Date, provided such aggregate balance is not less than $50.

Resident – Any Person who occupies a dwelling within the Community, has a present intent to remain within the Community for a period of time, and manifests the genuineness of that intent by establishing an ongoing physical presence within the Community together with an indication that such presence within the Community is something other than merely transitory in nature. To the extent the person is a corporation or other business entity, the principal place of business or headquarters shall determine residency under this provision. To the extent a person is a personal benefit plan or trustees, the circumstances of the beneficiary shall apply with respect to this definition. In the case of all other benefit plans or trusts, the circumstances of the trustee shall be examined for purposes of this definition. The Mutual Holding Company and Holding Company may utilize deposit or loan records of the Bank or such other evidence provided to it to make a determination as to whether a person is a resident. In all cases, however, such a determination shall be in the sole discretion of the Mutual Holding Company and Holding Company. A Participant must be a “Resident” for purposes of determining whether such person “resides” in the Community as such term is used in this Plan.

SEC – The Securities and Exchange Commission.

Special Meeting of Members – The special meeting of Voting Members, and any adjournments thereof, held to consider and vote upon this Plan.

Subscription Offering – The offering of Subscription Shares to Participants.

Subscription Price – The price per Subscription Share to be paid by Participants and others in the Offering. The Subscription Price will be determined by the Board of Directors of the Holding Company and fixed prior to the commencement of the Subscription Offering.

Subscription Shares – Shares of Common Stock offered for sale in the Offering.

Supplemental Eligible Account Holder – Any Person, other than Directors and Officers of the Bank, the MHC and the Mid-Tier Holding Company and their Associates, holding a Qualifying Deposit on the Supplemental Eligibility Record Date, who is not an Eligible Account Holder.

Supplemental Eligibility Record Date – The date for determining Supplemental Eligible Account Holders, which shall be the last day of the calendar quarter preceding OTS approval of the application for conversion.

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Syndicated Community Offering – The offering of Subscription Shares, at the sole discretion of the Holding Company, following commencement of the Subscription Offering through a syndicate of broker-dealers.

Tax-Qualified Employee Stock Benefit Plan – Any defined benefit plan or defined contribution plan, such as an employee stock ownership plan, stock bonus plan, profit-sharing plan or other plan, which, with its related trust, meets the requirements to be “qualified” under Section 401 of the Internal Revenue Code of 1986, as amended. The Bank may make scheduled discretionary contributions to a tax-qualified employee stock benefit plan, provided such contributions do not cause the Bank to fail to meet its regulatory capital requirements. A “Non-Tax-Qualified Employee Stock Benefit Plan” is any defined benefit plan or defined contribution plan that is not so qualified.

Voting Member – Any Person who at the close of business on the Voting Record Date is entitled to vote as a Member of the Mutual Holding Company pursuant to its charter and bylaws.

Voting Record Date – The date fixed by the Directors for determining eligibility to vote at the Special Meeting of Members.

3. PROCEDURES FOR CONVERSION

A. After approval of this Plan by the Boards of Directors of the Mutual Holding Company, the Mid-Tier Holding Company and the Bank, this Plan together with all other requisite material shall be submitted to the OTS for approval. Notice of the adoption of this Plan by the Boards of Directors of the Mutual Holding Company, the Mid-Tier Holding Company and the Bank, and the submission of this Plan to the OTS for approval will, as required by applicable regulation, be published in a newspaper having general circulation in each community in which an office of the Bank is located, and copies of this Plan will be made available at each office of the Bank for inspection by depositors. The Mutual Holding Company, the Mid-Tier Holding Company and the Bank also will publish all required notices related to the filing with the OTS of an application for conversion and holding company application in accordance with the provisions of this Plan, and as required by applicable regulation.

B. Following approval of this Plan by the OTS, this Plan will be submitted to a vote of the Voting Members at the Special Meeting of Members. The Mutual Holding Company will mail to all Voting Members, at their last known address appearing on the records of the Bank, a proxy statement in either long or summary form describing this Plan, which will be submitted to a vote of Voting Members at the Special Meeting of Members. The Holding Company also will mail to all Participants a Prospectus and Order Form for the purchase of Subscription Shares. Upon approval of this Plan by a majority of the total number of votes entitled to be cast by Voting Members, the Holding Company, the Mutual Holding Company, the Mid-Tier Holding Company and the Bank will take all other necessary steps pursuant to applicable laws and regulations to consummate the Conversion and Offering. The Conversion must be completed within 24 months of the approval of this Plan by Voting Members, unless a longer time period is permitted by governing laws and regulations.

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C. The Conversion will be effected as follows, or in any other manner that is consistent with the purposes of this Plan and applicable laws and regulations. The choice of which method to use to effect the Conversion will be made by the Board of Directors of the Mutual Holding Company, the Mid-Tier Holding Company and the Bank immediately prior to the closing of the Conversion. Each of the steps set forth below shall be deemed to occur in such order as is necessary to consummate the Conversion pursuant to this Plan, the intent of the Board of Directors of the Mutual Holding Company, the Mid-Tier Holding Company and the Bank, and applicable federal and state regulations and policy. Approval of this Plan by Voting Members also shall constitute approval of each of the transactions necessary to implement this Plan.

(1) The Mid-Tier Holding Company will establish the Holding Company as a first-tier Maryland chartered stock holding company subsidiary.

(2) The Mutual Holding Company will merge with and into the Mid-Tier Holding Company with the Mid-Tier Holding Company as the resulting entity (the “MHC Merger”), pursuant to the Agreement and Plan of Merger attached hereto as Exhibit A, whereby the shares of Mid-Tier Holding Company common stock held by the Mutual Holding Company will be canceled and members of the Mutual Holding Company will constructively receive liquidation interests in the Mid-Tier Holding Company in exchange for their ownership interests in the Mutual Holding Company.

(3) Immediately after the MHC Merger, the Mid-Tier Holding Company will merge with the Holding Company, with the Holding Company as the resulting entity (the “Mid-Tier Merger”), pursuant to the Agreement and Plan of Merger attached hereto as Exhibit B, whereby the Bank will become the wholly-owned subsidiary of the Holding Company. As part of the Mid-Tier Merger, the liquidation interests in Mid-Tier Holding Company constructively received by the members of the Mutual Holding Company immediately prior to the Conversion will automatically, without further action on the part of the holders thereof, be exchanged for an interest in the Liquidation Account.

(4) Immediately after the Mid-Tier Merger, the Holding Company will offer for sale the Holding Company Common Stock in the Offering.

(5) The Holding Company will contribute at least 50% of the net proceeds of the Offering to the Bank in constructive exchange for additional shares of common stock of the Bank and in exchange for the Bank Liquidation Account.

D. The Holding Company shall register the issuance of the Subscription Shares with the SEC and any appropriate state securities authorities.

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E. All assets, rights, interests, privileges, powers, franchises and property (real, personal and mixed) of the Mid-Tier Holding Company and Mutual Holding Company shall be automatically transferred to and vested in the Holding Company by virtue of the Conversion without any deed or other document of transfer. The Holding Company, without any order or action on the part of any court or otherwise and without any documents of assumption or assignment, shall hold and enjoy all of the properties, franchises and interests, including appointments, powers, designations, nominations and all other rights and interests as the agent or other fiduciary in the same manner and to the same extent as such rights, franchises, and interests and powers were held or enjoyed by the Mid-Tier Holding Company and Mutual Holding Company. The Holding Company shall be responsible for all of the liabilities, restrictions and duties of every kind and description of the Mid-Tier Holding Company and Mutual Holding Company immediately prior to the Conversion, including liabilities for all debts, obligations and contracts of the Mid-Tier Holding Company and Mutual Holding Company, matured or unmatured, whether accrued, absolute, contingent or otherwise and whether or not reflected or reserved against on balance sheets, books or accounts or records of the Mid-Tier Holding Company and Mutual Holding Company.

F. The home office and branch offices of the Bank shall be unaffected by the Conversion. The executive offices of the Holding Company shall be located at the current offices of the Mutual Holding Company and Mid-Tier Holding Company.

4. HOLDING COMPANY APPLICATIONS AND APPROVALS

The Boards of Directors of the Mutual Holding Company, the Mid-Tier Holding Company, the Holding Company and the Bank will take all necessary steps to convert the Mutual Holding Company to stock form, form the Holding Company and complete the Offering. The Mutual Holding Company, the Mid-Tier Holding Company, the Bank and the Holding Company shall make timely applications to the OTS and filings with the SEC for any requisite regulatory approvals to complete the Conversion.

5. SALE OF SHARES

The Subscription Shares will be offered simultaneously in the Subscription Offering to the Participants in the respective priorities set forth in this Plan. The Subscription Offering may begin as early as the mailing of the Proxy Statement for the Special Meeting of Members. The Bank will not extend credit to any Person for the purpose of purchasing shares of Common Stock.

Any shares of Common Stock for which subscriptions have not been received in the Subscription Offering may be offered and sold in the Community Offering or Syndicated Community Offering. The Community Offering and Syndicated Community Offering may begin at any time after commencement of or concurrent with the Subscription Offering, and the Community Offering must be completed within 45 days after completion of the Subscription Offering unless extended by the Mutual Holding Company and the Holding Company with any required regulatory approval.

Any shares of Common Stock sold in a Community Offering or Syndicated Community Offering, or in any other manner permitted by the Office of Thrift Supervision, shall be sold in a manner that will achieve the widest distribution of the Common Stock. The Syndicated

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Community Offering may be conducted in addition to, or instead of, a Community Offering. The issuance of Common Stock in any Subscription Offering and any Community Offering will be consummated simultaneously on the date the sale of Common Stock in the Syndicated Community Offering is consummated and only if the required minimum number of shares of Common Stock has been issued.

6. PURCHASE PRICE AND NUMBER OF SUBSCRIPTION SHARES

The total number of shares, or a range thereof, of Subscription Shares to be offered for sale in the Offering will be determined jointly by the Boards of Directors of the Mutual Holding Company and the Holding Company immediately prior to the commencement of the Subscription Offering, and will be based on the Appraised Value Range and the Subscription Price. The Offering Range will be equal to the Appraised Value Range divided by the Subscription Price. The estimated pro forma consolidated market value of the Holding Company will be subject to adjustment within the Appraised Value Range if necessitated by market or financial conditions, with the receipt of any required approvals of the OTS, and the maximum of the Appraised Value Range may be increased by up to 15% subsequent to the commencement of the Subscription Offering to reflect changes in market and financial conditions or demand for the Common Stock. The number of Subscription Shares issued in the Offering will be equal to the estimated pro forma consolidated market value of the Holding Company, as may be amended, divided by the Subscription Price.

In the event that the Subscription Price multiplied by the number of Subscription Shares to be issued in the Offering is below the minimum of the Appraised Value Range, or materially above the maximum of the Appraised Value Range, a resolicitation of purchasers may be required, provided that up to a 15% increase above the maximum of the Appraised Value Range will not be deemed material so as to require a resolicitation. Any such resolicitation shall be effected in such manner and within such time as the Holding Company and the Mutual Holding Company shall establish, if all required regulatory approvals are obtained.

Notwithstanding the foregoing, Subscription Shares will not be issued unless, prior to the consummation of the Offering, the Independent Appraiser confirms to the Bank, the Mutual Holding Company, the Holding Company and OTS, that, to the best knowledge of the Independent Appraiser, nothing of a material nature has occurred which, taking into account all relevant factors, would cause the Independent Appraiser to conclude that the number of Subscription Shares to be issued in the Offering multiplied by the Subscription Price is incompatible with its estimate of the aggregate consolidated pro forma market value of the Holding Company. If such confirmation is not received, the Holding Company may cancel the Offering, extend the Offering and establish a new Subscription Price and/or Appraised Value Range, extend, reopen or hold a new Offering, or take such other action as the OTS may permit.

The Common Stock to be issued in the Offering shall be fully paid and non-assessable.

7. RETENTION OF OFFERING PROCEEDS BY THE HOLDING COMPANY

The Holding Company may retain up to 50% of the net proceeds of the Offering. The Holding Company believes that the Offering proceeds will provide economic strength to the

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Holding Company and the Bank for the future in a highly competitive and regulated financial services environment and would facilitate the continued expansion through acquisitions of financial service organizations, continued diversification into other related businesses and for other business and investment purposes, including the possible payment of dividends and possible future repurchases of the Common Stock as permitted by applicable federal and state regulations and policy.

8. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS (FIRST PRIORITY)

A. Each Eligible Account Holder shall have nontransferable subscription rights to subscribe for in the Subscription Offering up to the greater of 25,000 shares of Common Stock, 0.10% of the total number of shares of Common Stock issued in the Offering, or fifteen times the product (rounded down to the next whole number) obtained by multiplying the number of Subscription Shares offered in the Offering by a fraction of which the numerator is the amount of the Eligible Account Holder’s Qualifying Deposit and the denominator is the total amount of Qualifying Deposits of all Eligible Account Holders, in each case on the Eligibility Record Date, subject to the provisions of Section 14.

B. In the event that Eligible Account Holders exercise subscription rights for a number of Subscription Shares in excess of the total number of such shares eligible for subscription, the Subscription Shares shall be allocated among the subscribing Eligible Account Holders so as to permit each subscribing Eligible Account Holder to purchase a number of shares sufficient to make his or her total allocation of Subscription Shares equal to the lesser of 100 shares or the number of shares for which such Eligible Account Holder has subscribed. Any remaining shares will be allocated among the subscribing Eligible Account Holders whose subscriptions remain unsatisfied in the proportion that the amount of the Qualifying Deposit of each Eligible Account Holder whose subscription remains unsatisfied bears to the total amount of the Qualifying Deposits of all Eligible Account Holders whose subscriptions remain unsatisfied. If the amount so allocated exceeds the amount subscribed for by any one or more Eligible Account Holders, the excess shall be reallocated (one or more times as necessary) among those Eligible Account Holders whose subscriptions are still not fully satisfied on the same principle until all available shares have been allocated.

C. Subscription rights as Eligible Account Holders received by Directors and Officers and their Associates that are based on increased deposits during the year before the Eligibility Record Date shall be subordinated to the subscription rights of all other Eligible Account Holders, except as permitted by the OTS.

9. SUBSCRIPTION RIGHTS OF EMPLOYEE PLANS (SECOND PRIORITY)

The Employee Plans of the Holding Company and the Bank shall have subscription rights to purchase in the aggregate up to 10% of the Subscription Shares issued in the Offering, including any Subscription Shares to be issued as a result of an increase in the maximum of the Offering Range after commencement of the Subscription Offering and prior to completion of the Offering and including any shares issued to the Foundation. Consistent with applicable laws and regulations and practices and policies, the Employee Plans may use funds contributed by the

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Holding Company or the Bank and/or borrowed from an independent financial institution to exercise such subscription rights, and the Holding Company and the Bank may make scheduled discretionary contributions thereto, provided that such contributions do not cause the Holding Company or the Bank to fail to meet any applicable regulatory capital requirements. The Employee Plans shall not be deemed to be Associates or Affiliates of or Persons Acting in Concert with any Director or Officer of the Mutual Holding Company, Holding Company, Mid-Tier Holding Company, Bank or a majority owned subsidiary of any such entity. Alternatively, if permitted by the OTS, the Employee Plans may purchase all or a portion of such shares in the open market.

10. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS (THIRD PRIORITY)

A. Each Supplemental Eligible Account Holder shall have nontransferable subscription rights to subscribe for in the Subscription Offering up to the greater of 25,000 shares of Common Stock, 0.10% of the total number of shares of Common Stock issued in the Offering, or fifteen times the product (rounded down to the next whole number) obtained by multiplying the number of shares Subscription Shares offered in the Offering by a fraction of which the numerator is the amount of the Supplemental Eligible Account Holder’s Qualifying Deposit and the denominator is the total amount of Qualifying Deposits of all Supplemental Eligible Account Holders, in each case on the Supplemental Eligibility Record Date, subject to the availability of sufficient shares after filling in full all subscription orders of the Eligible Account Holders and Employee Plans and to the purchase limitations specified in Section 14.

B. In the event that Supplemental Eligible Account Holders exercise subscription rights for a number of Subscription Shares in excess of the total number of such shares eligible for subscription, the Subscription Shares shall be allocated among the subscribing Supplemental Eligible Account Holders so as to permit each such subscribing Supplemental Eligible Account Holder, to the extent possible, to purchase a number of shares sufficient to make his or her total allocation of Subscription Shares equal to the lesser of 100 shares or the number of shares for which each such Supplemental Eligible Account Holder has subscribed. Any remaining shares will be allocated among the subscribing Supplemental Eligible Account Holders whose subscriptions remain unsatisfied in the proportion that the amount of the Qualifying Deposit of each such Supplemental Eligible Account Holder bears to the total amount of the Qualifying Deposits of all Supplemental Eligible Account Holders whose subscriptions remain unsatisfied. If the amount so allocated exceeds the amount subscribed for by any one or more Supplemental Eligible Account Holders, the excess shall be reallocated (one or more times as necessary) among those Supplemental Eligible Account Holders whose subscriptions are still not fully satisfied on the same principle until all available shares have been allocated.

11. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY)

A. Each Other Member shall have nontransferable subscription rights to subscribe for in the Subscription Offering up to the greater of 25,000 shares of Common Stock or 0.10% of the total number of shares of Common Stock issued in the Offering, subject to the availability of sufficient shares after filling in full all subscription orders of Eligible Account Holders, Employee Plans and Supplemental Eligible Account Holders and subject to the purchase limitations specified in Section 14.

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B. In the event that such Other Members subscribe for a number of Subscription Shares which, when added to the Subscription Shares subscribed for by the Eligible Account Holders, Employee Plans and Supplemental Eligible Account Holders, is in excess of the total number of Subscription Shares to be issued, the available shares will be allocated to Other Members so as to permit each such subscribing Other Member, to the extent possible, to purchase a number of shares sufficient to make his or her total allocation of Subscription Shares equal to the lesser of 100 shares or the number of shares for which each such Other Member has subscribed. Any remaining shares will be allocated among the subscribing Other Members whose subscriptions remain unsatisfied in the proportion that the amount of the subscription of each such Other Member bears to the total amount of the subscriptions of all Other Members whose subscriptions remain unsatisfied.

12. COMMUNITY OFFERING

If subscriptions are not received for all Subscription Shares offered for sale in the Subscription Offering, shares for which subscriptions have not been received may be offered for sale in the Community Offering through a direct community marketing program which may use a broker, dealer, consultant or investment banking firm experienced and expert in the sale of savings institutions securities. Such entities may be compensated on a fixed fee basis or on a commission basis, or a combination thereof. In the event orders for Common Stock in the Community Offering exceed the number of shares available for sale, shares may be allocated (to the extent shares remain available) first to satisfy orders of natural persons residing in the Community, and thereafter to satisfy orders of other members of the general public, so that each Person in such category of the Community Offering may receive the lesser of 100 shares or the number of shares they ordered. In addition, orders received for shares in the Community Offering will be filled up to a maximum of two percent (2%) of the shares sold in the Offering, and thereafter any remaining shares will be allocated on an equal number of shares basis per order. The Mutual Holding Company and Holding Company shall use their best efforts consistent with this Plan to distribute Common Stock sold in the Community Offering in such a manner as to promote the widest distribution practicable of such stock. The Mutual Holding Company and Holding Company reserve the right to reject any or all orders, in whole or in part, which are received in the Community Offering. Any Person may purchase up to 25,000 shares of Common Stock in the Community Offering, subject to the purchase limitations specified in Section 14.

13. SYNDICATED COMMUNITY OFFERING

If feasible, the Board of Directors may determine to offer Subscription Shares not issued in the Subscription Offering or the Community Offering, if any, in a Syndicated Community, subject to such terms, conditions and procedures as may be determined by the Mutual Holding Company or Holding Company, in a manner that will achieve the widest distribution of the Common Stock, subject to the right of the Mutual Holding Company or Holding Company to accept or reject in whole or in part any subscriptions in the Syndicated Community Offering. In the Syndicated Community Offering, any Person may purchase up to 25,000 shares of Common

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Stock, subject to the purchase limitations specified in Section 14. Orders received for shares in a Syndicated Community Offering will first be filled up to a maximum of two percent (2%) of the shares sold in the Offering, and thereafter any remaining shares will be allocated on an equal number of shares basis per order.

Provided that the Subscription Offering has commenced, the Holding Company may commence the Syndicated Community Offering at any time, provided that the completion of the offer and sale of the Common Stock will be conditioned upon the approval of this Plan by Voting Members.

If for any reason a Syndicated Community Offering of shares of Common Stock not sold in the Subscription Offering or Community Offering if any, cannot be effected, or in the event that any insignificant residue of shares of Common Stock is not sold in the Subscription Offering or Community Offering or in the Syndicated Community Offering, if possible, the Holding Company will make other arrangements for the disposition of unsubscribed shares aggregating at least the minimum of the Offering Range. Such other purchase arrangements will be subject to receipt of any required approval of the OTS.

14. LIMITATION ON PURCHASES

The following limitations shall apply to all purchases and issuances of shares of Subscription Shares:

A. The maximum number of shares of Common Stock that may be subscribed for or purchased in all categories in the Offering by any Person or Participant together with any Associate or group of Persons Acting in Concert shall not exceed 35,000 shares of Common Stock, except that the Employee Plans may subscribe for up to 10% of the Common Stock issued in the Offering (including shares issued in the event of an increase in the maximum of the Offering Range of 15% and including shares issued to the Foundation).

B. The maximum number of shares of Common Stock that may be issued to or purchased in all categories of the Offering by Officers and Directors and their Associates in the aggregate, shall not exceed 26% of the shares of Common Stock issued in the Offering.

C. A minimum of 25 shares of Common Stock must be purchased by each Person purchasing shares in the Offering to the extent those shares are available; provided, however, that in the event the minimum number of shares of Common Stock purchased times the price per share exceeds $500, then such minimum purchase requirement shall be reduced to such number of shares which when multiplied by the price per share shall not exceed $500, as determined by the Board.

If the number of shares of Common Stock otherwise allocable pursuant to Sections 8 through 13, inclusive, to any Person or that Person’s Associates would be in excess of the maximum number of shares permitted as set forth above, the number of shares of Common Stock allocated to each such person shall be reduced to the lowest limitation applicable to that Person, and then the number of shares allocated to each group consisting of a Person and that Person’s Associates shall be reduced so that the aggregate allocation to that Person and his or her Associates complies with the above limits.

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Depending upon market or financial conditions, the Boards of Directors of the Holding Company and Mutual Holding Company, with the receipt of any required approvals of the OTS and without further approval of Voting Members, may decrease or increase the purchase limitations in this Plan; provided, that the maximum purchase limitations may not be increased to a percentage in excess of 5% of the shares issued in the Offering except as provided below. If the Mutual Holding Company or Holding Company increase the maximum purchase limitations, the Mutual Holding Company or Holding Company are only required to resolicit Persons who subscribed for the maximum purchase amount in the Subscription Offering and may, in the sole discretion of the Mutual Holding Company or Holding Company, resolicit certain other large subscribers. In the event that the maximum purchase limitation is increased to 5% of the shares of Common Stock sold in the Offering, such limitation may be further increased to 9.99% of shares of Common Stock sold in the Offering; provided, that orders for Common Stock exceeding 5% of the shares of Common Stock issued in the Offering shall not exceed in the aggregate 10% of the total shares of Common Stock issued in the Offering. Requests to purchase additional Subscription Shares in the event that the purchase limitation is so increased will be determined by the Boards of Directors of the Mutual Holding Company and Holding Company in their sole discretion.

In the event of an increase in the total number of shares offered in the Subscription Offering due to an increase in the maximum of the Offering Range of up to 15% (the “Adjusted Maximum”), the additional shares may be used to fill the Employee Plans orders before all other orders and then will be allocated in accordance with the priorities set forth in this Plan.

For purposes of this Section 14, (i) Directors, Officers and employees of the Bank, the Mid-Tier Holding Company, the Mutual Holding Company and the Holding Company or any of their subsidiaries shall not be deemed to be Associates or a group affiliated with each other or otherwise Acting in Concert solely as a result of their capacities as such, (ii) shares purchased by Tax-Qualified Employee Stock Benefit Plans shall not be attributable to the individual trustees or beneficiaries of any such plan for purposes of determining compliance with the limitations set forth in paragraphs A. and B. of this Section 14, and (iii) shares purchased by a Tax-Qualified Employee Stock Benefit Plan pursuant to instructions of an individual in an account in such plan in which the individual has the right to direct the investment, including any plan of the Bank qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended, shall be aggregated and included in that individual’s purchases and not attributed to the Tax-Qualified Employee Stock Benefit Plan.

Each Person purchasing Common Stock in the Offering shall be deemed to confirm that such purchase does not conflict with the above purchase limitations contained in this Plan.

15. PAYMENT FOR SUBSCRIPTION SHARES

All payments for Common Stock subscribed for in the Subscription Offering and Community Offering must be delivered in full to the Bank or Holding Company, together with a properly completed and executed Order Form, on or prior to the expiration date of the Offering; provided, however, that if the Employee Plans subscribe for shares in the Subscription Offering, such plans will not be required to pay for the shares at the time they subscribe but rather may pay for such shares of Common Stock subscribed for by such plans at the Subscription Price upon consummation of the Offering. Subscription funds will be held in a segregated account at the Bank or, at the discretion of the Bank, at another insured depository institution.

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Payment for Common Stock subscribed for shall be made by check, money order or bank draft. Alternatively, subscribers in the Subscription and Community Offerings may pay for the shares for which they have subscribed by authorizing the Bank on the Order Form to make a withdrawal from the designated types of Deposit Accounts at the Bank in an amount equal to the aggregate Subscription Price of such shares. Such authorized withdrawal shall be without penalty as to premature withdrawal. If the authorized withdrawal is from a certificate account, and the remaining balance does not meet the applicable minimum balance requirement, the certificate shall be canceled at the time of withdrawal, without penalty, and the remaining balance will earn interest at the passbook rate. Funds for which a withdrawal is authorized will remain in the subscriber’s Deposit Account but may not be used by the subscriber during the Subscription and Community Offerings. Thereafter, the withdrawal will be given effect only to the extent necessary to satisfy the subscription (to the extent it can be filled) at the Subscription Price per share. Interest will continue to be earned on any amounts authorized for withdrawal until such withdrawal is given effect. Interest on funds received by check, money order or bank draft will be paid by the Bank at not less than the passbook rate on payments for Common Stock. Such interest will be paid from the date payment is received by the Bank until consummation or termination of the Offering. If for any reason the Offering is not consummated, all payments made by subscribers in the Subscription and Community Offerings will be refunded to them with interest. In case of amounts authorized for withdrawal from Deposit Accounts, refunds will be made by canceling the authorization for withdrawal. The Bank is prohibited by regulation from knowingly making any loans or granting any lines of credit for the purchase of stock in the Offering, and therefore, will not do so.

16. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER FORMS

As soon as practicable after the registration statement prepared by the Holding Company and Mutual Holding Company has been declared effective by the SEC and the stock offering materials have been approved by the OTS, Order Forms will be distributed to the Eligible Account Holders, Employee Plans, Supplemental Eligible Account Holders and Other Members at their last known addresses appearing on the records of the Bank for the purpose of subscribing for shares of Common Stock in the Subscription Offering and will be made available for use by those Persons to whom a Prospectus is delivered.

Each Order Form will be preceded or accompanied by a Prospectus describing the Holding Company, Mutual Holding Company, Mid-Tier Holding Company, Bank, the Common Stock and the Offering. Each Order Form will contain, among other things, the following:

A. A specified date by which all Order Forms must be received by the Mutual Holding Company or Holding Company, which date shall be not less than 20 days, nor more than 45 days, following the date on which the Order Forms are mailed by the Holding Company, and which date will constitute the termination of the Subscription Offering unless extended;

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B. The Subscription Price per share for shares of Common Stock to be sold in the Offering;

C. A description of the minimum and maximum number of Subscription Shares that may be subscribed for pursuant to the exercise of subscription rights or otherwise purchased in the Subscription and Community Offering;

D. Instructions as to how the recipient of the Order Form is to indicate thereon the number of Subscription Shares for which such person elects to subscribe and the available alternative methods of payment therefor;

E. An acknowledgment that the recipient of the Order Form has received a final copy of the prospectus prior to execution of the Order Form;

F. A statement to the effect that all subscription rights are nontransferable, will be void at the end of the Subscription Offering, and can only be exercised by delivering to the Mutual Holding Company or Holding Company within the subscription period such properly completed and executed Order Form, together with payment in the full amount of the aggregate purchase price as specified in the Order Form for the shares of Common Stock for which the recipient elects to subscribe in the Subscription Offering (or by authorizing on the Order Form that the Bank withdraw said amount from the subscriber’s Deposit Account at the Bank); and

G. A statement to the effect that the executed Order Form, once received by the Mutual Holding Company or Holding Company, may not be modified or amended by the subscriber without the consent of the Holding Company.

Notwithstanding the above, the Mutual Holding Company or Holding Company reserve the right in its sole discretion to accept or reject orders received on photocopied or facsimilied order forms.

17. UNDELIVERED, DEFECTIVE OR LATE ORDER FORM; INSUFFICIENT PAYMENT

In the event Order Forms (a) are not delivered by the United States Postal Service, (b) are not received back by the Mutual Holding Company or Holding Company or are received by the Mutual Holding Company or Holding Company after the expiration date specified thereon, (c) are defectively filled out or executed, (d) are not accompanied by the full required payment, unless waived by the Mutual Holding Company or Holding Company, for the shares of Common Stock subscribed for (including cases in which deposit accounts from which withdrawals are authorized are insufficient to cover the amount of the required payment), or (e) are not mailed pursuant to a “no mail” order placed in effect by the account holder, the subscription rights of the Person to whom such rights have been granted will lapse as though such Person failed to return the completed Order Form within the time period specified thereon; provided, however, that the Mutual Holding Company or Holding Company may, but will not be required to, waive any immaterial irregularity on any Order Form or require the submission of corrected Order Forms or the remittance of full payment for subscribed shares by such date as the Mutual Holding Company or Holding Company may specify. The interpretation of the Mutual Holding Company or Holding Company of terms and conditions of this Plan and of the Order Forms will be final, subject to the authority of the OTS.

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18. RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES

The Mutual Holding Company and Holding Company will make reasonable efforts to comply with the securities laws of all States in the United States in which Persons entitled to subscribe for shares of Common Stock pursuant to this Plan reside. However, no such Person will be issued subscription rights or be permitted to purchase shares of Common Stock in the Subscription Offering if such Person resides in a foreign country, or in a State of the United States with respect to which any of the following apply: (A) a small number of Persons otherwise eligible to subscribe for shares under this Plan reside in such state; (B) the issuance of subscription rights or the offer or sale of shares of Common Stock to such Persons would require the Holding Company under the securities laws of such state, to register as a broker, dealer, salesman or agent or to register or otherwise qualify its securities for sale in such state; or (C) such registration or qualification would be impracticable for reasons of cost or otherwise.

19. ESTABLISHMENT OF LIQUIDATION ACCOUNT

A Liquidation Account shall be established by the Holding Company at the time of the Conversion in an amount equal to the Mutual Holding Company’s total equity as reflected in the latest statement of financial condition contained in the final Prospectus used in the Offering. Following the Conversion, the Liquidation Account will be maintained for the benefit of the Eligible Account Holders and Supplemental Eligible Account Holders who continue to maintain their Deposit Accounts at the Bank. Each Eligible Account Holder and Supplemental Eligible Account Holder shall, with respect to his Deposit Account, hold a related inchoate interest in a portion of the Liquidation Account balance, in relation to his Deposit Account balance at the Eligibility Record Date or Supplemental Eligibility Record Date, respectively, or to such balance as it may be subsequently reduced, as hereinafter provided.

In the unlikely event of a complete liquidation of (i) the Bank or (ii) the Bank and the Holding Company (and only in such event), following all liquidation payments to creditors (including those to Account Holders to the extent of their Deposit Accounts) each Eligible Account Holder and Supplemental Eligible Account Holder shall be entitled to receive a liquidating distribution from the Liquidation Account, in the amount of the then adjusted subaccount balance for such Account Holder’s Deposit Account, before any liquidation distribution may be made to any holders of the Holding Company’s capital stock. A merger, consolidation or similar combination with another depository institution, in which the Holding Company and/or the Bank is not the surviving entity, shall not be deemed to be a complete liquidation for this purpose. In such transactions, the Liquidation Account shall be assumed by the surviving holding company or institution.

In the unlikely event of a complete liquidation of (i) the Bank or (ii) the Bank and the Holding Company (and only in such event) following all liquidation payments to creditors (including those to Account Holders to the extent of their Deposit Accounts), at a time when the Bank has a positive net worth and the Holding company does not have sufficient assets (other than the stock of the Bank) to fund the obligations under the Liquidation Account, the Bank with

17

respect to the Bank Liquidation Account shall make a distribution to each Eligible Account Holder and Supplemental Eligible Account Holder in the amount necessary to fund the Holding Company’s remaining obligation under the Liquidation Account, before any liquidation distribution may be made to any holders of the Bank’s capital stock.

In the event of a complete liquidation of the Holding Company where the Bank is not also completely liquidating, or in the event of a sale or other disposition of the Holding Company apart from the Bank, each Eligible Account Holder and Supplemental Eligible Account Holder shall be treated as surrendering such Person’s rights to the Liquidation Account and receiving from the Holding Company and equivalent interest in the Bank Liquidation Account. Each such holder’s interest in the Bank Liquidation Account shall be subject to the same rights and terms as if the Bank Liquidation Account were the Liquidation Account (except that the Holding Company shall cease to exist).

The initial subaccount balance for a Deposit Account held by an Eligible Account Holder and Supplemental Eligible Account Holder shall be determined by multiplying the opening balance in the Liquidation Account by a fraction, the numerator of which is the amount of the Qualifying Deposits of such Account Holder and the denominator of which is the total amount of all Qualifying Deposits of all Eligible Account Holders and Supplemental Account Holders. For Deposit Accounts in existence at both the Eligibility Record Date and the Supplemental Eligibility Record Date, separate initial subaccount balances shall be determined on the basis of the Qualifying Deposits in such Deposit Account on each such record date. Such initial subaccount balance shall not be increased, but shall be subject to downward adjustment as described below.

If, at the close of business on any September 30 liquidation account annual closing date, commencing on or after the effective date of the Conversion, the deposit balance in the Deposit Account of an Eligible Account Holder or Supplemental Eligible Account Holder is less than the lesser of (i) the balance in the Deposit Account at the close of business on any other annual closing date subsequent to the Eligibility Record Date or Supplemental Eligibility Record Date, or (ii) the amount of the Qualifying Deposit in such Deposit Account as of the Eligibility Record Date or Supplemental Eligibility Record Date, the subaccount balance for such Deposit Account shall be adjusted by reducing such subaccount balance in an amount proportionate to the reduction in such deposit balance. In the event of such downward adjustment, the subaccount balance shall not be subsequently increased, notwithstanding any subsequent increase in the deposit balance of the related Deposit Account. If any such Deposit Account is closed, the related subaccount shall be reduced to zero.

The creation and maintenance of the Liquidation Account and the Bank Liquidation Account shall not operate to restrict the use or application of any of the equity accounts of the Holding Company or the Bank. Neither the Holding Company nor the Bank shall be required to set aside funds in connection with its obligations hereunder relating to the Liquidation Account and the Bank Liquidation Account, respectively. Eligible Account Holders and Supplemental Eligible Account Holders do not retain any voting rights in either the Holding Company or the Bank based on their liquidation subaccounts.

18

The amount of the Bank Liquidation Account shall equal at all times the amount of the Liquidation Account, and in no event will any Eligible Account Holder or Supplemental Eligible Account Holder be entitled to a distribution exceeding such holder’s subaccount balance in the Liquidation Account.

For the three-year period following the completion of the Conversion, the Holding Company will not without prior OTS approval (i) sell or liquidate the Holding Company, or (ii) cause the Bank to be sold or liquidated. Upon the written request of the OTS at anytime after two years from the completion of the Conversion, the Holding Company shall transfer the Liquidation Account to the Bank and the Liquidation Account shall be assumed by the Bank, at which time the interests of Eligible Account Holders and Supplemental Eligible Account Holders will be solely and exclusively established in the Bank. In the event such transfer occurs, the Bank Liquidation Account shall be extinguished. In addition, after two years from the completion of the Conversion, the Holding Company may elect to transfer the Liquidation account to the Bank pursuant to the terms of this Section 19. Approval of the Plan of Conversion by the Members shall constitute approval of the transactions described therein.

20. ESTABLISHMENT AND FUNDING OF CHARITABLE FOUNDATION

As part of the Conversion, the Holding Company and the Bank intend to establish the Foundation, which will qualify as an exempt organization under Section 501(c)(3) of the Internal Revenue Code, and to donate to the Foundation cash and shares of Common Stock, in an aggregate amount up to 8% of the value of the shares of Conversion Stock sold in the Stock Offering. The Foundation is being formed in connection with the Conversion in order to complement the Bank’s existing community reinvestment activities and to share with the Bank’s local community a part of the Bank’s financial success as a community-based financial institution. The funding of the Foundation with Common Stock accomplishes this goal as it enables the community to share in the growth and profitability of the Holding Company and the Bank over the long-term.

The Foundation will be dedicated to the promotion of charitable purposes including community development, grants or donations to support housing assistance, not-for-profit community groups and other types of organizations or civic-minded projects. The Foundation will annually distribute total grants to assist charitable organizations or to fund projects within its local community of not less than 5% of the average fair market value of Foundation assets each year, less certain expenses. In order to serve the purposes for which it was formed and maintain its Section 501(c)(3) qualification, the Foundation may sell, on an annual basis, a limited portion of the Common Stock contributed to it by the Holding Company.

The board of directors of the Foundation will include persons who are Officers or Directors of the Holding Company or the Bank. For at least five years after the organization of the Holding Company, except for temporary periods resulting from death, resignation, removal or disqualification, at least (i) one director of the Foundation will be an independent director who is unaffiliated with the Bank or the Holding Company, who is from the Bank’s local community and who has experience with local community charitable organizations and grant making, and (ii) at least one director will be a person who is also a member of the Board of Directors of the Bank.

19

The board of directors of the Foundation will be responsible for establishing the policies of the Foundation with respect to grants or donations, consistent with the stated purposes of the Foundation.

The establishment of the Foundation and contribution of stock and cash to the Foundation in connection with the Conversion will require the prior approval of the OTS.

21. VOTING RIGHTS OF STOCKHOLDERS

Following consummation of the Conversion, the holders of the voting capital stock of the Holding Company shall have the exclusive voting rights with respect to the Holding Company.

22. RESTRICTIONS ON RESALE OR SUBSEQUENT DISPOSITION

A. All shares of Common Stock purchased by Directors or Officers of the Holding Company Bank, Mid-Tier Holding Company and Mutual Holding Company in the Offering shall be subject to the restriction that, except as provided in this Section 22 or as may be approved by the OTS, no interest in such shares may be sold or otherwise disposed of for value for a period of one year following the date of purchase in the Offering.

B. The restriction on disposition of Subscription Shares set forth above in this Section 22 shall not apply to the following:

(1) Any exchange of such shares in connection with a merger or acquisition involving the Bank or the Holding Company, as the case may be, which has been approved by the appropriate federal regulatory agency; and

(2) Any disposition of such shares following the death of the person to whom such shares were initially sold under the terms of this Plan.

C. With respect to all Subscription Shares subject to restrictions on resale or subsequent disposition, each of the following provisions shall apply:

(1) Each certificate representing shares restricted by this section shall bear a legend prominently stamped on its face giving notice of the restriction;

(2) Instructions shall be issued to the stock transfer agent for the Holding Company not to recognize or effect any transfer of any certificate or record of ownership of any such shares in violation of the restriction on transfer; and

(3) Any shares of capital stock of the Holding Company issued with respect to a stock dividend, stock split, or otherwise with respect to ownership of outstanding Subscription Shares subject to the restriction on transfer hereunder shall be subject to the same restriction as is applicable to such Subscription Shares.

20

23. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS FOLLOWING THE CONVERSION

For a period of three years following the Conversion, no Officer, Director or their Associates shall purchase, without the prior written approval of the OTS, any outstanding shares of Common Stock except from a broker-dealer registered with the SEC. This provision shall not apply to negotiated transactions involving more than 1% of the outstanding shares of Common Stock, the exercise of any options pursuant to a stock option plan or purchases of Common Stock made by or held by any Tax-Qualified Employee Stock Benefit Plan or Non-Tax-Qualified Employee Stock Benefit Plan of the Bank or the Holding Company (including the Employee Plans) which may be attributable to any Officer or Director. As used herein, the term “negotiated transaction” means a transaction in which the securities are offered and the terms and arrangements relating to any sale are arrived at through direct communications between the seller or any person acting on its behalf and the purchaser or his investment representative. The term “investment representative” shall mean a professional investment advisor acting as agent for the purchaser and independent of the seller and not acting on behalf of the seller in connection with the transaction.

24. TRANSFER OF DEPOSIT ACCOUNTS

Each person holding a Deposit Account at the Bank at the time of Conversion shall retain an identical Deposit Account at the Bank following Conversion in the same amount and subject to the same terms and conditions (except as to voting and liquidation rights).

25. REGISTRATION AND MARKETING

Within the time period required by applicable laws and regulations, the Holding Company will register the securities issued in connection with the Offering pursuant to the Securities Exchange Act of 1934 and will not deregister such securities for a period of at least three years thereafter, except that the requirement that registration be maintained for three years may be fulfilled by any successor to the Holding Company. In addition, the Holding Company will use its best efforts to encourage and assist a market-maker to establish and maintain a market for the Common Stock and to list those securities on a national or regional securities exchange or the Nasdaq Stock Market.

26. TAX RULINGS OR OPINIONS

Consummation of the Conversion is expressly conditioned upon prior receipt by the Mutual Holding Company, the Mid-Tier Holding Company, Holding Company or Bank of either a ruling or an opinion of counsel with respect to federal tax laws, and either a ruling, an opinion of counsel, or a letter of advice from their tax advisor with respect to applicable state tax laws, to the effect that consummation of the transactions contemplated by the Conversion and this Plan will not result in a taxable reorganization under the provisions of the applicable codes or otherwise result in any adverse tax consequences to the Mutual Holding Company, Mid-Tier Holding Company, Holding Company or Bank, or the account holders receiving subscription rights before or after the Conversion, except in each case to the extent, if any, that subscription rights are deemed to have value on the date such rights are issued.

21

27. STOCK BENEFIT PLANS AND EMPLOYMENT AGREEMENTS

A. The Holding Company and Bank are authorized to adopt Tax-Qualified Employee Stock Benefit Plans in connection with the Offering, including without limitation, an ESOP. Existing as well as any newly created Tax-Qualified Employee Stock Benefit Plans may purchase shares of Common Stock in the Offering, to the extent permitted by the terms of such benefit plans and this Plan.

B. The Holding Company and Bank are authorized to enter into employment agreements and change in control agreements with their executive officers.

C. The Holding Company and Bank are authorized to adopt stock option plans, restricted stock grant plans and other Non-Tax-Qualified Employee Stock Benefit Plans, provided that such plans conform to any applicable requirements of federal regulations.

28. RESTRICTIONS ON ACQUISITION OF BANK AND HOLDING COMPANY

A.	(1)	The charter of the Bank shall contain a provision stipulating that no person, except the Holding Company, for a period of five years following the closing date of the Conversion, may directly or indirectly acquire or offer to acquire the beneficial ownership of more than 10% of any class of an equity security of the Bank, without the prior written approval of the OTS. In addition, such charter shall also provide that for a period of five years following the closing date of the Conversion, shares beneficially owned in violation of the above-described charter provision shall not be entitled to vote and shall not be voted by any person or counted as voting stock in connection with any matter submitted to stockholders for a vote. In addition, special meetings of the stockholders relating to changes in control or amendment of the charter may only be called by the Board of Directors, and shareholders shall not be permitted to cumulate their votes for the election of Directors.
	(2)	For a period of three years from the date of consummation of the Conversion, no person, other than the Holding Company, may directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of any class of an equity security of the Bank without the prior written consent of the OTS.

B. The Articles of Incorporation of the Holding Company shall contain a provision stipulating that in no event shall any record owner of any outstanding shares of Common Stock that are beneficially owned, directly or indirectly, by a person who, as of any record date for the determination of shareholders entitled to vote on any matter, beneficially owns in excess of 10% of the then-outstanding shares of Common Stock, be entitled or permitted to any vote with respect to any shares held in excess of the limit. In addition, the Articles of Incorporation and Bylaws of the Holding Company may contain provisions which prohibit cumulative voting for the election of directors and provide for staggered terms of the directors, impose certain requirements for directors, limitations on the calling of special meetings, a fair price provision for certain business combinations and certain notice requirements.

22

C. For the purposes of this section:

(1) The term “person” includes an individual, a firm, a corporation or other entity;

(2) The term “offer” includes every offer to buy or acquire, solicitation of an offer to sell, tender offer for, or request or invitation for tenders of, a security or interest in a security for value;

(3) The term “acquire” includes every type of acquisition, whether effected by purchase, exchange, operation of law or otherwise; and

(4) The term “security” includes non-transferable subscription rights issued pursuant to a plan of conversion as well as a “security” as defined in 15 U.S.C. § 77b(a)1.

29. PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK

A. The Holding Company shall comply with any applicable law or regulation in the repurchase of any shares of its capital stock following consummation of the Conversion.

B. The Bank shall not declare or pay a cash dividend on, or repurchase any of, its capital stock if the effect thereof would cause its regulatory capital to be reduced below (i) the amount required for the Liquidation Account, or (ii) the federal or state regulatory capital requirements.

30. CONSUMMATION OF CONVERSION AND EFFECTIVE DATE

The Effective Date of the Conversion shall be the date upon which the Articles of Combination (or similar documents) shall be filed with OTS with respect to the MHC Merger and the Mid-Tier Merger. The Articles of Combination shall be filed after all requisite regulatory and depositor approvals have been obtained, all applicable waiting periods have expired, and sufficient subscriptions and orders for Subscription Shares have been received. The Closing of the sale of all shares of Common Stock sold in the Offering shall occur simultaneously on the effective date of the Closing.

31. EXPENSES OF CONVERSION

The Mutual Holding Company, the Mid-Tier Holding Company, the Bank and the Holding Company may retain and pay for the services of legal, financial and other advisors to assist in connection with any or all aspects of the Conversion, including the Offering, and such parties shall use their best efforts to assure that such expenses are reasonable.

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32. AMENDMENT OR TERMINATION OF PLAN

If deemed necessary or desirable, this Plan may be substantively amended as a result of comments from the OTS or otherwise at any time prior to solicitation of proxies from Voting Members to vote on this Plan by the Board of Directors of the Mutual Holding Company, and at any time thereafter by the Board of Directors of the Mutual Holding Company with the concurrence of the OTS. Any amendment to this Plan made after approval by Voting Members with the approval of the OTS shall not require further approval by Voting Members unless otherwise required by the OTS. The Board of Directors of the Mutual Holding Company may terminate this Plan at any time prior to the Special Meeting of Members to vote on this Plan, and at any time thereafter with the concurrence of the OTS.

By adopting this Plan, Voting Members of the Mutual Holding Company authorize the Board of Directors of the Mutual Holding Company to amend or terminate this Plan under the circumstances set forth in this Section 32.

33. CONDITIONS TO CONVERSION

Consummation of the Conversion pursuant to this Plan is expressly conditioned upon the following:

A. Prior receipt by the Mutual Holding Company, the Mid-Tier Holding Company, or the Bank of rulings of the United States Internal Revenue Service and the state taxing authorities, or opinions of counsel or tax advisers as described in Section 26 hereof;

B. The issuance of the Subscription Shares offered in the Offering; and

C. The completion of the Conversion within the time period specified in Section 3 of this Plan.

34. INTERPRETATION

All interpretations of this Plan and application of its provisions to particular circumstances by a majority of the Board of Directors of the Mutual Holding Company shall be final, subject to the authority of the OTS.

Adopted: February 16, 2010

Amended: March 11, 2010

24

EXHIBIT A

FORM OF AGREEMENT OF MERGER BETWEEN

PEOPLES FEDERAL MHC

AND PEOPLES FEDERAL BANCORP, INC.

EXHIBIT A

FORM OF AGREEMENT OF MERGER BETWEEN

PEOPLES FEDERAL MHC

AND PEOPLES FEDERAL BANCORP, INC.

THIS AGREEMENT OF MERGER (the “MHC Merger Agreement”) dated as of             , is made by and between Peoples Federal MHC, a federal mutual holding company (the “Mutual Holding Company”) and Peoples Federal Bancorp, Inc., a federal corporation (the “Mid-Tier Holding Company”). Capitalized terms have the respective meanings given them in the Plan of Conversion and Reorganization of Peoples Federal MHC (the “Plan”), unless otherwise defined herein.

R E C I T A L S:

1. The Mid-Tier Holding Company is a federal corporation that owns 100% of the common stock of the Bank.

2. The Mutual Holding Company is a federal mutual holding company that owns 100% of the common stock of the Mid-Tier Holding Company.

3. At least two-thirds of the members of the boards of directors of the Mutual Holding Company and the Mid-Tier Holding Company have approved this MHC Merger Agreement whereby the Mutual Holding Company shall merge with and into the Mid-Tier Holding Company with the Mid-Tier Holding Company as the surviving or resulting corporation (the “MHC Merger”), and have authorized the execution and delivery thereof.

NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein, the parties hereto have agreed as follows:

1. Merger. At and on the Effective Date of the MHC Merger, the Mutual Holding Company will merge with the Mid-Tier Holding Company with the Mid-Tier Holding Company as the resulting entity (“Resulting Corporation”) whereby the shares of Mid-Tier Holding Company common stock held by the Mutual Holding Company will be canceled and members of the Mutual Holding Company will constructively receive liquidation interests in Mid-Tier Holding Company in exchange for their interests in the Mutual Holding Company.

2. Effective Date. The MHC Merger shall not be effective until and unless the Plan is approved by the Office of Thrift Supervision (the “OTS”) after approval by at least (i) two-thirds of the outstanding common stock of the Mid-Tier Holding Company and (ii) a majority of the eligible votes of Voting Depositors, and the Articles of Combination shall have been filed with the OTS with respect to the MHC Merger. Approval of the Plan by the Voting Depositors shall constitute approval of the MHC Merger Agreement by the Voting Depositors. Approval of the Plan by the sole stockholder of the Mid-Tier Holding Company shall constitute approval of the MHC Merger Agreement by such stockholder.

3. Name. The name of the Resulting Corporation shall be Peoples Federal Bancorp, Inc.

EXHIBIT A

4. Offices. The main office of the Resulting Corporation shall be 435 Market Street, Brighton, Massachusetts 02135.

5. Directors and Officers. The directors and officers of the Mid-Tier Holding Company immediately prior to the Effective Date shall be the directors and officers of the Resulting Corporation after the Effective Date.

6. Rights and Duties of the Resulting Corporation. At the Effective Date, the Mutual Holding Company shall be merged with and into the Mid-Tier Holding Company with the Mid-Tier Holding Company as the Resulting Corporation. The business of the Resulting Corporation shall be that of a Federally-chartered corporation as provided in its Charter. All assets, rights, interests, privileges, powers, franchises and property (real, personal and mixed) of the Mid-Tier Holding Company and the Mutual Holding Company shall be transferred automatically to and vested in the Resulting Corporation by virtue of the MHC Merger without any deed or other document of transfer. The Resulting Corporation, without any order or action on the part of any court or otherwise and without any documents of assumption or assignment, shall hold and enjoy all of the properties, franchises and interests, including appointments, powers, designations, nominations and all other rights and interests as the agent or other fiduciary in the same manner and to the same extent as such rights, franchises, and interests and powers were held or enjoyed by the Mid-Tier Holding Company and the Mutual Holding Company. The Resulting Corporation shall be responsible for all of the liabilities, restrictions and duties of every kind and description of the Mid-Tier Holding Company and the Mutual Holding Company immediately prior to the MHC Merger, including liabilities for all debts, obligations and contracts of the Mid-Tier Holding Company and the Mutual Holding Company, matured or unmatured, whether accrued, absolute, contingent or otherwise and whether or not reflected or reserved against on balance sheets, books of accounts or records of the Mid-Tier Holding Company or the Mutual Holding Company. The stockholders of the Mid-Tier Holding Company shall possess all voting rights with respect to the shares of stock of the Resulting Corporation. All rights of creditors and other obligees and all liens on property of the Mid-Tier Holding Company and the Mutual Holding Company shall be preserved and shall not be released or impaired.

7. Rights of Stockholders. At the Effective Date, the shares of Mid-Tier Holding Company common stock held by the Mutual Holding Company will be canceled and members of the Mutual Holding Company will receive liquidation interests in the Mid-Tier Holding Company in exchange for their interests in the Mutual Holding Company.

8. Other Terms. The Plan is incorporated herein by this reference and made a part hereof to the extent necessary or appropriate to effect and consummate the terms of this MHC Merger Agreement and the Conversion.

A-2

EXHIBIT A

IN WITNESS WHEREOF, the Mid-Tier Holding Company and the Mutual Holding Company have caused this MHC Merger Agreement to be executed as of the date first above written.

	Peoples Federal Bancorp, Inc.
	(a federal corporation)
ATTEST:
	By:
Myron J. Fox, Secretary		Maurice H. Sullivan, Jr.
		Chairman and Chief Executive Officer
	Peoples Federal MHC
	(a federal mutual holding company)
ATTEST:
	By:
Myron J. Fox, Secretary		Maurice H. Sullivan, Jr.
		Chairman and Chief Executive Officer

A-3

EXHIBIT B

FORM OF AGREEMENT OF MERGER BETWEEN

PEOPLES FEDERAL BANCORP, INC. AND

PEOPLES FEDERAL BANCSHARES, INC.

EXHIBIT B

EXHIBIT B

FORM OF

AGREEMENT OF MERGER BETWEEN

PEOPLES FEDERAL BANCORP, INC. AND

PEOPLES FEDERAL BANCSHARES, INC.

THIS AGREEMENT OF MERGER (the “Mid-Tier Merger Agreement”), dated as of                     , is made by and between Peoples Federal Bancorp, Inc., a federal corporation (the “Mid-Tier Holding Company”) and Peoples Federal Bancshares, Inc., a Maryland corporation (the “Holding Company”). Capitalized terms have the respective meanings given them in the Plan of Conversion and Reorganization of Peoples Federal MHC (the “Plan”) unless otherwise defined herein.

R E C I T A L S:

1. The Mid-Tier Holding Company is a federal corporation that owns 100% of the common stock of the Bank.

2. The Holding Company has been organized as the wholly-owned subsidiary of the Mid-Tier Holding Company to succeed to the operations of the Mid-Tier Holding Company at the Effective Date of the Mid-Tier Merger, as such tem is defined below.

3. At least two-thirds of the members of the boards of directors of the Mid-Tier Holding Company and the Holding Company have approved this Mid-Tier Merger Agreement whereby the Mid-Tier Holding Company will be merged with the Holding Company with the Holding Company as the resulting corporation (the “Mid-Tier Merger”), and authorized the execution and delivery thereof.

NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein, the parties hereto have agreed as follows:

1. Merger. At and on the Effective Date of the Mid-Tier Merger, the Mid-Tier Holding Company will merge with the Holding Company with the Holding Company as the resulting corporation (the “Resulting Corporation”), whereby the Bank will become the wholly-owned subsidiary of the Holding Company. As part of the Mid-Tier Merger, the liquidation interests of the members of Peoples Federal MHC in the Mid-Tier Holding Company will automatically, without further action, be exchanged for an interest in the Liquidation Account.

2. Effective Date. The Mid-Tier Merger shall not be effective until and unless the Plan is approved by the Office of Thrift Supervision (the “OTS”) after (i) approval by at least two-thirds of the outstanding common stock of the Mid-Tier Holding Company, (ii) approval by at least a majority of the eligible votes of Voting Depositors, and (iii) the filing of the Articles of Combination with the OTS and filing of the Articles of Merger with the Maryland State Department of Assessments and Taxation with respect to the Mid-Tier Merger. Approval of the Plan by the Voting Depositors shall constitute approval of the Mid-Tier Merger Agreement by the Voting Depositors in their capacity as members of Peoples Federal MHC.

B-1

EXHIBIT B

3. Name. The name of the Resulting Corporation shall be Peoples Federal Bancshares, Inc.

4. Offices. The main office of the Resulting Corporation shall be 435 Market Street, Brighton, Massachusetts 02135.

5. Directors and Officers. The directors and officers of the Mid-Tier Holding Company immediately prior to the Effective Date shall be the directors and officers of the Resulting Corporation after the Effective Date.

6. Rights and Duties of the Resulting Corporation. At the Effective Date, the Mid-Tier Holding Company shall merge with the Holding Company, with the Holding Company as the Resulting Corporation. The business of the Resulting Corporation shall be that of a Maryland corporation as provided in its Articles of Incorporation. All assets, rights, interests, privileges, powers, franchises and property (real, personal and mixed) of the Mid-Tier Holding Company and the Holding Company shall be transferred automatically to and vested in the Resulting Corporation by virtue of the Mid-Tier Merger without any deed or other document of transfer. The Resulting Corporation, without any order or action on the part of any court or otherwise and without any documents of assumption or assignment, shall hold and enjoy all of the properties, franchises and interests, including appointments, powers, designations, nominations and all other rights and interests as the agent or other fiduciary in the same manner and to the same extent as such rights, franchises, and interests and powers were held or enjoyed by the Mid-Tier Holding Company and the Holding Company. The Resulting Corporation shall be responsible for all of the liabilities, restrictions and duties of every kind and description of the Mid-Tier Holding Company and the Holding Company immediately prior to the Mid-Tier Merger, including liabilities for all debts, obligations and contracts of the Mid-Tier Holding Company and the Holding Company, matured or unmatured, whether accrued, absolute, contingent or otherwise and whether or not reflected or reserved against on balance sheets, books of accounts or records of the Mid-Tier Holding Company or the Holding Company. The stockholders of the Holding Company shall possess all voting rights with respect to the shares of stock of the Resulting Corporation. All rights of creditors and other obligees and all liens on property of the Mid-Tier Holding Company and the Holding Company shall be preserved and shall not be released or impaired.

7. Rights of Stockholders. At the Effective Date, the members of Peoples Federal MHC will automatically exchange their liquidation interests in the Mid-Tier Holding Company that they received in the MHC Merger for an interest in the Liquidation Account.

8. Other Terms. The Plan is incorporated herein by this reference and made a part hereof to the extent necessary or appropriate to effect and consummate the terms of this Mid-Tier Merger Agreement and the Conversion.

B-2

EXHIBIT B

IN WITNESS WHEREOF, the Mid-Tier Holding Company and the Holding Company have caused this Mid-Tier Merger Agreement to be executed as of the date first above written.

	Peoples Federal Bancorp, Inc.
ATTEST:
	By:
Myron J. Fox, Secretary		Maurice H. Sullivan, Jr.
		Chairman and Chief Executive Officer
	Peoples Federal Bancshares, Inc.
ATTEST:
	By:
, Secretary		Maurice H. Sullivan, Jr.
		Chairman and Chief Executive Officer

B-3

EX-3.1

Exhibit 3.1

ARTICLES OF INCORPORATION

PEOPLES FEDERAL BANCSHARES, INC.

The undersigned, Steven T. Lanter, whose address is 5335 Wisconsin Avenue, N.W., Suite 780, Washington, DC 20015, being at least eighteen years of age, acting as incorporator, does hereby form a corporation under the general laws of the State of Maryland, having the following Articles of Incorporation (the “Articles”):

ARTICLE 1. Name. The name of the corporation is Peoples Federal Bancshares, Inc. (herein the “Corporation”).

ARTICLE 2. Principal Office. The address of the principal office of the Corporation in the State of Maryland is c/o CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 1660, Baltimore, Maryland 21202.

ARTICLE 3. Purpose. The purpose for which the Corporation is formed is to engage in any lawful act or activity for which corporations may be organized under the general laws of the State of Maryland as now or hereafter in force.

ARTICLE 4. Resident Agent. The name and address of the registered agent of the Corporation in the State of Maryland is CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 1660, Baltimore, Maryland 21202. Said resident agent is a Maryland corporation.

ARTICLE 5. Capital Stock

A. Authorized Stock. The total number of shares of capital stock of all classes that the Corporation has authority to issue is one-hundred fifty million (150,000,000) shares, consisting of:

1. fifty million (50,000,000) shares of preferred stock, par value one cent ($0.01) per share (the “Preferred Stock”); and

2. one-hundred million (100,000,000) shares of common stock, par value one cent ($0.01) per share (the “Common Stock”).

The aggregate par value of all the authorized shares of capital stock is one million, five-hundred thousand dollars ($1,500,000). Except to the extent required by governing law, rule or regulation, the shares of capital stock may be issued from time to time by the Board of Directors without further approval of the stockholders of the Corporation. The Corporation shall have the authority to purchase its capital stock out of funds lawfully available therefor, which funds shall include, without limitation, the Corporation’s unreserved and unrestricted capital surplus. The Board of Directors, pursuant to a resolution approved by a majority of the Whole Board (rounded up to the nearest whole number), and without action by the stockholders, may amend these Articles to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that the Corporation has authority to issue. For the purposes of these Articles, the term “Whole Board” shall mean the total number of directors that the Corporation would have if there were no vacancies on the Board of Directors at the time any such resolution is presented to the Board of Directors for adoption.

B. Common Stock. Except as provided under the terms of any series of Preferred Stock and as limited by Section D of this Article 5, the exclusive voting power shall be vested in the Common Stock. Except as otherwise provided in these Articles, each holder of the Common Stock shall be entitled to one vote for each share of Common Stock standing in the holder’s name on the books of the Corporation. Subject to any rights and preferences of any series of Preferred Stock, holders of Common Stock shall be entitled to such dividends as may be declared by the Board of Directors out of funds lawfully available therefor. Upon the dissolution, liquidation or winding up of the Corporation, the holders of the Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders ratably in proportion to the number of shares held by them, respectively, after: (i) payment or provision for payment of the Corporation’s debts and liabilities; (ii) distributions or provision for distributions in settlement of the Liquidation Account established by the Corporation pursuant to Office of Thrift Supervision regulations for the benefit of certain depositors of Peoples Federal Savings Bank, a federally chartered savings bank and a wholly owned subsidiary of the Corporation, in connection with the Plan of Conversion and Reorganization of Peoples Federal MHC, dated February 16, 2010 (as may be amended); and (iii) distributions or provisions for distributions to holders of any class or series of stock having a preference over the Common Stock in the liquidation, dissolution or winding up of the Corporation.

C. Preferred Stock. The Board of Directors is hereby expressly authorized, subject to any limitations prescribed by law, to provide for the issuance of the shares of Preferred Stock in series, to establish from time to time the number of shares to be included in each such series, and to fix the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the shares of each such series. The number of authorized shares of the Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required by law or pursuant to the terms of such Preferred Stock.

D. Restrictions on Voting Rights of the Corporation’s Equity Securities.

1. Notwithstanding any other provision of these Articles, in no event shall the record owner (or if more than one record owner, all such record owners taken as a group) of any outstanding Common Stock that is beneficially owned, directly or indirectly, by a Person who, as of any record date for the determination of stockholders entitled to vote on any matter, beneficially owns in excess of 10% of the then-outstanding shares of Common Stock (the “Limit”), be entitled, or permitted to any vote in respect of the shares held in excess of the Limit. The number of votes that may be cast by any particular record owner by virtue of the provisions hereof in respect of Common Stock beneficially owned by such Person owning shares in excess of the Limit (a “Holder in Excess”) shall be a number equal to the total number of votes that a single record owner of all Common Stock owned by such Holder in Excess would be entitled to cast after giving effect to the provisions hereof, multiplied by a fraction, the numerator of which is the number of shares of such class or series that are both (i) beneficially owned by such Holder

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in Excess and (ii) owned of record by such particular record owner and the denominator of which is the total number of shares of Common Stock beneficially owned by such Holder in Excess. The provisions of this Section D of this Article 5 shall not be applicable if, before the Holder in Excess acquired beneficial ownership of such shares in excess of the Limit, such acquisition was approved by a majority of the “Unaffiliated Directors.” For this purpose, the term “Unaffiliated Director” means any member of the Board of Directors who is unaffiliated with the Holder in Excess and was a member of the Board of Directors prior to the time that the Holder in Excess became such, and any director who is thereafter chosen to fill any vacancy on the Board of Directors and who is elected and who, in either event, is unaffiliated with the Holder in Excess and in connection with his or her initial assumption of office is recommended for appointment or election by a majority of the Unaffiliated Directors then serving on the Board of Directors.

2. The following definitions shall apply to this Section D of this Article 5.

(a) An “affiliate” of a specified Person shall mean a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified.

(b) “Beneficial ownership” shall be determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934 (or any successor rule or statutory provision), or, if said Rule 13d-3 shall be rescinded and there shall be no successor rule or statutory provision thereto, pursuant to said Rule 13d-3 as in effect on December 31, 2009; provided, however, that a Person shall, in any event, also be deemed the “beneficial owner” of any Common Stock:

(1) that such Person or any of its affiliates beneficially owns, directly or indirectly; or

(2) that such Person or any of its affiliates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding (but shall not be deemed to be the beneficial owner of any voting shares solely by reason of an agreement, contract, or other arrangement with the Corporation to effect any transaction of the type described in clause (i) or (ii) of the first sentence of Article 9 hereof) or upon the exercise of conversion rights, exchange rights, warrants, or options or otherwise, or (ii) sole or shared voting or investment power with respect thereto pursuant to any agreement, arrangement, understanding, relationship or otherwise (but shall not be deemed to be the beneficial owner of any voting shares solely by reason of a revocable proxy granted for a particular meeting of stockholders, pursuant to a public solicitation of proxies for such meeting, with respect to shares of which neither such Person nor any such affiliate is otherwise deemed the beneficial owner); or

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(3) that are beneficially owned, directly or indirectly, by any other Person with which such first mentioned Person or any of its affiliates acts as a partnership, limited partnership, syndicate or other group pursuant to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the Corporation; and provided further, however, that (i) no director or officer of the Corporation (or any affiliate of any such director or officer) shall, solely by reason of any or all of such directors or officers acting in their capacities as such, be deemed, for any purposes hereof, to beneficially own any Common Stock beneficially owned by any other such director or officer (or any affiliate thereof), and (ii) neither any employee stock ownership or similar plan of the Corporation or any subsidiary of the Corporation nor any trustee with respect thereto (or any affiliate of such trustee) shall, solely by reason of such capacity of such trustee, be deemed, for any purposes hereof, to beneficially own any Common Stock held under any such plan. For purposes of computing the percentage of beneficial ownership of Common Stock of a Person, the outstanding Common Stock shall include shares deemed owned by such Person through application of this subsection but shall not include any other shares of Common Stock that may be issuable by the Corporation pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise. For all other purposes, the outstanding Common Stock shall include only Common Stock then outstanding and shall not include any Common Stock that may be issuable by the Corporation pursuant to any agreement, or upon the exercise of conversion rights, warrants or options, or otherwise.

(c) A “Person” shall mean any individual, firm, corporation, or other entity.

(d) The Board of Directors shall have the power to construe and apply the provisions of this Section D and to make all determinations necessary or desirable to implement such provisions including, but not limited to, matters with respect to (i) the number of shares of Common Stock beneficially owned by any Person, (ii) whether a Person is an affiliate of another, (iii) whether a Person has an agreement, arrangement, or understanding with another as to the matters referred to in the definition of beneficial ownership, (iv) the application of any other definition or operative provision of this Section D to the given facts, or (v) any other matter relating to the applicability or effect of this Section D.

3. The Board of Directors shall have the right to demand that any Person reasonably believed by the Board of Directors to be a Holder in Excess (or holder of record of Common Stock beneficially owned by any Holder in Excess) supply the Corporation with complete information as to (i) the record owner(s) of all shares beneficially owned by such Holder in Excess, and (ii) any other factual matter relating to the applicability or effect of this section as may reasonably be requested of such Holder in Excess. The Board of Directors shall further

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have the right to receive from any Holder in Excess reimbursement for all expenses incurred by the Board in connection with its investigation of any matters relating to the applicability or effect of this section on such Holder in Excess, to the extent such investigation is deemed appropriate by the Board of Directors as a result of the Holder in Excess refusing to supply the Corporation with the information described in the previous sentence.

4. Any constructions, applications, or determinations made by the Board of Directors pursuant to this Section D in good faith and on the basis of such information and assistance as was then reasonably available for such purpose, shall be conclusive and binding upon the Corporation and its stockholders.

5. In the event any provision (or portion thereof) of this Section D shall be found to be invalid, prohibited or unenforceable for any reason, the remaining provisions (or portions thereof) of this Section D shall remain in full force and effect, and shall be construed as if such invalid, prohibited or unenforceable provision had been stricken herefrom or otherwise rendered inapplicable, it being the intent of the Corporation and its stockholders that each such remaining provision (or portion thereof) of this Section D remain, to the fullest extent permitted by law, applicable and enforceable as to all stockholders, including Holders in Excess, notwithstanding any such finding.

E. Majority Vote. Pursuant to Section 2-104(b)(5) of the Maryland General Corporation Law (“MGCL”), notwithstanding any provision of the MGCL requiring stockholder authorization of an action by a greater proportion than a majority of the total number of shares of all classes of capital stock or of the total number of shares of any class of capital stock, such action shall be valid and effective if authorized by the affirmative vote of the holders of a majority of the total number of shares of all classes outstanding and entitled to vote thereon, except as otherwise provided in these Articles.

F. Quorum. Except as otherwise provided by law or expressly provided in these Articles, the presence, in person or by proxy, of the holders of record of shares of capital stock of the Corporation entitling the holders thereof to cast a majority of the votes (after giving effect, if required, to the provisions of Article 5, Section D) entitled to be cast by the holders of shares of capital stock of the Corporation entitled to vote shall constitute a quorum at all meetings of the stockholders, and every reference in these Articles to a majority or other proportion of capital stock (or the holders thereof) for purposes of determining any quorum requirement or any requirement for stockholder consent or approval shall be deemed to refer to such majority or other proportion of the votes (or the holders thereof) then entitled to be cast in respect of such capital stock.

ARTICLE 6. Preemptive Rights and Appraisal Rights.

A. Preemptive Rights. Except for preemptive rights approved by the Board of Directors pursuant to a resolution approved by a majority of the directors then in office, no holder of the capital stock of the Corporation or series of stock or of options, warrants or other rights to purchase shares of any class or series of stock or of other securities of the Corporation shall have any preemptive right to purchase or subscribe for any unissued capital stock of any class or series, or any unissued bonds, certificates of indebtedness, debentures or other securities convertible into or exchangeable for capital stock of any class or series or carrying any right to purchase stock of any class or series.

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B. Appraisal Rights. Holders of shares of stock shall not be entitled to exercise any rights of an objecting stockholder provided for under Title 3, Subtitle 2 of the MGCL or any successor statute unless the Board of Directors, pursuant to a resolution approved by a majority of the directors then in office, shall determine that such rights apply with respect to all or any classes or series of stock, to one or more transactions occurring after the date of such determination in connection with which holders of such shares would otherwise be entitled to exercise such rights.

ARTICLE 7. Directors. The following provisions are made a part of these Articles for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:

A. Management of the Corporation. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. All powers of the Corporation may be exercised by or under the authority of the Board of Directors, except as conferred on or as reserved to the stockholders by law or by these Articles or the Bylaws of the Corporation; provided, however, that any limitations on the Board of Director’s management or direction of the affairs of the Corporation shall reserve the directors’ full power to discharge their fiduciary duties.

B. Number, Class and Terms of Directors; No Cumulative Voting. The number of directors constituting the Board of Directors of the Corporation shall initially be eleven (11), which number may be increased or decreased in the manner provided in the Bylaws of the Corporation; provided, however, that such number shall never be less than the minimum number of directors required by the MGCL now or hereafter in force. The directors, other than those who may be elected by the holders of any series of Preferred Stock, shall be divided into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class (“Class I”) to expire at the conclusion of the first annual meeting of stockholders, the term of office of the second class (“Class II”) to expire at the conclusion of the annual meeting of stockholders one year thereafter and the term of office of the third class (“Class III”) to expire at the conclusion of the annual meeting of stockholders two years thereafter, with each director to hold office until his or her successor shall have been duly elected and qualified. At each annual meeting of stockholders, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election or for such shorter period of time as the Board of Directors may determine, with each director to hold office until his or her successor shall have been duly elected and qualified.

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The names of the individuals who will serve as directors of the Corporation until their successors are elected and qualify are as follows:

Class I Directors:	Term to Expire in
Thomas J. Leetch, Jr.	2011
Vincent J. Mannering	2011
Norman Posner	2011
Maurice H. Sullivan, III	2011
Class II Directors:	Term to Expire in
D. Randolph Berry	2012
Hugh Gallagher	2012
Frederick Taw	2012
Class III Directors:	Term to Expire in
William Giudice	2013
Myron J. Fox	2013
John F. Reen, Jr.	2013
Maurice H. Sullivan, Jr.	2013

Stockholders shall not be permitted to cumulate their votes in the election of directors.

C. Vacancies. Any vacancies in the Board of Directors may be filled in the manner provided in the Bylaws of the Corporation.

D. Removal. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 80% of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (after giving effect to the provisions of Article 5 hereof) voting together as a single class.

E. Stockholder Proposals and Nominations of Directors. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation. Stockholder proposals to be presented in connection with a special meeting of stockholders shall be presented by the Corporation only to the extent required by Section 2-502 of the MGCL and the Bylaws of the Corporation.

ARTICLE 8. Bylaws. The Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws of the Corporation. Any adoption, amendment or repeal of the Bylaws of the Corporation by the Board of Directors shall require the approval of a majority of the Whole Board. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the

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Corporation. In addition to any vote of the holders of any class or series of stock of the Corporation required by law or by these Articles, the affirmative vote of the holders of at least 80% of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (after giving effect to the provisions of Article 5 hereof), voting together as a single class, shall be required for the adoption, amendment or repeal of any provisions of the Bylaws of the Corporation by the stockholders.

ARTICLE 9. Evaluation of Certain Offers. The Board of Directors, when evaluating (i) any offer of another Person (as defined below) to (A) make a tender or exchange offer for any equity security of the Corporation, (B) merge or consolidate the Corporation with another corporation or entity, or (C) purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation or (ii) any other actual or proposed transaction that would or may involve a change in control of the Corporation (whether by purchases of shares of stock or any other securities of the Corporation in the open market or otherwise, tender offer, merger, consolidation, share exchange, dissolution, liquidation, sale of all or substantially all of the assets of the Corporation, proxy solicitation or otherwise), may, in connection with the exercise of its business judgment in determining what is in the best interests of the Corporation and its stockholders and in making any recommendation to the Corporation’s stockholders, give due consideration to all relevant factors, including, but not limited to: (A) the economic effect, both immediate and long-term, upon the Corporation’s stockholders, including stockholders, if any, who do not participate in the transaction; (B) the social and economic effect on the present and future employees, creditors and customers of, and others dealing with, the Corporation and its subsidiaries and on the communities in which the Corporation and its subsidiaries operate or are located; (C) whether the proposal is acceptable based on the historical, current or projected future operating results or financial condition of the Corporation; (D) whether a more favorable price could be obtained for the Corporation’s stock or other securities in the future; (E) the reputation and business practices of the other entity to be involved in the transaction and its management and affiliates as they would affect the employees of the Corporation and its subsidiaries; (F) the future value of the stock or any other securities of the Corporation or the other entity to be involved in the proposed transaction; (G) any antitrust or other legal and regulatory issues that are raised by the proposal; (H) the business and historical, current or expected future financial condition or operating results of the other entity to be involved in the transaction, including, but not limited to, debt service and other existing financial obligations, financial obligations to be incurred in connection with the proposed transaction, and other likely financial obligations of the other entity to be involved in the proposed transaction; and (I) the ability of the Corporation to fulfill its objectives as a financial institution holding company and on the ability of its subsidiary financial institution(s) to fulfill the objectives of a federally insured financial institution under applicable statutes and regulations. If the Board of Directors determines that any proposed transaction of the type described in clause (i) or (ii) of the immediately preceding sentence should be rejected, it may take any lawful action to defeat such transaction, including, but not limited to, any or all of the following: advising stockholders not to accept the proposal; instituting litigation against the party making the proposal; filing complaints with governmental and regulatory authorities; acquiring the stock or any of the securities of the Corporation; selling or otherwise issuing authorized but unissued stock or other securities or granting options or rights with respect thereto; and obtaining a more favorable offer from another individual or entity. This Article 9 does not create any implication concerning factors that may be considered by the Board of Directors regarding any proposed transaction of the type described in clause (i) or (ii) of the first sentence of this Article 9.

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For purposes of this Article 9, a “Person” shall include an individual, a group acting in concert, a corporation, a partnership, an association, a joint venture, a pool, a joint stock company, a trust, an unincorporated organization or similar company, a syndicate or any other group or entity formed for the purpose of acquiring, holding or disposing of securities.

ARTICLE 10. Indemnification, etc. of Directors and Officers.

A. Indemnification. The Corporation shall indemnify (1) its current and former directors and officers, whether serving the Corporation or at its request any other entity, to the fullest extent required or permitted by the MGCL now or hereafter in force, including the advancement of expenses under the procedures and to the fullest extent permitted by law, and (2) other employees and agents to such extent as shall be authorized by the Board of Directors and permitted by law; provided, however, that, except as provided in Section B of this Article 10 with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.

B. Procedure. If a claim under Section A of this Article 10 is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall also be entitled to be reimbursed the expense of prosecuting or defending such suit. It shall be a defense to any action for advancement of expenses that the Corporation has not received both (i) an undertaking as required by law to repay such advances in the event it shall ultimately be determined that the standard of conduct has not been met and (ii) a written affirmation by the indemnitee of his good faith belief that the standard of conduct necessary for indemnification by the Corporation has been met. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met the applicable standard for indemnification set forth in the MGCL. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the MGCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a

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right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article 10 or otherwise shall be on the Corporation.

C. Non-Exclusivity. The rights to indemnification and to the advancement of expenses conferred in this Article 10 shall not be exclusive of any other right that any Person may have or hereafter acquire under any statute, these Articles, the Corporation’s Bylaws, any agreement, any vote of stockholders or the Board of Directors, or otherwise.

D. Insurance. The Corporation may maintain insurance, at its expense, to insure itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such Person against such expense, liability or loss under the MGCL.

E. Miscellaneous. The Corporation shall not be liable for any payment under this Article 10 in connection with a claim made by any indemnitee to the extent such indemnitee has otherwise actually received payment under any insurance policy, agreement, or otherwise, of the amounts otherwise indemnifiable hereunder. The rights to indemnification and to the advancement of expenses conferred in Sections A and B of this Article 10 shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director or officer and shall inure to the benefit of the indemnitee’s heirs, executors and administrators.

F. Limitations Imposed by Federal Law. Notwithstanding any other provision set forth in this Article 10, in no event shall any payments made by the Corporation pursuant to this Article 10 exceed the amount permissible under applicable federal law, including, without limitation, Section 18(k) of the Federal Deposit Insurance Act and the regulations promulgated thereunder.

Any repeal or modification of this Article 10 shall not in any way diminish any rights to indemnification or advancement of expenses of such director or officer or the obligations of the Corporation arising hereunder with respect to events occurring, or claims made, while this Article 10 is in force.

ARTICLE 11. Limitation of Liability. An officer or director of the Corporation, as such, shall not be liable to the Corporation or its stockholders for money damages, except (A) to the extent that it is proved that the Person actually received an improper benefit or profit in money, property or services, for the amount of the benefit or profit in money, property or services actually received; or (B) to the extent that a judgment or other final adjudication adverse to the Person is entered in a proceeding based on a finding in the proceeding that the Person’s action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding; or (C) to the extent otherwise provided by the MGCL. If the MGCL is amended to further eliminate or limit the personal liability of officers and directors, then the liability of officers and directors of the Corporation shall be eliminated or limited to the fullest extent permitted by the MGCL, as so amended.

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Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such repeal or modification.

ARTICLE 12. Amendment of the Articles of Incorporation. The Corporation reserves the right to amend or repeal any provision contained in these Articles in the manner prescribed by the MGCL, including any amendment altering the terms or contract rights, as expressly set forth in these Articles, of any of the Corporation’s outstanding stock by classification, reclassification or otherwise, and no stockholder approval shall be required if the approval of stockholders is not required for the proposed amendment or repeal by the MGCL, and all rights conferred upon stockholders are granted subject to this reservation.

The Board of Directors, pursuant to a resolution approved by a majority of the Whole Board (rounded up to the nearest whole number), and without action by the stockholders, may amend these Articles to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that the Corporation has authority to issue.

No proposed amendment or repeal of any provision of these Articles shall be submitted to a stockholder vote unless the Board of Directors shall have (1) approved the proposed amendment or repeal, (2) determined that it is advisable, and (3) directed that it be submitted for consideration at either an annual or special meeting of the stockholders pursuant to a resolution approved by the Board of Directors. Any proposed amendment or repeal of any provision of these Articles may be abandoned by the Board of Directors at any time before its effective time upon the adoption of a resolution approved by a majority of the Whole Board (rounded up to the nearest whole number).

The amendment or repeal of any provision of these Articles shall be approved by at least two-thirds of all votes entitled to be cast by the holders of shares of capital stock of the Corporation entitled to vote on the matter (after giving due effect to the provisions of Article 5 of these Articles), except that the proposed amendment or repeal of any provision of these Articles need only be approved by the vote of a majority of all the votes entitled to be cast by the holders of shares of capital stock of the Corporation entitled to vote on the matter (after giving due effect to the provisions of Article 5 of these Articles) if the amendment or repeal of such provision is approved by the Board of Directors pursuant to a resolution approved by at least two-thirds of the Whole Board (rounded up to the nearest whole number).

Notwithstanding any other provision of these Articles or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of the Corporation required by law or by these Articles, the affirmative vote of the holders of at least 80% of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (after giving effect to the provisions of Article 5), voting together as a single class, shall be required to amend or repeal this Article 12, Section C, D, E or F of Article 5, Article 7, Article 8, Article 9, Article 10 or Article 11.

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ARTICLE 13. Name and Address of Incorporator. The name and mailing address of the sole incorporator are as follows:

Steven T. Lanter, Esq.

5335 Wisconsin Ave., N.W. Suite 780

Washington, D.C. 20015

[Remainder of Page Intentionally Left Blank]

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I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a corporation under the laws of the State of Maryland, do make, file and record this Charter, do certify that the facts herein stated are true, and, accordingly, have hereto set my hand this 10th day of March 2010.

/s/ Steven T. Lanter

Steven T. Lanter, Incorporator

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EX-3.2

Exhibit 3.2

PEOPLES FEDERAL BANCSHARES, INC.

BYLAWS

ARTICLE I

STOCKHOLDERS

Section 1. Annual Meeting.

The Corporation shall hold an annual meeting of its stockholders to elect directors and to transact any other business within its powers, at such place, on such date during the month of February and at such time as the Board of Directors shall fix. Failure to hold an annual meeting does not invalidate the Corporation’s existence or affect any otherwise valid corporate act.

Section 2. Special Meetings.

Special meetings of stockholders of the Corporation may be called by the Chairman of the Board or by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors that the Corporation would have if there were no vacancies on the Board of Directors (hereinafter the “Whole Board”). Special meetings of the stockholders shall be called by the Secretary at the request of stockholders only on the written request of stockholders entitled to cast at least a majority of all the votes entitled to be cast at the meeting. Such written request shall state the purpose or purposes of the meeting and the matters proposed to be acted upon at the meeting, and shall be delivered at the principal office of the Corporation addressed to the President or the Secretary. The Secretary shall inform the stockholders who make the request of the reasonably estimated cost of preparing and mailing a notice of the meeting and, upon payment of these costs to the Corporation, notify each stockholder entitled to notice of the meeting. The Board of Directors shall have the sole power to fix (i) the record date for determining stockholders entitled to request a special meeting of stockholders and the record date for determining stockholders entitled to notice of and to vote at the special meeting and (ii) the date, time and place of the special meeting and the means of remote communication, if any, by which stockholders and proxy holders may be considered present in person and may vote at the special meeting.

Section 3. Notice of Meetings; Adjournment.

Not less than 10 nor more than 90 days before each stockholders’ meeting, the Secretary shall give notice of the meeting in writing or by electronic transmission to each stockholder entitled to vote at the meeting and to each other stockholder entitled to notice of the meeting. The notice shall state the time and place of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and may vote at the meeting, and, if the meeting is a special meeting or notice of the purpose is required by statute, the purpose of the meeting. Notice is given to a stockholder when it is personally delivered to the stockholder, left at the stockholder’s residence or usual place of business, mailed to the stockholder at his or her address as it appears on the records of the Corporation, or transmitted to the stockholder by an electronic transmission to any address or number of the stockholder at which the stockholder receives electronic transmissions. If the Corporation has

received a request from a stockholder that notice not be sent by electronic transmission, the Corporation may not provide notice to the stockholder by electronic transmission. Notwithstanding the foregoing provisions, each person who is entitled to notice waives notice if such person, before or after the meeting, delivers a written waiver or waiver by electronic transmission which is filed with the records of the stockholders’ meetings, or is present at the meeting in person or by proxy.

A meeting of stockholders convened on the date for which it was called may be adjourned from time to time without further notice to a date not more than 120 days after the original record date. At any adjourned meeting, any business may be transacted that might have been transacted at the original meeting.

As used in these Bylaws, the term “electronic transmission” shall have the meaning given to such term by Section 1-101(l) of the Maryland General Corporation Law (the “MGCL”) or any successor provision.

Section 4. Quorum.

Unless the Articles of the Corporation provide otherwise, where a separate vote by a class or classes is required, a majority of the shares of such class or classes, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter.

If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of stock who are present at the meeting, in person or by proxy, may, in accordance with Section 3 of this Article I, adjourn the meeting to another place, date or time.

Section 5. Organization and Conduct of Business.

The Chairman of the Board of the Corporation or Chief Executive Officer, or in his or her absence, the President, or in his or her absence, such other person as may be designated by a majority of the Whole Board, shall call to order any meeting of the stockholders and act as chairman of the meeting. In the absence of the Secretary, the secretary of the meeting shall be such person as the chairman appoints. The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him or her in order.

Section 6. Advance Notice Provisions for Business to be Transacted at Annual Meetings and Elections of Directors.

(a) At any annual meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (i) as specified in the Corporation’s notice of the meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Corporation who: (1) is a stockholder of record on the date such stockholder gives the notice provided for in this Section 6(a) and on the record date for the determination of stockholders entitled to vote at such annual meeting; and (2) complies with the notice procedures set forth in this Section 6(a). For business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of the immediately preceding sentence, the stockholder must have given

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timely notice thereof in writing to the Secretary of the Corporation and such business must otherwise be a proper matter for action by stockholders. To be timely, a stockholder’s notice must be delivered or mailed to and received by the Secretary of the Corporation at the principal executive office of the Corporation not less than 80 days nor more than 90 days prior to any such meeting; provided, however, that if less than 90 days’ notice or prior public disclosure of the date of the meeting is given to stockholders, such written notice shall be delivered or mailed to and received by the Secretary of the Corporation at the principal executive office of the Corporation not later than the tenth day following the day on which notice of the meeting was mailed to stockholders or such public disclosure was made.

A stockholder’s notice to the Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and address of such stockholder as they appear on the Corporation’s books and of the beneficial owner, if any, on whose behalf the proposal is made; (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder and such beneficial owner; (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business; and (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting.

Notwithstanding anything in these Bylaws to the contrary, no business shall be brought before or conducted at an annual meeting except in accordance with the provisions of this Section 6(a). The officer of the Corporation or other person presiding over the annual meeting shall, if the facts so warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 6(a) and, if he or she should so determine, he or she shall so declare to the meeting and any such business so determined to be not properly brought before the meeting shall not be transacted.

At any special meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting pursuant to the Corporation’s notice of the meeting.

(b) Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders at which directors are to be elected only (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation who (1) is a stockholder of record on the date such stockholder gives the notice provided for in this Section 6(b) and on the record date for the determination of stockholders entitled to vote at such meeting, and (2) complies with the notice procedures set forth in this Section 6(b). Such nominations, other than those made by or at the direction of the Board of Directors, shall be made by timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered or mailed to and received by the Secretary of the Corporation at the principal executive office of the Corporation not less than 80 days nor more than 90 days prior to any such meeting; provided, however, that if less than 90 days’ notice or prior public disclosure of the date of the meeting is given to stockholders, such written notice

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shall be delivered or mailed, as prescribed, to the Secretary of the Corporation not later than the tenth day following the day on which notice of the meeting was mailed to stockholders or such public disclosure was made.

A stockholder’s notice must be in writing and set forth (a) as to each person whom the stockholder proposes to nominate for election as a director, all information relating to such person that would indicate such person’s qualification under Article 2, Section 12, of these Bylaws including an affidavit that such person would not be disqualified under the provisions of Article 2, Section 12(b) of these Bylaws and such information relating to such person that is required to be disclosed in connection with solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any successor rule or regulation; and (b) as to the stockholder giving the notice: (i) the name and address of such stockholder as they appear on the Corporation’s books and of the beneficial owner, if any, on whose behalf the nomination is made; (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder and such beneficial owner; (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder; (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice; and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Regulation 14A under the Exchange Act or any successor rule or regulation. Such notice must be accompanied by a written consent of each proposed nominee to be named as a nominee and to serve as a director if elected. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the provisions of this Section 6(b). The officer of the Corporation or other person presiding at the meeting shall, if the facts so warrant, determine that a nomination was not made in accordance with such provisions and, if he or she should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded.

(c) For purposes of subsections (a) and (b) of this Section 6, the term “public disclosure” shall mean disclosure (i) in a press release reported by a nationally recognized news service, (ii) in a document publicly filed or furnished by the Corporation with the U.S. Securities and Exchange Commission or (iii) on a website maintained by the Corporation. The timely notice requirements provided in subsections (a) and (b) of this Section 6 shall apply to all stockholder nominations for election as a director and all stockholder proposals for business to be conducted at an annual meeting regardless of whether such proposal is submitted for inclusion in the Corporation’s proxy materials pursuant to Rule 14a-8 of Regulation 14A under the Exchange Act.

Section 7. Proxies and Voting.

Unless the Articles of the Corporation provide for a greater or lesser number of votes per share or limits or denies voting rights, each outstanding share of stock, regardless of class, is entitled to one vote on each matter submitted to a vote at a meeting of stockholders; however, a share is not entitled to be voted if any installment payable on it is overdue and unpaid. In all

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elections for directors, directors shall be determined by a plurality of the votes cast, and except as otherwise required by law or as provided in the Articles of the Corporation, all other matters voted on by stockholders shall be determined by a majority of the votes cast on the matter.

A stockholder may vote the stock the stockholder owns of record either in person or by proxy. A stockholder may sign a writing authorizing another person to act as proxy. Signing may be accomplished by the stockholder or the stockholder’s authorized agent signing the writing or causing the stockholder’s signature to be affixed to the writing by any reasonable means, including facsimile signature. A stockholder may authorize another person to act as proxy by transmitting, or authorizing the transmission of, an authorization for the person to act as the proxy to the person authorized to act as proxy or to any other person authorized to receive the proxy authorization on behalf of the person authorized to act as the proxy, including a proxy solicitation firm or proxy support service organization. The authorization may be transmitted by a telegram, cablegram, datagram, electronic mail or any other electronic or telephonic means. Unless a proxy provides otherwise, it is not valid more than 11 months after its date. A proxy is revocable by a stockholder at any time without condition or qualification unless the proxy states that it is irrevocable and the proxy is coupled with an interest. A proxy may be made irrevocable for as long as it is coupled with an interest. The interest with which a proxy may be coupled includes an interest in the stock to be voted under the proxy or another general interest in the Corporation or its assets or liabilities.

Section 8. Conduct of Voting

The Board of Directors shall, in advance of any meeting of stockholders, appoint one or more persons as inspectors of election, to act at the meeting or any adjournment thereof and make a written report thereof, in accordance with applicable law. At all meetings of stockholders, the proxies and ballots shall be received, and all questions relating to the qualification of voters and the validity of proxies and the acceptance or rejection of votes shall be decided or determined by the inspector of election. All voting, including on the election of directors but excepting where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefor by a stockholder entitled to vote or his or her proxy or the chairman of the meeting, a written vote shall be taken. Every written vote shall be taken by ballot, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. Every vote taken by ballot shall be counted by an inspector or inspectors appointed by the chairman of the meeting. No candidate for election as a director at a meeting shall serve as an inspector at such meeting.

Section 9. Control Share Acquisition Act.

Notwithstanding any other provision of the Articles of the Corporation or these Bylaws, Title 3, Subtitle 7 of the MGCL (or any successor statute) shall not apply to any acquisition by any person of shares of stock of the Corporation. This Section 9 may be repealed by the Whole Board, in whole or in part, at any time, whether before or after an acquisition of Control Shares (as defined in Section 3-701(d) of the MGCL, or any successor provision) and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent Control Share Acquisition (as defined in Section 3-701(d) of the MGCL, or any successor provision).

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ARTICLE II

BOARD OF DIRECTORS

Section 1. General Powers, Number and Term of Office.

The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. The number of directors of the Corporation shall, by virtue of the Corporation’s election made hereby to be governed by Section 3-804(b) of the MGCL, be fixed from time to time exclusively by vote of the Board of Directors; provided, however, that such number shall never be less than the minimum number of directors required by the MGCL now or hereafter in force. The Board of Directors shall annually elect a Chairman of the Board from among its members and shall designate the Chairman of the Board or his designee to preside at its meetings.

The directors, other than those who may be elected by the holders of any series of preferred stock, shall be divided into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the first annual meeting of stockholders, the term of office of the second class to expire at the annual meeting of stockholders one year thereafter and the term of office of the third class to expire at the annual meeting of stockholders two years thereafter, with each director to hold office until his or her successor shall have been duly elected and qualified. At each annual meeting of stockholders, commencing with the first annual meeting, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election or for such shorter period of time as the Board of Directors may determine, with each director to hold office until his or her successor shall have been duly elected and qualified.

Section 2. Vacancies and Newly Created Directorships.

By virtue of the Corporation’s election made hereby to be subject to Section 3-804(c) of the MGCL, any vacancies in the Board of Directors resulting from an increase in the size of the Board of Directors or the death, resignation or removal of a director may be filled only by the affirmative vote of two-thirds of the remaining directors in office, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred and until a successor is elected and qualifies. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

Section 3. Regular Meetings.

Regular meetings of the Board of Directors shall be held at such place or places or by means of remote communication, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all directors. A notice of each regular meeting shall not be required. Any regular meeting of the Board of Directors may adjourn from time to time to reconvene at the same or some other place, and no notice need be given of any such adjourned meeting other than by announcement.

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Section 4. Special Meetings.

Special meetings of the Board of Directors may be called by one-third (1/3) of the directors then in office (rounded up to the nearest whole number), the Chairman of the Board, or by the Chief Executive Officer or by the President and shall be held at such place or by means of remote communication, on such date, and at such time as they or he or she shall fix. Notice of the place, date, and time of each such special meeting shall be given to each director who has not waived notice by mailing and post-marking written notice not less than five days before the meeting, or by facsimile or other electronic transmission of the same not less than 24 hours before the meeting. Any director may waive notice of any special meeting, either before or after such meeting, by delivering a written waiver or a waiver by electronic transmission that is filed with the records of the meeting. Attendance of a director at a special meeting shall constitute a waiver of notice of such meeting, except where the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted nor the purpose of any special meeting of the Board of Directors need be specified in the notice of such meeting. Any special meeting of the Board of Directors may adjourn from time to time to reconvene at the same or some other place, and no notice need be given of any such adjourned meeting other than by announcement.

Section 5. Quorum.

At any meeting of the Board of Directors, a majority of the authorized number of directors then constituting the Board shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, without further notice or waiver thereof.

Section 6. Participation in Meetings By Conference Telephone.

Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board or committee by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Such participation shall constitute presence in person at such meeting.

Section 7. Conduct of Business.

At any meeting of the Board of Directors, business shall be transacted in such order and manner as the Board may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided in these Bylaws or the Corporation’s Articles or required by law. Action may be taken by the Board of Directors without a meeting if a unanimous consent which sets forth the action is given in writing or by electronic transmission by each member of the Board of Directors and filed in paper or electronic form with the minutes of proceedings of the Board of Directors.

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Section 8. Powers.

All powers of the Corporation may be exercised by or under the authority of the Board of Directors except as provided by the Corporation’s Articles. Consistent with the foregoing, the Board of Directors shall have, among other powers, the unqualified power:

(i) To declare dividends from time to time in accordance with law;

(ii) To purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine;

(iii) To authorize the creation, making and issuance, in such form as it may determine, of written obligations of every kind, negotiable or non-negotiable, secured or unsecured, and to do all things necessary in connection therewith;

(iv) To remove any officer of the Corporation with or without cause, and from time to time to devolve the powers and duties of any officer upon any other person for the time being;

(v) To confer upon any officer of the Corporation the power to appoint, remove and suspend subordinate officers, employees and agents;

(vi) To adopt from time to time such stock, option, stock purchase, bonus or other compensation plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine;

(vii) To adopt from time to time such insurance, retirement, and other benefit plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; and

(viii) To adopt from time to time regulations, not inconsistent with these Bylaws, for the management of the Corporation’s business and affairs.

Section 9. Compensation of Directors.

Directors, as such, may receive, pursuant to resolution of the Board of Directors, fixed fees and other compensation for their services as directors, including, without limitation, their services as members of committees of the Board of Directors.

Section 10. Resignation.

Any director may resign at any time by giving written notice of such resignation to the President or the Secretary at the principal office of the Corporation. Unless otherwise specified therein, such resignation shall take effect upon receipt thereof.

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Section 11. Presumption of Assent.

A director of the Corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to such action unless such director announces his dissent at the meeting and (a) such director’s dissent is entered in the minutes of the meeting, (b) such director files his written dissent to such action with the secretary of the meeting before the adjournment thereof, or (c) such director forwards his written dissent within 24 hours after the meeting is adjourned, by certified mail, return receipt requested, bearing a postmark from the United States Postal Service, to the secretary of the meeting or the Secretary of the Corporation. Such right to dissent shall not apply to a director who voted in favor of such action or failed to make his dissent known at the meeting.

Section 12. Director Qualifications

A person is not qualified to serve as director if he or she: (1) is under indictment for, or has ever been convicted of, a criminal offense involving dishonesty or breach of trust and the penalty for such offense could be imprisonment for more than one year, (2) is a person against whom a banking agency has, within the past ten years, issued a cease and desist order for conduct involving dishonesty or breach of trust and that order is final and not subject to appeal, or (3) has been found either by a regulatory agency whose decision is final and not subject to appeal or by a court to have (i) breached a fiduciary duty involving personal profit, or (ii) committed a willful violation of any law, rule or regulation governing banking, securities, commodities or insurance, or any final cease and desist order issued by a banking, securities, commodities or insurance regulatory agency. No person may serve on the Board of Directors and at the same time be a director or officer of another co-operative bank, credit union, savings bank, savings and loan association, trust company, bank holding company or banking association (in each case whether chartered by a state, the federal government or any other jurisdiction) that has an office in any city or county in which the Corporation or any of its subsidiaries has an office, or in any county contiguous to such cities or counties. A majority of the members of the Board of Directors must be residents of a city or county in which the Corporation or any of its subsidiaries has an office, or any county contiguous to such cities or counties. The Board of Directors shall have the power to construe and apply the provisions of this Section 12 and to make all determinations necessary or desirable to implement such provisions.

Section 13. Attendance at Board Meetings.

The Board of Directors shall have the right to remove any director from the board upon a director’s unexcused absence of three consecutive regularly scheduled meetings of the Board of Directors.

ARTICLE III

COMMITTEES

Section 1. Committees of the Board of Directors.

(a) General Provisions. The Board of Directors may appoint from among its members an Audit Committee, a Compensation Committee, a Governance/Nominating Committee, and such other committees as the Board of Directors deems necessary or desirable.

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The membership of the Audit Committee, the Compensation Committee and the Governance/Nominating Committee shall consist of independent directors to the extent required by the applicable rules of the Securities and Exchange Commission or the NASDAQ Stock Market. The Board of Directors may delegate to any committee so appointed any of the powers and authorities of the Board of Directors to the fullest extent permitted by the MGCL and any other applicable law.

(b) Composition. Each committee shall be composed of one or more directors or any other number of members specified in these Bylaws. The Chairman of the Board may recommend committees, committee memberships, and committee chairmanships to the Board of Directors. The Board of Directors shall have the power at any time to appoint the chairman and the members of any committee, change the membership of any committee, to fill all vacancies on committees, to designate alternate members to replace or act in the place of any absent or disqualified member of a committee, or to dissolve any committee.

(c) Governance/Nominating Committee. The Governance/Nominating Committee, if appointed, shall consist of not less than three members who meet the applicable independence requirements referenced in Section 1.(a), above and shall have authority: (i) to review any nominations for election to the Board of Directors made by a stockholder of the Corporation pursuant to Article I, Section 6 of these Bylaws in order to determine compliance with such Bylaw provision; and (ii) to recommend to the Board of Directors nominees for election to the Board of Directors to replace those Directors whose terms expire at the annual meeting of stockholders next ensuing. No Director shall participate in the deliberations or vote in the meeting of the Governance/Nominating Committee at which he or she has been or is seeking to be proposed as a nominee.

(d) Issuance of Stock. If the Board of Directors has given general authorization for the issuance of stock providing for or establishing a method or procedure for determining the maximum number of shares to be issued, a committee of the Board of Directors, in accordance with that general authorization or any stock option or other plan or program adopted by the Board of Directors, may authorize or fix the terms of stock subject to classification or reclassification and the terms on which any stock may be issued, including all terms and conditions required or permitted to be established or authorized by the Board of Directors. Any committee so designated may exercise the power and authority of the Board of Directors if the resolution that designated the committee or a supplemental resolution of the Board of Directors shall so provide.

Section 2. Conduct of Business.

Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings; one-third of the members shall constitute a quorum unless the committee shall consist of one or two members, in which event one member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting if a unanimous consent which sets forth the action is given in writing or by electronic transmission by each member of the committee and filed in paper or electronic form

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with the minutes of the proceedings of such committee. The members of any committee may conduct any meeting thereof by conference telephone or other communications equipment in accordance with the provisions of Section 6 of Article II.

ARTICLE IV

OFFICERS

Section 1. Generally.

(a) The Board of Directors as soon as may be practicable after the annual meeting of stockholders shall choose a Chairman of the Board, Chief Executive Officer, President, one or more Vice Presidents, a Secretary and a Chief Financial Officer/Treasurer and from time to time may choose such other officers as it may deem proper. Any number of offices may be held by the same person, except that no person may concurrently serve as both President and Vice President of the Corporation.

(b) The term of office of all officers shall be until the next annual election of officers and until their respective successors are chosen, but any officer may be removed from office at any time by the affirmative vote of a majority of the authorized number of directors then constituting the Board of Directors.

(c) All officers chosen by the Board of Directors shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article IV. Such officers shall also have such powers and duties as from time to time may be conferred by the Board of Directors or by any committee thereof.

Section 2. Chairman of the Board of Directors.

The Chairman of the Board of Directors of the Corporation shall perform all duties and have all powers which are commonly incident to the office of Chairman of the Board or which are delegated to him or her by the Board of Directors. He or she shall have power to sign all stock certificates, contracts and other instruments of the Corporation that are authorized.

Section 3. Chief Executive Officer.

The Chief Executive Officer, subject to the control of the Board of Directors, shall serve in general executive capacity and have general power over the management and oversight of the administration and operation of the Corporation’s business and general supervisory power and authority over its policies and affairs. The Chief Executive Officer shall see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect.

Section 4. President.

The President shall perform the duties of the Chief Executive Officer in the Chief Executive Officer’s absence or during his or her disability to act. In addition, the President shall perform the duties and exercise the powers usually incident to their respective office and/or such other duties and powers as may be properly assigned to the President from time to time by the Board of Directors, the Chairman of the Board or the Chief Executive Officer.

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Section 5. Vice President.

The Vice President or Vice Presidents (including Executive Vice Presidents or other levels of Vice President designated by the Board of Directors), if any, shall perform the duties of the Chief Executive Officer in the absence of both the Chief Executive Officer and the President, or during their disability to act. In addition, the Vice Presidents shall perform the duties and exercise the powers usually incident to their respective office and/or such other duties and powers as may be properly assigned to the Vice Presidents from time to time by the Board of Directors, the Chairman of the Board or the Chief Executive Officer.

Section 6. Secretary.

The Secretary or an Assistant Secretary shall issue notices of meetings, shall keep the minutes of meetings, shall have charge of the seal and the corporate books, shall perform such other duties and exercise such other powers as are usually incident to such offices and/or such other duties and powers as are properly assigned thereto by the Board of Directors, the Chairman of the Board or the Chief Executive Officer.

Section 7. Chief Financial Officer/Treasurer.

The Chief Financial Officer/Treasurer shall have charge of all monies and securities of the Corporation, other than monies and securities of any division of the Corporation that has a treasurer or financial officer appointed by the Board of Directors, and shall keep regular books of account. The funds of the Corporation shall be deposited in the name of the Corporation by the Chief Financial Officer/Treasurer with such banks or trust companies or other entities as the Board of Directors from time to time shall designate. The Chief Financial Officer/Treasurer shall sign or countersign such instruments as require his or her signature, shall perform all such duties and have all such powers as are usually incident to such office and/or such other duties and powers as are properly assigned to him or her by the Board of Directors, the Chairman of the Board or the Chief Executive Officer, and may be required to give bond for the faithful performance of his or her duties in such sum and with such surety as may be required by the Board of Directors.

Section 8. Other Officers.

The Board of Directors may designate and fill such other offices in its discretion and the persons holding such other offices shall have such powers and shall perform such duties as the Board of Directors or Chief Executive Officer may from time to time assign.

Section 9. Action with Respect to Securities of Other Corporations

Stock of other corporations or associations, registered in the name of the Corporation, may be voted by the Chief Executive Officer, the President, a Vice President, or a proxy appointed by either of them. The Board of Directors, however, may by resolution appoint some other person to vote such shares, in which case such person shall be entitled to vote such shares upon the production of a certified copy of such resolution.

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ARTICLE V

STOCK

Section 1. Certificates of Stock.

The Board of Directors may determine to issue certificated or uncertificated shares of capital stock and other securities of the Corporation. For certificated stock, each stockholder is entitled to certificates which represent and certify the shares of stock he or she holds in the Corporation. Each stock certificate shall include on its face the name of the Corporation, the name of the stockholder or other person to whom it is issued, and the class of stock and number of shares it represents. It shall also include on its face or back (a) a statement of any restrictions on transferability and a statement of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption of the stock of each class which the Corporation is authorized to issue, of the differences in the relative rights and preferences between the shares of each series of preferred stock which the Corporation is authorized to issue, to the extent they have been set, and of the authority of the Board of Directors to set the relative rights and preferences of subsequent series of preferred stock or (b) a statement which provides in substance that the Corporation will furnish a full statement of such information to any stockholder on request and without charge. Such request may be made to the Secretary or to the Corporation’s transfer agent. Upon the issuance of uncertificated shares of capital stock, the Corporation shall send the stockholder a written statement of the same information required above on stock certificates. Each stock certificate shall be in such form, not inconsistent with law or with the Corporation’s Articles, as shall be approved by the Board of Directors or any officer or officers designated for such purpose by resolution of the Board of Directors. Each stock certificate shall be signed by the Chairman of the Board, the President, or a Vice-President, and countersigned by the Secretary, an Assistant Secretary, the Treasurer, or an Assistant Treasurer. Each certificate may be sealed with the actual corporate seal or a facsimile of it or in any other form and the signatures may be either manual or facsimile signatures. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. A certificate may not be issued until the stock represented by it is fully paid.

Section 2. Transfers of Stock.

Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 4 of Article V of these Bylaws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor.

Section 3. Record Dates or Closing of Transfer Books.

The Board of Directors may, and shall have the power to, set a record date or direct that the stock transfer books be closed for a stated period for the purpose of making any proper determination with respect to stockholders, including which stockholders are entitled to notice of a meeting, vote at a meeting, receive a dividend, or be allotted other rights. The record date may not be prior to the close of business on the day the record date is fixed nor, subject to Section 3

13

of Article I, more than 90 days before the date on which the action requiring the determination will be taken; the transfer books may not be closed for a period longer than 20 days; and, in the case of a meeting of stockholders, the record date or the closing of the transfer books shall be at least ten days before the date of the meeting. Any shares of the Corporation’s own stock acquired by the Corporation between the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders and the time of the meeting may be voted at the meeting by the holder of record as of the record date and shall be counted in determining the total number of outstanding shares entitled to be voted at the meeting.

Section 4. Lost, Stolen or Destroyed Certificates.

The Board of Directors of the Corporation may determine the conditions for issuing a new stock certificate in place of one which is alleged to have been lost, stolen, or destroyed, or the Board of Directors may delegate such power to any officer or officers of the Corporation. In their discretion, the Board of Directors or such officer or officers may require the owner of the certificate to give a bond, with sufficient surety, to indemnify the Corporation against any loss or claim arising as a result of the issuance of a new certificate. In their discretion, the Board of Directors or such officer or officers may refuse to issue such new certificate without the order of a court having jurisdiction over the matter.

Section 5. Stock Ledger.

The Corporation shall maintain a stock ledger which contains the name and address of each stockholder and the number of shares of stock of each class which the stockholder holds. The stock ledger may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. The original or a duplicate of the stock ledger shall be kept at the offices of a transfer agent for the particular class of stock or, if none, at the principal executive office of the Corporation.

Section 6. Regulations.

The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish.

ARTICLE VI

MISCELLANEOUS

Section 1. Facsimile Signatures.

In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.

Section 2. Corporate Seal.

The Board of Directors may provide a suitable seal, bearing the name of the Corporation, which shall be in the charge of the Secretary. The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof. If the Corporation is required to place its

14

corporate seal to a document, it is sufficient to meet the requirement of any law, rule, or regulation relating to a corporate seal to place the word “(seal)” adjacent to the signature of the person authorized to sign the document on behalf of the Corporation.

Section 3. Books and Records.

The Corporation shall keep correct and complete books and records of its accounts and transactions and minutes of the proceedings of its stockholders and Board of Directors and of any committee when exercising any of the powers of the Board of Directors. The books and records of the Corporation may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. Minutes shall be recorded in written form but may be maintained in the form of a reproduction. The original or a certified copy of these Bylaws shall be kept at the principal office of the Corporation.

Section 4. Reliance upon Books, Reports and Records.

Each director, each member of any committee designated by the Board of Directors, and each officer and agent of the Corporation shall, in the performance of his or her duties, in addition to any protections conferred upon him or her by law, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors so designated, or by any other person as to matters which such director, committee member, officer or agent reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

Section 5. Fiscal Year.

The fiscal year of the Corporation shall commence on the first day of October and end on the last day of September in each year.

Section 6. Time Periods.

In applying any provision of these Bylaws that requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded and the day of the event shall be included.

Section 7. Checks, Drafts, Etc.

All checks, drafts and orders for the payment of money, notes and other evidences of indebtedness, issued in the name of the Corporation, shall be signed by any officer, employee or agent of the Corporation that is authorized by the Board of Directors.

Section 8. Mail.

Any notice or other document that is required by these Bylaws to be mailed shall be deposited in the United States mail, postage prepaid.

15

Section 9. Contracts and Agreements.

To the extent permitted by applicable law, and except as otherwise prescribed by the Articles or these Bylaws, the Board of Directors may authorize any officer, employee or agent of the Corporation to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation. Such authority may be general or confined to specific instances. A person who holds more than one office in the Corporation may not act in more than one capacity to execute, acknowledge, or verify an instrument required by law to be executed, acknowledged, or verified by more than one officer.

ARTICLE VIII

AMENDMENTS

These Bylaws may be adopted, amended or repealed as provided in the Articles of the Corporation.

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EX-4

Exhibit 4

INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND

  No.     PEOPLES FEDERAL BANCSHARES, INC.     Shares  

FULLY PAID AND NON-ASSESSABLE

PAR VALUE $0.01 PER SHARE

CUSIP:                         

THE SHARES REPRESENTED BY THIS

CERTIFICATE ARE SUBJECT TO

RESTRICTIONS, SEE REVERSE SIDE

THIS CERTIFIES that is the owner of

SHARES OF COMMON STOCK

of

Peoples Federal Bancshares, Inc.

a Maryland corporation

The shares evidenced by this certificate are transferable only on the books of Peoples Federal Bancshares, Inc. by the holder hereof, in person or by attorney, upon surrender of this certificate properly endorsed. The capital stock evidenced hereby is not an account of an insurable type and is not insured by the Federal Deposit Insurance Corporation or any other Federal or state governmental agency.

IN WITNESS WHEREOF, Peoples Federal Bancshares, Inc. has caused this certificate to be executed by the facsimile signatures of its duly authorized officers and has caused a facsimile of its seal to be hereunto affixed.

By		[SEAL]	By
	MYRON J. FOX			MAURICE H. SULLIVAN, JR.
	CORPORATE SECRETARY			CHAIRMAN AND CHIEF EXECUTIVE OFFICER

The Board of Directors of Peoples Federal Bancshares, Inc. (the “Company”) is authorized by resolution or resolutions, from time to time adopted, to provide for the issuance of more than one class of stock, including preferred stock in series, and to fix and state the voting powers, designations, preferences, limitations and restrictions thereof. The Company will furnish to any stockholder upon request and without charge a full description of each class of stock and any series thereof.

The shares evidenced by this certificate are subject to a limitation contained in the Articles of Incorporation to the effect that in no event shall any record owner of any outstanding common stock which is beneficially owned, directly or indirectly, by a person who beneficially owns in excess of 10% of the outstanding shares of common stock (the “Limit”) be entitled or permitted to any vote in respect of shares held in excess of the Limit.

The shares represented by this certificate may not be cumulatively voted on any matter. The Articles of Incorporation require that, with limited exceptions, no amendment, addition, alteration, change or repeal of the Articles of Incorporation shall be made, unless such is first approved by the Board of Directors of the Company and approved by the stockholders by a majority of the total shares entitled to vote, or in certain circumstances approved by the affirmative vote of up to eighty percent (80%) of the shares entitled to vote.

The following abbreviations when used in the inscription on the face of this certificate shall be construed as though they were written out in full according to applicable laws or regulations.

TEN COM	-	as tenants in common	UNIF GIFT MIN ACT	-		Custodian
					(Cust)		(Minor)
TEN ENT	-	as tenants by the entireties
					Under Uniform Gifts to Minors Act
JT TEN	-	as joint tenants with right of survivorship and not as tenants in common			(State)

Additional abbreviations may also be used though not in the above list

For value received,                                                                   hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER

(please print or typewrite name and address including postal zip code of assignee)

	Shares of
the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint                                                                                                            Attorney to transfer the said shares on the books of the within named corporation with full power of substitution in the premises.

Dated,                         

In the presence of Signature:

NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.

EX-5

Exhibit 5

LUSE GORMAN POMERENK & SCHICK

A PROFESSIONAL CORPORATION

ATTORNEYS AT LAW

5335 WISCONSIN AVENUE, N.W., SUITE 780

WASHINGTON, D.C. 20015

TELEPHONE (202) 274-2000

FACSIMILE (202) 362-2902

www.luselaw.com

WRITER’S DIRECT DIAL NUMBER	WRITER’S EMAIL
(202) 274-2000

March 17, 2010

The Board of Directors

Peoples Federal Bancshares, Inc.

435 Market Street

Brighton, Massachusetts 02135

Re: Peoples Federal Bancshares, Inc.

Common Stock, Par Value $0.01 Per Share

Gentlemen:

You have requested the opinion of this firm as to certain matters in connection with the offer and sale (the “Offering”) of Peoples Federal Bancshares, Inc. (the “Company”) Common Stock, par value $0.01 per share (“Common Stock”). We have reviewed the Company’s Articles of Incorporation, Registration Statement on Form S-1 (the “Form S-1”), as well as applicable statutes and regulations governing the Company and the offer and sale of the Common Stock. The opinion expressed below is limited to the Maryland General Corporation Law (which includes applicable provisions of the Maryland Constitution and reported judicial decisions interpreting the Maryland General Corporation Law and the Maryland Constitution).

We are of the opinion that upon the declaration of effectiveness of the Form S-1, the Common Stock, when sold pursuant to the Company’s prospectus and the Plan of Conversion and Reorganization of Peoples Federal MHC, a federally chartered mutual holding company, will be legally issued, fully paid and non-assessable.

This Opinion has been prepared in connection with the Form S-1. We hereby consent to our firm being referenced under the caption “Legal Matters,” and for inclusion of this opinion as an exhibit to the Registration Statement on Form S-1.

Very truly yours,

/s/ Luse Gorman Pomerenk & Schick, PC

LUSE GORMAN POMERENK & SCHICK

A PROFESSIONAL CORPORATION

EX-8.1

Exhibit 8.1

FORM OF FEDERAL TAX OPINION

March         , 2010

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp, Inc.

Peoples Federal Bancshares, Inc.

Peoples Federal Savings Bank

Ladies and Gentlemen:

You have requested this firm’s opinion regarding the material federal income tax consequences that will result from the conversion of Peoples Federal MHC, a federal mutual holding company (the “Mutual Holding Company”) into the capital stock form of organization (the “Conversion”), as effectuated pursuant to the two integrated transactions described below.

In connection therewith, we have made such investigations as we have deemed relevant or necessary for the purpose of this opinion. In our examination, we have assumed the authenticity of original documents, the accuracy of copies and the genuineness of signatures. We have further assumed the absence of adverse facts not apparent from the face of the instruments and documents we examined and have relied upon the accuracy of the factual matters set forth in the Plan of Conversion and Reorganization of Peoples Federal MHC (the “Plan”) and the Registration Statement filed by Peoples Federal Bancshares, Inc., a Maryland stock corporation (the “Holding Company”) with the Securities and Exchange Commission (“SEC”) under the Securities Act of 1933, as amended, and the Application for Conversion on Form AC filed by the Mutual Holding Company with the Office of Thrift Supervision (the “OTS”). In addition, we are relying on a letter from RP Financial, LC. to you stating its belief as to certain valuation matters described below. Capitalized terms used but not defined herein shall have the same meaning as set forth in the Plan. Furthermore, we assume that each of the parties to the Conversion will comply with all reporting obligations with respect to the Conversion required under the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations thereunder.

Our opinion is based upon the existing provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations thereunder (the “Treasury Regulations”), and upon current Internal Revenue Service (“IRS”) published rulings and existing court decisions, any of which could be changed at any time. Any such changes may be retroactive and could significantly modify the statements and opinions expressed herein. Similarly, any change in the facts and assumptions stated below, upon which this opinion is based, could modify the conclusions. This opinion is as of the date hereof, and we disclaim any obligation to advise you of any change in any matter considered herein after the date hereof.

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp, Inc.

Peoples Federal Banshares, Inc.

Peoples Federal Savings Bank

March     , 2010

Page 2

We opine only as to the matters we expressly set forth, and no opinions should be inferred as to any other matters or as to the tax treatment of the transactions that we do not specifically address. We express no opinion as to other federal laws and regulations, or as to laws and regulations of other jurisdictions, or as to factual or legal matters other than as set forth herein.

For purposes of this opinion, we are relying on the representations as to factual matters provided to us by the Mutual Holding Company, Peoples Federal Savings Bank, Peoples Federal Bancorp, Inc. and the Holding Company, as set forth in the certificates for each of those aforementioned entities and signed by authorized officers of each of the aforementioned entities, incorporated herein by reference.

Description of Proposed Transactions

Based upon our review of the documents described above, and in reliance upon such documents, we understand that the relevant facts are as follows. Peoples Federal Savings Bank (the “Bank”) is a federally-chartered savings bank headquartered in Brighton, Massachusetts. The Bank was originally organized in 1888, and reorganized into the mutual holding company structure in 2005. The Bank is currently the wholly owned subsidiary of Peoples Federal Bancorp, Inc., a federal corporation (the “Mid-Tier Holding Company”), which is the wholly owned subsidiary of the Mutual Holding Company. The Mutual Holding Company is a mutual holding company with no stockholders. The Mutual Holding Company has members (e.g., the depositors of the Bank), who are entitled upon the complete liquidation of the Mutual Holding Company to liquidation proceeds after the payment of creditors.

Within the last six months, the Boards of Directors of the Mutual Holding Company, the Holding Company, the Mid-Tier Holding Company, and the Bank have adopted the Plan providing for the Conversion of the Mutual Holding Company from a federally chartered mutual holding company to the capital stock form of organization. A new Maryland stock corporation, the Holding Company, was incorporated in March 2010, as part of the Conversion and will succeed to all the rights and obligations of the Mutual Holding Company and the Mid-Tier Holding Company and will issue Holding Company Common Stock in the Conversion.

At the present time, two transactions referred to as the “MHC Merger” and the “Mid-Tier Merger” are being undertaken. Pursuant to the Plan, the Conversion will be effected in the following steps, in such order as is necessary to consummate the Conversion:

(1) The Mid-Tier Holding Company will establish the Holding Company as a first-tier Maryland-chartered stock holding company subsidiary.

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp, Inc.

Peoples Federal Banshares, Inc.

Peoples Federal Savings Bank

March     , 2010

Page 3

(2) The Mutual Holding Company will merge with and into the Mid-Tier Holding Company with the Mid-Tier Holding Company as the resulting entity (the “MHC Merger”) whereby the shares of Mid-Tier Holding Company held by the Mutual Holding Company will be cancelled and the members of the Mutual Holding Company will automatically, without any further action on the part of the holders thereof, constructively receive liquidation interests in Mid-Tier Holding Company in exchange for their liquidation interests in the Mutual Holding Company.

(3) Immediately after the MHC Merger, the Mid-Tier Holding Company will merge with and into the Holding Company (the “Mid-Tier Merger”), with the Holding Company as the resulting entity. As part of the Mid-Tier Merger, the liquidation interests in Mid-Tier Holding Company constructively received by the members of Mutual Holding Company immediately prior to Conversion will automatically, without further action on the part of the holders thereof, be exchanged for an interest in the Liquidation Account.

(4) Immediately after the Mid-Tier Merger, the Holding Company will offer for sale its Common Stock in the Offering.

(5) The Holding Company will contribute at least 50% of the net proceeds of the Offering to the Bank in constructive exchange for additional shares of common stock of the Bank and the Bank Liquidation Account.

Following the Conversion, a Liquidation Account will be maintained by the Holding Company for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders who continue to maintain their deposit accounts with the Bank. Pursuant to Section 19 of the Plan, the Liquidation Account will be equal to the Mutual Holding Company’s total equity as reflected in the latest statement of financial condition contained in the final Prospectus used in the offering. In turn, the Holding Company will hold the Bank Liquidation Account. The terms of the Liquidation Account and Bank Liquidation Account, which supports the payment of the Liquidation Account in the event the Holding Company lacks sufficient net assets, are described in Section 19 of the Plan.

As a result of the Mid-Tier Merger and the MHC Merger, the Holding Company will be a publicly-held corporation, will register the Holding Company Common Stock under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and will become subject to the rules and regulations thereunder and file periodic reports and proxy

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp, Inc.

Peoples Federal Banshares, Inc.

Peoples Federal Savings Bank

March     , 2010

Page 4

statements with the SEC. The Bank will become a wholly owned subsidiary of the Holding Company and will continue to carry on its business and activities as conducted immediately prior to the Conversion.

The stockholders of the Holding Company will be those persons who purchase shares of Holding Company Common Stock in the Offering. Nontransferable rights to subscribe for the Holding Company Common Stock have been granted, in order of priority, to depositors of the Bank who have account balances of $50.00 or more as of the close of business on December 31, 2008 (“Eligible Account Holders”), the Bank’s tax-qualified employee plans (“Employee Plans”), depositors of the Bank who have account balances of $50.00 or more as of the close of business on the Supplemental Eligibility Record Date (“Supplemental Eligible Account Holders”), and depositors of the Bank as of the Voting Record Date (other than Eligible Account Holders and Supplemental Eligible Account Holders) and any borrower who qualifies as a Voting Member (“Other Members”). Subscription rights are nontransferable. The Holding Company will also offer shares of Holding Company Common Stock not subscribed for in the subscription offering, if any, for sale in a community offering to certain members of the general public.

Opinions

Based on the foregoing description of the MHC Merger and the Mid-Tier Merger, and subject to the qualifications and limitations set forth in this letter, we are of the opinion that:

1. The MHC Merger of the Mutual Holding Company with and into Mid-Tier Holding Company will qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(A) of the Code. (Section 368(a)(l)(A) of the Code.)

2. The constructive exchange of the Eligible Account Holders and Supplemental Eligible Account Holders liquidation interests in the Mutual Holding Company for liquidation interests in the Mid-Tier Holding Company in the MHC Merger will satisfy the continuity of interest requirement of Section 1.368-1(b) of the Income Tax Regulations. (cf. Rev. Rul. 69-3, 1969-1 C.B. 103, and Rev. Rul. 69-646, 1969-2 C.B. 54.)

3. The Mutual Holding Company will not recognize any gain or loss on the transfer of its assets to the Mid-Tier Holding Company and the Mid-Tier Holding Company’s assumption of its liabilities, if any, in constructive exchange for liquidation interests in the Mid-Tier Holding Company or on the constructive distribution of such liquidation interests to the Mutual Holding Company’s members who remain depositors of the Bank. (Section 361(a), 361(c) and 357(a) of the Code.)

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp, Inc.

Peoples Federal Banshares, Inc.

Peoples Federal Savings Bank

March     , 2010

Page 5

4. No gain or loss will be recognized by the Mid-Tier Holding Company upon the receipt of the assets of the Mutual Holding Company in the MHC Merger in exchange for the constructive transfer to the members of the Mutual Holding Company of the liquidation interests in the Mid-Tier Holding Company. (Section 1032(a) of the Code.)

5. Persons who have an interest in the Mutual Holding Company will recognize no gain or loss upon the constructive receipt of liquidation interests in the Mid-Tier Holding Company in exchange for their voting and liquidation rights in the Mutual Holding Company. (Section 354(a) of the Code.)

6. The basis of the assets of Mutual Holding Company (other than stock in the Mid-Tier Holding Company) to be received by Mid-Tier Holding Company will be the same as the basis of such assets in the hands of the Mutual Holding Company immediately prior to the transfer. (Section 362(b) of the Code.)

7. The holding period of the assets of the Mutual Holding Company in the hands of the Mid-Tier Holding Company will include the holding period of those assets in the hands of the Mutual Holding Company. (Section 1223(2) of the Code.)

8. The Mid-Tier Merger of Mid-Tier Holding Company with and into the Holding Company will constitute a mere change in identity, form or place of organization within the meaning of Section 368(a)(1)(F) of the Code and therefore will qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the Code. (Section 368(a)(1)(F) of the Code.)

9. The Mid-Tier Holding Company will not recognize any gain or loss on the transfer of its assets to the Holding Company and the Holding Company’s assumption of its liabilities in exchange for interests in the Liquidation Accounts for the Eligible Account Holders and Supplemental Eligible Account Holders. (Sections 361(a), 361(c) and 357(a) of the Code.)

10. No gain or loss will be recognized by the Holding Company upon the receipt of the assets of Mid-Tier Holding Company in the Mid-Tier Merger. (Section 1032(a) of the Code.)

11. The basis of the assets of the Mid-Tier Holding Company to be received by the Holding Company will be the same as the basis of such assets in the hands of Mid-Tier Holding Company immediately prior to the transfer. (Section 362(b) of the Code.)

12. Eligible Account Holders and Supplemental Eligible Account Holders will not recognize any gain or loss upon their constructive exchange of their liquidation interests in Mid-Tier Holding Company for the Liquidation Accounts in the Holding Company. (Section 354 of the Code.)

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp, Inc.

Peoples Federal Banshares, Inc.

Peoples Federal Savings Bank

March     , 2010

Page 6

13. The constructive exchange of the Eligible Account Holders and Supplemental Eligible Account Holders liquidation interests in the Mid-Tier Holding Company for interests in a Liquidation Account established in the Holding Company will satisfy the continuity of interest requirement of Section 1.368-1(b) of the Income Tax Regulations (cf. Rev. Rul. 69-3, 1969-1 C.B. 103, and Rev. Rul. 69-646, 1969-2 C.B. 54).

14. It is more likely than not that the fair market value of the nontransferable subscription rights to purchase Holding Company Common Stock is zero. Accordingly, it is more likely than not that no gain or loss will be recognized by Eligible Account Holders, Supplemental Eligible Account Holders and Other Voting Members upon distribution to them of nontransferable subscription rights to purchase shares of Holding Company Common Stock. (Section 356(a) of the Code.) Eligible Account Holders, Supplemental Eligible Account Holders and Other Voting Members will not realize any taxable income as the result of the exercise by them of the nontransferable subscriptions rights. (Rev. Rul. 56-572, 1956-2 C.B. 182.)

15. It is more likely than not that the fair market value of the benefit provided by the Bank Liquidation Account supporting the payment of the Liquidation Account in the event the Holding Company lacks sufficient net assets is zero. Accordingly, it is more likely than not that no gain or loss will be recognized by Eligible Account Holders and Supplemental Eligible Account Holders upon the constructive distribution to them of such rights in the Bank Liquidation Account as of the effective date of the Mid-Tier Merger. (Section 356(a) of the Code.)

16. It is more likely than not that the basis of the Holding Company Common Stock purchased in the Offering by the exercise of the nontransferable subscription rights will be the purchase price thereof. (Section 1012 of the Code.)

17. The holding period of the Holding Company Common Stock purchased pursuant to the exercise of subscriptions rights shall commence on the date on which the right to acquire such stock was exercised. (Section 1223(5) of the Code.)

18. No gain or loss will be recognized by Holding Company on the receipt of money in exchange for Holding Company Common Stock sold in the Offering. (Section 1032 of the Code.)

Our opinions under paragraphs 9, 12 and 14 are based on the position that the subscription rights to purchase shares of Holding Company Common Stock received by Eligible Account Holders, Supplemental Eligible Account Holders and Other Members have a fair market value of zero. We understand that the subscription rights will be granted at no cost to the recipients, will be legally nontransferable and of short duration, and will provide the recipient with the right only to purchase shares of Holding Company Common Stock at the same price to be paid by members of the general public in any Community Offering. We also note that the IRS has not in

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp, Inc.

Peoples Federal Banshares, Inc.

Peoples Federal Savings Bank

March     , 2010

Page 7

the past concluded that subscription rights have value. In addition, we are relying on a letter from RP Financial, LC. to you stating its belief that subscription rights do not have any economic value at the time of distribution or at the time the rights are exercised in the subscription offering. Based on the foregoing, we believe it is more likely than not that the nontransferable subscription rights to purchase Holding Company Common Stock have no value.

If the subscription rights are subsequently found to have an economic value, income may be recognized by various recipients of the subscription rights (in certain cases, whether or not the rights are exercised) and the Holding Company and/or the Bank may be taxable on the distribution of the subscription rights.

Our opinion under paragraph 15 above is based on the position that the benefit provided by the Bank Liquidation Account supporting the payment of the Liquidation Account in the event the Holding Company lacks sufficient net assets has a fair market value of zero. We understand that: (i) there is no history of any holder of a liquidation account receiving any payment attributable to a liquidation account; (ii) the interests in the Liquidation Account and Bank Liquidation Account are not transferable; (iii) the amounts due under the Liquidation Account with respect to each Eligible Account Holder and Supplemental Eligible Account Holder will be reduced as their deposits in the Bank are reduced as described in the Plan; and (iv) the Bank Liquidation Account payment obligation arises only if the Holding Company lacks sufficient net assets to fund the Liquidation Account. We also note that the U.S. Supreme Court in Paulsen v. Commissioner, 469 U.S. 131 (1985) stated the following:

The right to participate in the net proceeds of a solvent liquidation is also not a significant part of the value of the shares. Referring to the possibility of a solvent liquidation of a mutual savings association, this Court observed: “It stretches the imagination very far to attribute any real value to such a remote contingency, and when coupled with the fact that it represents nothing which the depositor can readily transfer, any theoretical value reduces almost to the vanishing point.” Society for the Savings v. Bowers, 349 U.S. 143, 150 (1955).

In addition, we are relying on a letter from RP Financial, LC. to you stating its belief that the benefit provided by the Bank Liquidation Account supporting the payment of the Liquidation Account in the event the Holding Company lacks sufficient net assets does not have any economic value at the time of the Mid-Tier Merger. Based on the foregoing, we believe it is more likely than not that such rights in the Bank Liquidation Account have no value.

If such Bank Liquidation rights are subsequently found to have an economic value, income may be recognized by each Eligible Account Holder and Supplemental Eligible Account Holder in the amount of such fair market value as of the effective date of the Mid-Tier Merger.

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp, Inc.

Peoples Federal Banshares, Inc.

Peoples Federal Savings Bank

March     , 2010

Page 8

CONSENT

We hereby consent to the filing of the opinion as an exhibit to the Mutual Holding Company’s Application for Conversion filed with the OTS and to the Holding Company’s Registration Statement on Form S-1 as filed with the SEC. We also consent to the references to our firm in the Prospectus contained in the Application for Conversion and Form S-1 under the captions “The Conversion and Offering-Material Income Tax Consequences” and “Legal Matters.”

Very truly yours,

Luse Gorman Pomerenk & Schick

EX-8.2

Exhibit 8.2

FORM OF STATE TAX OPINION

March     , 2010

Board of Directors

Peoples Federal Savings Bank

Peoples Federal Bancorp, Inc.

Peoples Federal, MHC

Peoples Federal Bancshares, Inc.

435 market Street

Brighton, Massachusetts 02135

Ladies and Gentlemen:

This letter constitutes our opinion as to certain Massachusetts Corporation Excise Tax consequences to Peoples Federal Savings Bank, a federally-chartered savings bank (the “Bank”), Peoples Federal, MHC, a federal mutual holding company (the “Mutual Holding Company”), Peoples Federal Bancorp, Inc., a federal corporation, (the “Mid-Tier Holding Company”) and Peoples Federal Bancshares, Inc., a Maryland corporation (the “Holding Company”) resulting from the proposed plan of reorganization of the Mutual Holding Company from a federally chartered mutual holding company to the capital form of organization through a series of transactions collectively referred to herein as the “Reorganization” pursuant to that certain Plan of Conversion and Reorganization of Peoples Federal MHC (the “Plan” or “Plan of Reorganization”) adopted by the Board of Directors on              2010. Unless otherwise defined, all terms used herein have the meanings given to such terms in the Plan of Reorganization. The opinion contained herein is rendered only with respect to the holdings set forth herein under the heading OPINION and we express no opinion with respect to any other legal, federal, state or local tax aspect of these transactions.

In preparing this opinion letter, we have relied, in part, upon certain factual descriptions provided in the PLAN OF CONVERSION AND REORGANIZATION OF PEOPLES FEDERAL MHC dated              2010, as well as the federal income tax opinion related to this transaction of Luse, Gorman, Pomerenk & Schick, a Professional Corporation dated              2010, and the representations as to factual matters made by Peoples Federal Savings Bank, Peoples Federal Bancorp, Inc., Peoples Federal, MHC, and Peoples Federal Bancshares, Inc., in their filing to the various regulatory agencies regarding this transaction as referenced in federal tax opinion of Luse, Gorman, Pomerenk & Schick, a Professional Corporation. If any fact or representation contained in these documents is not complete or accurate it is important that we be notified immediately in writing as this may cause us to change our opinion.

Board of Directors

Peoples Federal Savings Bank

Peoples Federal Bancorp, Inc.

Peoples Federal, MHC

Peoples Federal Bancshares, Inc.

March     , 2010

DESCRIPTION OF PROPOSED TRANSACTIONS

Based upon our review of the documents described above, and in reliance upon such documents, we understand that the relevant facts are as follows. Peoples Federal Savings Bank (the “Bank”) is a federally-chartered savings bank headquartered in Brighton, Massachusetts. The Bank was originally organized in 1888, and reorganized into the mutual holding company structure in 2005. The Bank is currently the wholly owned subsidiary of Peoples Federal Bancorp, Inc., a federal corporation (the “Mid-Tier Holding Company”), which is the wholly owned subsidiary of the Mutual Holding Company. The Mutual Holding Company is a mutual holding company with no stockholders. The Mutual Holding Company has members (e.g., the depositors of the Bank), who are entitled upon the complete liquidation of the Mutual Holding Company to liquidation proceeds after the payment of creditors.

Within the last six months, the Boards of Directors of the Mutual Holding Company, the Holding Company, the Mid-Tier Holding Company, and the Bank have adopted the Plan providing for the Conversion of the Mutual Holding Company from a federally chartered mutual holding company to the capital stock form of organization. A new Maryland stock corporation, the Holding Company, was incorporated in March 2010, as part of the Conversion and will succeed to all the rights and obligations of the Mutual Holding Company and the Mid-Tier Holding Company and will issue Holding Company Common Stock in the Conversion.

At the present time, two transactions referred to as the “MHC Merger” and the “Mid-Tier Merger” are being undertaken. Pursuant to the Plan, the Conversion will be effected in the following steps, in such order as is necessary to consummate the Conversion:

(1) The Mid-Tier Holding Company will establish the Holding Company as a first-tier Maryland-chartered stock holding company subsidiary.

(2) The Mutual Holding Company will merge with and into the Mid-Tier Holding Company with the Mid-Tier Holding Company as the resulting entity (the “MHC Merger”) whereby the shares of Mid-Tier Holding Company held by the Mutual Holding Company will be cancelled and the members of the Mutual Holding Company will automatically, without any further action on the part of the holders thereof, constructively receive liquidation interests in Mid-Tier Holding Company in exchange for their liquidation interests in the Mutual Holding Company.

(3) Immediately after the MHC Merger, the Mid-Tier Holding Company will merge with and into the Holding Company (the “Mid-Tier Merger”), with the Holding Company as the resulting entity. As part of the Mid-Tier Merger, the liquidation interests in Mid-Tier Holding Company constructively received by the members of Mutual Holding will, with without further action on the part of the holders thereof, be exchanged for an interest in the Liquidation Account.

Board of Directors

Peoples Federal Savings Bank

Peoples Federal Bancorp, Inc.

Peoples Federal, MHC

Peoples Federal Bancshares, Inc.

March     , 2010

(4) Immediately after the Mid-Tier Merger, the Holding Company will offer for sale its Common Stock in the Offering.

(5) The Holding Company will contribute at least 50% of the net proceeds of the Offering to the Bank in constructive exchange for additional shares of common stock of the Bank and the Bank Liquidation Account.

Following the Conversion, a Liquidation Account will be maintained by the Holding Company for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders who continue to maintain their deposit accounts with the Bank. Pursuant to Section 19 of the Plan, the Liquidation Account will be equal to the Mutual Holding Company’s total equity as reflected in the latest statement of financial condition contained in the final Prospectus used in the offering. In turn, the Holding Company will hold the Bank Liquidation Account. The terms of the Liquidation Account and Bank Liquidation Account, which supports the payment of the Liquidation Account in the event the Holding Company lacks sufficient net assets, are described in Section 19 of the Plan.

As a result of the Mid-Tier Merger and the MHC Merger, the Holding Company will be a publicly-held corporation, will register the Holding Company Common Stock under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and will become subject to the rules and regulations thereunder and file periodic reports and proxy statements with the SEC. The Bank will become a wholly owned subsidiary of the Holding Company and will continue to carry on its business and activities as conducted immediately prior to the Conversion.

The stockholders of the Holding Company will be those persons who purchase shares of Holding Company Common Stock in the Offering. Nontransferable rights to subscribe for the Holding Company Common Stock have been granted, in order of priority, to depositors of the Bank who have account balances of $50.00 or more as of the close of business on December 31, 2008 (“Eligible Account Holders”), the Bank's tax-qualified employee plans (“Employee Plans”), depositors of the Bank who have account balances of $50.00 or more as of the close of business on the Supplemental Eligibility Record Date (“Supplemental Eligible Account Holders”), and depositors of the Bank as of the Voting Record Date (other than Eligible Account Holders and Supplemental Eligible Account Holders) and any borrower who qualifies as a Voting Member (“Other Members”). Subscription rights are nontransferable. The Holding Company will also offer shares of Holding Company Common Stock not subscribed for in the subscription offering, if any, for sale in a community offering to certain members of the general public.

Board of Directors

Peoples Federal Savings Bank

Peoples Federal Bancorp, Inc.

Peoples Federal, MHC

Peoples Federal Bancshares, Inc.

March     , 2010

DISCUSSION OF STATE INCOME TAX LAW

Discussion – MASSACHUSETTS GENERAL LAWS CHAPTER 63

Massachusetts follows the federal treatment of corporate reorganization by reference to the United State Internal Revenue Code (IRC) with certain adjustments otherwise defined in the statutes. Massachusetts has adopted federal treatment of mergers qualifying under IRC Section 368 in which no gain or loss will be recognized by any “party to a reorganization” as defined within the meaning of IRC Section 368(b). also, if the transaction results in no gain or loss to savings depositors under IRC Section 354(a) then no gain or loss results at the state level. The various IRC sections referenced in federal opinion letter have been similarly adopted by the Commonwealth of Massachusetts.

OPINION

Based solely on the above discussion of state law, the representations and documentation filed by Peoples Federal Savings Bank, Peoples Federal Bancorp, Inc., Peoples Federal, MHC, Peoples Federal Bancshares, Inc., the PLAN OF CONVERSION AND REORGANIZATION OF PEOPLES FEDERAL, MHC and the federal tax opinion letter of Luse, Gorman, Pomerenk & Schick, a Professional Corporation, it is our opinion that for Massachusetts excise tax purposes:

1. No gain or loss will be recognized by any corporate parties to the reorganization for Massachusetts excise tax for any phase of the proposed transaction.

2. The conversion will not give rise to any positive or negative tax base adjustments for Massachusetts excise tax purposes.

3. No gain or loss shall be recognized by the members on the transfer of their rights and privileges in the MHC for their rights and privileges in the liquidation account.

4. The tax treatment of the reorganization will be the same as it is for federal income tax purposes.

The opinions expressed above are rendered with respect to the specific matters discussed herein and we express no opinion with respect to any other federal or state income tax, or other state and local taxes, or legal aspect of the conversion and reorganization. Our opinions are based on the completeness and accuracy of the above referenced documents. If any of the foregoing are not entirely complete or accurate, it is imperative that we be informed immediately in writing, as the inaccuracy of incompleteness could have a material effect on our conclusions. References to Massachusetts law, regulations and pronouncements are based upon current laws as enacted and pronouncements thereunder as of the date of this memorandum. We are relying upon the relevant provisions of the Internal Revenue Code of 1986, as amended, the regulations thereunder, and

Board of Directors

Peoples Federal Savings Bank

Peoples Federal Bancorp, Inc.

Peoples Federal, MHC

Peoples Federal Bancshares, Inc.

March     , 2010

judicial and administrative interpretations thereof, and state and local tax authorities which are subject to change or modification by subsequent legislative, regulatory, administrative, or judicial decisions. any such changes could also have an effect on the validity of our opinions. the opinions contained herein are not binding upon the Internal Revenue Service, any other tax authority or any court, and no assurance can be given that a position contrary to that expressed herein will not be asserted by a tax authority and ultimately sustained by a court.

CONSENT

We hereby consent to the filing of the opinion as an exhibit to the Mutual Holding Company’s Application for Conversion filed with the OTS and to the Holding Company’s Registration Statement on Form S-1 as filed with the SEC. We also consent to the references to our firm in the Prospectus contained in the Application for Conversion and Form S-1 under the captions “The Conversion and Offering-Material Income Tax Consequences” and “Legal Matters.”

Very truly yours,

Shatswell, MacLeod & Company, P.C.

EX-10.1

Exhibit 10.1

PEOPLES FEDERAL MHC

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is made effective as of December 16, 2008 (the “Effective Date”), by and between Peoples Federal MHC (the “Company”), a federally chartered mutual holding company, with its principal offices located at 435 Market Street, Boston, Massachusetts 02135, and Maurice H. Sullivan, Jr. (“Executive”).

WHEREAS, the Executive is currently employed as Chairman and Chief Executive Officer of the Company pursuant to an employment agreement between the Company and the Executive originally entered into as of October 1, 2005 (the “Original Agreement”);

WHEREAS, the Company desires to amend and restate the Original Agreement in order to make changes to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the final regulations issued thereunder in April 2007;

WHEREAS, the Company desires to ensure that the Company is assured of the continued availability of the Executive’s services as provided in this Agreement; and

WHEREAS, the Executive is willing to serve the Company on the terms and conditions hereinafter set forth and has agreed to such changes.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

1. Position and Responsibilities.

(a) During the period of Executive’s employment under this Agreement, Executive agrees to serve as Chairman and Chief Executive Officer of the Company. Executive shall perform all duties and shall have all powers which are commonly incident to the offices of Chief Executive Officer or which, consistent with that office, are delegated to him by the Board of Directors of the Company (the “Board of Directors”).

(b) During the period of Executive’s employment under this Agreement, except for periods of absence occasioned by illness, vacation, and reasonable leaves of absence, Executive shall devote the business time, attention, skill and efforts necessary to perform the duties under this Agreement, including activities and services related to the organization, operation and management of the Company and its affiliates, as well as participation in community, professional and civic organizations; provided, however, that, with the approval of the Board of Directors, as evidenced by a resolution of the Board of Directors, from time to time, Executive may continue his law practice and may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, companies or organizations, which, in the judgment of the Board of Directors, will not present any conflict of interest with the Company or its affiliates, or materially affect the performance of Executive’s duties pursuant to this Agreement.

(c) The Company will furnish Executive with the working facilities and staff customary for executive officers with the title and duties set forth in this Agreement and as are necessary for him to perform his duties. The location of such facilities and staff shall be at the principal administrative offices of the Company.

2. Term of Employment.

(a) The term of this Agreement shall be (i) the initial term, consisting of the period commencing on the Effective Date and ending on the third anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to this Section 2.

(b) Commencing on the first anniversary of the Effective Date and as of each anniversary thereafter (each, an “Anniversary Date”), the disinterested members of the Board of Directors may renew the term of this Agreement for an additional one (1) year period beyond the then effective expiration date, provided that Executive shall not have given at least sixty (60) days’ written notice of his desire that the term not be renewed. If notice of nonrenewal is provided to the Executive, then in such case the term of this Agreement shall become fixed and shall cease at the end of thirty-six (36) full calendar months following the Anniversary Date.

(c) Notwithstanding anything contained in this Agreement to the contrary, either Executive or the Company may terminate Executive’s employment with the Company at any time during the term of this Agreement, subject to the terms and conditions of this Agreement.

3. Compensation and Benefits.

(a) Base Salary. The Company agrees to pay Executive during the term of this Agreement a base salary (“Base Salary”) at the rate of $321,800 per annum, payable in accordance with the Company’s customary payroll practices; provided, however, such per annum payment shall be adjusted and paid on a pro rata basis relative to the overall business time expended by Executive to perform his duties under this Agreement as determined by the Board from time to time. The Board of Directors of the Company shall review annually the rate of Executive’s Base Salary based upon factors they deem relevant, and may maintain or increase his Base Salary, provided that no such action shall reduce the rate of Base Salary below the rate in effect on the Effective Date. In the absence of action by the Board of Directors, Executive shall continue to receive his Base Salary at the per annum rate specified on the Effective Date or, if another rate has been established under the provisions of this Section 3, the rate last properly established by action of the Board of Directors.

(b) Incentive Compensation. Executive shall be entitled to participate in discretionary bonuses or other incentive compensation programs that the Board of Directors may award from time to time to senior management employees pursuant to bonus plans or otherwise.

(c) Automobile and Cellular Phone. The Company shall provide Executive with, and Executive shall have the primary use of, an automobile owned or leased by the Company and the Company shall pay (or reimburse Executive) for all expenses of insurance, registration, operation and maintenance of the automobile. Executive shall comply with reasonable reporting and

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expense limitations on the use of such automobile, as the Company may establish from time to time, and the Company shall annually include on Executive’s Form W-2 any amount attributable to Executive’s personal use of such automobile. The Company shall also provide Executive with a cellular phone and shall pay (or reimburse) Executive for all reasonable expenses related to the business use of such phone. All expenses and reimbursements shall be paid promptly by the Company and in any event no later than March 15 of the year immediately following the year in which the expenses were incurred.

(d) Vacation and Holidays. Executive shall take vacation at a time mutually agreed upon by the Company and Executive. Executive shall receive his Base Salary and other benefits during periods of vacation. Executive shall also be entitled to paid legal holidays in accordance with the policies of the Company.

(e) Other Employee Benefits. In addition to any other compensation or benefits provided for under this Agreement, Executive shall be entitled to participate in any employee benefit plans, arrangements and perquisites of the Company or any affiliate. Executive shall also be entitled to participate in any employee benefits or perquisites the Company, or any affiliate, offers to full-time employees or executive management in the future. The Company will not, without Executive’s prior written consent, make any changes in such plans, arrangements or perquisites which would adversely affect Executive’s rights or benefits thereunder without separately providing for an arrangement that ensures Executive receives or will receive the economic value that Executive would otherwise lose as a result of any adverse changes. Without limiting the generality of the foregoing provisions of this paragraph, Executive shall be entitled to participate in or receive benefits under all plans relating to stock options, restricted stock awards, stock purchases, pension, profit sharing, employee stock ownership, supplemental retirement, directors’ retirement, group life insurance, medical and other health and welfare coverage that are made available by the Company, or any affiliate, currently or at any time in the future during the term of this Agreement, subject to and on a basis consistent with, the terms, conditions and overall administration of such plans and arrangements.

(f) Retirement Benefits. In the event the Executive’s employment is terminated on or after the Executive attains the age of sixty-five (65), then the Executive and the Executive’s spouse shall be entitled to receive for the life of the Executive and the Executive’s spouse, at no cost to either individual, participation in a supplemental medical retiree insurance plan and a prescription drug benefit plan offered by the Bank; provided that any insurance premiums payable by the Bank, or any successors, shall be payable at such times and in such amounts as if the Executive was still an employee of the Bank, subject to any increases in such amounts imposed by the insurance company or COBRA, and the amount of insurance premiums required to be paid by the Bank in any taxable year shall not affect the amount of insurance premiums required to be paid by the Bank in any other taxable year; and provided further that if the Executive or the Executive’s spouse’s participation in a supplemental medical retiree insurance plan or prescription drug benefit plan is barred, the Bank shall arrange to provide the Executive or the Executive’s spouse with insurance benefits substantially similar to those which the Executive or the Executive’s spouse was entitled to receive under this Section 3(f) at no additional cost to the Executive or the Executive’s spouse.

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4. Payments to Executive Upon an Event of Termination.

(a) Upon the occurrence of an Event of Termination (as herein defined) during Executive’s term of employment under this Agreement, the provisions of this Section 4 shall apply. Unless Executive agrees otherwise, as used in this Agreement, an “Event of Termination” shall mean and include any one or more of the following: (i) the termination by the Company of Executive’s employment for any reason other than a termination governed by Section 7 of this Agreement; or (ii) Executive’s resignation from the Company for “Good Reason.” Good Reason shall include any of the following: (A) failure to reappoint Executive as Chief Executive Officer; (B) material change in Executive’s functions, duties or responsibilities with the Company or its affiliates, which change would cause Executive’s position to become one of lesser responsibility, importance or scope from the position and attributes thereof described in Section 1 of this Agreement; (C) relocation of Executive’s principal place of employment by more than twenty-five (25) miles from its location at the Effective Date of this Agreement; (D) material reduction in the benefits and perquisites provided to Executive from those being provided as of the Effective Date of this Agreement (except for any reduction that is part of an employee-wide reduction in pay or benefits); (E) liquidation or dissolution of the Company other than liquidations or dissolutions that are caused by reorganizations that do not affect the status of Executive; or (F) breach of this Agreement by the Company. Upon the occurrence of any event described in clauses (A) through (F), above, Executive shall have the right to elect to terminate his employment under this Agreement by resignation upon not less than 30 days prior written notice given within a reasonable period of time (not to exceed 90 days) after the event giving rise to the right to elect, which termination by Executive shall be an Event of Termination. The Bank shall have 30 days to cure the condition giving rise to the Event of Termination, provided that the Bank may elect to waive said 30-day period.

(b) Upon Executive’s termination of employment in accordance with paragraph (a) of this Section 4, as of the Date of Termination, as defined in Section 8 of this Agreement, the Company shall be obligated to pay Executive, or, in the event of his death following the Date of Termination, his beneficiary(ies), or his estate, as the case may be, an amount equal to the sum of: (i) the Base Salary and incentive compensation that would have been paid to Executive for the remaining term of this Agreement had the Event of Termination not occurred (based on Executive’s then current Base Salary and most recently paid or accrued bonus at the time of the Event of Termination) plus (ii) the value of all employee benefits that would have been provided to Executive for the remaining term of this Agreement had the Event of Termination not occurred, based on the most recent level of contribution, accrual or other participation by or on behalf of Executive. Such amounts shall be paid to Executive in a single cash lump sum distribution within thirty (30) days following Executive’s Event of Termination; provided, however, if the Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be delayed until the first day of the seventh full month following the Executive’s Date of Termination. Such payments shall not be reduced in the event Executive obtains other employment following termination of employment with the Company.

(c) In addition to the payments provided for in paragraph (b) of this Section 4, upon Executive’s termination of employment in accordance with the provisions of paragraph (a) of

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this Section 4, to the extent that the Company, or any affiliate, continues to offer any life insurance, non-taxable medical, health, or dental insurance plan or arrangement in which Executive or his dependents participates as of the date of the Event of Termination (each being a “Welfare Plan”), Executive and his covered dependents shall continue participating in such Welfare Plans, subject to the same premium contributions on the part of Executive as were required immediately prior to the Event of Termination until the earlier of (i) his death; (ii) his employment by another employer other than one of which he is the majority owner; or (iii) the end of the remaining term of this Agreement. If the Company, or any affiliate, does not offer the Welfare Plans at any time after the Event of Termination, then the Company, or any affiliate, shall provide Executive with a payment equal to the premiums for such benefits for the period which runs until the earlier of (i) his death; (ii) his employment by another employer other than one of which he is the majority owner; or (iii) the end of the remaining term of this Agreement, with such amounts payable to Executive in a single cash lump sum distribution within thirty (30) days following Executive’s Event of Termination; provided however, if the Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be delayed until the first day of the seventh full month following the Executive’s Date of Termination.

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5. Change in Control.

(a) For purposes of this Agreement, a “Change in Control” shall mean one of the following events:

(i) There occurs a “Change in Control” of the Company, as defined or determined by either the Company’s primary federal regulator or under regulations promulgated by such regulator;

(ii) As a result of, or in connection with, any merger or other business combination, sale of assets or contested election, wherein the persons who were non-employee directors of the Company before such transaction or event cease to constitute a majority of the Board of Directors of the Company or any successor to the Company;

(iii) The Company transfers all or substantially all of its assets to another corporation or entity which is not an affiliate of the Company;

(iv) The Company is merged or consolidated with another corporation or entity and, as a result of such merger or consolidation, less than sixty percent (60%) of the equity interest in the surviving or resulting corporation is owned by the former shareholders or depositors of the Company; or

(v) The Company sells or transfers more than a fifty percent (50%) equity interest in the Company to another person or entity which is not an affiliate of the Company, excluding a sale or transfer to a person or persons who are employed by the Company.

Notwithstanding anything in this Agreement to the contrary, in no event shall the conversion of the Company from mutual to stock form (including, without limitation, through the formation of a stock holding company) or the public issuance of stock by any affiliate constitute a Change in Control for purposes of this Agreement.

(b) If any of the events described in paragraph (a) of this Section 5, constituting a Change in Control, have occurred or the Board of Directors determines that a Change in Control has occurred, Executive shall be entitled to the benefits provided for in paragraphs (c), (d), and (e) of this Section 5 upon his termination of employment at any time during the term of this Agreement on or after the date the Change in Control occurs due to (i) Executive’s dismissal, (ii) Executive’s resignation following any demotion, loss of title, office or significant authority or responsibility, reduction in annual compensation or benefits or relocation of his principal place of employment by more than twenty-five (25) miles from its location immediately prior to the Change in Control, or (iii) Executive’s resignation for any reason within ninety (90) days of the effective date of a Change in Control, unless Executive’s termination is for Just Cause as defined in Section 7 of this Agreement; provided, however, that such benefits shall be reduced by any payments made under Section 4 of this Agreement.

(c) Upon the occurrence of a Change in Control followed by Executive’s termination of employment, as provided for in paragraph (b) of this Section 5, the Company shall pay

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Executive, or in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, as severance pay or liquidated damages, or both, the greater of the payments and benefits due for the remaining term of the Agreement, pursuant to the provisions of Section 4 of this agreement, or three (3) times Executive’s average Annual Compensation over the five (5) most recently completed calendar years ending with the year immediately preceding the effective date of the Change in Control. In determining Executive’s average Annual Compensation, “Annual Compensation” shall include Base Salary and any other taxable income, including, but not limited to, amounts related to the granting, vesting or exercise of restricted stock or stock option awards, commissions, bonuses (whether paid or accrued for the applicable period), as well as retirement benefits, director or committee fees and fringe benefits paid or to be paid to Executive or paid for Executive’s benefit during any such year, profit sharing, employee stock ownership plan and other retirement contributions or benefits, including to any tax-qualified plan or arrangement (whether or not taxable) made or accrued on behalf of Executive for such year. All amounts payable to the Executive shall be paid in a single cash lump sum distribution within thirty (30) days following such termination of Executive’s employment; provided, however, if the Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be delayed until the first day of the seventh full month following the Executive’s Date of Termination.

(d) Upon the occurrence of a Change in Control and Executive’s termination of employment in connection therewith, to the extent that the Company continues to offer any life insurance, non-taxable medical, health, or dental insurance plan or arrangement in which Executive or his dependents participated immediately prior to the Change in Control (each being a “Welfare Plan”), Executive and his covered dependents shall continue participating in such Welfare Plans, subject to the same premium contributions on the part of Executive as were required immediately prior to the Change in Control, until the earlier of (i) Executive’s death; (ii) his employment by another employer other than one of which he is the majority owner; or (iii) the expiration of thirty-six (36) months. If the Company does not offer the Welfare Plans at any time after the Change in Control, the Company shall provide Executive with a payment equal to the premiums for such benefits for the period which runs until the earlier of (i) his death; (ii) his employment by another employer other than one of which he is the majority owner; or (iii) the expiration of 36 months, with such amounts payable to Executive in a single cash lump sum distribution within thirty (30) days following Executive’s Event of Termination; provided however, if the Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be delayed until the first day of the seventh full month following the Executive’s Date of Termination.

(e) The use or provision of any membership, license, automobile use or other perquisites shall be continued during the remaining term of the Agreement on the same financial terms and obligations as were in place immediately prior to the Change in Control, provided however, that if such expenses are paid in the first instance by the Executive, the Company shall reimburse the Executive therefore. Such reimbursement shall be paid promptly by the Company and in any event no later than March 15 of the year immediately following the year in which such expenses were incurred. To the extent that any item referred to in this paragraph will, at the end of the

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term of this Agreement, no longer be available to Executive, Executive will have the option to purchase all rights then held by the Company to such item for a price equal to the then fair market value of the item.

(f) For purposes of this Agreement, “Event of Termination” and “termination of employment” shall mean “Separation from Service” as defined in Code Section 409A and the Treasury Regulations promulgated thereunder, provided, however, that the Bank and Executive reasonably anticipate that the level of bona fide services Executive would perform after termination would permanently decrease to a level that is less than 50% of the average level of bona fide services performed (whether as an employee or independent contractor) over the immediately preceding 36-month period.

6. Change in Control Related Provisions.

Notwithstanding the preceding provisions of this Section 5, in no event shall the aggregate payments or benefits to be made or afforded to Executive under said paragraphs (the “Termination Benefits”) constitute an “excess parachute payment” under Section 280G of the Code or any successor thereto, and in order to avoid such a result, Termination Benefits will be reduced, if necessary, to an amount, the value of which is one dollar ($1.00) less than an amount equal to three (3) times Executive’s “base amount,” as determined in accordance with said Section 280G. The allocation of the reduction required among the Termination Benefits provided by this Section 5 shall be determined by Executive, provided, however, that if such reduction violates Code Section 409A, then the reduction shall be applied to the severance benefits otherwise payable under Section 5(c) hereof.

7. Termination for Just Cause.

The phrase termination for “Just Cause” shall mean termination because of Executive’s personal dishonesty, incompetence, willful misconduct, any breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, regulation (other than traffic violations or similar offenses), final cease and desist order or material breach of any provision of this Agreement. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Just Cause unless and until there shall have been delivered to him a Notice of Termination which shall include a copy of a resolution duly adopted by the affirmative vote of not less than a simple majority of all of the members of the Board of Directors at a meeting of the Board of Directors called and held for that purpose, finding that, in the good faith opinion of the Board of Directors, Executive was guilty of conduct justifying termination for Just Cause and specifying the particulars thereof in detail. Executive shall not have the right to receive compensation or other benefits for any period after termination for Just Cause.

8. Notice.

(a) Any purported termination by the Company or by Executive shall be communicated by means of a Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination

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provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.

(b) “Date of Termination” shall mean the date specified in the Notice of Termination.

9. Post-Termination Obligations.

Payments and benefits to Executive under this Agreement shall be subject to Executive’s compliance with Section 10 for one (1) full year after the earlier of the expiration of this Agreement or termination of Executive’s employment with the Company. Executive shall, upon reasonable notice, furnish such information and assistance as may reasonably be required by the Company in connection with any litigation to which it or any of its affiliates is, or may become, a party.

10. Non-Competition and Non-Disclosure.

(a) Upon any termination of Executive’s employment pursuant to Section 4 of this Agreement, Executive agrees not to compete with the Company or its affiliates for a period of one (1) year following such termination in any city, town or county in which Executive’s normal business office is located and the Company or any of its affiliates has an office or has filed an application for regulatory approval to establish an office, determined as of the effective date of such termination, except as agreed to pursuant to a resolution duly adopted by the Board of Directors. Executive agrees that during such period and within said cities, towns and counties, Executive shall not work for or advise, consult or otherwise serve with, directly or indirectly, any entity whose business materially competes with the depository, lending or other business activities of the Company or its affiliates. The parties hereto, recognizing that irreparable injury will result to the Company or its affiliates, its business and property in the event of Executive’s breach of this Subsection 10(a), agree that in the event of any such breach by Executive, the Company or its affiliates will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by Executive, Executive’s partners, agents, servants, employees and all persons acting for or under the direction of Executive. Executive represents and admits that, in the event of the termination of his employment pursuant to Section 4 of this Agreement, Executive’s experience and capabilities are such that Executive can obtain employment in a business engaged in other lines and/or of a different nature than the Company or its affiliates, and that the enforcement of a remedy by way of injunction will not prevent Executive from earning a livelihood. Nothing herein will be construed as prohibiting the Company or its affiliates from pursuing any other remedies available to the Company or its affiliates for such breach or threatened breach, including the recovery of damages from Executive.

(b) Executive recognizes and acknowledges that his knowledge of the business activities and plans for business activities of the Company and its affiliates, as it may exist from time to time, is a valuable, special and unique asset of the business of the Company and its affiliates. Executive will not, during or after the term of his employment, disclose any knowledge of the past, present, planned or considered business activities of the Company and its affiliates to any

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person, firm, corporation or other entity for any reason or purpose whatsoever, unless expressly authorized by the Board of Directors or required by law. Notwithstanding the foregoing, Executive may disclose any knowledge of companying, financial and/or economic principles, concepts or ideas which are not solely and exclusively derived from the business plans and activities of the Company or its affiliates. In the event of a breach or threatened breach by Executive of the provisions of this Section 10(b), the Company will be entitled to an injunction restraining Executive from disclosing, in whole or in part, knowledge of the past, present, planned or considered business activities of the Company or its affiliates or from rendering any services to any person, firm, corporation or other entity to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein will be construed as prohibiting the Company from pursuing any other remedies available to the Company for such breach or threatened breach, including the recovery of damages from Executive.

11. Death and Disability.

(a) Death. Notwithstanding any other provision of this Agreement to the contrary, in the event of Executive’s death during the term of this Agreement, the Company shall immediately pay his estate any salary and bonus accrued but unpaid as of the date of his death, and, for a period of six (6) months after Executive’s death, the Company shall continue to provide his dependents with the same non-taxable medical insurance benefits existing on the date of his death and shall pay Executive’s designated beneficiary all compensation that would otherwise be payable to him pursuant to Section 3(a) of this Agreement, within thirty (30) days of such death. This provision shall not negate any rights Executive or his beneficiaries may have to death benefits under any employee benefit plan of the Company.

(b) Disability.

(i) Termination of Executive’s employment based on “Disability” shall be construed to comply with Section 409A of the Internal Revenue Code and shall be deemed to have occurred if: (i) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, or last for a continuous period of not less than 12 months; (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death, or last for a continuous period of not less than 12 months, Executive is receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company; or (iii) Executive is determined to be totally disabled by the Social Security Administration. The provisions of Sections 6(b) and (c) shall apply upon the termination of the Executive’s employment based on Disability. Upon the determination that Executive has suffered a Disability, disability payments hereunder shall commence within thirty (30) days.

(ii) In the event of Disability, Executive’s obligation to perform services under this Agreement will terminate. In the event of such termination, Executive shall continue to receive A) one hundred percent (100%) of his monthly Base Salary (at the annual rate in effect on the Date of Termination) through the one hundred eightieth (180^th) day following the Date of Termination by reason of Disability and B) sixty percent (60%) of his monthly Base Salary from the one hundred eighty-first (181^st) day following termination through the earlier of the date of

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his death or the date he attains age 70. Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to Executive under any disability program and any retirement benefits payable to Executive under any tax-qualified retirement plan sponsored by the Company, but in no event shall Executive’s Disability benefit be reduced below zero. In addition, during any period of Executive’s Disability, Executive and his dependents shall, to the greatest extent possible, continue to be covered under life insurance and non-taxable medical and dental plans of the Bank in which Executive participated prior to the occurrence of Executive’s Disability, on the same terms as if Executive were actively employed by the Company. Notwithstanding anything to the contrary herein, no payments shall be made hereunder which would violate Code Section 409A. Accordingly, any payments required hereunder shall commence within thirty (30) days from the date of determination of Executive’s Disability and shall be paid no less frequently than monthly during the period that Executive is Disabled.

12. Source of Payments.

All payments provided for in this Agreement shall be timely paid in cash or check from the general funds of the Company.

13. Effect on Prior Agreements and Existing Benefit Plans.

This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment or change in control agreement between the Company or any predecessor of the Company and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement.

14. No Attachment.

(a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation, or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void and of no effect.

(b) This Agreement shall be binding upon and inure to the benefit of Executive and the Company and their respective successors and assigns.

15. Modification and Waiver.

(a) This Agreement may not be modified or amended, except by an instrument in writing signed by the parties hereto.

(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver

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shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived.

16. Severability.

If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any remaining part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.

17. Headings for Reference Only.

The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

18. Governing Law.

This Agreement shall be governed by the laws of the Commonwealth of Massachusetts without regard to principles of conflicts of law of the Commonwealth of Massachusetts.

19. Arbitration.

Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators sitting in a location selected by Executive within fifty (50) miles from the location of the Company, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

In the event any dispute or controversy arising under or in connection with Executive’s termination is resolved in favor of Executive, whether by judgment, arbitration or settlement, Executive shall be entitled to the payment of all back-pay, including salary, bonuses and any other cash compensation, fringe benefits and any compensation and benefits due Executive under this Agreement. Such payment shall occur no later than two and one-half (2 ¹/2) months after the dispute is settled or resolved in Executive’s favor.

20. Payment of Legal Fees.

All reasonable legal fees paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Company only if Executive is successful pursuant to a legal judgment, arbitration or settlement. Such payment or reimbursement shall occur no later than two and one-half (2 ¹/2) months after the dispute is settled or resolved in Executive’s favor.

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21. Indemnification.

(a) The Company shall provide Executive (including his heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at its expense and shall indemnify Executive (and his heirs, executors and administrators) to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director or officer of the Company (whether or not he continues to be a director or officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs, attorneys’ fees and the costs of reasonable settlements.

22. Successors to the Company.

The Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business or assets of the Company, expressly and unconditionally to assume and agree to perform the Company’s obligations under this Agreement, in the same manner and to the same extent that the Company would be required to perform if no such succession or assignment had taken place.

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SIGNATURES

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

ATTEST:	PEOPLES FEDERAL MHC
/s/ Bernard Burke	By:	/s/ Thomas J. Leetch
Secretary		For the Entire Board of Directors
WITNESS:	EXECUTIVE:
/s/ Bernard Burke	/s/ Maurice H .Sullivan, Jr.
Secretary	Maurice H. Sullivan, Jr

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EX-10.2

Exhibit 10.2

PEOPLES FEDERAL SAVINGS BANK

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is made effective as of December 16, 2008 (the “Effective Date”), by and between Peoples Federal Savings Bank (the “Bank”), a federally chartered financial institution, with its principal offices located at 435 Market Street, Boston, Massachusetts 02135, and Thomas J. Leetch (“Executive”).

WHEREAS, the Executive is currently employed as President and Chief Executive Officer of the Bank pursuant to an employment agreement between the Bank and the Executive originally entered into as of October 1, 2004 (the “Original Agreement”);

WHEREAS, the Bank desires to amend and restate the Original Agreement in order to make changes to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the final regulations issued thereunder in April 2007;

WHEREAS, the Bank desires to ensure that the Bank is assured of the continued availability of the Executive’s services as provided in this Agreement; and

WHEREAS, the Executive is willing to serve the Bank on the terms and conditions hereinafter set forth and has agreed to such changes.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

1. Position and Responsibilities.

(a) During the period of Executive’s employment under this Agreement, Executive agrees to serve as President and Chief Executive Officer of the Bank. Executive shall perform all duties and shall have all powers which are commonly incident to the offices of President and Chief Executive Officer or which, consistent with that office, are delegated to him by the Board of Directors of the Bank (the “Board of Directors”).

(b) During the period of Executive’s employment under this Agreement, except for periods of absence occasioned by illness, vacation, and reasonable leaves of absence, Executive shall devote substantially all of his business time, attention, skill and efforts to the faithful performance of his duties under this Agreement, including activities and services related to the organization, operation and management of the Bank and its affiliates, as well as participation in community, professional and civic organizations; provided, however, that, with the approval of the Board of Directors, as evidenced by a resolution of the Board of Directors, from time to time, Executive may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, companies or organizations, which, in the judgment of the Board of Directors, will not present any conflict of interest with the Bank or its affiliates, or materially affect the performance of Executive’s duties pursuant to this Agreement.

(c) The Bank will furnish Executive with the working facilities and staff customary for executive officers with the title and duties set forth in this Agreement and as are necessary for him to perform his duties. The location of such facilities and staff shall be at the principal administrative offices of the Bank.

2. Term of Employment.

(a) The term of this Agreement shall be (i) the initial term, consisting of the period commencing on the Effective Date and ending on the third anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to this Section 2.

(b) Commencing on the first anniversary of the Effective Date and as of each anniversary thereafter (each, an “Anniversary Date”), the disinterested members of the Board of Directors may renew the term of this Agreement for an additional one (1) year period beyond the then effective expiration date, provided that Executive shall not have given at least sixty (60) days’ written notice of his desire that the term not be renewed. If notice of nonrenewal is provided to the Executive, then in such case the term of this Agreement shall become fixed and shall cease at the end of thirty-six (36) full calendar months following the Anniversary Date.

(c) Notwithstanding anything contained in this Agreement to the contrary, either Executive or the Bank may terminate Executive’s employment with the Bank at any time during the term of this Agreement, subject to the terms and conditions of this Agreement.

3. Compensation and Benefits.

(a) Base Salary. The Bank agrees to pay Executive during the term of this Agreement a base salary (“Base Salary”) at the rate of $321,800 per annum, payable in accordance with the Bank’s customary payroll practices. The Board of Directors of the Bank shall review annually the rate of Executive’s Base Salary based upon factors they deem relevant, and may maintain or increase his Base Salary, provided that no such action shall reduce the rate of Base Salary below the rate in effect on the Effective Date. In the absence of action by the Board of Directors, Executive shall continue to receive his Base Salary at the per annum rate specified on the Effective Date or, if another rate has been established under the provisions of this Section 3, the rate last properly established by action of the Board of Directors.

(b) Incentive Compensation. Executive shall be entitled to participate in discretionary bonuses or other incentive compensation programs that the Board of Directors may award from time to time to senior management employees pursuant to bonus plans or otherwise.

(c) Automobile and Cellular Phone. The Bank shall provide Executive with, and Executive shall have the primary use of, an automobile owned or leased by the Bank and the Bank shall pay (or reimburse Executive) for all expenses of insurance, registration, operation and maintenance of the automobile. Executive shall comply with reasonable reporting and expense limitations on the use of such automobile, as the Bank may establish from time to time, and the Bank shall annually include on Executive’s Form W-2 any amount attributable to Executive’s personal use of such automobile. The Bank shall also provide Executive with a cellular phone and shall pay

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(or reimburse) Executive for all reasonable expenses related to the business use of such phone. All expenses and reimbursements shall be paid promptly by the Bank and in any event no later than March 15 of the year immediately following the year in which the expenses were incurred.

(d) Vacation and Holidays. Executive shall take vacation at a time mutually agreed upon by the Bank and Executive. Executive shall receive his Base Salary and other benefits during periods of vacation. Executive shall also be entitled to paid legal holidays in accordance with the policies of the Bank.

(e) Other Employee Benefits. In addition to any other compensation or benefits provided for under this Agreement, Executive shall be entitled to continue to participate in any employee benefit plans, arrangements and perquisites of the Bank in which he participated or was eligible to participate as of the Effective Date. Executive shall also be entitled to participate in any employee benefits or perquisites the Bank offers to full-time employees or executive management in the future. The Bank will not, without Executive’s prior written consent, make any changes in such plans, arrangements or perquisites which would adversely affect Executive’s rights or benefits thereunder without separately providing for an arrangement that ensures Executive receives or will receive the economic value that Executive would otherwise lose as a result of any adverse changes. Without limiting the generality of the foregoing provisions of this paragraph, Executive shall be entitled to participate in or receive benefits under all plans relating to stock options, restricted stock awards, stock purchases, pension, profit sharing, employee stock ownership, supplemental retirement, directors’ retirement, group life insurance, medical and other health and welfare coverage that are made available by the Bank currently or at any time in the future during the term of this Agreement, subject to and on a basis consistent with, the terms, conditions and overall administration of such plans and arrangements.

(f) Retirement Benefits. In the event the Executive’s employment is terminated on or after the Executive attains the age of sixty-five (65), then the Executive and the Executive’s spouse shall be entitled to receive for the life of the Executive and the Executive’s spouse, at no cost to either individual, participation in a supplemental medical retiree insurance plan and a prescription drug benefit plan offered by the Bank; provided that any insurance premiums payable by the Bank, or any successors, shall be payable at such times and in such amounts as if the Executive was still an employee of the Bank, subject to any increases in such amounts imposed by the insurance company or COBRA, and the amount of insurance premiums required to be paid by the Bank in any taxable year shall not affect the amount of insurance premiums required to be paid by the Bank in any other taxable year; and provided further that if the Executive or the Executive’s spouse’s participation in a supplemental medical retiree insurance plan or prescription drug benefit plan is barred, the Bank shall arrange to provide the Executive or the Executive’s spouse with insurance benefits substantially similar to those which the Executive or the Executive’s spouse was entitled to receive under this Section 3(f) at no additional cost to the Executive or the Executive’s spouse.

4. Payments to Executive Upon an Event of Termination.

(a) Upon the occurrence of an Event of Termination (as herein defined) during Executive’s term of employment under this Agreement, the provisions of this Section 4 shall apply. Unless

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Executive agrees otherwise, as used in this Agreement, an “Event of Termination” shall mean and include any one or more of the following: (i) the termination by the Bank of Executive’s full-time employment for any reason other than a termination governed by Section 7 of this Agreement; or (ii) Executive’s resignation from the Bank for “Good Reason.” Good Reason shall include any of the following: (A) failure to reappoint Executive as President and Chief Executive Officer; (B) material change in Executive’s functions, duties or responsibilities with the Bank or its affiliates, which change would cause Executive’s position to become one of lesser responsibility, importance or scope from the position and attributes thereof described in Section 1 of this Agreement; (C) relocation of Executive’s principal place of employment by more than twenty-five (25) miles from its location at the Effective Date of this Agreement; (D) material reduction in the benefits and perquisites provided to Executive from those being provided as of the Effective Date of this Agreement (except for any reduction that is part of an employee-wide reduction in pay or benefits); (E) liquidation or dissolution of the Bank other than liquidations or dissolutions that are caused by reorganizations that do not affect the status of Executive; or (F) breach of this Agreement by the Bank. Upon the occurrence of any event described in clauses (A) through (F), above, Executive shall have the right to elect to terminate his employment under this Agreement by resignation upon not less than 30 days prior written notice given within a reasonable period of time (not to exceed 90 days) after the event giving rise to the right to elect, which termination by Executive shall be an Event of Termination. The Bank shall have 30 days to cure the condition giving rise to the Event of Termination, provided that the Bank may elect to waive said 30-day period.

(b) Upon Executive’s termination of employment in accordance with paragraph (a) of this Section 4, as of the Date of Termination, as defined in Section 8 of this Agreement, the Bank shall be obligated to pay Executive, or, in the event of his death following the Date of Termination, his beneficiary(ies), or his estate, as the case may be, an amount equal to the sum of: (i) the Base Salary and incentive compensation that would have been paid to Executive for the remaining term of this Agreement had the Event of Termination not occurred (based on Executive’s then current Base Salary and most recently paid or accrued bonus at the time of the Event of Termination) plus (ii) the value of all employee benefits that would have been provided to Executive for the remaining term of this Agreement had the Event of Termination not occurred, based on the most recent level of contribution, accrual or other participation by or on behalf of Executive. Such amounts shall be paid to Executive in a single cash lump sum distribution within thirty (30) days following Executive’s Event of Termination; provided however, if the Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be delayed until the first day of the seventh full month following the Executive’s Date of Termination. Such payments shall not be reduced in the event Executive obtains other employment following termination of employment with the Bank.

(c) In addition to the payments provided for in paragraph (b) of this Section 4, upon Executive’s termination of employment in accordance with the provisions of paragraph (a) of this Section 4, to the extent that the Bank continues to offer any life insurance, non-taxable medical, health, or dental insurance plan or arrangement in which Executive or his dependents participate as of the date of the Event of Termination (each being a “Welfare Plan”), Executive and his covered dependents shall continue participating in such Welfare Plans, subject to the

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same premium contributions on the part of Executive as were required immediately prior to the Event of Termination until the earlier of (i) his death; (ii) his employment by another employer other than one of which he is the majority owner; or (iii) the end of the remaining term of this Agreement. If the Bank does not offer the Welfare Plans at any time after the Event of Termination, then the Bank shall provide Executive with a payment equal to the premiums for such benefits for the period which runs until the earlier of (i) his death; (ii) his employment by another employer other than one of which he is the majority owner; or (iii) the end of the remaining term of this Agreement, with such amounts payable to Executive in a single cash lump sum distribution within thirty (30) days following Executive’s Event of Termination; provided, however, if the Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be delayed until the first day of the seventh full month following the Executive’s Date of Termination.

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5. Change in Control.

(a) For purposes of this Agreement, a “Change in Control” shall mean one of the following events:

(i) There occurs a “Change in Control” of the Bank, as defined or determined by either the Bank’s primary federal regulator or under regulations promulgated by such regulator;

(ii) As a result of, or in connection with, any merger or other business combination, sale of assets or contested election, wherein the persons who were non-employee directors of the Bank before such transaction or event cease to constitute a majority of the Board of Directors of the Bank or any successor to the Bank;

(iii) The Bank transfers all or substantially all of its assets to another corporation or entity which is not an affiliate of the Bank;

(iv) The Bank is merged or consolidated with another corporation or entity and, as a result of such merger or consolidation, less than sixty percent (60%) of the equity interest in the surviving or resulting corporation is owned by the former shareholders or depositors of the Bank; or

(v) The Bank sells or transfers more than a fifty percent (50%) equity interest in the Bank to another person or entity which is not an affiliate of the Bank, excluding a sale or transfer to a person or persons who are employed by the Bank.

Notwithstanding anything in this Agreement to the contrary, in no event shall the conversion of the Bank from mutual to stock form (including, without limitation, through the formation of a stock holding company) or the reorganization of the Bank into the mutual holding company form of organization constitute a Change in Control for purposes of this Agreement.

(b) If any of the events described in paragraph (a) of this Section 5, constituting a Change in Control, have occurred or the Board of Directors determines that a Change in Control has occurred, Executive shall be entitled to the benefits provided for in paragraphs (c), (d), and (e) of this Section 5 upon his termination of employment at any time during the term of this Agreement on or after the date the Change in Control occurs due to (i) Executive’s dismissal, (ii) Executive’s resignation following any demotion, loss of title, office or significant authority or responsibility, reduction in annual compensation or benefits or relocation of his principal place of employment by more than twenty-five (25) miles from its location immediately prior to the Change in Control, or (iii) Executive’s resignation for any reason within ninety (90) days of the effective date of a Change in Control, unless Executive’s termination is for Just Cause as defined in Section 7 of this Agreement; provided, however, that such benefits shall be reduced by any payments made under Section 4 of this Agreement.

(c) Upon the occurrence of a Change in Control followed by Executive’s termination of employment, as provided for in paragraph (b) of this Section 5, the Bank shall pay Executive, or

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in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, as severance pay or liquidated damages, or both, the greater of the payments and benefits due for the remaining term of the Agreement, pursuant to the provisions of Section 4 of this agreement, or three (3) times Executive’s average Annual Compensation over the five (5) most recently completed calendar years ending with the year immediately preceding the effective date of the Change in Control. In determining Executive’s average Annual Compensation, “Annual Compensation” shall include Base Salary and any other taxable income, including, but not limited to, amounts related to the granting, vesting or exercise of restricted stock or stock option awards, commissions, bonuses (whether paid or accrued for the applicable period), as well as retirement benefits, director or committee fees and fringe benefits paid or to be paid to Executive or paid for Executive’s benefit during any such year, profit sharing, employee stock ownership plan and other retirement contributions or benefits, including to any tax-qualified plan or arrangement (whether or not taxable) made or accrued on behalf of Executive for such year. All amounts payable to the Executive shall be paid in a single cash lump sum distribution within thirty (30) days following such termination of Executive’s employment; provided however, if the Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be delayed until the first day of the seventh full month following the Executive’s Date of Termination.

(d) Upon the occurrence of a Change in Control and Executive’s termination of employment in connection therewith, to the extent that the Bank continues to offer any life insurance, non-taxable medical, health, or dental insurance plan or arrangement in which Executive or his dependents participated immediately prior to the Change in Control (each being a “Welfare Plan”), Executive and his covered dependents shall continue participating in such Welfare Plans, subject to the same premium contributions on the part of Executive as were required immediately prior to the Change in Control, until the earlier of (i) Executive’s death; (ii) his employment by another employer other than one of which he is the majority owner; or (iii) the expiration of thirty-six (36) months. If the Bank does not offer the Welfare Plans at any time after the Change in Control, the Bank shall provide Executive with a payment equal to the premiums for such benefits for the period which runs until the earlier of (i) his death; (ii) his employment by another employer other than one of which he is the majority owner; or (iii) the expiration of 36 months, with such amounts payable to Executive in a single cash lump sum distribution within thirty (30) days following Executive’s Event of Termination; provided, however, if the Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be delayed until the first day of the seventh full month following the Executive’s Date of Termination.

(e) The use or provision of any membership, license, automobile use or other perquisites shall be continued during the remaining term of the Agreement on the same financial terms and obligations as were in place immediately prior to the Change in Control, provided however, that if such expenses are paid in the first instance by the Executive, the Bank shall reimburse the Executive therefore. Such reimbursement shall be paid promptly by the Bank and in any event no later than March 15 of the year immediately following the year in which such expenses were incurred. To the extent that any item referred to in this paragraph will, at the end of the term of this Agreement, no longer be available to Executive, Executive will have the option to purchase all rights then held by the Bank to such item for a price equal to the then fair market value of the item.

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(f) For purposes of this Agreement, “Event of Termination” and “termination of employment” shall mean “Separation from Service” as defined in Code Section 409A and the Treasury Regulations promulgated thereunder, provided, however, that the Bank and Executive reasonably anticipate that the level of bona fide services Executive would perform after termination would permanently decrease to a level that is less than 50% of the average level of bona fide services performed (whether as an employee or independent contractor) over the immediately preceding 36-month period.

6. Change in Control Related Provisions.

Notwithstanding the preceding provisions of this Section 5, in no event shall the aggregate payments or benefits to be made or afforded to Executive under said paragraphs (the “Termination Benefits”) constitute an “excess parachute payment” under Section 280G of the Code or any successor thereto, and in order to avoid such a result, Termination Benefits will be reduced, if necessary, to an amount, the value of which is one dollar ($1.00) less than an amount equal to three (3) times Executive’s “base amount,” as determined in accordance with said Section 280G. The allocation of the reduction required among the Termination Benefits provided by this Section 5 shall be determined by Executive, provided, however, that if such reduction violates Code Section 409A, then the reduction shall be applied to the severance benefits otherwise payable under Section 5(c) hereof.

7. Termination for Just Cause.

The phrase termination for “Just Cause” shall mean termination because of Executive’s personal dishonesty, incompetence, willful misconduct, any breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, regulation (other than traffic violations or similar offenses), final cease and desist order or material breach of any provision of this Agreement. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Just Cause unless and until there shall have been delivered to him a Notice of Termination which shall include a copy of a resolution duly adopted by the affirmative vote of not less than a simple majority of all of the members of the Board of Directors at a meeting of the Board of Directors called and held for that purpose, finding that, in the good faith opinion of the Board of Directors, Executive was guilty of conduct justifying termination for Just Cause and specifying the particulars thereof in detail. Executive shall not have the right to receive compensation or other benefits for any period after termination for Just Cause.

8. Notice.

(a) Any purported termination by the Bank or by Executive shall be communicated by means of a Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.

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(b) “Date of Termination” shall mean the date specified in the Notice of Termination.

9. Post-Termination Obligations.

Payments and benefits to Executive under this Agreement shall be subject to Executive’s compliance with Section 10 for one (1) full year after the earlier of the expiration of this Agreement or termination of Executive’s employment with the Bank. Executive shall, upon reasonable notice, furnish such information and assistance as may reasonably be required by the Bank in connection with any litigation to which it or any of its affiliates is, or may become, a party.

10. Non-Competition and Non-Disclosure.

(a) Upon any termination of Executive’s employment pursuant to Section 4 of this Agreement, Executive agrees not to compete with the Bank or its affiliates for a period of one (1) year following such termination in any city, town or county in which Executive’s normal business office is located and the Bank or any of its affiliates has an office or has filed an application for regulatory approval to establish an office, determined as of the effective date of such termination, except as agreed to pursuant to a resolution duly adopted by the Board of Directors. Executive agrees that during such period and within said cities, towns and counties, Executive shall not work for or advise, consult or otherwise serve with, directly or indirectly, any entity whose business materially competes with the depository, lending or other business activities of the Bank or its affiliates. The parties hereto, recognizing that irreparable injury will result to the Bank or its affiliates, its business and property in the event of Executive’s breach of this Subsection 10(a), agree that in the event of any such breach by Executive, the Bank or its affiliates will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by Executive, Executive’s partners, agents, servants, employees and all persons acting for or under the direction of Executive. Executive represents and admits that, in the event of the termination of his employment pursuant to Section 4 of this Agreement, Executive’s experience and capabilities are such that Executive can obtain employment in a business engaged in other lines and/or of a different nature than the Bank or its affiliates, and that the enforcement of a remedy by way of injunction will not prevent Executive from earning a livelihood. Nothing herein will be construed as prohibiting the Bank or its affiliates from pursuing any other remedies available to the Bank or its affiliates for such breach or threatened breach, including the recovery of damages from Executive.

(b) Executive recognizes and acknowledges that his knowledge of the business activities and plans for business activities of the Bank and its affiliates, as it may exist from time to time, is a valuable, special and unique asset of the business of the Bank and its affiliates. Executive will not, during or after the term of his employment, disclose any knowledge of the past, present, planned or considered business activities of the Bank and its affiliates to any person, firm, corporation or other entity for any reason or purpose whatsoever, unless expressly authorized by the Board of Directors or required by law. Notwithstanding the foregoing, Executive may

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disclose any knowledge of banking, financial and/or economic principles, concepts or ideas which are not solely and exclusively derived from the business plans and activities of the Bank or its affiliates. In the event of a breach or threatened breach by Executive of the provisions of this Section 10(b), the Bank will be entitled to an injunction restraining Executive from disclosing, in whole or in part, knowledge of the past, present, planned or considered business activities of the Bank or its affiliates or from rendering any services to any person, firm, corporation or other entity to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein will be construed as prohibiting the Bank from pursuing any other remedies available to the Bank for such breach or threatened breach, including the recovery of damages from Executive.

11. Death and Disability.

(a) Death. Notwithstanding any other provision of this Agreement to the contrary, in the event of Executive’s death during the term of this Agreement, the Bank shall immediately pay his estate any salary and bonus accrued but unpaid as of the date of his death, and, for a period of six (6) months after Executive’s death, the Bank shall continue to provide his dependents with the same non-taxable medical insurance benefits existing on the date of his death and shall pay Executive’s designated beneficiary all compensation that would otherwise be payable to him pursuant to Section 3(a) of this Agreement, within thirty (30) days of such death. This provision shall not negate any rights Executive or his beneficiaries may have to death benefits under any employee benefit plan of the Bank.

(b) Disability.

(i) Termination of Executive’s employment based on “Disability” shall be construed to comply with Section 409A of the Internal Revenue Code and shall be deemed to have occurred if: (i) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, or last for a continuous period of not less than 12 months; (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death, or last for a continuous period of not less than 12 months, Executive is receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Bank; or (iii) Executive is determined to be totally disabled by the Social Security Administration. The provisions of Section 11(b) shall apply upon the termination of the Executive’s employment based on Disability. Upon the determination that Executive has suffered a Disability, disability payments hereunder shall commence within thirty (30) days.

(ii) In the event of Disability, Executive’s obligation to perform services under this Agreement will terminate. In the event of such termination, Executive shall continue to receive A) one hundred percent (100%) of his monthly Base Salary (at the annual rate in effect on the Date of Termination) through the one hundred eightieth (180^th) day following the Date of Termination by reason of Disability and B) sixty percent (60%) of his monthly Base Salary from the one hundred eighty-first (181^st) day following termination through the earlier of the date of his death or the date he attains age 70. Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to Executive under any disability program and any

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retirement benefits payable to Executive under any tax-qualified retirement plan sponsored by the Bank, but in no event shall Executive’s Disability benefit be reduced below zero. In addition, during any period of Executive’s Disability, Executive and his dependents shall, to the greatest extent possible, continue to be covered under life insurance and non-taxable medical and dental plans of the Bank in which Executive participated prior to the occurrence of Executive’s Disability, on the same terms as if Executive were actively employed by the Bank. Notwithstanding anything to the contrary herein, no payments shall be made hereunder which would violate Code Section 409A. Accordingly, any payments required hereunder shall commence within thirty (30) days from the date of determination of Executive’s Disability and shall be paid no less frequently than monthly during the period that Executive is Disabled.

12. Source of Payments.

All payments provided for in this Agreement shall be timely paid in cash or check from the general funds of the Bank.

13. Effect on Prior Agreements and Existing Benefit Plans.

This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment or change in control agreement between the Bank or any predecessor of the Bank and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement.

14. No Attachment.

(a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation, or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void and of no effect.

(b) This Agreement shall be binding upon and inure to the benefit of Executive and the Bank and their respective successors and assigns.

15. Modification and Waiver.

(a) This Agreement may not be modified or amended, except by an instrument in writing signed by the parties hereto.

(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived.

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16. Severability.

If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any remaining part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.

17. Headings for Reference Only.

The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

18. Governing Law.

This Agreement shall be governed by the laws of the Commonwealth of Massachusetts without regard to principles of conflicts of law of the Commonwealth of Massachusetts.

19. Arbitration.

Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators sitting in a location selected by Executive within fifty (50) miles from the location of the Bank, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

In the event any dispute or controversy arising under or in connection with Executive’s termination is resolved in favor of Executive, whether by judgment, arbitration or settlement, Executive shall be entitled to the payment of all back-pay, including salary, bonuses and any other cash compensation, fringe benefits and any compensation and benefits due Executive under this Agreement. Such payment shall occur no later than two and one-half (2 ¹/2) months after the dispute is settled or resolved in Executive’s favor.

20. Payment of Legal Fees.

All reasonable legal fees paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Bank only if Executive is successful pursuant to a legal judgment, arbitration or settlement. Such payment or reimbursement shall occur no later than two and one-half (2 ¹/2) months after the dispute is settled or resolved in Executive’s favor.

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21. Indemnification.

(a) The Bank shall provide Executive (including his heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at its expense and shall indemnify Executive (and his heirs, executors and administrators) to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director or officer of the Bank (whether or not he continues to be a director or officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs, attorneys’ fees and the costs of reasonable settlements.

22. Successors to the Bank.

The Bank shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business or assets of the Bank, expressly and unconditionally to assume and agree to perform the Bank’s obligations under this Agreement, in the same manner and to the same extent that the Bank would be required to perform if no such succession or assignment had taken place.

23. Required Provisions.

(a) The Bank may terminate Executive’s employment at any time, but any termination by the Bank, other than termination for Just Cause, shall not prejudice Executive’s right to receive compensation or other benefits under this Agreement. Executive shall not have the right to receive compensation or other benefits for any period after termination for Just Cause as defined in Section 7 of this Agreement.

(b) If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(3) or (g)(1); the Bank’s obligations under this contract shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion: (i) pay Executive all or part of the compensation withheld while their contract obligations were suspended; and (ii) reinstate (in whole or in part) any of the obligations which were suspended.

(c) If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(4) or (g)(1), all obligations of the Bank under this contract shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.

(d) If the Bank is in default as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1813(x)(1), all obligations of the Bank under this contract shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.

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(e) All obligations of the Bank under this contract shall be terminated, except to the extent it is determined that continuation of the contract is necessary for the continued operation of the Bank: (i) by the Director of the OTS (or his designee), the FDIC or the Resolution Trust Corporation, at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. §1823(c); or (ii) by the Director of the OTS (or his designee) at the time the Director (or his designee) approves a supervisory merger to resolve problems related to the operations of the Bank, or when the Bank is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.

(f) Any payments made to Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon compliance with 12 U.S.C. §1828(k) and 12 C.F.R. §545.121 and any rules and regulations promulgated thereunder.

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SIGNATURES

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

ATTEST:	PEOPLES FEDERAL SAVINGS BANK
/s/ Bernard Burke	By:	/s/ Maurice H. Sullivan, Jr.
Secretary		For the Entire Board of Directors
WITNESS:	EXECUTIVE:
/s/ Bernard Burke	/s/ Thomas J. Leetch, Jr.
Secretary	Thomas J. Leetch, Jr.

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EX-10.3

Exhibit 10.3

PEOPLES FEDERAL SAVINGS BANK

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is made effective as of December 16, 2008 (the “Effective Date”), by and between Peoples Federal Savings Bank (the “Bank”), a federally chartered financial institution, with its principal offices located at 435 Market Street, Boston, Massachusetts 02135, and James J. Gavin (“Executive”).

WHEREAS, the Executive is currently employed as Executive Vice President and Chief Lending Officer/Chief Operating Officer of the Bank pursuant to an employment agreement between the Bank and the Executive originally entered into as of October 1, 2004 (the “Original Agreement”);

WHEREAS, the Bank desires to amend and restate the Original Agreement in order to make changes to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the final regulations issued thereunder in April 2007;

WHEREAS, the Bank desires to ensure that the Bank is assured of the continued availability of the Executive’s services as provided in this Agreement; and

WHEREAS, the Executive is willing to serve the Bank on the terms and conditions hereinafter set forth and has agreed to such changes.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

1. Position and Responsibilities.

(a) During the period of Executive’s employment under this Agreement, Executive agrees to serve as Executive Vice President and Chief Lending Officer/Chief Operating Officer of the Bank. Executive shall perform all duties and shall have all powers which are commonly incident to the offices of Vice President and Chief Lending Officer/Chief Operating Officer or which, consistent with that office, are delegated to him by the Board of Directors of the Bank (the “Board of Directors”).

(b) During the period of Executive’s employment under this Agreement, except for periods of absence occasioned by illness, vacation, and reasonable leaves of absence, Executive shall devote substantially all of his business time, attention, skill and efforts to the faithful performance of his duties under this Agreement, including activities and services related to the organization, operation and management of the Bank and its affiliates, as well as participation in community, professional and civic organizations; provided, however, that, with the approval of the Board of Directors, as evidenced by a resolution of the Board of Directors, from time to time, Executive may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, companies or organizations, which, in the judgment of the Board of Directors, will not present any conflict of interest with the Bank or its affiliates, or materially affect the performance of Executive’s duties pursuant to this Agreement.

(c) The Bank will furnish Executive with the working facilities and staff customary for executive officers with the title and duties set forth in this Agreement and as are necessary for him to perform his duties. The location of such facilities and staff shall be at the principal administrative offices of the Bank.

2. Term of Employment.

(a) The term of this Agreement shall be (i) the initial term, consisting of the period commencing on the Effective Date and ending on the third anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to this Section 2.

(b) Commencing on the first anniversary of the Effective Date and as of each anniversary thereafter (each, an “Anniversary Date”), the disinterested members of the Board of Directors may renew the term of this Agreement for an additional one (1) year period beyond the then effective expiration date, provided that Executive shall not have given at least sixty (60) days’ written notice of his desire that the term not be renewed. If notice of nonrenewal is provided to the Executive, then in such case the term of this Agreement shall become fixed and shall cease at the end of thirty-six (36) full calendar months following the Anniversary Date.

(c) Notwithstanding anything contained in this Agreement to the contrary, either Executive or the Bank may terminate Executive’s employment with the Bank at any time during the term of this Agreement, subject to the terms and conditions of this Agreement.

3. Compensation and Benefits.

(a) Base Salary. The Bank agrees to pay Executive during the term of this Agreement a base salary (“Base Salary”) at the rate of $191,200 per annum, payable in accordance with the Bank’s customary payroll practices. The Board of Directors of the Bank shall review annually the rate of Executive’s Base Salary based upon factors they deem relevant, and may maintain or increase his Base Salary, provided that no such action shall reduce the rate of Base Salary below the rate in effect on the Effective Date. In the absence of action by the Board of Directors, Executive shall continue to receive his Base Salary at the per annum rate specified on the Effective Date or, if another rate has been established under the provisions of this Section 3, the rate last properly established by action of the Board of Directors.

(b) Incentive Compensation. Executive shall be entitled to participate in discretionary bonuses or other incentive compensation programs that the Board of Directors may award from time to time to senior management employees pursuant to bonus plans or otherwise.

(c) Vacation and Holidays. Executive shall take vacation at a time mutually agreed upon by the Bank and Executive. Executive shall receive his Base Salary and other benefits during periods of vacation. Executive shall also be entitled to paid legal holidays in accordance with the policies of the Bank.

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(d) Other Employee Benefits. In addition to any other compensation or benefits provided for under this Agreement, Executive shall be entitled to continue to participate in any employee benefit plans, arrangements and perquisites of the Bank in which he participated or was eligible to participate as of the Effective Date. Executive shall also be entitled to participate in any employee benefits or perquisites the Bank offers to full-time employees or executive management in the future. The Bank will not, without Executive’s prior written consent, make any changes in such plans, arrangements or perquisites which would adversely affect Executive’s rights or benefits thereunder without separately providing for an arrangement that ensures Executive receives or will receive the economic value that Executive would otherwise lose as a result of any adverse changes. Without limiting the generality of the foregoing provisions of this paragraph, Executive shall be entitled to participate in or receive benefits under all plans relating to stock options, restricted stock awards, stock purchases, pension, profit sharing, employee stock ownership, supplemental retirement, directors’ retirement, group life insurance, medical and other health and welfare coverage that are made available by the Bank currently or at any time in the future during the term of this Agreement, subject to and on a basis consistent with, the terms, conditions and overall administration of such plans and arrangements.

4. Payments to Executive Upon an Event of Termination.

(a) Upon the occurrence of an Event of Termination (as herein defined) during Executive’s term of employment under this Agreement, the provisions of this Section 4 shall apply. Unless Executive agrees otherwise, as used in this Agreement, an “Event of Termination” shall mean and include any one or more of the following: (i) the termination by the Bank of Executive’s full-time employment for any reason other than a termination governed by Section 7 of this Agreement; or (ii) Executive’s resignation from the Bank for “Good Reason.” Good Reason shall include any of the following: (A) failure to reappoint Executive as Vice President and Chief Lending Officer/Chief Operating Officer; (B) material change in Executive’s functions, duties or responsibilities with the Bank or its affiliates, which change would cause Executive’s position to become one of lesser responsibility, importance or scope from the position and attributes thereof described in Section 1 of this Agreement; (C) relocation of Executive’s principal place of employment by more than twenty-five (25) miles from its location at the Effective Date of this Agreement; (D) material reduction in the benefits and perquisites provided to Executive from those being provided as of the Effective Date of this Agreement (except for any reduction that is part of an employee-wide reduction in pay or benefits); (E) liquidation or dissolution of the Bank other than liquidations or dissolutions that are caused by reorganizations that do not affect the status of Executive; or (F) breach of this Agreement by the Bank. Upon the occurrence of any event described in clauses (A) through (F), above, Executive shall have the right to elect to terminate his employment under this Agreement by resignation upon not less than 30 days prior written notice given within a reasonable period of time (not to exceed 90 days) after the event giving rise to the right to elect, which termination by Executive shall be an Event of Termination. The Bank shall have 30 days to cure the condition giving rise to the Event of Termination, provided that the Bank may elect to waive said 30-day period.

(b) Upon Executive’s termination of employment in accordance with paragraph (a) of this Section 4, as of the Date of Termination, as defined in Section 8 of this Agreement, the Bank shall be obligated to pay Executive, or, in the event of his death following the Date of

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Termination, his beneficiary(ies), or his estate, as the case may be, an amount equal to the sum of: (i) the Base Salary and incentive compensation that would have been paid to Executive for the remaining term of this Agreement had the Event of Termination not occurred (based on Executive’s then current Base Salary and most recently paid or accrued bonus at the time of the Event of Termination) plus (ii) the value of all employee benefits that would have been provided to Executive for the remaining term of this Agreement had the Event of Termination not occurred, based on the most recent level of contribution, accrual or other participation by or on behalf of Executive. Such amounts shall be paid to Executive in a single cash lump sum distribution within thirty (30) days following Executive’s Event of Termination; provided however, if the Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be delayed until the first day of the seventh full month following the Executive’s Date of Termination. Such payments shall not be reduced in the event Executive obtains other employment following termination of employment with the Bank.

(c) In addition to the payments provided for in paragraph (b) of this Section 4, upon Executive’s termination of employment in accordance with the provisions of paragraph (a) of this Section 4, to the extent that the Bank continues to offer any life insurance, non-taxable medical, health, or dental insurance plan or arrangement in which Executive or his dependents participates as of the date of the Event of Termination (each being a “Welfare Plan”), Executive and his covered dependents shall continue participating in such Welfare Plans, subject to the same premium contributions on the part of Executive as were required immediately prior to the Event of Termination until the earlier of (i) his death; (ii) his employment by another employer other than one of which he is the majority owner; or (iii) the end of the remaining term of this Agreement. If the Bank does not offer the Welfare Plans at any time after the Event of Termination, then the Bank shall provide Executive with a payment equal to the premiums for such benefits for the period which runs until the earlier of (i) his death; (ii) his employment by another employer other than one of which he is the majority owner; or (iii) the end of the remaining term of this Agreement, with such amounts payable to Executive in a single cash lump sum distribution within thirty (30) days following Executive’s Event of Termination; provided, however, if the Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be delayed until the first day of the seventh full month following the Executive’s Date of Termination.

5. Change in Control.

(a) For purposes of this Agreement, a “Change in Control” shall mean one of the following events:

(i) There occurs a “Change in Control” of the Bank, as defined or determined by either the Bank’s primary federal regulator or under regulations promulgated by such regulator;

(ii) As a result of, or in connection with, any merger or other business combination, sale of assets or contested election, wherein the persons who were non-employee directors of the Bank before such transaction or event cease to constitute a majority of the Board of Directors of the Bank or any successor to the Bank;

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(iii) The Bank transfers all or substantially all of its assets to another corporation or entity which is not an affiliate of the Bank;

(iv) The Bank is merged or consolidated with another corporation or entity and, as a result of such merger or consolidation, less than sixty percent (60%) of the equity interest in the surviving or resulting corporation is owned by the former shareholders or depositors of the Bank; or

(v) The Bank sells or transfers more than a fifty percent (50%) equity interest in the Bank to another person or entity which is not an affiliate of the Bank, excluding a sale or transfer to a person or persons who are employed by the Bank.

Notwithstanding anything in this Agreement to the contrary, in no event shall the conversion of the Bank from mutual to stock form (including, without limitation, through the formation of a stock holding company) or the reorganization of the Bank into the mutual holding company form of organization constitute a Change in Control for purposes of this Agreement.

(b) If any of the events described in paragraph (a) of this Section 5, constituting a Change in Control, have occurred or the Board of Directors determines that a Change in Control has occurred, Executive shall be entitled to the benefits provided for in paragraphs (c), (d), and (e) of this Section 5 upon his termination of employment at any time during the term of this Agreement on or after the date the Change in Control occurs due to (i) Executive’s dismissal, (ii) Executive’s resignation following any demotion, loss of title, office or significant authority or responsibility, reduction in annual compensation or benefits or relocation of his principal place of employment by more than twenty-five (25) miles from its location immediately prior to the Change in Control, or (iii) Executive’s resignation for any reason within ninety (90) days of the effective date of a Change in Control, unless Executive’s termination is for Just Cause as defined in Section 7 of this Agreement; provided, however, that such benefits shall be reduced by any payments made under Section 4 of this Agreement.

(c) Upon the occurrence of a Change in Control followed by Executive’s termination of employment, as provided for in paragraph (b) of this Section 5, the Bank shall pay Executive, or in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, as severance pay or liquidated damages, or both, the greater of the payments and benefits due for the remaining term of the Agreement, pursuant to the provisions of Section 4 of this agreement, or three (3) times Executive’s average Annual Compensation over the five (5) most recently completed calendar years ending with the year immediately preceding the effective date of the Change in Control. In determining Executive’s average Annual Compensation, “Annual Compensation” shall include Base Salary and any other taxable income, including, but not limited to, amounts related to the granting, vesting or exercise of restricted stock or stock option awards, commissions, bonuses (whether paid or accrued for the applicable period), as well as retirement benefits, director or committee fees and fringe benefits paid or to be paid to Executive or paid for Executive’s benefit during any such year, profit sharing, employee stock

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ownership plan and other retirement contributions or benefits, including to any tax-qualified plan or arrangement (whether or not taxable) made or accrued on behalf of Executive for such year. All amounts payable to the Executive shall be paid in a single cash lump sum distribution within thirty (30) days following such termination of Executive’s employment; provided, however, if the Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be delayed until the first day of the seventh full month following the Executive’s Date of Termination.

(d) Upon the occurrence of a Change in Control and Executive’s termination of employment in connection therewith, to the extent that the Bank continues to offer any life insurance, non-taxable medical, health, or dental insurance plan or arrangement in which Executive or his dependents participated immediately prior to the Change in Control (each being a “Welfare Plan”), Executive and his covered dependents shall continue participating in such Welfare Plans, subject to the same premium contributions on the part of Executive as were required immediately prior to the Change in Control, until the earlier of (i) Executive’s death; (ii) his employment by another employer other than one of which he is the majority owner; or (iii) the expiration of thirty-six (36) months. If the Bank does not offer the Welfare Plans at any time after the Change in Control, the Bank shall provide Executive with a payment equal to the premiums for such benefits for the period which runs until the earlier of (i) his death; (ii) his employment by another employer other than one of which he is the majority owner; or (iii) the expiration of 36 months, with such amounts payable to Executive in a single cash lump sum distribution within thirty (30) days following Executive’s Event of Termination; provided, however, if the Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be delayed until the first day of the seventh full month following the Executive’s Date of Termination.

(e) The use or provision of any membership, license, automobile use or other perquisites shall be continued during the remaining term of the Agreement on the same financial terms and obligations as were in place immediately prior to the Change in Control, provided however, that if such expenses are paid in the first instance by the Executive, the Bank shall reimburse the Executive therefore. Such reimbursement shall be paid promptly by the Bank and in any event no later than March 15 of the year immediately following the year in which such expenses were incurred. To the extent that any item referred to in this paragraph will, at the end of the term of this Agreement, no longer be available to Executive, Executive will have the option to purchase all rights then held by the Bank to such item for a price equal to the then fair market value of the item.

(f) For purposes of this Agreement, “Event of Termination” and “termination of employment” shall mean “Separation from Service” as defined in Code Section 409A and the Treasury Regulations promulgated thereunder, provided, however, that the Bank and Executive reasonably anticipate that the level of bona fide services Executive would perform after termination would permanently decrease to a level that is less than 50% of the average level of bona fide services performed (whether as an employee or independent contractor) over the immediately preceding 36-month period.

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6. Change in Control Related Provisions.

Notwithstanding the preceding provisions of this Section 5, in no event shall the aggregate payments or benefits to be made or afforded to Executive under said paragraphs (the “Termination Benefits”) constitute an “excess parachute payment” under Section 280G of the Code or any successor thereto, and in order to avoid such a result, Termination Benefits will be reduced, if necessary, to an amount, the value of which is one dollar ($1.00) less than an amount equal to three (3) times Executive’s “base amount,” as determined in accordance with said Section 280G. The allocation of the reduction required among the Termination Benefits provided by this Section 5 shall be determined by Executive, provided, however, that if such reduction violates Code Section 409A, then the reduction shall be applied to the severance benefits otherwise payable under Section 5(c) hereof.

7. Termination for Just Cause.

The phrase termination for “Just Cause” shall mean termination because of Executive’s personal dishonesty, incompetence, willful misconduct, any breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, regulation (other than traffic violations or similar offenses), final cease and desist order or material breach of any provision of this Agreement. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Just Cause unless and until there shall have been delivered to him a Notice of Termination which shall include a copy of a resolution duly adopted by the affirmative vote of not less than a simple majority of all of the members of the Board of Directors at a meeting of the Board of Directors called and held for that purpose, finding that, in the good faith opinion of the Board of Directors, Executive was guilty of conduct justifying termination for Just Cause and specifying the particulars thereof in detail. Executive shall not have the right to receive compensation or other benefits for any period after termination for Just Cause.

8. Notice.

(a) Any purported termination by the Bank or by Executive shall be communicated by means of a Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.

(b) “Date of Termination” shall mean the date specified in the Notice of Termination.

9. Post-Termination Obligations.

Payments and benefits to Executive under this Agreement shall be subject to Executive’s compliance with Section 10 for one (1) full year after the earlier of the expiration of this Agreement or termination of Executive’s employment with the Bank. Executive shall, upon reasonable notice, furnish such information and assistance as may reasonably be required by the Bank in connection with any litigation to which it or any of its affiliates is, or may become, a party.

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10. Non-Competition and Non-Disclosure.

(a) Upon any termination of Executive’s employment pursuant to Section 4 of this Agreement, Executive agrees not to compete with the Bank or its affiliates for a period of one (1) year following such termination in any city, town or county in which Executive’s normal business office is located and the Bank or any of its affiliates has an office or has filed an application for regulatory approval to establish an office, determined as of the effective date of such termination, except as agreed to pursuant to a resolution duly adopted by the Board of Directors. Executive agrees that during such period and within said cities, towns and counties, Executive shall not work for or advise, consult or otherwise serve with, directly or indirectly, any entity whose business materially competes with the depository, lending or other business activities of the Bank or its affiliates. The parties hereto, recognizing that irreparable injury will result to the Bank or its affiliates, its business and property in the event of Executive’s breach of this Subsection 10(a), agree that in the event of any such breach by Executive, the Bank or its affiliates will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by Executive, Executive’s partners, agents, servants, employees and all persons acting for or under the direction of Executive. Executive represents and admits that, in the event of the termination of his employment pursuant to Section 4 of this Agreement, Executive’s experience and capabilities are such that Executive can obtain employment in a business engaged in other lines and/or of a different nature than the Bank or its affiliates, and that the enforcement of a remedy by way of injunction will not prevent Executive from earning a livelihood. Nothing herein will be construed as prohibiting the Bank or its affiliates from pursuing any other remedies available to the Bank or its affiliates for such breach or threatened breach, including the recovery of damages from Executive.

(b) Executive recognizes and acknowledges that his knowledge of the business activities and plans for business activities of the Bank and its affiliates, as it may exist from time to time, is a valuable, special and unique asset of the business of the Bank and its affiliates. Executive will not, during or after the term of his employment, disclose any knowledge of the past, present, planned or considered business activities of the Bank and its affiliates to any person, firm, corporation or other entity for any reason or purpose whatsoever, unless expressly authorized by the Board of Directors or required by law. Notwithstanding the foregoing, Executive may disclose any knowledge of banking, financial and/or economic principles, concepts or ideas which are not solely and exclusively derived from the business plans and activities of the Bank or its affiliates. In the event of a breach or threatened breach by Executive of the provisions of this Section 10(b), the Bank will be entitled to an injunction restraining Executive from disclosing, in whole or in part, knowledge of the past, present, planned or considered business activities of the Bank or its affiliates or from rendering any services to any person, firm, corporation or other entity to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein will be construed as prohibiting the Bank from pursuing any other remedies available to the Bank for such breach or threatened breach, including the recovery of damages from Executive.

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11. Death and Disability.

(a) Death. Notwithstanding any other provision of this Agreement to the contrary, in the event of Executive’s death during the term of this Agreement, the Bank shall immediately pay his estate any salary and bonus accrued but unpaid as of the date of his death, and, for a period of six (6) months after Executive’s death, the Bank shall continue to provide his dependents with the same non-taxable medical insurance benefits existing on the date of his death and shall pay Executive’s designated beneficiary all compensation that would otherwise be payable to him pursuant to Section 3(a) of this Agreement, within thirty (30) days of such death. This provision shall not negate any rights Executive or his beneficiaries may have to death benefits under any employee benefit plan of the Bank.

(b) Disability.

(i) Termination of Executive’s employment based on “Disability” shall be construed to comply with Section 409A of the Internal Revenue Code and shall be deemed to have occurred if: (i) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, or last for a continuous period of not less than 12 months; (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death, or last for a continuous period of not less than 12 months, Executive is receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Bank; or (iii) Executive is determined to be totally disabled by the Social Security Administration. The provisions of Section 11(b) shall apply upon the termination of the Executive’s employment based on Disability. Upon the determination that Executive has suffered a Disability, disability payments hereunder shall commence within thirty (30) days.

(ii) In the event of Disability, Executive’s obligation to perform services under this Agreement will terminate. In the event of such termination, Executive shall continue to receive A) one hundred percent (100%) of his monthly Base Salary (at the annual rate in effect on the Date of Termination) through the one hundred eightieth (180^th) day following the Date of Termination by reason of Disability and B) sixty percent (60%) of his monthly Base Salary from the one hundred eighty-first (181^st) day following termination through the earlier of the date of his death or the date he attains age 70. Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to Executive under any disability program and any retirement benefits payable to Executive under any tax-qualified retirement plan sponsored by the Bank, but in no event shall Executive’s Disability benefit be reduced below zero. In addition, during any period of Executive’s Disability, Executive and his dependents shall, to the greatest extent possible, continue to be covered under life insurance and non-taxable medical and dental plans of the Bank in which Executive participated prior to the occurrence of Executive’s Disability, on the same terms as if Executive were actively employed by the Bank. Notwithstanding anything to the contrary herein, no payments shall be made hereunder which would violate Code Section 409A. Accordingly, any payments required hereunder shall commence within thirty (30) days from the date of determination of Executive’s Disability and shall be paid no less frequently than monthly during the period that Executive is Disabled.

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12. Source of Payments.

All payments provided for in this Agreement shall be timely paid in cash or check from the general funds of the Bank.

13. Effect on Prior Agreements and Existing Benefit Plans.

This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment or change in control agreement between the Bank or any predecessor of the Bank and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement.

14. No Attachment.

(a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation, or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void and of no effect.

(b) This Agreement shall be binding upon and inure to the benefit of Executive and the Bank and their respective successors and assigns.

15. Modification and Waiver.

(a) This Agreement may not be modified or amended, except by an instrument in writing signed by the parties hereto.

(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived.

16. Severability.

If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any remaining part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.

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17. Headings for Reference Only.

The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

18. Governing Law.

This Agreement shall be governed by the laws of the Commonwealth of Massachusetts without regard to principles of conflicts of law of the Commonwealth of Massachusetts.

19. Arbitration.

Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators sitting in a location selected by Executive within fifty (50) miles from the location of the Bank, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

In the event any dispute or controversy arising under or in connection with Executive’s termination is resolved in favor of Executive, whether by judgment, arbitration or settlement, Executive shall be entitled to the payment of all back-pay, including salary, bonuses and any other cash compensation, fringe benefits and any compensation and benefits due Executive under this Agreement. Such payment shall occur no later than two and one-half (2  ¹/2) months after the dispute is settled or resolved in Executive’s favor.

20. Payment of Legal Fees.

All reasonable legal fees paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Bank only if Executive is successful pursuant to a legal judgment, arbitration or settlement. Such payment or reimbursement shall occur no later than two and one-half (2 ¹/2) months after the dispute is settled or resolved in Executive’s favor.

21. Indemnification.

(a) The Bank shall provide Executive (including his heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at its expense and shall indemnify Executive (and his heirs, executors and administrators) to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director or officer of the Bank (whether or not he continues to be a director or officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs, attorneys’ fees and the costs of reasonable settlements.

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22. Successors to the Bank.

The Bank shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business or assets of the Bank, expressly and unconditionally to assume and agree to perform the Bank’s obligations under this Agreement, in the same manner and to the same extent that the Bank would be required to perform if no such succession or assignment had taken place.

23. Required Provisions.

(a) The Bank may terminate Executive’s employment at any time, but any termination by the Bank, other than termination for Just Cause, shall not prejudice Executive’s right to receive compensation or other benefits under this Agreement. Executive shall not have the right to receive compensation or other benefits for any period after termination for Just Cause as defined in Section 7 of this Agreement.

(b) If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(3) or (g)(1); the Bank’s obligations under this contract shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion: (i) pay Executive all or part of the compensation withheld while their contract obligations were suspended; and (ii) reinstate (in whole or in part) any of the obligations which were suspended.

(c) If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(4) or (g)(1), all obligations of the Bank under this contract shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.

(d) If the Bank is in default as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1813(x)(1), all obligations of the Bank under this contract shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.

(e) All obligations of the Bank under this contract shall be terminated, except to the extent it is determined that continuation of the contract is necessary for the continued operation of the Bank: (i) by the Director of the OTS (or his designee), the FDIC or the Resolution Trust Corporation, at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. §1823(c); or (ii) by the Director of the OTS (or his designee) at the time the Director (or his designee) approves a supervisory merger to resolve problems related to the operations of the Bank, or when the Bank is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.

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(f) Any payments made to Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon compliance with 12 U.S.C. §1828(k) and 12 C.F.R. §545.121 and any rules and regulations promulgated thereunder.

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SIGNATURES

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

ATTEST:	PEOPLES FEDERAL SAVINGS BANK
/s/ Bernard Burke	By:	/s/ Thomas J. Leetch
Secretary		For the Entire Board of Directors
WITNESS:	EXECUTIVE:
/s/ Bernard Burke	/s/ James J. Gavin
Secretary	James J. Gavin

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EX-10.4

Exhibit 10.4

PEOPLES FEDERAL BANCSHARES, INC.

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made effective as of                     , 2010 (the “Effective Date”), by and between Peoples Federal Bancshares, Inc. (the “Company”), a Maryland corporation, with its principal offices located at 435 Market Street, Boston, Massachusetts 02135, and                      (“Executive”). Any reference herein to the “Bank” shall refer to Peoples Federal Savings Bank, the wholly-owned subsidiary of the Company.

WHEREAS, the Executive is currently employed as                      of the Bank pursuant to an employment agreement between the Bank and the Executive originally entered into as of                      (the “Bank Agreement”);

WHEREAS, the Company desires also to enter into this Agreement with Executive so that the Company is assured of the continued availability of the Executive’s services as provided in this Agreement; and

WHEREAS, the Executive is willing to serve the Company on the terms and conditions hereinafter set forth and has agreed to such changes.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

1. Position and Responsibilities.

(a) During the period of Executive’s employment under this Agreement, Executive agrees to serve as                      of the Company. Executive shall perform all duties and shall have all powers which are commonly incident to the offices of                      or which, consistent with that office, are delegated to him by the Board of Directors of the Company (the “Board of Directors” or “Board”) or the [President of the Company].

(b) During the period of Executive’s employment under this Agreement, except for periods of absence occasioned by illness, vacation, and reasonable leaves of absence, Executive shall devote substantially all of his business time, attention, skill and efforts to the faithful performance of his duties under this Agreement, including activities and services related to the organization, operation and management of the Company and its affiliates, as well as participation in community, professional and civic organizations; provided, however, that, with the approval of the Board of Directors, as evidenced by a resolution of the Board of Directors, from time to time, Executive may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, companies or organizations, which, in the judgment of the Board of Directors, will not present any conflict of interest with the Company or its affiliates, or materially affect the performance of Executive’s duties pursuant to this Agreement.

(c) The Executive will be furnished with the working facilities and staff customary for executive officers with the title and duties set forth in this Agreement and as are necessary for him to perform his duties. The location of such facilities and staff shall be at the principal administrative offices of the Company, or at such other site or sites customary for such offices.

2. Term of Employment.

(a) The term of this Agreement shall be (i) the initial term, consisting of the period commencing on the Effective Date and ending on the third anniversary of the Effective Date, plus (ii) any and all extensions of the initial term made pursuant to this Section 2.

(b) The term of this Agreement shall be extended for one day each day so that a constant thirty-six (36) calendar month term shall remain in effect, until such time as the Board or Executive elects not to extend the term of the Agreement by giving written notice to the other party in accordance with the terms of this Agreement, in which case the term of this Agreement shall be fixed and shall end on the third anniversary of the date of such written notice. Commencing within ninety (90) days of the first anniversary of the Effective Date and as of each anniversary thereafter (each, an “Anniversary Date”), the disinterested members of the Board of Directors shall determine whether to continue the renewals of the Agreement on a daily basis or to notify the Executive that the Agreement shall not be renewed. If notice of nonrenewal is provided to the Executive, then in such case the term of this Agreement shall become fixed and shall cease at the end of thirty-six (36) full calendar months following the Anniversary Date.

(c) Notwithstanding anything contained in this Agreement to the contrary, either Executive or the Company may terminate Executive’s employment with the Company at any time during the term of this Agreement, subject to the terms and conditions of this Agreement.

3. Compensation and Benefits.

(a) Base Salary. The Company agrees to pay Executive during the term of this Agreement a base salary (“Base Salary”) at the rate of $             per annum, payable in accordance with the Company’s customary payroll practices. The Board of Directors of the Company shall review annually the rate of Executive’s Base Salary based upon factors they deem relevant, and may maintain or increase his Base Salary, provided that no such action shall reduce the rate of Base Salary below the rate in effect on the Effective Date. In the absence of action by the Board of Directors, Executive shall continue to receive his Base Salary at the per annum rate specified on the Effective Date or, if another rate has been established under the provisions of this Section 3, the rate last properly established by action of the Board of Directors.

(b) Incentive Compensation. Executive shall be entitled to participate in discretionary bonuses or other incentive compensation programs that the Board of Directors may award from time to time to senior management employees pursuant to bonus plans or otherwise.

(c) Automobile and Cellular Phone. The Bank or the Company shall provide Executive with, and Executive shall have the primary use of, an automobile owned or leased by the Bank or the Company and the Bank or the Company shall pay (or reimburse Executive) for all expenses of insurance, registration, operation and maintenance of the automobile. Executive shall comply with reasonable reporting and expense limitations on the use of such automobile, as the Bank or

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the Company may establish from time to time, and the Bank or the Company shall annually include on Executive’s Form W-2 any amount attributable to Executive’s personal use of such automobile. The Bank or the Company shall also provide Executive with a cellular phone and shall pay (or reimburse) Executive for all reasonable expenses related to the business use of such phone. All expenses and reimbursements shall be paid promptly by the Bank or the Company and in any event no later than March 15 of the year immediately following the year in which the expenses were incurred. [Leetch and Sullivan contracts only]

(d) Vacation and Holidays. Executive shall take vacation at a time mutually agreed upon by the Company and Executive. Executive shall receive his Base Salary and other benefits during periods of vacation. Executive shall also be entitled to paid legal holidays in accordance with the policies of the Company.

(e) Other Employee Benefits. In addition to any other compensation or benefits provided for under this Agreement, Executive shall be entitled to continue to participate in any employee benefit plans, arrangements and perquisites of the Company or the Bank in which he participated or was eligible to participate as of the Effective Date. Executive shall also be entitled to participate in any employee benefits or perquisites the Company offers to full-time employees or executive management in the future. The Company will not, without Executive’s prior written consent, make any changes in such plans, arrangements or perquisites which would adversely affect Executive’s rights or benefits thereunder without separately providing for an arrangement that ensures Executive receives or will receive the economic value that Executive would otherwise lose as a result of any adverse changes. Without limiting the generality of the foregoing provisions of this paragraph, Executive shall be entitled to participate in or receive benefits under all plans relating to stock options, restricted stock awards, stock purchases, pension, profit sharing, employee stock ownership, supplemental retirement, directors’ retirement, group life insurance, medical and other health and welfare coverage that are made available by the Company currently or at any time in the future during the term of this Agreement, subject to and on a basis consistent with, the terms, conditions and overall administration of such plans and arrangements.

(f) Retirement Benefits. In the event the Executive’s employment is terminated on or after the Executive attains the age of sixty-five (65), then the Executive and the Executive’s spouse shall be entitled to receive for the life of the Executive and the Executive’s spouse, at no cost to either individual, participation in a supplemental medical retiree insurance plan and a prescription drug benefit plan offered by the Bank or the Company; provided that any insurance premiums payable by the Bank or the Company, or any successors, shall be payable at such times and in such amounts as if the Executive was still an employee of the Bank or the Company, subject to any increases in such amounts imposed by the insurance company or COBRA, and the amount of insurance premiums required to be paid by the Bank or the Company in any taxable year shall not affect the amount of insurance premiums required to be paid by the Bank or the Company in any other taxable year; and provided further that if the Executive or the Executive’s spouse’s participation in a supplemental medical retiree insurance plan or prescription drug benefit plan is barred, the Bank or the Company shall arrange to provide the Executive or the Executive’s spouse with insurance benefits substantially similar to those which the Executive or the Executive’s spouse was entitled to receive under this Section 3(f) at no additional cost to the Executive or the Executive’s spouse. [Leetch and Sullivan contracts only]

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4. Payments to Executive Upon an Event of Termination.

(a) Upon the occurrence of an Event of Termination (as herein defined) during Executive’s term of employment under this Agreement, the provisions of this Section 4 shall apply. Unless Executive agrees otherwise, as used in this Agreement, an “Event of Termination” shall mean and include any one or more of the following: (i) the termination by the Company of Executive’s full-time employment for any reason other than a termination governed by Section 6 of this Agreement; or (ii) Executive’s resignation from the Company for “Good Reason.” Good Reason shall include any of the following:

(A) failure to reappoint Executive as                     ;

(B) material change in Executive’s functions, duties or responsibilities with the Company or its affiliates, which change would cause Executive’s position to become one of lesser responsibility, importance or scope from the position and attributes thereof described in Section 1 of this Agreement;

(C) relocation of Executive’s principal place of employment by more than twenty-five (25) miles from its location at the Effective Date of this Agreement;

(D) material reduction in the benefits and perquisites provided to Executive from those being provided as of the Effective Date of this Agreement (except for any reduction that is part of an employee-wide reduction in pay or benefits);

(E) liquidation or dissolution of the Company other than liquidations or dissolutions that are caused by reorganizations that do not affect the status of Executive; or

(F) breach of this Agreement by the Company.

Upon the occurrence of any event described in clauses (A) through (F), above, Executive shall have the right to elect to terminate his employment under this Agreement by resignation upon not less than 30 days prior written notice given within a reasonable period of time (not to exceed 90 days) after the event giving rise to the right to elect, which termination by Executive shall be an Event of Termination. The Company shall have 30 days to cure the condition giving rise to the Event of Termination, provided that the Company may elect to waive said 30-day period.

(b) Upon Executive’s termination of employment in accordance with paragraph (a) of this Section 4, as of the Date of Termination, as defined in Section 7 of this Agreement, the Company shall be obligated to pay Executive, or, in the event of his death following the Date of Termination, his beneficiary(ies), or his estate, as the case may be, an amount equal to the sum of: (i) the Base Salary and incentive compensation that would have been paid to Executive for the remaining term of this Agreement had the Event of Termination not occurred (based on Executive’s then current Base Salary and most recently paid or accrued bonus at the time of the

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Event of Termination) plus (ii) the value of all employee benefits that would have been provided to Executive for the remaining term of this Agreement had the Event of Termination not occurred, based on the most recent level of contribution, accrual or other participation by or on behalf of Executive. Such amounts shall be paid to Executive in a single cash lump sum distribution within thirty (30) days following Executive’s Event of Termination; provided however, if the Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be delayed until the first day of the seventh full month following the Executive’s Date of Termination. Such payments shall not be reduced in the event Executive obtains other employment following termination of employment with the Company.

(c) In addition to the payments provided for in paragraph (b) of this Section 4, upon Executive’s termination of employment in accordance with the provisions of paragraph (a) of this Section 4, to the extent that the Company continues to offer any life insurance, non-taxable medical, health, or dental insurance plan or arrangement in which Executive or his dependents participates as of the date of the Event of Termination (each being a “Welfare Plan”), Executive and his covered dependents shall continue participating in such Welfare Plans, subject to the same premium contributions on the part of Executive as were required immediately prior to the Event of Termination until the earlier of (i) his death; (ii) his employment by another employer other than one of which he is the majority owner; or (iii) the end of the remaining term of this Agreement. If the Company does not offer the Welfare Plans at any time after the Event of Termination, then the Company shall provide Executive with a payment equal to the premiums for such benefits for the period which runs until the earlier of (i) his death; (ii) his employment by another employer other than one of which he is the majority owner; or (iii) the end of the remaining term of this Agreement, with such amounts payable to Executive in a single cash lump sum distribution within thirty (30) days following Executive’s Event of Termination; provided, however, if the Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be delayed until the first day of the seventh full month following the Executive’s Date of Termination.

5. Change in Control.

(a) For purposes of this Agreement, a “Change in Control” shall mean one of the following events:

(i) There occurs a “Change in Control” of the Company, as defined or determined by either the Company’s primary federal regulator or under regulations promulgated by such regulator;

(ii) As a result of, or in connection with, any merger or other business combination, sale of assets or contested election, wherein the persons who were non-employee directors of the Company before such transaction or event cease to constitute a majority of the Board of Directors of the Company or any successor to the Company;

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(iii) The Company transfers all or substantially all of its assets to another corporation or entity which is not an affiliate of the Company;

(iv) The Company is merged or consolidated with another corporation or entity and, as a result of such merger or consolidation, less than sixty percent (60%) of the equity interest in the surviving or resulting corporation is owned by the former shareholders or depositors of the Company; or

(v) The Company sells or transfers more than a fifty percent (50%) equity interest in the Company to another person or entity which is not an affiliate of the Company, excluding a sale or transfer to a person or persons who are employed by the Company.

(b) If any of the events described in paragraph (a) of this Section 5, constituting a Change in Control, have occurred or the Board of Directors determines that a Change in Control has occurred, Executive shall be entitled to the benefits provided for in paragraphs (c), (d), and (e) of this Section 5 upon his termination of employment at any time during the term of this Agreement on or after the date the Change in Control occurs due to (i) Executive’s dismissal, (ii) Executive’s resignation following any demotion, loss of title, office or significant authority or responsibility, reduction in annual compensation or benefits or relocation of his principal place of employment by more than twenty-five (25) miles from its location immediately prior to the Change in Control, or (iii) Executive’s resignation for any reason within ninety (90) days of the effective date of a Change in Control, unless Executive’s termination is for Just Cause as defined in Section 6 of this Agreement; provided, however, that such benefits shall be reduced by any payments made under Section 4 of this Agreement.

(c) Upon the occurrence of a Change in Control followed by Executive’s termination of employment, as provided for in paragraph (b) of this Section 5, the Company shall pay Executive, or in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be, as severance pay or liquidated damages, or both, the greater of the payments and benefits due for the remaining term of the Agreement, pursuant to the provisions of Section 4 of this agreement, or three (3) times Executive’s average Annual Compensation over the five (5) most recently completed calendar years ending with the year immediately preceding the effective date of the Change in Control. In determining Executive’s average Annual Compensation, “Annual Compensation” shall include Base Salary and any other taxable income, including, but not limited to, amounts related to the granting, vesting or exercise of restricted stock or stock option awards, commissions, bonuses (whether paid or accrued for the applicable period), as well as retirement benefits, director or committee fees and fringe benefits paid or to be paid to Executive or paid for Executive’s benefit during any such year, profit sharing, employee stock ownership plan and other retirement contributions or benefits, including any tax-qualified plan or arrangement (whether or not taxable) made or accrued on behalf of Executive for such year. All amounts payable to the Executive shall be paid in a single cash lump sum distribution within thirty (30) days following such termination of Executive’s employment; provided, however, if the Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be delayed until the first day of the seventh full month following the Executive’s Date of Termination.

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(d) Upon the occurrence of a Change in Control and Executive’s termination of employment in connection therewith, to the extent that the Company continues to offer any life insurance, non-taxable medical, health, or dental insurance plan or arrangement in which Executive or his dependents participated immediately prior to the Change in Control (each being a “Welfare Plan”), Executive and his covered dependents shall continue participating in such Welfare Plans, subject to the same premium contributions on the part of Executive as were required immediately prior to the Change in Control, until the earlier of (i) Executive’s death; (ii) his employment by another employer other than one of which he is the majority owner; or (iii) the expiration of thirty-six (36) months. [For Leetch and Sullivan contract only: In addition, Executive shall be entitled to the benefit provided under Section 3(f) above if Executive’s termination following a Change in Control occurs after Executive attains age sixty-five or within three years prior to Executive’s sixty-fifth birthday.] If the Company does not offer the Welfare Plans at any time after the Change in Control, the Company shall provide Executive with a payment equal to the premiums for such benefits for the period which runs until the earlier of (i) his death; (ii) his employment by another employer other than one of which he is the majority owner; or (iii) the expiration of 36 months, with such amounts payable to Executive in a single cash lump sum distribution within thirty (30) days following Executive’s Event of Termination; provided, however, if the Executive is a “Specified Employee,” as defined in Treasury Regulation 1.409-1(i), then, solely to the extent required to avoid penalties under Section 409A of the Code, such payment shall be delayed until the first day of the seventh full month following the Executive’s Date of Termination.

(e) The use or provision of any membership, license, automobile use or other perquisites shall be continued during the remaining term of the Agreement on the same financial terms and obligations as were in place immediately prior to the Change in Control, provided however, that if such expenses are paid in the first instance by the Executive, the Company shall reimburse the Executive therefore. Such reimbursement shall be paid promptly by the Company and in any event no later than March 15 of the year immediately following the year in which such expenses were incurred. To the extent that any item referred to in this paragraph will, at the end of the term of this Agreement, no longer be available to Executive, Executive will have the option to purchase all rights then held by the Company to such item for a price equal to the then fair market value of the item.

(f) For purposes of this Agreement, “Event of Termination” and “termination of employment” shall mean “Separation from Service” as defined in Code Section 409A and the Treasury Regulations promulgated thereunder, provided, however, that the Company and Executive reasonably anticipate that the level of bona fide services Executive would perform after termination would permanently decrease to a level that is less than 50% of the average level of bona fide services performed (whether as an employee or independent contractor) over the immediately preceding 36-month period.

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6. Termination for Just Cause.

The phrase termination for “Just Cause” shall mean termination because of Executive’s personal dishonesty, incompetence, willful misconduct, any breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, regulation (other than traffic violations or similar offenses), final cease and desist order or material breach of any provision of this Agreement. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Just Cause unless and until there shall have been delivered to him a Notice of Termination which shall include a copy of a resolution duly adopted by the affirmative vote of not less than a simple majority of all of the members of the Board of Directors at a meeting of the Board of Directors called and held for that purpose, finding that, in the good faith opinion of the Board of Directors, Executive was guilty of conduct justifying termination for Just Cause and specifying the particulars thereof in detail. Executive shall not have the right to receive compensation or other benefits for any period after termination for Just Cause.

7. Notice.

(a) Any purported termination by the Company or by Executive shall be communicated by means of a Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.

(b) “Date of Termination” shall mean the date specified in the Notice of Termination.

8. Post-Termination Obligations.

Payments and benefits to Executive under this Agreement shall be subject to Executive’s compliance with Section 9 for one (1) full year after the earlier of the expiration of this Agreement or termination of Executive’s employment with the Company. Executive shall, upon reasonable notice, furnish such information and assistance as may reasonably be required by the Company in connection with any litigation to which it or any of its affiliates is, or may become, a party.

9. Non-Competition and Non-Disclosure.

(a) Upon any termination of Executive’s employment pursuant to Section 4 of this Agreement, Executive agrees not to compete with the Company or its affiliates for a period of one (1) year following such termination in any city, town or county in which Executive’s normal business office is located and the Company or any of its affiliates has an office or has filed an application for regulatory approval to establish an office, determined as of the effective date of such termination, except as agreed to pursuant to a resolution duly adopted by the Board of Directors. Executive agrees that during such period and within said cities, towns and counties, Executive shall not work for or advise, consult or otherwise serve with, directly or indirectly, any

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entity whose business materially competes with the depository, lending or other business activities of the Company or its affiliates. The parties hereto, recognizing that irreparable injury will result to the Company or its affiliates, its business and property in the event of Executive’s breach of this Section 9(a), agree that in the event of any such breach by Executive, the Company or its affiliates will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by Executive, Executive’s partners, agents, servants, employees and all persons acting for or under the direction of Executive. Executive represents and admits that, in the event of the termination of his employment pursuant to Section 4 of this Agreement, Executive’s experience and capabilities are such that Executive can obtain employment in a business engaged in other lines and/or of a different nature than the Company or its affiliates, and that the enforcement of a remedy by way of injunction will not prevent Executive from earning a livelihood. Nothing herein will be construed as prohibiting the Company or its affiliates from pursuing any other remedies available to the Company or its affiliates for such breach or threatened breach, including the recovery of damages from Executive.

(b) Executive recognizes and acknowledges that his knowledge of the business activities and plans for business activities of the Company and its affiliates, as it may exist from time to time, is a valuable, special and unique asset of the business of the Company and its affiliates. Executive will not, during or after the term of his employment, disclose any knowledge of the past, present, planned or considered business activities of the Company and its affiliates to any person, firm, corporation or other entity for any reason or purpose whatsoever, unless expressly authorized by the Board of Directors or required by law. Notwithstanding the foregoing, Executive may disclose any knowledge of banking, financial and/or economic principles, concepts or ideas which are not solely and exclusively derived from the business plans and activities of the Company or its affiliates. In the event of a breach or threatened breach by Executive of the provisions of this Section 9(b), the Company will be entitled to an injunction restraining Executive from disclosing, in whole or in part, knowledge of the past, present, planned or considered business activities of the Company or its affiliates or from rendering any services to any person, firm, corporation or other entity to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein will be construed as prohibiting the Company from pursuing any other remedies available to the Company for such breach or threatened breach, including the recovery of damages from Executive.

10. Death and Disability.

(a) Death. Notwithstanding any other provision of this Agreement to the contrary, in the event of Executive’s death during the term of this Agreement, the Company shall immediately pay his estate any salary and bonus accrued but unpaid as of the date of his death, and, for a period of six (6) months after Executive’s death, the Company shall continue to provide his dependents with the same non-taxable medical insurance benefits existing on the date of his death and shall pay Executive’s designated beneficiary all compensation that would otherwise be payable to him pursuant to Section 3(a) of this Agreement, within thirty (30) days of such death. This provision shall not negate any rights Executive or his beneficiaries may have to death benefits under any employee benefit plan of the Company.

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(b) Disability.

(i) Termination of Executive’s employment based on “Disability” shall be construed to comply with Section 409A of the Internal Revenue Code and shall be deemed to have occurred if: (i) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, or last for a continuous period of not less than 12 months; (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death, or last for a continuous period of not less than 12 months, Executive is receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company; or (iii) Executive is determined to be totally disabled by the Social Security Administration. The provisions of Section 10(b) shall apply upon the termination of the Executive’s employment based on Disability. Upon the determination that Executive has suffered a Disability, disability payments hereunder shall commence within thirty (30) days.

(ii) In the event of Disability, Executive’s obligation to perform services under this Agreement will terminate. In the event of such termination, Executive shall continue to receive A) one hundred percent (100%) of his monthly Base Salary (at the annual rate in effect on the Date of Termination) through the one hundred eightieth (180^th) day following the Date of Termination by reason of Disability and B) sixty percent (60%) of his monthly Base Salary from the one hundred eighty-first (181^st) day following termination through the earlier of the date of his death or the date he attains age 70. Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to Executive under any disability program and any retirement benefits payable to Executive under any tax-qualified retirement plan sponsored by the Company, but in no event shall Executive’s Disability benefit be reduced below zero. In addition, during any period of Executive’s Disability, Executive and his dependents shall, to the greatest extent possible, continue to be covered under life insurance and non-taxable medical and dental plans of the Company in which Executive participated prior to the occurrence of Executive’s Disability, on the same terms as if Executive were actively employed by the Company. Notwithstanding anything to the contrary herein, no payments shall be made hereunder which would violate Code Section 409A. Accordingly, any payments required hereunder shall commence within thirty (30) days from the date of determination of Executive’s Disability and shall be paid no less frequently than monthly during the period that Executive is Disabled.

11. Source of Payments: No Duplication of Benefits.

Notwithstanding any provision in this Agreement to the contrary, to the extent payments and benefits, as provided for under this Agreement, are paid or received by Executive under the Employment Agreement in effect between Executive and the Bank, the payments and benefits paid by the Bank will be subtracted from any amount or benefit due simultaneously to Executive under similar provisions of this Agreement. Payments will be allocated in proportion to the level of activity and the time expended by Executive on activities related to the Company and at the Bank, respectively, as determined by the Company and the Bank.

[With respect to Sullivan agreement, this Section shall read as follows:

Source of Payments. All payments provided for in this Agreement shall be timely paid in cash or check from the general funds of the Company.]

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12. Effect on Prior Agreements and Existing Benefit Plans.

This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment or change in control agreement between the Company or any predecessor of the Company and Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to him without reference to this Agreement.

13. No Attachment.

(a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation, or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void and of no effect.

(b) This Agreement shall be binding upon and inure to the benefit of Executive and the Company and their respective successors and assigns.

14. Modification and Waiver.

(a) This Agreement may not be modified or amended, except by an instrument in writing signed by the parties hereto.

(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived.

15. Severability.

If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any remaining part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.

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16. Headings for Reference Only.

The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

17. Governing Law.

This Agreement shall be governed by the laws of the Commonwealth of Massachusetts without regard to principles of conflicts of law of the Commonwealth of Massachusetts.

18. Arbitration.

Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators sitting in a location selected by Executive within fifty (50) miles from the location of the Company, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

In the event any dispute or controversy arising under or in connection with Executive’s termination is resolved in favor of Executive, whether by judgment, arbitration or settlement, Executive shall be entitled to the payment of all back-pay, including salary, bonuses and any other cash compensation, fringe benefits and any compensation and benefits due Executive under this Agreement. Such payment shall occur no later than two and one-half (2 ¹/2) months after the dispute is settled or resolved in Executive’s favor.

19. Payment of Legal Fees.

All reasonable legal fees paid or incurred by Executive pursuant to any dispute or question of interpretation relating to this Agreement shall be paid or reimbursed by the Company only if Executive is successful pursuant to a legal judgment, arbitration or settlement. Such payment or reimbursement shall occur no later than two and one-half (2 ¹/2) months after the dispute is settled or resolved in Executive’s favor.

20. Indemnification.

(a) The Company shall provide Executive (including his heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at its expense and shall indemnify Executive (and his heirs, executors and administrators) to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director or officer of the Company (whether or not he continues to be a director or officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs, attorneys’ fees and the costs of reasonable settlements.

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21. Successors to the Company.

The Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business or assets of the Company, expressly and unconditionally to assume and agree to perform the Company’s obligations under this Agreement, in the same manner and to the same extent that the Company would be required to perform if no such succession or assignment had taken place.

22. Miscellaneous. In the event any of the provisions of this Section 22 are in conflict with the other terms of this Agreement, this Section 22 shall prevail.

(a) The Board may terminate Executive’s employment at any time, but any termination by the Company, other than termination for Just Cause, shall not prejudice Executive’s right to compensation or other benefits under this Agreement. Executive shall not have the right to receive compensation or other benefits for any period after termination for Just Cause as defined in Section 6 hereinabove.

(b) Any payments made to employees pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

[Signature Page Follows]

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SIGNATURES

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

ATTEST:	PEOPLES FEDERAL BANCSHARES, INC.
	By:
Secretary		For the Entire Board of Directors
WITNESS:	EXECUTIVE:
Secretary

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EX-10.5

Exhibit 10.5

PEOPLES FEDERAL MHC

Salary Continuation Agreement

PEOPLES FEDERAL MHC

SALARY CONTINUATION AGREEMENT

THIS SALARY CONTINUATION AGREEMENT (the “Agreement”) is adopted this 13th day of September, 2006, by and between PEOPLES FEDERAL MHC, a corporation located in Boston, Massachusetts (the “Company”) and MAURICE H. SULLIVAN, JR. (the “Executive”).

The purpose of this Agreement is to provide specified benefits to the Executive, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development, and future business success of the Bank. This Agreement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended from time to time.

Article 1

Definitions

Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1 “Account Value” means the amount shown on Schedule A under the heading Account Value. The parties expressly acknowledge that the Account Value may be different than the liability that should be accrued by the Company, under Generally Accepted Accounting Principles (“GAAP”), for the Company’s obligation to the Executive under this Agreement. The Account Value on any date other than the end of a Plan Year shall be determined by adding the prorated increase attributable for the current Plan Year to the Account Value for the previous Plan Year.

1.2 “Beneficiary” means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive determined pursuant to Article 4.

1.3 “Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that the Executive completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries.

1.4 “Board” means the Board of Directors of the Company as from time to time constituted.

1.5 “Change in Control” means:

(a) There occurs a “Change in Control” of the Company, as defined or determined by either the Company’s primary federal regulator or under regulations promulgated by such regulator;

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Salary Continuation Agreement

(b) As a result of, or in connection with, any merger or other business combination, sale of assets or contested election, wherein the persons who were non-employee directors of the Company before such transaction or event cease to constitute a majority of the Board of Directors of the Company or any successor to the Company;

(c) The Company transfers all or substantially all of its assets to another corporation or entity which is not an affiliate of the Company;

(d) The Company is merged or consolidated with another corporation or entity and, as a result of such merger of consolidation, less than sixty percent (60%) of the equity interest in the surviving or resulting corporation is owned by the former shareholders or depositors of the Company; or

(e) The Company sells or transfers more than a fifty percent (50%) equity interest in the Company to another person or entity which is not an affiliate of the Company, excluding a sale or transfer to a person or persons who are employed by the Company.

Notwithstanding anything in this Agreement to the contrary, in no event shall the conversion of the Company from mutual to stock form (including, without limitation, through the formation of a stock holding company) or the reorganization of the Company into the mutual holding company form of organization constitute a Change in Control for purposes of this Agreement.

1.6 “Code” means the Internal Revenue Code of 1986, as amended.

1.7 “Disability” means Executive: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Bank. Medical determination of Disability may be made by either the Social Security Administration or by the provider of an accident or health plan covering employees of the Bank. Upon the request of the Plan Administrator, the Executive must submit proof to the Plan Administrator of the Social Security Administration’s or the provider’s determination.

1.8 “Early Termination” means Separation from Service before Normal Retirement Age except when such Separation from Service occurs: (i) within twelve (12) months following a Change in Control; or (ii) due to death, Disability, or Termination for Cause.

1.9 “Effective Date” means May 1, 2006.

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Salary Continuation Agreement

1.10 “Normal Retirement Age” means the Executive attaining age sixty-five (65).

1.11 “Normal Retirement Date” means the later of Normal Retirement Age or Separation from Service.

1.12 “Plan Administrator” means the plan administrator described in Article 6.

1.13 “Plan Year” means each twelve-month period commencing on December 1 and ending on November 30 of each year. The initial Plan Year shall commence on the Effective Date of this Agreement and end on the following November 30.

1.14 “Schedule A” means the schedule attached to this Agreement and made a part hereof. Schedule A shall be updated upon a change in any of the benefits under Articles 2 or 3.

1.15 “Separation from Service” means the termination of the Executive’s employment with the Bank for reasons other than death. Whether a Separation from Service takes place is determined based on the facts and circumstances surrounding the termination of the Executive’s employment and whether the Bank and the Executive intended for the Executive to provide significant services for the Bank following such termination. A termination of employment will not be considered a Separation from Service if:

(a) the Executive continues to provide services as an employee of the Bank at an annual rate that is twenty percent (20%) or more of the services rendered, on average, during the immediately preceding three full calendar years of employment (or, if employed less than three years, such lesser period) and the annual remuneration for such services is twenty percent (20%) or more of the average annual remuneration earned during the final three full calendar years of employment (or, if less, such lesser period), or

(b) the Executive continues to provide services to the Bank in a capacity other than as an employee of the Bank at an annual rate that is fifty percent (50%) or more of the services rendered, on average, during the immediately preceding three full calendar years of employment (or if employed less than three years, such lesser period) and the annual remuneration for such services is fifty percent (50%) or more of the average annual remuneration earned during the final three full calendar years of employment (or if less, such lesser period).

1.16 “Specified Employee” means a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) of the Company if any stock of the Company is publicly traded on an established securities market or otherwise.

1.17 “Termination for Cause” has that meaning set forth in Article 5.

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Salary Continuation Agreement

Article 2

Distributions During Lifetime

2.1 Normal Retirement Benefit. Upon the Normal Retirement Date, the Company shall distribute to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Article.

2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is Seventy Seven Thousand Five Hundred Dollars ($77,500).

2.1.2 Distribution of Benefit. The Company shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following Separation from Service. The annual benefit shall be distributed to the Executive for twenty (20) years.

2.2 Early Termination Benefit. Upon Early Termination, the Company shall distribute to the Executive the benefit described in this Section 2.2 in lieu of any other benefit under this Article.

2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 is the Early Termination Benefit set forth on Schedule A for the Plan Year in which Separation from Service occurs.

2.2.2 Distribution of Benefit. The Company shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following the Executive’s attainment of Normal Retirement Age. The annual benefit shall be distributed to the Executive for twenty (20) years.

2.3 Disability Benefit. If the Executive experiences a Disability which results in a Separation from Service prior to Normal Retirement Age, the Company shall distribute to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Article.

2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is the Disability Benefit set forth on Schedule A for the Plan Year in which Separation from Service due to Disability occurs.

2.3.2 Distribution of Benefit. The Company shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following the Executive’s Separation from Service due to Disability. The annual benefit shall be distributed to the Executive for twenty (20) years.

2.4 Change in Control Benefit. Upon a Change in Control followed within twelve (12) months by a Separation from Service, the Company shall distribute to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Article.

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PEOPLES FEDERAL MHC

Salary Continuation Agreement

2.4.1 Amount of Benefit. The annual benefit under this Section 2.4 is the Change in Control Benefit set forth on Schedule A for the Plan Year in which the Executive’s Separation from Service occurs.

2.4.2 Distribution of Benefit. The Company shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following Separation from Service. The annual benefit shall be distributed to the Executive for twenty (20) years.

2.5 Restriction on Timing of Distribution. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at Separation from Service under such procedures as established by the Company in accordance with Section 409A of the Code, benefit distributions that are made upon Separation from Service may not commence earlier than six (6) months after the date of such Separation from Service. Therefore, in the event this Section 2.5 is applicable to the Executive, any distribution which would otherwise be paid to the Executive within the first six months following the Separation from Service shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following the Separation from Service. All subsequent distributions shall be paid in the manner specified.

2.6 Distributions Upon Income Inclusion Under Section 409A of the Code. Upon the inclusion of any portion of the Account Value into the Executive’s income as a result of the failure of this non-qualified deferred compensation plan to comply with the requirements of Section 409A of the Code, to the extent such tax liability can be covered by the Executive’s vested Account Value, a distribution shall be made as soon as is administratively practicable following the discovery of the plan failure.

2.7 Change in Form or Timing of Distributions. For distribution of benefits under this Article 2, the Executive and the Company may, subject to the terms of Section 8.1, amend the Agreement to delay the timing or change the form of distributions. Any such amendment:

(a) may not accelerate the time or schedule of any distribution, except as provided in Section 409A of the Code and the regulations thereunder;

(b) must, for benefits distributable under Section 2.2 and 2.3, be made at least twelve (12) months prior to the first scheduled distribution;

(c) must, for benefits distributable under Sections 2.1, 2.2, 2.3 and 2.4, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and

(d) must take effect not less than twelve (12) months after the amendment is made.

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PEOPLES FEDERAL MHC

Salary Continuation Agreement

Article 3

Distribution at Death

3.1 Death During Active Service. If the Executive dies while in the active service of the Company, the Company shall distribute to the Beneficiary the benefit described in this Section 3.1. This benefit shall be distributed in lieu of the benefits under Article 2.

3.1.1 Amount of Benefit. The benefit under this Section 3.1 is the Normal Retirement Benefit amount described in Section 2.1.1.

3.1.2 Distribution of Benefit. The Company shall distribute the annual benefit to the Beneficiary in twelve (12) equal monthly installments for twenty (20) years commencing the first day of the month following receipt by the Company of the Executive’s death certificate.

3.2 Death During Distribution of a Benefit. If the Executive dies after any benefit distributions have commenced under this Agreement but before receiving all such distributions, the Company shall distribute to the Beneficiary the remaining benefits at the same time and in the same amounts that would have been distributed to the Executive had the Executive survived.

3.3 Death After Separation from Service But Before Benefit Distributions Commence. If the Executive is entitled to benefit distributions under this Agreement, but dies prior to the commencement of said benefit distributions, the Company shall distribute to the Beneficiary the same benefits that the Executive was entitled to prior to death except that the benefit distributions shall commence within thirty (30) days following receipt by the Company of the Executive’s death certificate.

Article 4

Beneficiaries

4.1 Beneficiary. The Executive shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefit distributions under this Agreement upon the death of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other plan of the Company in which the Executive participates.

4.2 Beneficiary Designation: Change. The Executive shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved. The Executive shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the

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PEOPLES FEDERAL MHC

Salary Continuation Agreement

acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by the Plan Administrator prior to the Executive’s death.

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.

4.4 No Beneficiary Designation. If the Executive dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Executive, then the Executive’s spouse shall be the designated Beneficiary. If the Executive has no surviving spouse, the benefits shall be made to the personal representative of the Executive’s estate.

4.5 Facility of Distribution. If the Plan Administrator determines in its discretion that a benefit is to be distributed to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a distribution for the account of the Executive and the Executive’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such distribution amount.

Article 5

General Limitations

5.1 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement if the Company’s Board of Directors terminates the Executive’s employment for:

(a) Personal dishonesty;

(b) Incompetence;

(c) Willful misconduct;

(d) Any breach of fiduciary duty involving personal profit;

(e) Intentional failure to perform stated duties; or

(f) Willful violation of any law, rule, regulation (other than traffic violations or similar offenses), or final cease and desist order.

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Salary Continuation Agreement

5.2 Suicide or Misstatement. The Company shall not pay any benefit under this Agreement if the Executive commits suicide within two years after the Effective Date. In addition, the Company shall not pay any benefit under this Agreement if the Executive has made any material misstatement of fact on any application for life insurance owned by the Company on the Executive’s life.

5.3 Removal. Notwithstanding any provision of this Agreement to the contrary, the Company shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act.

5.4 Competition After Separation from Service. The Company shall not pay any benefit under this Agreement if the Executive, within twelve (12) months following Separation from Service, without the prior written consent of the Company, engages in, becomes interested in, directly or indirectly, as a sole proprietor, as a partner in a partnership, or as a substantial shareholder in a corporation, or becomes associated with, in the capacity of employee, director, officer, principal, agent, trustee, or in any other capacity whatsoever, any enterprise conducted in the marketing area of the Company, which enterprise is, or may deemed to be, competitive with any business carried on by the Company as of the date of termination of the Executive’s employment or retirement. This section shall not apply following a Change in Control.

Article 6

Administration of Agreement

6.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator which shall consist of the Board, or such committee or person(s) as the Board shall appoint. The Plan Administrator shall administer this Agreement according to its express terms and shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement to the extent the exercise of such discretion and authority does not conflict with Section 409A of the Code and regulations thereunder.

6.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Company.

6.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement.

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Salary Continuation Agreement

6.4 Indemnity of Plan Administrator. The Company shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.

6.5 Company Information. To enable the Plan Administrator to perform its functions, the Company shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Separation from Service of the Executive, and such other pertinent information as the Plan Administrator may reasonably require.

6.6 Annual Statement. The Plan Administrator shall provide to the Executive, within one hundred twenty (120) days after the end of each Plan Year, a statement setting forth the benefits to be distributed under this Agreement.

Article 7

Claims And Review Procedures

7.1 Claims Procedure. An Executive or Beneficiary (“claimant”) who has not received benefits under the Agreement that he or she believes should be distributed shall make a claim for such benefits as follows:

7.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the claimant, the claim must be made within sixty (60) days after such notice was received by the claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the claimant.

7.1.2 Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 90 days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

7.1.3 Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

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Salary Continuation Agreement

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

(d) An explanation of the Agreement’s review procedures and the time limits applicable to such procedures; and

(e) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

7.2 Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:

7.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.

7.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

7.2.3 Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

7.2.4 Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

7.2.5 Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

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Salary Continuation Agreement

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and

(d) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

Article 8

Amendments and Termination

8.1 Amendments and Termination Generally. This Agreement may be amended or terminated on only by a written agreement signed by the Company and the Executive. If the Bank’s Board of Directors, however, determines that the Executive is no longer a member of a select group of management or highly compensated employees, as that phrase applies to ERISA, for reasons other than death, Disability or retirement, the Bank may terminate this Agreement. In the event of such termination, the benefit shall be the Account Value determined as of the date the Agreement is terminated; provided, however, that except as provided in Section 8.2, the termination of this Agreement shall not cause a distribution of benefits under this Agreement. Rather, in the event of such termination, benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3.

Additionally, the Company may unilaterally amend this Agreement to conform with written directives to the Company from its auditors or banking regulators or to comply with legislative or tax law, including without limitation Section 409A of the Code and any and all regulations and guidance promulgated thereunder.

8.2 Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 8.1, if the Company terminates this Agreement in the following circumstances:

(a) Within thirty (30) days before, or twelve (12) months after a Change in Control, provided that all distributions are made no later than twelve (12) months following such termination of the Agreement and further provided that all the Company’s arrangements which are substantially similar to the Agreement are terminated so the Executive and all participants in the similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the termination of the arrangements;

(b) Upon the Company’s dissolution or with the approval of a bankruptcy court provided that the amounts deferred under the Agreement are included in the Executive’s gross income in the latest of (i) the calendar year in which the Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practical; or

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Salary Continuation Agreement

(c) Upon the Company’s termination of this and all other non-account balance plans (as referenced in Section 409A of the Code or the regulations thereunder), provided that all distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and the Company does not adopt any new non-account balance plans for a minimum of five (5) years following the date of such termination;

the Company may distribute the Account Value, determined as of the date of the termination of the Agreement, to the Executive in a lump sum subject to the above terms.

Article 9

Miscellaneous

9.1 Binding Effect. This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, executors, administrators and transferees.

9.2 No Guarantee of Employment. This Agreement is not a contract for employment. It does not give the Executive the right to remain as an employee of the Company, nor does it interfere with the Company’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate service at any time.

9.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

9.4 Tax Withholding and Reporting. The Company shall withhold any taxes that are required to be withheld, including but not limited to taxes owed under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement. The Executive acknowledges that the Company’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies). Further, the Company shall satisfy all applicable reporting requirements, including those under Section 409A of the Code and regulations thereunder.

9.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

9.6 Unfunded Arrangement. The Executive and the Beneficiary are general unsecured creditors of the Company for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Company to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life or other informal funding asset is a general asset of the Company to which the Executive and Beneficiary have no preferred or secured claim.

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Salary Continuation Agreement

9.7 Reorganization. The Company shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Company under this Agreement. Upon the occurrence of such event, the term “Company” as used in this Agreement shall be deemed to refer to the successor or survivor company.

9.8 Entire Agreement. This Agreement constitutes the entire agreement between the Company and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.

9.9 Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

9.10 Alternative Action. In the event it shall become impossible for the Bank or the Plan Administrator to perform any act required by this Agreement, the Bank or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Bank, provided that such alternative acts do not violate Section 409A of the Code.

9.11 Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.

9.12 Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision has never been inserted herein.

9.13 Notice. Any notice or filing required or permitted to be given to the Company or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Peoples Federal Savings Bank

435 Market Street

Boston, MA

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

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PEOPLES FEDERAL MHC

Salary Continuation Agreement

Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive.

9.14 Compliance with Section 409A. This Agreement shall at all times be administered and the provisions of this Agreement shall be interpreted consistent with the requirements of Section 409A of the Code and any and all regulations thereunder, including such regulations as may be promulgated after the Effective Date of this Agreement.

9.15 Rescissions. Any modification to the terms of this Agreement that would inadvertently result in an additional tax liability on the part of the Executive, shall have no effect to the extent the change in the terms of the plan is rescinded by the earlier of a date before the right is exercised (if the change grants a discretionary right) and the last day of the calendar year during which such change occurred.

IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Company have signed this Agreement.

EXECUTIVE:	COMPANY:
/s/ Maurice H. Sullivan, Jr.	By:	/s/ Thomas J. Leetch
Maurice H. Sullivan, Jr.	Title: President and COO

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PEOPLES FEDERAL MHC

Salary Continuation Agreement

BENEFICIARY DESIGNATION FORM

{    } New Designation

{    } Change in Designation

I,                                         , designate the following as Beneficiary under the Agreement:

Primary:
	%
	%
Contingent:
	%
	%

Notes:

• Please PRINT CLEARLY or TYPE the names of the beneficiaries.

• To name a trust as Beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement.

• To name your estate as Beneficiary, please write “Estate of [your name]”.

• Be aware that none of the contingent beneficiaries will receive anything unless ALL of the primary beneficiaries predecease you.

I understand that I may change these beneficiary designations by delivering a new written designation to the Plan Administrator, which shall be effective only upon receipt and acknowledgment by the Plan Administrator prior to my death. I further understand that the designations will be automatically revoked if the Beneficiary predeceases me, or, if I have named my spouse as Beneficiary and our marriage is subsequently dissolved.

Name:
Signature:	Date:

Received by the Plan Administrator this      day of             , 2    

By:

Title:

FIRST AMENDMENT TO

SALARY CONTINUATION AGREEMENT

First Amendment, dated as of December 16, 2008 (the “Amendment”), to the Salary Continuation Agreement, dated as of September 13, 2006 (as amended, the “Salary Continuation Agreement”), by and among Peoples Federal MHC (the “Company”) and Maurice H. Sullivan (the “Executive”). Capitalized terms which are not defined herein shall have the same meaning as set forth in the Salary Continuation Agreement.

W I T N E S S E T H:

WHEREAS, the Company desires to amend the Salary Continuation Agreement to comply with the final regulations issued in April 2007 by the Internal Revenue Service under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, pursuant to Section 8.1 of the Salary Continuation Agreement, the Company may unilaterally amend the Salary Continuation Agreement to comply with the requirements of Section 409A of the Code, without consent from the Executive;

NOW, THEREFORE, in consideration of the premises, the mutual agreements herein set forth and such other consideration the sufficiency of which is hereby acknowledged, the Company hereby amends the Salary Continuation Agreement as follows:

Section 1. Amendment to Section 1.15 of the Salary Continuation Agreement. Section 1.15 of the Salary Continuation Agreement is hereby amended to read in its entirety as follows:

““Separation from Service” means the termination of the Executive’s employment with the Bank for reasons other than death. Whether a Separation from Service has occurred shall be determined in accordance with the requirements of Section 409A of the Code based on whether the facts and circumstances indicate that the Bank and the Executive reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to a level that is less than 50% of the average level of bona fide services performed (whether as an employee or independent contractor) over the immediately preceding 36-month period.”

Section 2. Amendment to Section 1.16 of the Salary Continuation Agreement. Section 1.16 of the Salary Continuation Agreement is hereby amended to read in its entirety as follows:

““Specified Employee” means a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) in the event the Bank or any corporate parent is or becomes publicly traded on an established securities market or otherwise.”

Section 3. Amendment to Section 2.7 of the Salary Continuation Agreement. Section 2.7 of the Salary Continuation Agreement is hereby amended to read in its entirety as follows:

“Change in Form or Timing of Distributions. For distribution of benefits under this Article 2, the Executive and the Bank may, subject to the terms of Article 8, amend the Agreement to delay the timing or change the form of distributions. Any such amendment:

(a) may not accelerate the time or schedule of any distribution, except as provided in Code Section 409A;

(b) must, for benefits distributable under Sections 2.1 and 2.2, be made at least twelve (12) months prior to the first scheduled distribution;

(c) must, for benefits distributable under Sections 2.1, 2.2 and 2.4, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and

(d) must take effect not less than twelve (12) months after the amendment is made.”

Section 4. Amendment to Section 3.1.2 of the Salary Continuation Agreement. Section 3.1.2 of the Salary Continuation Agreement is hereby amended to read in its entirety as follows:

“The Bank shall distribute the annual benefit to the Beneficiary in twelve (12) equal monthly installments for twenty (20) years commencing within (90) days following the Executive’s death. The Beneficiary shall be required to provide to the Bank the Executive’s death certificate.”

Section 5. Amendment to Section 3.3 of the Salary Continuation Agreement. Section 3.3 of the Salary Continuation Agreement is hereby amended to read in its entirety as follows:

“If the Executive is entitled to benefit distributions under this Agreement but dies prior to the date that commencement of said benefit distributions, the Bank shall distribute to the Beneficiary the same benefits to which the Executive was entitled prior to death, except that the benefit distributions shall commence on the earlier of (a) ninety (90) days following the Executive’s death, or (b) the date the benefits would have commenced if the Executive had not died. The Beneficiary shall be required to provide to the Bank the Executive’s death certificate.”

Section 6. Amendment to Section 8.2 of the Salary Continuation Agreement. Section 8.2 of the Salary Continuation Agreement is hereby amended to read in its entirety as follows:

“8.2 Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 8.1, if the Bank terminates this Agreement in the following circumstances:

(a) Within thirty (30) days before a Change in Control, provided that all distributions are made no later than twelve (12) months following such

2

irrevocable termination of this Agreement and further provided that all of the arrangements sponsored by the Bank that would be aggregated with this Agreement under Treasury Regulation §1.409A-1(c)(2) are terminated so the Executive and all participants under the other aggregated arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Bank irrevocably takes all necessary action to terminate such arrangements;

(b) With twelve (12) months of a dissolution of the Bank taxed under Section 331 of the Code or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred under this Agreement are included in the Executive’s gross income in the latest of (i) the calendar year in which this Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practicable; or

(c) Upon the Bank’s termination of this and all other arrangements that would be aggregated with this Agreement pursuant to Treasury Regulation §1.409A-1(c) if the Executive participated in such arrangements (“Similar Arrangements”), provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank, (ii) no payments are made within twelve (12) months of the termination of the arrangements other than payments that would be payable under the terms of the arrangements if the termination had not occurred, (iii) all termination distributions are made no later than twenty-four (24) months following such termination, and (iv) the Bank does not adopt any new arrangement that would be a Similar Arrangement for a minimum of three (3) years following the date the Bank takes all necessary action to irrevocably terminate and liquidate the Agreement;

the Bank may distribute the Account Value, determined as of the date of the termination of the Agreement, to the Executive in a lump sum subject to the above terms.”

Section 7. Effectiveness. This Amendment shall be deemed effective as of the date first above written, as if executed on such date. Except as expressly set forth herein, this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Salary Continuation Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect and shall be otherwise unaffected.

Section 8. Governing Law. This Amendment and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

Section 9. Compliance with Section 409A. This Agreement shall be interpreted and administered consistent with Section 409A of the Code.

3

IN WITNESS WHEREOF, the Company has duly executed this Amendment as of the day and year first written above.

PEOPLES FEDERAL MHC
By:	/s/ Thomas J. Leetch
Name:	Thomas J. Leetch
Title:	President & CEO
EXECUTIVE
/s/ Maurice H. Sullivan
Maurice H. Sullivan

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EX-10.6

Exhibit 10.6

PEOPLES FEDERAL SAVINGS BANK

Amended and Restated Salary Continuation Agreement

AMENDED AND RESTATED

PEOPLES FEDERAL SAVINGS BANK

SALARY CONTINUATION AGREEMENT

THIS AMENDED & RESTATED PEOPLES FEDERAL SAVINGS BANK SALARY CONTINUATION AGREEMENT (the “Agreement”) is adopted this 6^th day of July, 2006, by and between PEOPLES FEDERAL SAVINGS BANK, a federally-chartered corporation located in Boston, Massachusetts (the “Bank”) and THOMAS J. LEETCH (the “Executive”).

This agreement amends and restates the prior PEOPLES FEDERAL SAVINGS BANK SALARY CONTINUATION AGREEMENT between the Bank and the Executive dated November 29, 2004 (the “Prior Agreement”).

The parties intend this Amended and Restated Agreement to be a material modification of the Prior Agreement such that all amounts earned and vested prior to December 31, 2004 shall be subject to the provisions of Section 409A of the Code and the regulations promulgated thereunder.

The purpose of this Agreement is to provide specified benefits to the Executive, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development, and future business success of the Bank. This Agreement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended from time to time.

Article 1

Definitions

Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1 “Account Value” means the amount shown on Schedule A under the heading Account Value. The parties expressly acknowledge that the Account Value may be different than the liability that should be accrued by the Bank, under Generally Accepted Accounting Principles (“GAAP”), for the Bank’s obligation to the Executive under this Agreement. The Account Value on any date other than the end of a Plan Year shall be determined by adding the prorated increase attributable for the current Plan Year to the Account Value for the previous Plan Year.

1.2 “Bank” shall mean Peoples Federal Savings Bank, Boston, Massachusetts and any subsidiary, parent corporation or affiliate of the Bank.

1.3 “Beneficiary” means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive determined pursuant to Article 4.

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PEOPLES FEDERAL SAVINGS BANK

Amended and Restated Salary Continuation Agreement

1.4 “Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that the Executive completes, signs, and returns to the Plan Administrator to designate one or more Beneficiaries.

1.5 “Board” means the Board of Directors of the Bank as from time to time constituted.

1.6 “Change in Control” means:

(a) There occurs a “Change in Control” of the Bank, as defined or determined by either the Bank’s primary federal regulator or under regulations promulgated by such regulator;

(b) As a result of, or in connection with, any merger or other business combination, sale of assets or contested election, wherein the persons who were non-employee directors of the Bank before such transaction or event cease to constitute a majority of the Board of Directors of the Bank or any successor to the Bank;

(c) The Bank transfers all or substantially all of its assets to another corporation or entity which is not an affiliate of the Bank;

(d) The Bank is merged or consolidated with another corporation or entity and, as a result of such merger of consolidation, less than sixty percent (60%) of the equity interest in the surviving or resulting corporation is owned by the former shareholders or depositors of the Bank; or

(e) The Bank sells or transfers more than a fifty percent (50%) equity interest in the Bank to another person or entity which is not an affiliate of the Bank, excluding a sale or transfer to a person or persons who are employed by the Bank.

Notwithstanding anything in this Agreement to the contrary, in no event shall the conversion of the Bank from mutual to stock form (including, without limitation, through the formation of a stock holding company) or the reorganization of the Bank into the mutual holding company form of organization constitute a Change in Control for purposes of this Agreement.

1.7 “Code” means the Internal Revenue Code of 1986, as amended.

1.8 “Disability” means Executive: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for

2

PEOPLES FEDERAL SAVINGS BANK

Amended and Restated Salary Continuation Agreement

a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Bank. Medical determination of Disability may be made by either the Social Security Administration or by the provider of an accident or health plan covering employees of the Bank. Upon the request of the Plan Administrator, the Executive must submit proof to the Plan Administrator of the Social Security Administration’s or the provider’s determination.

1.9 “Early Termination” means Separation from Service before age sixty-five (65), but after completion of at least fifteen (15) Years of Service, for reasons other than death, Disability, Termination for Cause or within twelve (12) months following a Change in Control.

1.10 “Effective Date” means May 1, 2006.

1.11 “Normal Retirement Age” means the Executive’s 65^th birthday and his completion of at least fifteen (15) Years of Service.

1.12 “Normal Retirement Date” means the date that is the later of the Executive’s attainment of Normal Retirement Age or his actual Separation from Service.

1.13 “Plan Administrator” means the plan administrator described in Article 6.

1.14 “Plan Year” means each twelve-month period commencing on December 1^st and ending on November 30^th of each year. The initial Plan Year shall commence on the Effective Date of this Agreement and end on the following November 30^th.

1.15 “Schedule A” means the schedule attached to this Agreement and made a part hereof. Schedule A shall be updated upon a change in any of the benefits under Articles 2 or 3.

1.16 “Separation from Service” means the termination of the Executive’s employment with the Bank for reasons other than death. Whether a Separation from Service takes place is determined based on the facts and circumstances surrounding the termination of the Executive’s employment and whether the Bank and the Executive intended for the Executive to provide significant services for the Bank following such termination. A termination of employment will not be considered a Separation from Service if:

(a) the Executive continues to provide services as an employee of the Bank at an annual rate that is twenty percent (20%) or more of the services rendered, on average, during the immediately preceding three full calendar years of employment (or, if employed less than three years, such lesser period) and the annual remuneration for such services is twenty percent (20%) or more of the average annual remuneration earned during the final three full calendar years of employment (or, if less, such lesser period), or

(b) the Executive continues to provide services to the Bank in a capacity other than as

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PEOPLES FEDERAL SAVINGS BANK

Amended and Restated Salary Continuation Agreement

an employee of the Bank at an annual rate that is fifty percent (50%) or more of the services rendered, on average, during the immediately preceding three full calendar years of employment (or if employed less than three years, such lesser period) and the annual remuneration for such services is fifty percent (50%) or more of the average annual remuneration earned during the final three full calendar years of employment (or if less, such lesser period).

1.17 “Specified Employee” means a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) of the Bank if any stock of the Bank is publicly traded on an established securities market or otherwise.

1.18 “Termination for Cause” has that meaning set forth in Article 5.

1.19 “Years of Service” means each twelve (12) consecutive month period, beginning with the date or hire of initial service, that the Executive has been an employee and/or director of the Bank, inclusive of any approved leave of absence.

Article 2

Distributions During Lifetime

2.1 Normal Retirement Benefit. Upon the Normal Retirement Date, the Bank shall distribute to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Article.

2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is One Hundred Fifty Thousand Eight Hundred Ninety Dollars ($150,890).

2.1.2 Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following Separation from Service. The annual benefit shall be distributed to the Executive for twenty (20) years.

2.2 Early Termination Benefit. Upon Early Termination, the Bank shall distribute to the Executive the benefit described in this Section 2.2 in lieu of any other benefit under this Article.

2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 is the Early Termination Benefit set forth on Schedule A for the Plan Year in which Separation from Service occurs.

2.2.2 Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following the Executive’s attainment of Normal Retirement Age. The annual benefit shall be distributed to the Executive for twenty (20) years.

2.3 Disability Benefit. If the Executive experiences a Disability which results in a Separation from Service prior to Normal Retirement Age, the Bank shall distribute to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Article.

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PEOPLES FEDERAL SAVINGS BANK

Amended and Restated Salary Continuation Agreement

2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is the Disability Benefit set forth on Schedule A for the Plan Year in which Separation from Service due to Disability occurs.

2.3.2 Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following the Executive’s Normal Retirement Age. The annual benefit shall be distributed to the Executive for twenty (20) years.

2.4 Change in Control Benefit. Upon a Change in Control followed within twelve (12) months by a Separation from Service, the Bank shall distribute to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Article.

2.4.1 Amount of Benefit. The annual benefit under this Section 2.4 is the Change in Control Benefit set forth on Schedule A for the Plan Year in which the Executive’s Separation from Service occurs.

2.4.2 Distribution of Benefit. The Bank shall distribute the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following Separation from Service. The annual benefit shall be distributed to the Executive for twenty (20) years.

2.5 Restriction on Timing of Distribution. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at Separation from Service under such procedures as established by the Bank in accordance with Section 409A of the Code, benefit distributions that are made upon Separation from Service may not commence earlier than six (6) months after the date of such Separation from Service. Therefore, in the event this Section 2.5 is applicable to the Executive, any distribution which would otherwise be paid to the Executive within the first six months following the Separation from Service shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following the Separation from Service. All subsequent distributions shall be paid in the manner specified.

2.6 Distributions Upon Income Inclusion Under Section 409A of the Code. Upon the inclusion of any portion of the Account Value into the Executive’s income as a result of the failure of this non-qualified deferred compensation plan to comply with the requirements of Section 409A of the Code, to the extent such tax liability can be covered by the Executive’s Account Value, a distribution shall be made as soon as is administratively practicable following the discovery of the plan failure.

2.7 Change in Form or Timing of Distributions. For distribution of benefits under this Article 2, the Executive and the Bank may, subject to the terms of Section 8.1, amend the Agreement to delay the timing or change the form of distributions. Any such amendment:

(a) may not accelerate the time or schedule of any distribution, except as provided in Section 409A of the Code and the regulations thereunder;

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PEOPLES FEDERAL SAVINGS BANK

Amended and Restated Salary Continuation Agreement

(b) must, for benefits distributable under Section 2.2 and 2.3, be made at least twelve (12) months prior to the first scheduled distribution;

(c) must, for benefits distributable under Sections 2.1, 2.2, 2.3 and 2.4, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and

(d) must take effect not less than twelve (12) months after the amendment is made.

Article 3

Distribution at Death

3.1 Death During Active Service. If the Executive dies while in the active service of the Bank, the Bank shall distribute to the Beneficiary the benefit described in this Section 3.1. This benefit shall be distributed in lieu of the benefits under Article 2.

3.1.1 Amount of Benefit. The benefit under this Section 3.1 is the Normal Retirement Benefit amount described in Section 2.1.1.

3.1.2 Distribution of Benefit. The Bank shall distribute the annual benefit to the Beneficiary in twelve (12) equal monthly installments for twenty (20) years commencing the first day of the month following receipt by the Bank of the Executive’s death certificate.

3.2 Death During Distribution of a Benefit. If the Executive dies after any benefit distributions have commenced under this Agreement but before receiving all such distributions, the Bank shall distribute to the Beneficiary the remaining benefits at the same time and in the same amounts that would have been distributed to the Executive had the Executive survived.

3.3 Death After Separation from Service But Before Benefit Distributions Commence. If the Executive is entitled to benefit distributions under this Agreement, but dies prior to the commencement of said benefit distributions, the Bank shall distribute to the Beneficiary the same benefits that the Executive was entitled to prior to death except that the benefit distributions shall commence within thirty (30) days following receipt by the Bank of the Executive’s death certificate.

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PEOPLES FEDERAL SAVINGS BANK

Amended and Restated Salary Continuation Agreement

Article 4

Beneficiaries

4.1 Beneficiary. The Executive shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefit distributions under this Agreement upon the death of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other plan of the Bank in which the Executive participates.

4.2 Beneficiary Designation: Change. The Executive shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved. The Executive shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by the Plan Administrator prior to the Executive’s death.

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.

4.4 No Beneficiary Designation. If the Executive dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Executive, then the Executive’s spouse shall be the designated Beneficiary. If the Executive has no surviving spouse, the benefits shall be made to the personal representative of the Executive’s estate.

4.5 Facility of Distribution. If the Plan Administrator determines in its discretion that a benefit is to be distributed to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a distribution for the account of the Executive and the Executive’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such distribution amount.

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PEOPLES FEDERAL SAVINGS BANK

Amended and Restated Salary Continuation Agreement

Article 5

General Limitations

5.1 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement if the Bank’s Board of Directors terminates the Executive’s employment for:

(a) Personal dishonesty;

(b) Incompetence;

(c) Willful misconduct;

(d) Any breach of fiduciary duty involving personal profit;

(e) Intentional failure to perform stated duties; or

(f) Willful violation of any law, rule, regulation (other than traffic violations or similar offenses), or final cease and desist order.

5.2 Suicide or Misstatement. The Bank shall not pay any benefit under this Agreement if the Executive commits suicide within two years after the Effective Date of the Prior Agreement. In addition, the Bank shall not pay any benefit under this Agreement if the Executive has made any material misstatement of fact on any application for life insurance owned by the Bank on the Executive’s life.

5.3 Removal. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act.

5.4 Competition After Separation from Service. The Bank shall not pay any benefit under this Agreement if the Executive, within twelve (12) months following Separation from Service, without the prior written consent of the Bank, engages in, becomes interested in, directly or indirectly, as a sole proprietor, as a partner in a partnership, or as a substantial shareholder in a corporation, or becomes associated with, in the capacity of employee, director, officer, principal, agent, trustee, or in any other capacity whatsoever, any enterprise conducted in the marketing area of the Bank, which enterprise is, or may deemed to be, competitive with any business carried on by the Bank as of the date of termination of the Executive’s employment or retirement. This section shall not apply following a Change in Control.

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PEOPLES FEDERAL SAVINGS BANK

Amended and Restated Salary Continuation Agreement

Article 6

Administration of Agreement

6.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator which shall consist of the Board, or such committee or person(s) as the Board shall appoint. The Plan Administrator shall administer this Agreement according to its express terms and shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement to the extent the exercise of such discretion and authority does not conflict with Section 409A of the Code and regulations thereunder.

6.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Bank.

6.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement.

6.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.

6.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Separation from Service of the Executive, and such other pertinent information as the Plan Administrator may reasonably require.

6.6 Annual Statement. The Plan Administrator shall provide to the Executive, within one hundred twenty (120) days after the end of each Plan Year, a statement setting forth the benefits to be distributed under this Agreement.

Article 7

Claims And Review Procedures

7.1 Claims Procedure. An Executive or Beneficiary (“claimant”) who has not received benefits under the Agreement that he or she believes should be distributed shall make a claim for such benefits as follows:

7.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the claimant, the claim must be made within sixty (60) days after such notice was received by the claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the claimant.

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Amended and Restated Salary Continuation Agreement

7.1.2 Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 90 days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

7.1.3 Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

(d) An explanation of the Agreement’s review procedures and the time limits applicable to such procedures; and

(e) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

7.2 Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:

7.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.

7.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

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PEOPLES FEDERAL SAVINGS BANK

Amended and Restated Salary Continuation Agreement

7.2.3 Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

7.2.4 Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

7.2.5 Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and

(d) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

Article 8

Amendments and Termination

8.1 Amendments and Termination Generally. This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Executive. If the Bank’s Board of Directors, however, determines that the Executive is no longer a member of a select group of management or highly compensated employees, as that phrase applies to ERISA, for reasons other than death, Disability or retirement, the Bank may terminate this Agreement. In the event of such termination, the benefit shall be the Account Value determined as of the date the Agreement is terminated; provided, however, that except as provided in Section 8.2, the termination of this Agreement shall not cause a distribution of benefits under this Agreement. Rather, in the event of such termination, benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3.

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PEOPLES FEDERAL SAVINGS BANK

Amended and Restated Salary Continuation Agreement

Additionally, the Bank may unilaterally amend this Agreement to conform with written directives to the Bank from its auditors or banking regulators or to comply with legislative or tax law, including without limitation Section 409A of the Code and any and all regulations and guidance promulgated thereunder.

8.2 Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 8.1, if the Bank terminates this Agreement in the following circumstances:

(a) Within thirty (30) days before, or twelve (12) months after a Change in Control, provided that all distributions are made no later than twelve (12) months following such termination of the Agreement and further provided that all the Bank’s arrangements which are substantially similar to the Agreement are terminated so the Executive and all participants in the similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the termination of the arrangements;

(b) Upon the Bank’s dissolution or with the approval of a bankruptcy court provided that the amounts deferred under the Agreement are included in the Executive’s gross income in the latest of (i) the calendar year in which the Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practical; or

(c) Upon the Bank’s termination of this and all other non-account balance plans (as referenced in Section 409A of the Code or the regulations thereunder), provided that all distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and the Bank does not adopt any new non-account balance plans for a minimum of five (5) years following the date of such termination;

the Bank may distribute the Account Value, determined as of the date of the termination of the Agreement, to the Executive in a lump sum subject to the above terms.

Article 9

Miscellaneous

9.1 Binding Effect. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, administrators and transferees.

9.2 No Guarantee of Employment. This Agreement is not a contract for employment. It does not give the Executive the right to remain as an employee of the Bank, nor does it interfere with the Bank’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.

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PEOPLES FEDERAL SAVINGS BANK

Amended and Restated Salary Continuation Agreement

9.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

9.4 Tax Withholding and Reporting. The Bank shall withhold any taxes that are required to be withheld, including but not limited to taxes owed under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement. The Executive acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies). Further, the Bank shall satisfy all applicable reporting requirements, including those under Section 409A of the Code and regulations thereunder.

9.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

9.6 Unfunded Arrangement. The Executive and the Beneficiary are general unsecured creditors of the Bank for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Bank to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life or other informal funding asset is a general asset of the Bank to which the Executive and Beneficiary have no preferred or secured claim.

9.7 Reorganization. The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor bank.

9.8 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.

9.9 Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

9.10 Alternative Action. In the event it shall become impossible for the Bank or the Plan Administrator to perform any act required by this Agreement, the Bank or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Bank, provided that such alternative acts do not violate Section 409A of the Code.

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PEOPLES FEDERAL SAVINGS BANK

Amended and Restated Salary Continuation Agreement

9.11 Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.

9.12 Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision has never been inserted herein.

9.13 Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Peoples Federal Savings Bank

435 Market Street

Boston, MA

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive.

9.14 Compliance with Section 409A. This Agreement shall at all times be administered and the provisions of this Agreement shall be interpreted consistent with the requirements of Section 409A of the Code and any and all regulations thereunder, including such regulations as may be promulgated after the Effective Date of this Agreement.

9.15 Rescissions. Any modification to the terms of this Agreement that would inadvertently result in an additional tax liability on the part of the Executive, shall have no effect to the extent the change in the terms of the plan is rescinded by the earlier of a date before the right is exercised (if the change grants a discretionary right) and the last day of the calendar year during which such change occurred.

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PEOPLES FEDERAL SAVINGS BANK

Amended and Restated Salary Continuation Agreement

IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Agreement.

EXECUTIVE :	BANK:
	Peoples Federal Savings Bank
/s/ Thomas J. Leetch	By:	/s/ Christopher Lake
Thomas J. Leetch	Title:	CFO/ Treasurer

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PEOPLES FEDERAL SAVINGS BANK

Amended and Restated Salary Continuation Agreement

BENEFICIARY DESIGNATION FORM

{    } New Designation

{    } Change in Designation

I,                                         , designate the following as Beneficiary under the Agreement:

Primary:
	%
	%
Contingent:
	%
	%

Notes:

• Please PRINT CLEARLY or TYPE the names of the beneficiaries.

• To name a trust as Beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement.

• To name your estate as Beneficiary, please write “Estate of [your name]”.

• Be aware that none of the contingent beneficiaries will receive anything unless ALL of the primary beneficiaries predecease you.

I understand that I may change these beneficiary designations by delivering a new written designation to the Plan Administrator, which shall be effective only upon receipt and acknowledgment by the Plan Administrator prior to my death. I further understand that the designations will be automatically revoked if the Beneficiary predeceases me, or, if I have named my spouse as Beneficiary and our marriage is subsequently dissolved.

Name:
Signature:	Date:

Received by the Plan Administrator this      day of             , 2    

By:

Title:

FIRST AMENDMENT TO

AMENDED AND RESTATED SALARY CONTINUATION AGREEMENT

First Amendment, dated as of December 16, 2008 (the “Amendment”), to the Amended and Restated Salary Continuation Agreement, dated as of July 6, 2006 (as amended, the “Salary Continuation Agreement”), by and among Peoples Federal Savings Bank (the “Bank”) and Thomas J. Leetch (the “Executive”). Capitalized terms which are not defined herein shall have the same meaning as set forth in the Salary Continuation Agreement.

W I T N E S S E T H:

WHEREAS, the parties desires to amend the Salary Continuation Agreement to comply with the final regulations issued in April 2007 by the Internal Revenue Service under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, pursuant to Article 8 of the Salary Continuation Agreement, the parties to the Salary Continuation Agreement desire to amend the Salary Continuation Agreement;

NOW, THEREFORE, in consideration of the premises, the mutual agreements herein set forth and such other consideration the sufficiency of which is hereby acknowledged, the Bank and the Executive hereby amend the Salary Continuation Agreement as follows:

Section 1. Amendment to Section 1.16 of the Salary Continuation Agreement. Section 1.16 of the Salary Continuation Agreement is hereby amended to read in its entirety as follows:

““Separation from Service” means the termination of the Executive’s employment with the Bank for reasons other than death. Whether a Separation from Service has occurred shall be determined in accordance with the requirements of Section 409A of the Code based on whether the facts and circumstances indicate that the Bank and the Executive reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to a level that is less than 50% of the average level of bona fide services performed (whether as an employee or independent contractor) over the immediately preceding 36-month period.”

Section 2. Amendment to Section 1.17 of the Salary Continuation Agreement. Section 1.17 of the Salary Continuation Agreement is hereby amended to read in its entirety as follows:

““Specified Employee” means a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) in the event the Bank or any corporate parent is or becomes publicly traded on an established securities market or otherwise.”

Section 3. Amendment to Section 2.7 of the Salary Continuation Agreement. Section 2.7 of the Salary Continuation Agreement is hereby amended to read in its entirety as follows:

“Change in Form or Timing of Distributions. For distribution of benefits under this Article 2, the Executive and the Bank may, subject to the terms of Article 7, amend the Agreement to delay the timing or change the form of distributions. Any such amendment:

(a) may not accelerate the time or schedule of any distribution, except as provided in Code Section 409A;

(b) must, for benefits distributable under Sections 2.1 and 2.2, be made at least twelve (12) months prior to the first scheduled distribution;

(c) must, for benefits distributable under Sections 2.1, 2.2 and 2.4, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and

(d) must take effect not less than twelve (12) months after the amendment is made.”

Section 4. Amendment to Article 8 of the Salary Continuation Agreement. Article 8 of the Salary Continuation Agreement is hereby amended to read in its entirety as follows:

“8.1 Amendments and Termination Generally. This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Executive. If the Bank’s Board of Directors, however, determines that the Executive is no longer a member of a select group of management or highly compensated employees, as that phrase applies to ERISA, for reasons other than death, Disability or retirement, the Bank may terminate this Agreement. In the event of such termination, the benefit shall be the Account Value determined as of the date the Agreement is terminated; provided, however, that except as provided in Section 8.2, the termination of this Agreement shall not cause a distribution of benefits under this Agreement. Rather, in the event of such termination, benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3.

Additionally, the Bank may unilaterally amend this Agreement to conform with written directives to the Bank from its auditors or banking regulators or to comply with legislative or tax law, including without limitation Section 409A of the Code and any and all regulations and guidance promulgated thereunder.

8.2 Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 8.2, if the Bank terminates this Agreement in the following circumstances:

(a) Within thirty (30) days before a Change in Control, provided that all distributions are made no later than twelve (12) months following such irrevocable termination of this Agreement and further provided that all of the arrangements sponsored by the Bank that would be aggregated with this Agreement under Treasury Regulation §1.409A-1(c)(2) are terminated so the

2

Executive and all participants under the other aggregated arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Bank irrevocably takes all necessary action to terminate such arrangements;

(b) With twelve (12) months of a dissolution of the Bank taxed under Section 331 of the Code or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred under this Agreement are included in the Executive’s gross income in the latest of (i) the calendar year in which this Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practicable; or

(c) Upon the Bank’s termination of this and all other arrangements that would be aggregated with this Agreement pursuant to Treasury Regulation §1.409A-1(c) if the Executive participated in such arrangements (“Similar Arrangements”), provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank, (ii) no payments are made within twelve (12) months of the termination of the arrangements other than payments that would be payable under the terms of the arrangements if the termination had not occurred, (iii) all termination distributions are made no later than twenty-four (24) months following such termination, and (iv) the Bank does not adopt any new arrangement that would be a Similar Arrangement for a minimum of three (3) years following the date the Bank takes all necessary action to irrevocably terminate and liquidate the Agreement;

the Bank may distribute the Account Value, determined as of the date of the termination of the Agreement, to the Executive in a lump sum subject to the above terms.”

Section 5. Effectiveness. This Amendment shall be deemed effective as of the date first above written, as if executed on such date. Except as expressly set forth herein, this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Salary Continuation Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect and shall be otherwise unaffected.

Section 6. Governing Law. This Amendment and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

Section 7. Compliance with Section 409A. This Agreement shall be interpreted and administered consistent with Section 409A of the Code.

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IN WITNESS WHEREOF, the Bank has duly executed this Amendment as of the day and year first written above.

PEOPLES FEDERAL SAVINGS BANK
By:	/s/ Maurice H. Sullivan, Jr.
Name:	Maurice H. Sullivan, Jr.
Title:	Chairman
EXECUTIVE
/s/ Thomas J. Leetch
Thomas J. Leetch

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EX-10.7

Exhibit 10.7

PEOPLES FEDERAL SAVINGS BANK

Salary Continuation Agreement

PEOPLES FEDERAL SAVINGS BANK

SALARY CONTINUATION AGREEMENT

THIS SALARY CONTINUATION AGREEMENT (the “Agreement”) is adopted this 29th day of November, 2004, by and between PEOPLES FEDERAL SAVINGS BANK, a federally-chartered corporation located in Boston, Massachusetts (the “Bank”), and JAMES J. GAVIN (the “Executive”).

The purpose of this Agreement is to provide specified benefits to the Executive, a member of a select group of management or highly compensated employees who contribute materially to the continued growth, development and future business success of the Bank. This Agreement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended from time to time. The Bank will pay the benefits from its general assets.

The Bank and the Executive agree as provided herein.

Article 1

Definitions

Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1 “Accrual Balance” means the liability that should be accrued by the Bank, under Generally Accepted Accounting Principles (“GAAP”), for the Bank’s obligation to the Executive under this Agreement, by applying Accounting Principles Board Opinion Number 12 (“APB 12”) as amended by Statement of Financial Accounting Standards Number 106 (“FAS 106”) and the Discount Rate. Any one of a variety of amortization methods may be used to determine the Accrual Balance. However, once chosen, the method must be consistently applied. The Accrual Balance shall be reported by the Bank to the Executive on Schedule A.

1.2 “Bank” shall mean Peoples Federal Savings Bank, Boston, Massachusetts and any subsidiary, parent corporation or affiliate of the Bank.

1.3 “Beneficiary” means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive determined pursuant to Article 4.

1.4 “Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that the Executive completes, signs and returns to the Plan Administrator to designate one or more Beneficiaries.

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Salary Continuation Agreement

1.5 “Change in Control” means:

(a) There occurs a “Change in Control” of the Bank, as defined or determined by either the Bank’s primary federal regulator or under regulations promulgated by such regulator;

(b) As a result of, or in connection with, any merger or other business combination, sale of assets or contested election, wherein the persons who were non-employee directors of the Bank before such transaction or event cease to constitute a majority of the Board of Directors of the Bank or any successor to the Bank;

(c) The Bank transfers all or substantially all of its assets to another corporation or entity which is not an affiliate of the Bank;

(d) The Bank is merged or consolidated with another corporation or entity and, as a result of such merger of consolidation, less than sixty percent (60%) of the equity interest in the surviving or resulting corporation is owned by the former shareholders or depositors of the Bank; or

(e) The Bank sells or transfers more than a fifty percent (50%) equity interest in the Bank to another person or entity which is not an affiliate of the Bank, excluding a sale or transfer to a person or persons who are employed by the Bank.

Notwithstanding anything in this Agreement to the contrary, in no event shall the conversion of the Bank from mutual to stock form (including, without limitation, through the formation of a stock holding company) or the reorganization of the Bank into the mutual holding company form of organization constitute a Change in Control for purposes of this Agreement.

1.6 “Code” means the Internal Revenue Code of 1986, as amended.

1.7 “Disability” means the Executive’s suffering a sickness, accident or injury which has been determined by the insurance carrier of any individual or group disability insurance policy covering the Executive, or by the Social Security Administration, to be a disability rendering the Executive totally and permanently disabled. The Executive must submit proof to the Plan Administrator of the insurance carrier’s or Social Security Administration’s determination upon the request of the Plan Administrator.

1.8 “Discount Rate” means the rate used by the Plan Administrator for determining the Accrual Balance. The initial Discount Rate is six and one quarter percent (6.25%). However, the Plan Administrator, in its sole discretion, may adjust the Discount Rate to maintain the rate within reasonable standards according to GAAP.

1.9 “Early Termination” means the Termination of Employment before age sixty-five (65), but after completion of at least fifteen (15) Years of Service, for reasons other than death, Disability, Termination for Cause or following a Change in Control.

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Salary Continuation Agreement

1.10 “Early Termination Date” means the month, day and year in which Early Termination occurs.

1.11 “Effective Date” means December 1, 2004.

1.12 “Normal Retirement Age” means the Executive’s 65^th birthday and his completion of at least fifteen (15) Years of Service.

1.13 “Normal Retirement Date” means the date that is the later of the Executive’s attainment of Normal Retirement Age or his actual Termination of Employment.

1.14 “Plan Administrator” means the plan administrator described in Article 8.

1.15 “Plan Year” means each twelve-month period commencing on the Effective Date.

1.16 “Termination for Cause” has that meaning set forth in Article 5.

1.17 “Termination of Employment” means that the Executive ceases to be employed by the Bank for any reason, voluntary or involuntary, other than by reason of a leave of absence approved by the Bank.

1.18 “Years of Service” means each twelve (12) consecutive month period, beginning with the date or hire of initial service, that the Executive has been an employee and/or director of the Bank, inclusive of any approved leave of absence.

Article 2

Benefits During Lifetime

2.1 Normal Retirement Benefit. Upon Termination of Employment on or after the Normal Retirement Age for reasons other than death, the Bank shall pay to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Article.

2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is Ninety-one Thousand Six Hundred Thirty-eight Dollars ($91,638).

2.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following the Executive’s Normal Retirement Date. The annual benefit shall be paid to the Executive for twenty (20) years.

2.2 Early Termination Benefit. Upon Early Termination, the Bank shall pay to the Executive the benefit described in this Section 2.2 in lieu of any other benefit under this Article.

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Salary Continuation Agreement

2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 is the Early Termination Benefit set forth on Schedule A for the Plan Year during which the Early Termination Date occurs. This benefit is determined by vesting the Executive in one hundred percent (100%) of the Accrual Balance.

2.2.2 Payment of Benefit. The Bank shall pay the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following the Executive’s attainment of Normal Retirement Age. The annual benefit shall be paid to the Executive for twenty (20) years.

2.3 Disability Benefit. Upon Termination of Employment due to Disability prior to Normal Retirement Age, the Bank shall pay to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Article.

2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is the Disability Benefit set forth on Schedule A for the Plan Year during which the Termination of Employment occurs. This benefit is determined by vesting the Executive in one hundred percent (100%) of the Normal Retirement Benefit.

2.3.2 Payment of Benefit. The Bank shall pay the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following the Executive’s 65^th birthday. The annual benefit shall be paid to the Executive for twenty (20) years.

2.4 Change in Control Benefit. Upon a Change in Control, followed by the Executive’s Termination of Employment within twelve (12) months, the Bank shall pay to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Article.

2.4.1 Amount of Benefit. The annual benefit under this Section 2.4 is the Change in Control Benefit set forth on Schedule A for the Plan Year during which Termination of Employment occurs. This benefit is determined by vesting the Executive in one hundred percent (100%) of the Normal Retirement Benefit amount described in Section 2.1.1. For purposes of the Change in Control Benefit, the Executive shall be deemed to have attained age 65 and completed 15 Years of Service as of the effective date of the Change in Control, regardless of actual age or service completed as of such date.

2.4.2 Payment of Benefit. The Bank shall pay the annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following the Executive’s Termination of Employment. The annual benefit shall be paid to the Executive for twenty (20) years.

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Salary Continuation Agreement

Article 3

Death Benefits

3.1 Death During Active Service. If the Executive dies while in the active service of the Bank, the Bank shall pay to the Beneficiary the benefit described in this Section 3.1. This benefit shall be paid in lieu of the benefits under Article 2.

3.1.1 Amount of Benefit. The benefit under this Section 3.1 is the Normal Retirement Benefit amount described in Section 2.1.1. For purposes of the benefit, the Executive shall be deemed to have attained age 65 and completed 15 Years of Service as of his date of death, regardless of actual age or service completed as of such date.

3.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Beneficiary in twelve (12) equal monthly installments commencing on the first day of the month following the date of the Executive’s death. The annual benefit shall be paid to the Beneficiary for a period of twenty years (20) years.

3.2 Death During Payment of a Benefit. If the Executive dies after any benefit payments have commenced under Article 2 of this Agreement, but before receiving all such payments, the Bank shall pay the remaining benefits to the Beneficiary at the same time and in the same amounts they would have been paid to the Executive had the Executive survived.

3.3 Death After Termination of Employment But Before Payment of a Benefit Commences. If the Executive is entitled to any benefit payments under Article 2 of this Agreement, but dies prior to the commencement of said benefit payments, the Bank shall pay the same benefit payments to the Beneficiary that the Executive was entitled to prior to death, except that the benefit payments shall commence on the first day of the month following the date of the Executive’s death.

Article 4

Beneficiaries

4.1 Beneficiary Designation. The Executive shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefits payable under this Agreement upon the death of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Bank in which the Executive participates.

4.2 Beneficiary Designation: Change. The Executive shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. The Executive’s Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the

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PEOPLES FEDERAL SAVINGS BANK

Salary Continuation Agreement

Executive names a spouse as Beneficiary and the marriage is subsequently dissolved. The Executive shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by the Plan Administrator prior to the Executive’s death.

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.

4.4 No Beneficiary Designation. If the Executive dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Executive, then the Executive’s spouse shall be the designated Beneficiary. If the Executive has no surviving spouse, the benefits shall be made to the personal representative of the Executive’s estate.

4.5 Facility of Payment. If the Plan Administrator determines in its discretion that a benefit is to be paid to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct payment of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Executive and the Executive’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such payment amount.

Article 5

General Limitations

5.1 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement if the Bank’s Board of Directors terminates the Executive’s employment for:

(a) Personal dishonesty;

(b) Incompetence;

(c) Willful misconduct;

(d) Any breach of fiduciary duty involving personal profit;

(e) Intentional failure to perform stated duties; or

(f) Willful violation of any law, rule, regulation (other than traffic violations or similar offenses), or final cease and desist order.

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PEOPLES FEDERAL SAVINGS BANK

Salary Continuation Agreement

5.2 Suicide or Misstatement. The Bank shall not pay any benefit under this Agreement if the Executive commits suicide within two years after the Effective Date. In addition, the Bank shall not pay any benefit under this Agreement if the Executive has made any material misstatement of fact on any application for life insurance owned by the Bank on the Executive’s life.

5.3 Competition After Termination of Employment. The Bank shall not pay any benefit under this Agreement if the Executive, within twelve (12) months following Termination of Employment, without the prior written consent of the Bank, engages in, becomes interested in, directly or indirectly, as a sole proprietor, as a partner in a partnership, or as a substantial shareholder in a corporation, or becomes associated with, in the capacity of employee, director, officer, principal, agent, trustee, or in any other capacity whatsoever, any enterprise conducted in the marketing area of the Bank, which enterprise is, or may deemed to be, competitive with any business carried on by the Bank as of the date of termination of the Executive’s employment or retirement. This section shall not apply following a Change in Control.

Article 6

Claims and Review Procedures

6.1 Claims Procedure. An Executive or Beneficiary (“claimant”) who has not received benefits under the Agreement that he or she believes should be paid shall make a claim for such benefits as follows:

6.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits.

6.1.2 Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 90 days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

6.1.3 Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

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PEOPLES FEDERAL SAVINGS BANK

Salary Continuation Agreement

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

(d) An explanation of the Agreement’s review procedures and the time limits applicable to such procedures; and

(e) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

6.2 Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:

6.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.

6.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

6.2.3 Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

6.2.4 Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

6.2.5 Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A statement that the claimant is entitled to receive, upon request and free

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PEOPLES FEDERAL SAVINGS BANK

Salary Continuation Agreement

of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and

(d) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

Article 7

Amendments and Termination

This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Executive. If the Bank’s Board of Directors, however, determines that the Executive is no longer a member of a select group of management or highly compensated employees, as that phrase applies to ERISA, for reasons other than death, Disability or retirement, the Bank may amend or terminate this Agreement. Upon such amendment or termination the Bank shall pay benefits to the Executive as if Early Termination occurred on the date of such amendment or termination, regardless of whether Early Termination actually occurs. Additionally, the Bank may also amend this Agreement to conform with written directives to the Bank from its banking regulators.

Article 8

Administration of Agreement

8.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator which shall consist of the Board, or such committee or person(s) as the Board shall appoint. The Executive may be a member of the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement.

8.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Bank.

8.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Executive or Beneficiary shall be deemed to have any right, vested or nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the Discount Rate.

8.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.

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PEOPLES FEDERAL SAVINGS BANK

Salary Continuation Agreement

8.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Termination of Employment of the Executive, and such other pertinent information as the Plan Administrator may reasonably require.

8.6 Annual Statement. The Plan Administrator shall provide to the Executive, within 120 days after the end of each Plan Year, a statement setting forth the benefits payable under this Agreement.

Article 9

Miscellaneous

9.1 Binding Effect. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, successors, administrators and transferees.

9.2 No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Bank, nor does it interfere with the Bank’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.

9.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

9.4 Tax Withholding. The Bank shall withhold any taxes that, in its reasonable judgment, are required to be withheld from the benefits provided under this Agreement. The Executive acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies).

9.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

9.6 Unfunded Arrangement. The Executive and Beneficiary are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life is a general asset of the Bank to which the Executive and Beneficiary have no preferred or secured claim.

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PEOPLES FEDERAL SAVINGS BANK

Salary Continuation Agreement

9.7 Successors. The Bank shall not merge or consolidate into or with another company, or sell substantially all of its assets to another company, firm, or person unless such succeeding or continuing company, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor company.

9.8 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.

9.9 Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

9.10 Alternative Action. In the event it shall become impossible for the Bank or the Plan Administrator to perform any act required by this Agreement, the Bank or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Bank.

9.11 Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.

9.12 Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision has never been inserted herein.

9.13 Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Peoples Federal Savings Bank

435 Water Street

Boston, MA 02135

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive.

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PEOPLES FEDERAL SAVINGS BANK

Salary Continuation Agreement

IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Agreement.

EXECUTIVE:	BANK:
	PEOPLES FEDERAL SAVINGS BANK
/s/ James J. Gavin	By:	/s/ Maurice H. Sullivan, Jr.
JAMES J. GAVIN	Title:	Chairman

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PEOPLES FEDERAL SAVINGS BANK

Salary Continuation Agreement

BENEFICIARY DESIGNATION FORM

I, JAMES J. GAVIN, designate the following as beneficiary of benefits under the Agreement payable following my death:

Primary:
	%
	%
Contingent:
	%
	%

Notes:

• Please PRINT CLEARLY or TYPE the names of the beneficiaries.

• To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement.

• To name your estate as beneficiary, please write “Estate of [your name]”.

• Be aware that none of the contingent beneficiaries will receive anything unless ALL of the primary beneficiaries predecease you.

I understand that I may change these beneficiary designations by delivering a new written designation to the Plan Administrator, which shall be effective only upon receipt and acknowledgment by the Plan Administrator prior to my death. I further understand that these designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.

Name:
Signature:	Date:

Received by the Plan Administrator this      day of             , 20    .

By:

Title:

FIRST AMENDMENT TO

SALARY CONTINUATION AGREEMENT

First Amendment, dated as of December 16, 2008 (the “Amendment”), to the Salary Continuation Agreement, dated as of November 29, 2004 (as amended, the “Salary Continuation Agreement”), by and among Peoples Federal Savings Bank (the “Bank”) and James J. Gavin (the “Executive”). Capitalized terms which are not defined herein shall have the same meaning as set forth in the Salary Continuation Agreement.

W I T N E S S E T H:

WHEREAS, the parties desires to amend the Salary Continuation Agreement to comply with the final regulations issued in April 2007 by the Internal Revenue Service under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, pursuant to Article 7 of the Salary Continuation Agreement, the parties to the Salary Continuation Agreement desire to amend the Salary Continuation Agreement;

NOW, THEREFORE, in consideration of the premises, the mutual agreements herein set forth and such other consideration the sufficiency of which is hereby acknowledged, the Bank and the Executive hereby amend the Salary Continuation Agreement as follows:

Section 1. Amendment to Section 1.7 of the Salary Continuation Agreement. Section 1.7 of the Salary Continuation Agreement is hereby amended to read in its entirety as follows:

““Disability” means the Executive: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Bank. Medical determination of Disability may be made by either the Social Security Administration or by the provider of disability insurance covering employees of the Bank, provided that the definition of “disability” applied under such insurance program complies with the requirements of the preceding sentence. Upon the request of the Plan Administrator, the Executive must submit proof to the Plan Administrator of the Social Security Administration’s or the provider’s determination.”

Section 2. Amendment to Section 1.17 of the Salary Continuation Agreement. Section 1.17 of the Salary Continuation Agreement is hereby amended to read in its entirety as follows:

“Termination of Employment” shall be construed to mean a Separation from Service, as defined in this Section 1.17, with the Bank for reasons other than death. Whether a Separation from

Service has occurred shall be determined in accordance with the requirements of Section 409A of the Code based on whether the facts and circumstances indicate that the Bank and the Executive reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to a level that is less than 50% of the average level of bona fide services performed (whether as an employee or independent contractor) over the immediately preceding 36-month period.”

Section 3. New Section 1.19 of the Salary Continuation Agreement. Section 1.19 of the Salary Continuation Agreement is hereby added to read in its entirety as follows:

““Specified Employee” means a key employee (as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) in the event the Bank or any corporate parent is or becomes publicly traded on an established securities market or otherwise.”

Section 4. New Section 2.5 of the Salary Continuation Agreement. Section 2.5 of the Salary Continuation Agreement is hereby added to read in its entirety as follows:

“Restriction on Timing of Distribution. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at Separation from Service under such procedures as established by the Bank in accordance with Section 409A of the Code, benefit distributions that are made upon Separation from Service may not commence earlier than six (6) months after the date of such Separation from Service. Therefore, in the event this Section 2.5 is applicable to the Executive, any distribution which would otherwise be paid to the Executive within the first six months following the Separation from Service shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following the Separation from Service. All subsequent distributions shall be paid in the manner specified.”

Section 5. New Section 2.6 of the Salary Continuation Agreement. Section 2.6 of the Salary Continuation Agreement is hereby added to read in its entirety as follows:

“Distributions Upon Income Inclusion Under Section 409A of the Code. Upon the inclusion of any portion of the Account Value into the Executive’s income as a result of the failure of this non-qualified deferred compensation plan to comply with the requirements of Section 409A of the Code, to the extent such tax liability can be covered by the Executive’s Accrual Balance, a distribution shall be made as soon as is administratively practicable following the discovery of the plan failure.”

Section 6. New Section 2.7 of the Salary Continuation Agreement. Section 2.7 of the Salary Continuation Agreement is hereby amended to read in its entirety as follows:

“Change in Form or Timing of Distributions. For distribution of benefits under this Article 2, the Executive and the Bank may, subject to the terms of Article 7, amend the Agreement to delay the timing or change the form of distributions. Any such amendment:

(a) may not accelerate the time or schedule of any distribution, except as provided in Code Section 409A;

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(b) must, for benefits distributable under Sections 2.1 and 2.2, be made at least twelve (12) months prior to the first scheduled distribution;

(c) must, for benefits distributable under Sections 2.1, 2.2 and 2.4, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and

(d) must take effect not less than twelve (12) months after the amendment is made.”

Section 7. Amendment to Article 7 of the Salary Continuation Agreement. Article 7 of the Salary Continuation Agreement is hereby amended to read in its entirety as follows:

“7.1 Amendments and Termination Generally. This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Executive. If the Bank’s Board of Directors, however, determines that the Executive is no longer a member of a select group of management or highly compensated employees, as that phrase applies to ERISA, for reasons other than death, Disability or retirement, the Bank may terminate this Agreement. In the event of such termination, the benefit shall be the Accrual Balance determined as of the date the Agreement is terminated; provided, however, that except as provided in Section 7.2, the termination of this Agreement shall not cause a distribution of benefits under this Agreement. Rather, in the event of such termination, benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3.

Additionally, the Bank may unilaterally amend this Agreement to conform with written directives to the Bank from its auditors or banking regulators or to comply with legislative or tax law, including without limitation Section 409A of the Code and any and all regulations and guidance promulgated thereunder.

7.2 Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 7.2, if the Bank terminates this Agreement in the following circumstances:

(a) Within thirty (30) days before a Change in Control, provided that all distributions are made no later than twelve (12) months following such irrevocable termination of this Agreement and further provided that all of the arrangements sponsored by the Bank that would be aggregated with this Agreement under Treasury Regulation §1.409A-1(c)(2) are terminated so the Executive and all participants under the other aggregated arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Bank irrevocably takes all necessary action to terminate such arrangements;

(b) With twelve (12) months of a dissolution of the Bank taxed under Section 331 of the Code or with the approval of a bankruptcy court pursuant to 11 U.S.C.

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§503(b)(1)(A), provided that the amounts deferred under this Agreement are included in the Executive’s gross income in the latest of (i) the calendar year in which this Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practicable; or

(c) Upon the Bank’s termination of this and all other arrangements that would be aggregated with this Agreement pursuant to Treasury Regulation §1.409A-1(c) if the Executive participated in such arrangements (“Similar Arrangements”), provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank, (ii) no payments are made within twelve (12) months of the termination of the arrangements other than payments that would be payable under the terms of the arrangements if the termination had not occurred, (iii) all termination distributions are made no later than twenty-four (24) months following such termination, and (iv) the Bank does not adopt any new arrangement that would be a Similar Arrangement for a minimum of three (3) years following the date the Bank takes all necessary action to irrevocably terminate and liquidate the Agreement;

the Bank may distribute the Accrual Balance, determined as of the date of the termination of the Agreement, to the Executive in a lump sum subject to the above terms.”

Section 8. Amendment to Section 9.4 of the Salary Continuation Agreement. Section 9.4 of the Salary Continuation Agreement is hereby added to read in its entirety as follows:

“Tax Withholding and Reporting. The Bank shall withhold any taxes that are required to be withheld, including but limited to taxes owed under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement. The Executive acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies). Further, the Bank shall satisfy all applicable reporting requirements, including those under Section 409A of the Code and regulations thereunder.”

Section 9. Effectiveness. This Amendment shall be deemed effective as of the date first above written, as if executed on such date. Except as expressly set forth herein, this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Salary Continuation Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect and shall be otherwise unaffected.

Section 10. Governing Law. This Amendment and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

Section 11. Compliance with Section 409A. This Agreement shall be interpreted and administered consistent with Section 409A of the Code.

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IN WITNESS WHEREOF, the Bank has duly executed this Amendment as of the day and year first written above.

PEOPLES FEDERAL SAVINGS BANK
By:	/s/ Thomas J. Leetch
Title:	President and CEO
EXECUTIVE
/s/ James J. Gavin
James J. Gavin

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EX-10.8

Exhibit 10.8

PEOPLES FEDERAL SAVINGS BANK

VOLUNTARY DEFERRED COMPENSATION PLAN

FOR EXECUTIVES

(Effective January 1, 2006)

TABLE OF CONTENTS

1. Establishment and Purpose of the Plan	1
2. Administration	1
3. Eligibility	1
4. Deferrals of Compensation	1
5. Accounts under the Plan	1
6. Deemed Investment of Accounts	2
7. Change in Investment Directions	2
8. Crediting of Accounts	2
9. Status of Investments	2
10. Vesting	3
11. Payment of Accounts	3
12. Unforeseeable Emergency	5
13. Designation of Beneficiaries	5
14. Nonalienation	5
15. Indemnification	5
16. Severability	6
17. Waiver	6
18. Notices	6
19. Governing Law	6
20. Construction of Language	6
21. Amendment or Discontinuance	6

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VOLUNTARY DEFERRED COMPENSATION PLAN

FOR EXECUTIVES

(Effective January 1, 2006)

1. Establishment and Purpose of the Plan. This Voluntary Deferred Compensation Plan for Executives (the “Plan”) is established to enable employees of Peoples Federal Savings Bank (the “Bank”) and its subsidiaries to defer a portion of their compensation that would otherwise be paid to them as employees and to, instead, receive such amounts at a later date. The Plan is intended to meet the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and other relevant provisions of the American Jobs Creation Act of 2004, as amended, and the Treasury Regulations promulgated thereunder.

2. Administration. The Plan shall be administered by the Compensation Committee of the Bank or such other committee appointed either by the Board of Directors of the Bank (the “Board”) or by such Compensation Committee (the “Committee”). The Committee shall be authorized to interpret the Plan and make decisions regarding any questions arising thereunder, and any such interpretation or decision of the Committee shall, unless overruled or modified by the Board, be final, conclusive and binding upon all employees of the Bank and its subsidiaries and upon any person claiming benefits or rights under the Plan by or through any such individual. No member of the Committee shall be entitled to act on or decide any matter relating solely to himself or herself or any of his or her rights or benefits under the Plan. The Committee may, in its discretion, designate a person or persons to carry out such duties or functions as the Committee so determines. Notwithstanding any provision of the Plan to the contrary, any duty or function which may be performed by the Committee or its delegates under the Plan may instead be performed by the Board if the Board so determines in its sole discretion.

3. Eligibility. Members of the management of the Bank and its subsidiaries which are selected or named by the Compensation Committee shall be permitted to participate in the Plan. To the extent, if any, the provisions of the Employee Retirement Income Security Act of 1974, as amended, apply to this Plan with respect to any employees of the Bank or its subsidiaries, it is intended that this program be limited to a select group of management or highly compensated employees, within the meaning of such law.

4. Deferrals of Compensation. With respect to each year as to which an individual has been designated as eligible to participate in this Plan, the individual may elect to become a Participant in the Plan by submitting to the Committee or its designee a written election to defer receipt of either a percentage of the amount, or specified dollar amount, that would otherwise be earned by the Participant in connection with his or her services as an employee of the Bank or one or more of its subsidiaries in the next following calendar year. Except as otherwise provided by the Committee in accordance with law, such election shall be made on or before the last day of the calendar year preceding the calendar year with respect to which the election relates. With respect to each individual who first becomes an eligible Participant, such an individual may defer receipt of compensation in the same year he/she first becomes eligible to participate in the Plan provided the election applies only to compensation deferred for services preformed subsequent to the date the election is filed with the Committee through the end of the calendar year and the election is made within 30 days after the individual first becomes an eligible Participant.

5. Accounts under the Plan. Amounts deferred by a Participant pursuant to Paragraph 4 hereof (or amounts contributed under paragraph 5, if any) shall be maintained in an Account for such Participant by the Bank or by the subsidiary of the Bank responsible to pay the compensation being deferred by the participant hereunder.

6. Deemed Investment of Accounts. The Account maintained on behalf of each Participant with respect to the amounts deferred by that Participant hereunder with respect to each year of participation by the Participant shall be deemed to be invested in, and shall be adjusted to reflect earnings and losses of, such investments or investment funds as is designated as available from time to time by the Committee. To the extent the Committee makes available alternative deemed investment vehicles with respect to amounts eligible to be deferred under the Plan, each Participant shall, upon making a deferral election hereunder, designate, in the form and manner prescribed by the Committee, that the amounts to be credited to his or her Account be applied in such proportions as he or she may designate, in such multiples as is permitted by the Committee, in each deemed investment made available by the Committee. The Committee may make available different deemed investments for amounts deferred at different times under the Plan, and may change the available deemed investments under the Plan from time to time. The Committee may also designate that only one deemed investment be available with respect to any amounts deferred hereunder, in which event that deemed investment shall apply to all such amounts without regard to any other election that a Participant may desire.

7. Change in Investment Directions. A Participant may, in the form and manner prescribed by the Committee, elect to change his or her investment direction with respect to all or a portion of the amounts then held, or to be held, in such Participant’s Account, with such election and new investment direction becoming effective the first day of any calendar quarter (i.e January 1, April 1, July 1 or October 1), provided such investment direction election is made, and not revoked, prior to the first day of such calendar quarter. Such direction may relate solely to amounts already allocated to the Participant’s Account (in which event it shall constitute a direction to transfer amounts in the Participant’s Account among the various available deemed investments) or may relate solely to amounts to be deferred in the future, or may relate to both amounts already allocated to the Participant’s Account and amounts to be deferred in the future. Any investment direction election made by a Participant shall remain in effect until changed, to the extent such change is permitted under the Plan.

8. Crediting of Accounts. Each Participant’s Account shall be deemed credited at the end of each calendar quarter (or on such other dates as is designated by the Committee) with the earnings or losses that the amount in the Account would have experienced had the Account actually been invested in the deemed investment designated by the Participant or, as appropriate, the Committee.

9. Status of Investments. All investments made by the Bank or any other subsidiary of the Bank pursuant to this Plan will be deemed made solely for the purpose of aiding such entity in measuring and meeting its obligations under the Plan. Further, such entities are not limited to the investments described in the provisions set forth above but are merely obligated to provide payments pursuant to the terms of this Plan that reflect the investment returns offered by the deemed investments made available under the Plan. The Bank or, as applicable, one or more of the subsidiaries of the Bank, will be named sole owner of all such investments and of all rights and privileges conferred by the terms of the instruments evidencing such investments. This Plan places no obligation upon any entity to invest any portion of the amount in a Participant’s Account, to invest or continue to invest in any specific asset, to liquidate any particular investment, or to apply in any specific manner the proceeds from the sale, liquidation, or maturity of any particular investment. Nothing stated herein shall cause such investments to be treated as anything but the general assets of the Bank or, as applicable, other subsidiaries of the Bank, nor will anything stated herein cause such investments to represent the vested, secured or preferred interest of the Participant or his or her beneficiaries designated under this Plan. Participants hereunder

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have the status of unsecured creditors with respect to their Accounts, and it is intended that the Plan be unfunded for tax purposes and, to any extent applicable, for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended.

10. Vesting. Participants shall be fully vested in all amounts in their accounts at all times.

11. (a) Payment of Accounts. At the time a Participant elects to defer compensation hereunder, the Participant shall designate the time and the manner of the payment of the amounts to be allocated to such Participant’s Account with respect to such deferral of compensation. Except as otherwise provided below, payment to a Participant shall commence upon a fixed date selected by the Participant at the time of the deferral chosen from the following dates:

(I) The last day of a calendar quarter ending at least two years from the end of the calendar year in which the deferred compensation would otherwise become payable, but no later than the end of the calendar quarter in which occurs the Participant’s 75^th birthday.

(ii) The last day of any one of the four calendar quarters ending after the service of the Participant with the Bank or any of is subsidiaries terminates (as designated by the Participant at the time of deferral).

Except as otherwise provided below, the form of payment of deferred amounts in a Participant’s Account shall be designated by the Participant at the time the election to defer compensation is made and shall be from among the following options, to the extent such optional forms are made available by the Committee. All forms of payment shall be based on the value of a Participant’s Account attributable to the particular deferral election and all forms of payment shall be actuarially equivalent to each other. The options that may be made available are:

(A) a lump sum;

(B) a number of quarterly installments or annual installments, limited in such manner as is determined by the Committee; or

(C) one or more forms of annuity, with such terms as shall be determined by the Committee

(D) a designated dollar amount (to the extent such amount is allocated to the Participant’s Account with respect to the deferral of compensation in question) or percentage of the Participant’s account at the end of one or more calendar quarters otherwise available for election for the commencement of distributions as described above, with the remainder of the amount subject to such designation to be distributed commencing at such other date chosen by the Participant at the time of the deferral.

In the event that payment is to be made in the form of an annuity, the amount of each annuity payment shall be determined by the Committee or its designee in its sole discretion, which amount shall be based

3

on the amounts that could be payable under one or more commercial annuity products that could be purchased with the amount in a Participant’s Account that is to be paid in the form of an annuity at a date set by the Committee that is within 60 days of the starting date of the annuity, with the identity of the commercial annuity products to be used for this purpose to be determined in the sole discretion of the Committee, or by the Committee’s designee in accordance with standards established by the Committee. Any such determination, and the determination by the Committee or its delegates of the amount of any annuity payments to be made hereunder shall be final and binding upon all Participants and beneficiaries. In the event that the Committee or its designee, in their sole and absolute discretion, shall direct that a commercial annuity be purchased in order to fund any payment obligations hereunder, such annuity contract, when purchased, shall be the property of the Bank or other purchasing subsidiary of the Bank, and the Participant will continue to be no more than an unsecured creditor of the Bank or, as applicable, another subsidiary of the Bank, as described above. Each Participant’s Account under the Plan shall be reduced by the amount of any distribution hereunder.

Notwithstanding any provision of the Plan to the contrary, a Participant who is a specified employee as defined in the regulations promulgated under Code Section 409A may not commence receipt of his/her benefit until the first day of the seventh month following his/her separation from service. For purposes of Code Section 409A, the Committee shall determine which Participant are specified employees as of December 31 in accordance with the Regulations promulgated under Section 409A. Such determination by the Committee shall be effective for the twelve month period commencing on April 1.

(b) Payment Upon Unforeseeable Emergency. A Participant may also, solely to the extent permitted by the Committee, direct that a portion of the amounts payable to the Participant be distributed in the event of an Unforeseeable Emergency (as defined below),

(c) Payments Upon Death. To the extent permitted by the Committee, a Participant may elect that if the Participant dies before payments of a deferred amount have otherwise commenced to the Participant, the amount allocated to the Participant’s Account be distributed to the Participant’s Beneficiary (as defined below) either on the last day of the calendar quarter in which the Participant dies (or as soon as practicable thereafter) or on the last day of the first calendar quarter in the calendar year immediately following the date of the Participant’s death; provided, however that if no such election is made, payment shall be made in a single lump sum at the end of the calendar quarter in which the Participant died, or as soon as practicable thereafter. If payments of a deferred amount in the form of installments have already commenced to the Participant, they shall continue to be made after the Participant’s death to the Participant’s Beneficiary in accordance with the Act to avoid acceleration of payment, who shall otherwise be granted the same rights as were held by the Participant hereunder.

4

(d) Additional Payment Elections. Notwithstanding the preceding provisions of this Paragraph 11 to the contrary, a Participant may subsequently elect, in such form and manner as may be prescribed by the Committee, a revised commencement date for the amounts credited to his or her Account, in lieu of the date(s) initially selected, provided that any such election is not effective until 12 months following such election, that the election provides that payment will be deferred for at least five (5) years from the date such payment would otherwise have been made (except for death as provided above), and the election is made at least 12 months prior to the first scheduled payment. Further, notwithstanding the preceding provisions of this Paragraph 11 to the contrary, a Participant may also subsequently elect, in such form and manner as may be prescribed by the Committee, that the amounts credited to his or her Account be paid in any one of the forms of benefit payment provided under this Paragraph 11 in lieu of the form of payment initially selected, provided that any such election is not effective for 12 months, that the election to modify the form of distribution provides that payment will be deferred for at least five (5) years from the date such payment would otherwise have been made (except for death as provided above), and such election is made at least 12 months prior to the first scheduled payment.

12. Unforeseeable Emergency. A Participant may request, in writing to the Committee, a request for a withdrawal from his/her Account if the Participant experiences an Unforeseeable Emergency. Withdrawals for the purpose of an Unforeseeable Emergency are limited to the extent needed to satisfy the emergency, which cannot be met by the Participant utilizing other resources. The Committee shall make a determination with regard to the Unforeseeable Emergency in accordance with Code Section 409A and the Treasury Regulations promulgated thereunder.

13. Designation of Beneficiaries. In the event that a Participant dies prior to the receipt of all amounts payable to him or her pursuant to the Plan, all remaining amounts credited to his or her Account shall be paid to such one or more Beneficiaries and in such proportions as the Participant may designate, in accordance with the provisions of Paragraph 11. If no Beneficiary has been named by the Participant, or if a named Beneficiary has predeceased the Participant and no successor beneficiary has been named or if a beneficiary designation is otherwise ineffective, payment shall be made to the estate of the Participant, and if any Beneficiary shall die after payments to that Beneficiary have commenced, if any remaining payments would otherwise be made to such Beneficiary, they shall instead be made to the estate of the Beneficiary. A Beneficiary designation pursuant to this Paragraph 13 shall not be effective unless it is in writing and is received by the Committee prior to the death of the Participant making the designation.

14. Nonalienation. The right to receive a benefit under the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or the Participant’s beneficiaries.

15. Indemnification. The Bank shall indemnify, hold harmless and defend each member of the Board, each member of the Committee, each member of the Benefits Committee, and each of their designees who are employees of the Bank or any of its subsidiaries, against any reasonable costs, including legal fees, incurred by them, or arising out of any action, suit or proceeding in which they may be involved, as a result of their efforts, in good faith, to defend or enforce the terms of the Plan.

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16. Severability. A determination that any provision of the Plan is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof

17. Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions of the Plan shall not be deemed a waiver of such term, covenant or condition. A waiver of any provision of the Plan must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

18. Notices. Any notice or other communication required or permitted to be given to a party under the Plan shall be deemed given if personally delivered or if mailed, postage prepaid, by certified mail, return receipt requested, to the party at the address listed below, or at such other address as one such party may by written notice specify to the other:

(a) if to the Committee:

Attention:	Chairman -	Compensation Committee
		Peoples Federal Savings Bank
		435 Market Street
		Brighton, MA 02135

(b) if to any party other than the Committee, to such party at the address last published by such party by written notice to the Committee.

19. Governing Law. The Plan shall be construed, administered and enforced according to the laws of the Commonwealth of Massachusetts, except to the extent that such laws are preempted by federal law.

20. Construction of Language. Wherever appropriate in the Plan, words used in the singular may be read in the plural, words in the plural may be read in the singular, and words importing the male gender shall be deemed equally to refer to the feminine or the neuter. Any reference to an Article or Section shall be to an Article or Section of the Plan, unless otherwise indicated.

21. Amendment or Discontinuance. The Board or the Compensation Committee of the Board may amend, discontinue or terminate the Plan at any time in accordance with applicable law; provided, however, that no amendment or discontinuance shall affect the rights of Participants to amounts already allocated to their Accounts under the Plan. The Benefits Committee of the Bank may make any amendment to the Plan that may be necessary or appropriate to facilitate the administration, management, and interpretation of the Plan or to conform the Plan thereto or that may be necessary or appropriate to satisfy requirements of law, provided that any such amendment does not significantly affect the cost to the Bank or any of its subsidiaries of maintaining the Plan. Notwithstanding the foregoing, no amendment by the Compensation Committee of the Board or the Benefits Committee of the Bank shall be made to

6

the extent that any such amendment would cause any Participant who administers any employee benefit plan of the Bank (or any subsidiary of the Bank) and who, in accordance with the terms of any such plan or applicable law, must be ‘disinterested’, to cease to qualify as an ‘outside’ director, within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and the treasury regulations thereunder.

In witness whereof, Peoples Federal Savings Bank has caused this Voluntary Deferred Compensation Plan for Executives to be executed effective as of the 1st day of January, 2006.

Peoples Federal Savings Bank
By:	/s/ Maurice H. Sullivan, Jr.
	Chairman of the Board

Attest:
/s/ Bernard Burke	/s/ Thomas J. Leetch
Secretary	President

7

AMENDMENT NUMBER ONE TO

PEOPLES FEDERAL SAVINGS BANK

VOLUNTARY DEFERRED COMPENSATION PLAN

FOR EXECUTIVES

THIS AMENDMENT NUMBER ONE (this “Amendment”) to the Peoples Federal Savings Bank Voluntary Deferred Compensation Plan for Executives (the “Plan”) is made and entered into effective as of December 16, 2008 by Peoples Federal Savings Bank (the “Bank”).

RECITALS:

WHEREAS, the Bank desires to amend the Plan to ensure that the Plan complies with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, the Board of Directors of the Bank may amend the Plan from time to time;

NOW, THEREFORE, in consideration of the premises, the mutual agreements herein set forth and such other consideration the sufficiency of which is hereby acknowledged, the Board hereby amends the Plan as follows:

Section 1. Amendment to Section 11 of the Plan. Section 11 of the Plan is hereby amended to add Section 11(e) to read in its entirety as follows:

“(e) For purposes of this Plan, “terminates” and “separation from service” shall mean “Separation from Service” as defined in Code Section 409A and the Treasury Regulations promulgated thereunder, provided, however, that the Bank and Participant reasonably anticipate that the level of bona fide services Participant would perform after termination would permanently decrease to a level that is less than 50% of the average level of bona fide services performed (whether as an employee or independent contractor) over the immediately preceding 36-month period.”

Section 2. Amendment to Section 12 of the Plan. Section 12 of the Plan is hereby amended to add Section 12(a) to read in its entirety as follows:

“(a) “Unforeseeable Emergency” shall mean a severe financial hardship to the Participant resulting from (1) an illness or accident of the Participant, the Participant’s spouse, or a dependent of the Participant (within the meaning of Section 152(a) of the Code), (2) a loss of the Participant’s property due to casualty, or (3) other extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The amount of such distribution may not exceed the amounts necessary to satisfy the emergency. The circumstances that will constitute an “Unforeseeable Emergency” will depend on the facts of each case, but, in any case, payment may not be made in the event that such hardship is or may be relieved:

(1) through reimbursement or compensation by insurance or otherwise;

(2) by liquidation of the Participant’s assets, to the extent that liquidation of such assets would not itself cause severe financial hardship; or

(3) by cessation of deferrals under the Plan.”

Section 3. Amendment to Section 21 of the Plan. Section 21 of the Plan is hereby amended to read in its entirety as follows:

“21. Amendment or Termination of the Plan

(a) The Bank reserves the right to amend or terminate the Plan at any time, except that no such amendment will affect the benefits or rights to which any Participant became entitled prior to such amendment or termination. A termination of the Plan will not be a distributable event, except in the three circumstances set forth in Section 21(b) below.

(b) Termination. Under no circumstances may the Plan permit the acceleration of the time or form of any payment under the Plan prior to the payment events specified herein, except as provided in this Section 21(b). The Bank may, in its discretion, elect to terminate the Plan in any of the following three circumstances and accelerate the payment of the entire unpaid balance of the Participant’s benefits as of the date of such payment in accordance with Section 409A of the Code:

(i) the Plan is irrevocably terminated within the 30 days preceding a Change in Control (as defined in Section 409A of the Code, but excluding any conversion of the Bank from mutual to stock form (including, without limitation, through the formation of a stock holding company) or the reorganization of the Bank into the mutual holding company form of organization) and (1) all arrangements sponsored by the Bank that would be aggregated with the Plan under Treasury Regulation §1.409A-1(c)(2) are terminated, and (2) each Participant participating in the Plan and all participants under the other aggregated arrangements receive all of their benefits under the terminated arrangements within 12 months of the date the Bank irrevocably takes all necessary action to terminate the Plan and the other aggregated arrangements;

(ii) the Plan is irrevocably terminated at a time that is not proximate to a downturn in the financial health of the Bank and (1) all arrangements sponsored by the Bank that would be aggregated with the Plan under Treasury Regulation 1.409A-1(c) if a Participant participated in such arrangements are terminated, (2) no payments are made within 12 months of the date the Bank takes all necessary action to irrevocably terminate the arrangements, other than payments that would be payable under the terms of the arrangements if the termination had not occurred, (3) all payments are made within 24 months of the date the Bank takes all necessary action to irrevocably terminate the arrangements, and (4) the Bank does not adopt a new arrangement that would be aggregated with the Plan under Treasury Regulation 1.409A-1(c) if a Participant participated in both arrangements, at any time within three years following the date the Bank takes all necessary action to irrevocably terminate the Plan; or

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(iii) the Plan is terminated within 12 months of a corporate dissolution taxed under Section 331 of the Code, or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred by each Participant under the Plan are included in the Participant’s gross income in the later of (1) the calendar year in which the termination of the Plan occurs, or (2) the first calendar year in which the payment is administratively practicable.”

Section 4. Addition of a New Section 22 of the Plan. The Plan is hereby amended to add a new Section 22 to read in its entirety as follows:

“22. Claims Procedures

(a) This Section is based on final regulations issued by the Department of Labor and published in the Federal Register on November 21, 2000 and codified at 29 C.F.R. Section 2560.503-1. If any provision of this Section conflicts with the requirements of those regulations, the requirements of those regulations will prevail.

(b) The Participant or any beneficiary who believes he or she is entitled to any benefit under the Plan (a “Claimant”) may file a claim with the Bank. The Bank shall review the claim itself or appoint an individual or an entity to review the claim.

(i) Initial Decision. The Claimant shall be notified within ninety (90) days after the claim is filed whether the claim is allowed or denied, unless the Claimant receives written notice from the Bank or appointee of the Bank prior to the end of the ninety (90) day period stating that special circumstances require an extension of the time for decision, with such extension not to extend beyond the day which is one hundred eighty (180) days after the day the claim is filed.

(ii) Manner and Content of Denial of Initial Claims. If the Bank denies a claim, it must provide to the Claimant, in writing or by electronic communication:

(A) The specific reasons for the denial;

(B) A reference to the provision of the Plan upon which the denial is based;

(C) A description of any additional information or material that the Claimant must provide in order to perfect the claim;

(D) An explanation of why such additional material or information is necessary;

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(E) Notice that the Claimant has a right to request a review of the claim denial and information on the steps to be taken if the Claimant wishes to request a review of the claim denial; and

(F) A statement of the Participant’s right to bring a civil action under Section 502(a) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) following a denial on review of the initial denial.

(c) Review Procedures

(i) Request For Review. A request for review of a denied claim must be made in writing to the Bank within sixty (60) days after receiving notice of denial. The decision upon review will be made within sixty (60) days after the Bank’s receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision will be rendered not later than one hundred twenty (120) days after receipt of a request for review. A notice of such an extension must be provided to the Claimant within the initial sixty (60) day period and must explain the special circumstances and provide an expected date of decision.

The reviewer shall afford the Claimant an opportunity to review and receive, without charge, all relevant documents, information and records and to submit issues and comments in writing to the Bank. The reviewer shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim regardless of whether the information was submitted or considered in the initial benefit determination.

(ii) Manner and Content of Notice of Decision on Review. Upon completion of its review of an adverse claim determination, the Bank will give the Claimant, in writing or by electronic notification, a notice containing:

(A) its decision;

(B) the specific reasons for the decision;

(C) the relevant provisions of the Plan upon which its decision is based;

(D) a statement that the Claimant is entitled to receive, upon request and without charge, reasonable access to, and copies of, all documents, records and other information in the Bank’s files which is relevant to the Claimant’s claim for benefits;

(E) a statement describing the Claimant’s right to bring an action for judicial review under Section 502(a) of ERISA; and

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(F) if an internal rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination on review, a statement that a copy of the rule, guideline, protocol or other similar criterion will be provided without charge to the Claimant upon request.

(d) For purposes of the time periods specified in this Section, the period of time during which a benefit determination is required to be made begins at the time a claim is filed in accordance with the procedures herein without regard to whether all the information necessary to make a decision accompanies the claim. If a period of time is extended due to a Claimant’s failure to submit all information necessary, the period for making the determination shall be tolled from the date the notification is sent to the Claimant until the date the Claimant responds.

(e) If the Bank fails to follow the claims procedures required by this Section, a Claimant shall be deemed to have exhausted the administrative remedies available under the Plan and shall be entitled to pursue any available remedy under Section 502(a) of ERISA on the basis that the Plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim. A Claimant’s compliance with the foregoing provisions of this Section is a mandatory requisite to a Claimant’s right to commence any legal action with respect to any claims for benefits under the Plan.

(f) Notwithstanding anything in this Plan to the contrary, the Bank may determine, in its sole and absolute discretion, to review any claim for benefits submitted by a Claimant under this Agreement.”

Section 5. No Further Modification. Except as expressly amended hereby, the Plan remains unmodified and in full force and effect.

Section 6. Governing Law. This Amendment and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

IN WITNESS WHEREOF, the Bank has duly executed this Amendment as of the day and year first written above.

PEOPLES FEDERAL SAVINGS BANK
By:	/s/ Thomas J. Leetch
Name:	Thomas J. Leetch
Title:	President & CEO

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EX-10.9

Exhibit 10.9

PEOPLES FEDERAL SAVINGS BANK

AMENDED AND RESTATED

VOLUNTARY DEFERRED COMPENSATION

AND

SUPPLEMENTAL EMPLOYEE STOCK OWNERSHIP

PLAN

FOR EXECUTIVES

(Effective                  , 2010)

TABLE OF CONTENTS

1.	Purpose of the Plan.	1
2.	Administration.	1
3.	Eligibility.	2
4.	Deferrals of Compensation.	2
5.	Supplemental ESOP Benefits.	2
6.	Accounts under the Plan.	3
7.	Deemed Investment of Accounts.	3
8.	Change in Investment Directions.	3
9.	Crediting of Accounts.	4
10.	Status of Investments.	4
11.	Vesting.	4
12.	Payment of Accounts.	4
13.	Unforeseeable Emergency.	7
14.	Designation of Beneficiaries.	7
15.	Nonalienation.	8
16.	Indemnification.	8
17.	Severability.	8
18.	Waiver.	8
19.	Notices.	8
20.	Governing Law.	9
21.	Construction of Language.	9
22.	Amendment or Termination of the Plan.	9
23.	Claims Procedures	10

PEOPLES FEDERAL SAVINGS BANK

AMENDED AND RESTATED VOLUNTARY DEFERRED COMPENSATION AND

SUPPLEMENTAL EMPLOYEE STOCK OWNERSHIP PLAN FOR EXECUTIVES

PREAMBLE

This Amended and Restated Voluntary Deferred Compensation and Supplemental Employee Stock Ownership Plan for Executives (“Plan”) of Peoples Federal Savings Bank (the “Bank”) is adopted effective as of the closing date of the reorganization of Peoples Federal Savings Bank from the mutual holding company structure to the stock holding company structure. The Plan was initially adopted effective as of January 1, 2006 and was subsequently amended as of December 16, 2008. The Plan as amended and restated shall in all respects be subject to the provisions set forth herein.

This Plan is being amended and restated to add a supplemental employee stock ownership plan feature which is intended to provide those executives of the Bank, who are listed in Appendix A, which is attached hereto, with the economic value of the annual allocations which are not accrued or credited to such executive’s account under the Peoples Federal Savings Bank Employee Stock Ownership Plan (“ESOP”) due to the limitations imposed by Sections 415 and 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Code”). No benefits payable under this Plan shall be deemed to be grandfathered for purposes of Section 409A of the Code.

The Plan shall at all times be characterized as a “top hat” plan of deferred compensation maintained for a select group of management or highly compensated employees, as described under Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”) and any regulations relating thereto. The Plan has been and shall continue to be operated in compliance with Section 409A of the Code. The Plan is an unfunded plan for tax purposes. The provisions of the Plan shall be construed to effectuate such intentions.

Accordingly, the Bank hereby adopts this amended and restated Plan pursuant to the terms and provisions set forth below:

1. Purpose of the Plan. This Plan will continue to enable eligible executives of the Bank and its subsidiaries to defer a portion of their compensation that would otherwise be paid to them as executives and to, instead, receive such amounts at a later date. This portion of the Plan shall be referred to as the “Deferral portion” of the Plan. In addition, this Plan will credit eligible executives of the Bank with amounts equal to the contributions which are not accrued or credited under the ESOP due to the limitations imposed by Sections 401(a)(17) and 415 of the Code. This portion of the Plan shall be referred to as the “Supplemental ESOP” portion of the Plan.

2. Administration. The Plan shall be administered by the Compensation Committee of the Bank or such other committee appointed either by the Board of Directors of the Bank (the “Board”) or by such Compensation Committee (the “Committee”). The Committee shall be

authorized to interpret the Plan and make decisions regarding any questions arising thereunder, and any such interpretation or decision of the Committee shall, unless overruled or modified by the Board, be final, conclusive and binding upon all executives of the Bank and its subsidiaries and upon any person claiming benefits or rights under the Plan by or through any such individual. No member of the Committee shall be entitled to act on or decide any matter relating solely to himself or herself or any of his or her rights or benefits under the Plan. The Committee may, in its discretion, designate a person or persons to carry out such duties or functions as the Committee so determines. Notwithstanding any provision of the Plan to the contrary, any duty or function which may be performed by the Committee or its delegates under the Plan may instead be performed by the Board if the Board so determines in its sole discretion.

3. Eligibility. Executives of the Bank and its subsidiaries who are selected or named by the Committee shall be permitted to participate in the Plan, provided that only a select group of management or highly compensated employees may participate in this Plan. The Committee, may from time to time designate, in its sole discretion, an executive to participate in either the Deferral portion of the Plan, the Supplemental ESOP portion of the Plan or both portions. A list of the persons designated as eligible for participation in each portion of the Plan shall be attached hereto as Appendix A.

4. Deferrals of Compensation. With respect to each year as to which an individual has been designated as eligible to participate in this Plan, the individual (“Participant”) may elect to participate in the Deferral portion of the Plan by submitting to the Committee or its designee a written election to defer receipt of either a percentage of the Participant’s compensation, or specified dollar amount, that would otherwise be earned by the Participant in connection with his or her services as an employee of the Bank or one or more of its subsidiaries in the next following calendar year. Except as otherwise provided by the Committee in accordance with law, such election shall be made on or before the last day of the calendar year preceding the calendar year with respect to which the election relates. With respect to each individual who first becomes an eligible Participant, such an individual may defer receipt of compensation in the same year he/she first becomes eligible to participate in the Plan provided the election applies only to compensation deferred for services performed subsequent to the date the election is filed with the Committee through the end of the calendar year and the election is made within 30 days after the individual first becomes an eligible Participant.

Any deferral election in effect as of the effective date of this amended and restated Plan shall continue in effect, until changed in accordance with the terms of this Section.

5. Supplemental ESOP Benefits. A Participant who is eligible for the Supplemental ESOP portion of the Plan (“ESOP Participant”), shall be entitled to be credited with an annual Bank contribution determined as set forth in this Section 5 (“Supplemental ESOP Benefit”), which shall be recorded in the ESOP Participant’s Account pursuant to Section 6 of this Plan. The amount of the Supplemental ESOP Benefit is equal to the sum of the difference (expressed in dollars) between “(X)” and “(Y)” where:

(a) “X” is the number of shares of common stock (“Stock”) of Peoples Federal Bancshares, Inc (“Company”) that would have been allocated to the account of the ESOP Participant for the period from January 1 to December 31 (“Plan Year”) under

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the ESOP but for the maximum limitations under Sections 401(a)(17) and 415 of the Code (collectively, the “Applicable Limitations), multiplied by the fair market value of such Stock on the last day of the ESOP Plan Year (December 31) for which the allocation is made; and

(b) “Y” is the number of shares of Stock actually allocated to the account of the ESOP Participant for the relevant ESOP Plan Year, multiplied by the fair market value of such Stock on the last day of the Plan Year (December 31) for which the allocation is made.

The Supplemental ESOP Benefit, which shall be credited to the ESOP Participant’s Account under this Plan as of December 31 of each year, as applicable, shall be deemed to be invested in accordance with the ESOP Participant’s investment elections pursuant to Sections 7 and 8 of this Plan. The Supplemental ESOP Benefit will be paid to the ESOP Participant pursuant to Section 12 of this Plan and the benefit will be subject to all other terms of this Plan.

6. Accounts under the Plan. Amounts deferred by a Participant (all references to Participant shall include ESOP Participant, as applicable) pursuant to Paragraph 4 hereof (or amounts credited under paragraph 5, if any) shall be maintained in an Account for such Participant by the Bank or by the subsidiary of the Bank responsible to pay the compensation being deferred by the Participant or contributed on his/her behalf hereunder. The Account shall consist of sub-accounts, which shall include an Elective Deferral Account, Supplemental ESOP Benefit Account, and any other sub-account the Committee deems necessary, in order to track the deferrals, contributions and investment gains and losses on behalf of a Participant.

7. Deemed Investment of Accounts. The Account maintained on behalf of each Participant with respect to the amounts deferred by that Participant hereunder (or amounts contributed under paragraph 5, if any) with respect to each year of participation by the Participant shall be deemed to be invested in, and shall be adjusted to reflect earnings and losses of, such investments or investment funds as is designated as available from time to time by the Committee. To the extent the Committee makes available alternative deemed investment vehicles with respect to amounts eligible to be deferred under the Plan, each Participant shall, upon making a deferral election hereunder, designate, in the form and manner prescribed by the Committee, that the amounts to be credited to his or her Account (or amounts contributed under paragraph 5, if any) be applied in such proportions as he or she may designate, in such multiples as is permitted by the Committee, in each deemed investment made available by the Committee. The Committee may make available different deemed investments for amounts deferred at different times under the Plan, and may change the available deemed investments under the Plan from time to time. The Committee may also designate that only one deemed investment be available with respect to any amounts deferred hereunder, in which event that deemed investment shall apply to all such amounts without regard to any other election that a Participant may desire.

8. Change in Investment Directions. A Participant may, in the form and manner prescribed by the Committee, elect to change his or her investment direction with respect to all or a portion of the amounts then held, or to be held, in such Participant’s Account, with such

3

election and new investment direction becoming effective the first day of any calendar quarter (i.e January 1, April 1, July 1 or October 1), provided such investment direction election is made, and not revoked, prior to the first day of such calendar quarter. Such direction may relate solely to amounts already allocated to the Participant’s Account (in which event it shall constitute a direction to transfer amounts in the Participant’s Account among the various available deemed investments) or may relate solely to amounts to be deferred in the future, or may relate to both amounts already allocated to the Participant’s Account and amounts to be deferred in the future. Any investment direction election made by a Participant shall remain in effect until changed, to the extent such change is permitted under the Plan.

9. Crediting of Accounts. Each Participant’s Account shall be deemed credited at the end of each calendar quarter (or on such other dates as is designated by the Committee) with the earnings or losses that the amount in the Account would have experienced had the Account actually been invested in the deemed investment designated by the Participant or, as appropriate, the Committee.

10. Status of Investments. All investments made by the Bank or any other subsidiary of the Bank pursuant to this Plan will be deemed made solely for the purpose of aiding such entity in measuring and meeting its obligations under the Plan. Further, such entities are not limited to the investments described in the provisions set forth above but are merely obligated to provide payments pursuant to the terms of this Plan that reflect the investment returns offered by the deemed investments made available under the Plan. The Bank or, as applicable, one or more of the subsidiaries of the Bank, will be named sole owner of all such investments and of all rights and privileges conferred by the terms of the instruments evidencing such investments. This Plan places no obligation upon any entity to invest any portion of the amount in a Participant’s Account, to invest or continue to invest in any specific asset, to liquidate any particular investment, or to apply in any specific manner the proceeds from the sale, liquidation, or maturity of any particular investment. Nothing stated herein shall cause such investments to be treated as anything but the general assets of the Bank or, as applicable, other subsidiaries of the Bank, nor will anything stated herein cause such investments to represent the vested, secured or preferred interest of the Participant or his or her beneficiaries designated under this Plan. Participants hereunder have the status of unsecured creditors with respect to their Accounts, and it is intended that the Plan be unfunded for tax purposes and, to any extent applicable, for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended.

11. Vesting. Participants shall be fully vested in all amounts in their Deferral Accounts at all times. Participants in the Supplemental ESOP shall be vested in their Supplemental ESOP Account to the same extent that they are vested in their account in the tax-qualified ESOP.

12. Payment of Accounts.

(a) At the time a Participant elects to defer compensation hereunder, the Participant shall designate the time and the manner of the payment of the amounts to be allocated to such Participant’s Account with respect to such deferral of compensation (and amounts credited under paragraph 5, if any). Except as otherwise provided below, payment to a Participant shall commence upon a fixed date selected by the Participant at the time of the deferral chosen from the following dates:

(i) The last day of a calendar quarter ending at least two years from the end of the calendar year in which the deferred compensation would otherwise become payable, but no later than the end of the calendar quarter in which occurs the Participant’s 75^th birthday; or

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(ii) The last day of any one of the four calendar quarters ending after the Participant experiences a Separation from Service (as defined in Section 12(f) of this Plan) (as designated by the Participant at the time of deferral).

Except as otherwise provided below, the form of payment of deferred amounts in a Participant’s Account shall be designated by the Participant at the time the election to defer compensation is made and shall be from among the following options, to the extent such optional forms are made available by the Committee. All forms of payment shall be based on the value of a Participant’s Account attributable to the particular deferral election (including amounts credited under paragraph 5, if any) and all forms of payment shall be actuarially equivalent to each other. The options that may be made available are:

(A) a lump sum;

(B) a number of quarterly installments or annual installments, limited in such manner as is determined by the Committee;

(C) one or more forms of annuity, with such terms as shall be determined by the Committee; or

(D) a designated dollar amount (to the extent such amount is allocated to the Participant’s Account with respect to the deferral of compensation in question) or percentage of the Participant’s account at the end of one or more calendar quarters otherwise available for election for the commencement of distributions as described above, with the remainder of the amount subject to such designation to be distributed commencing at such other date chosen by the Participant at the time of the deferral.

In the event that payment is to be made in the form of an annuity, the amount of each annuity payment shall be determined by the Committee or its designee in its sole discretion, which amount shall be based on the amounts that could be payable under one or more commercial annuity products that could be purchased with the amount in a Participant’s Account that is to be paid in the form of an annuity at a date set by the Committee that is within 60 days of the starting date of the annuity, with the identity of the commercial annuity products to be used for this purpose to be determined in the sole discretion of the Committee, or by the Committee’s designee in accordance with standards established by the Committee. Any such determination and the determination by the Committee or its delegates of the amount of any annuity payments to be made hereunder shall be final and binding upon all Participants and beneficiaries. In the event that the Committee or its designee, in their sole and absolute discretion, shall direct that a commercial annuity be purchased in order to fund any payment obligations hereunder,

5

such annuity contract, when purchased, shall be the property of the Bank or other purchasing subsidiary of the Bank, and the Participant will continue to be no more than an unsecured creditor of the Bank or, as applicable, another subsidiary of the Bank, as described above. Each Participant’s Account under the Plan shall be reduced by the amount of any distribution hereunder.

(b) Payment Upon Unforeseeable Emergency. A Participant may also, solely to the extent permitted by the Committee, direct that a portion of the amounts payable to the Participant be distributed in the event of an Unforeseeable Emergency (as defined in Section 13 of this Plan).

(c) Payments Upon Death. To the extent permitted by the Committee, a Participant may elect that if the Participant dies before payments of a deferred amount have otherwise commenced to the Participant, the amount allocated to the Participant’s Account be distributed to the Participant’s Beneficiary (as defined below) either on the last day of the calendar quarter in which the Participant dies (or as soon as practicable thereafter) or on the last day of the first calendar quarter in the calendar year immediately following the date of the Participant’s death; provided, however that if no such election is made, payment shall be made in a single lump sum at the end of the calendar quarter in which the Participant died, or as soon as practicable thereafter. If payments of a deferred amount in the form of installments have already commenced to the Participant, they shall continue to be made after the Participant’s death to the Participant’s Beneficiary in accordance with the Act to avoid acceleration of payment, who shall otherwise be granted the same rights as were held by the Participant hereunder.

(d) Additional Payment Elections. Notwithstanding the preceding provisions of this Paragraph 12 to the contrary, a Participant may subsequently elect, in such form and manner as may be prescribed by the Committee, a revised commencement date for the amounts credited to his or her Account, in lieu of the date(s) initially selected, provided that any such election is not effective until 12 months following such election, that the election provides that payment will be deferred for at least five (5) years from the date such payment would otherwise have been made (except for death as provided above), and the election is made at least 12 months prior to the first scheduled payment. Further, notwithstanding the preceding provisions of this Paragraph 12 to the contrary, a Participant may also subsequently elect, in such form and manner as may be prescribed by the Committee, that the amounts credited to his or her Account be paid in any one of the forms of benefit payment provided under this Paragraph 12 in lieu of the form of payment initially selected, provided that any such election is not effective for 12 months, that the election to modify the form of distribution provides that payment will be deferred for at least five (5) years from the date such payment would otherwise have been made (except for death as provided above), and such election is made at least 12 months prior to the first scheduled payment.

(e) 409A Requirements. For purposes of this Plan, “terminates” and “separation from service” shall mean “Separation from Service” as defined in Code Section 409A and the Treasury Regulations promulgated thereunder, provided, however, that the Bank and Participant reasonably anticipate that the level of bona fide services

6

Participant would perform after termination would permanently decrease to a level that is less than 50% of the average level of bona fide services performed (whether as an employee or independent contractor) over the immediately preceding 36-month period. Notwithstanding any provision of the Plan to the contrary, a Participant who is a specified employee as defined in the regulations promulgated under Code Section 409A may not commence receipt of his/her benefit until the first day of the seventh month following his or her Separation from Service. For purposes of Code Section 409A, the Committee shall determine which Participants are specified employees as of December 31 in accordance with the Regulations promulgated under Section 409A. Such determination by the Committee shall be effective for the twelve month period commencing on April 1.

13. Unforeseeable Emergency. A Participant may request, in writing to the Committee, a request for a withdrawal from his/her Account if the Participant experiences an Unforeseeable Emergency. Withdrawals for the purpose of an Unforeseeable Emergency are limited to the extent needed to satisfy the emergency, which cannot be met by the Participant utilizing other resources. The Committee shall make a determination with regard to the Unforeseeable Emergency in accordance with Code Section 409A and the Treasury Regulations promulgated thereunder.

(a) “Unforeseeable Emergency” shall mean a severe financial hardship to the Participant resulting from (1) an illness or accident of the Participant, the Participant’s spouse, or a dependent of the Participant (within the meaning of Section 152(a) of the Code), (2) a loss of the Participant’s property due to casualty, or (3) other extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The amount of such distribution may not exceed the amounts necessary to satisfy the emergency. The circumstances that will constitute an “Unforeseeable Emergency” will depend on the facts of each case, but, in any case, payment may not be made in the event that such hardship is or may be relieved:

(i) through reimbursement or compensation by insurance or otherwise;

(ii) by liquidation of the Participant’s assets, to the extent that liquidation of such assets would not itself cause severe financial hardship; or

(iii) by cessation of deferrals under the Plan.

14. Designation of Beneficiaries. In the event that a Participant dies prior to the receipt of all amounts payable to him or her pursuant to the Plan, all remaining amounts credited to his or her Account shall be paid to such one or more Beneficiaries and in such proportions as the Participant may designate, in accordance with the provisions of Paragraph 12. If no Beneficiary has been named by the Participant, or if a named Beneficiary has predeceased the Participant and no successor beneficiary has been named or if a beneficiary designation is otherwise ineffective, payment shall be made to the estate of the Participant, and if any Beneficiary shall die after payments to that Beneficiary have commenced, if any remaining payments would otherwise be made to such Beneficiary, they shall instead be made to the estate

7

of the Beneficiary. A Beneficiary designation pursuant to this Paragraph 14 shall not be effective unless it is in writing and is received by the Committee prior to the death of the Participant making the designation.

15. Nonalienation. The right to receive a benefit under the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or the Participant’s beneficiaries.

16. Indemnification. The Bank shall indemnify, hold harmless and defend each member of the Board, each member of the Committee, each member of the Benefits Committee, and each of their designees who are employees of the Bank or any of its subsidiaries, against any reasonable costs, including legal fees, incurred by them, or arising out of any action, suit or proceeding in which they may be involved, as a result of their efforts, in good faith, to defend or enforce the terms of the Plan.

17. Severability. A determination that any provision of the Plan is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

18. Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions of the Plan shall not be deemed a waiver of such term, covenant or condition. A waiver of any provision of the Plan must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

19. Notices. Any notice or other communication required or permitted to be given to a party under the Plan shall be deemed given if personally delivered or if mailed, postage prepaid, by certified mail, return receipt requested, to the party at the address listed below, or at such other address as one such party may by written notice specify to the other:

(a) if to the Committee:

Attention:	Chairman -	Compensation Committee
		Peoples Federal Savings Bank
		435 Market Street
		Brighton, MA 02135

(b) if to any party other than the Committee, to such party at the address last published by such party by written notice to the Committee.

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20. Governing Law. The Plan shall be construed, administered and enforced according to the laws of the Commonwealth of Massachusetts, except to the extent that such laws are preempted by federal law.

21. Construction of Language. Wherever appropriate in the Plan, words used in the singular may be read in the plural, words in the plural may be read in the singular, and words importing the male gender shall be deemed equally to refer to the feminine or the neuter.

22. Amendment or Termination of the Plan.

(a) The Bank reserves the right to amend or terminate the Plan at any time, except that no such amendment will affect the benefits or rights to which any Participant became entitled prior to such amendment or termination. A termination of the Plan will not be a distributable event, except in the three circumstances set forth in Paragraph 22(b) below.

(b) Termination. Under no circumstances may the Plan permit the acceleration of the time or form of any payment under the Plan prior to the payment events specified herein, except as provided in this Section 22(b). The Bank may, in its discretion, elect to terminate the Plan in any of the following three circumstances and accelerate the payment of the entire unpaid balance of the Participant’s benefits as of the date of such payment in accordance with Section 409A of the Code:

(i) the Plan is irrevocably terminated within the 30 days preceding a Change in Control and (1) all arrangements sponsored by the Bank that would be aggregated with the Plan under Treasury Regulation §1.409A-1(c)(2) are terminated, and (2) each Participant participating in the Plan and all participants under the other aggregated arrangements receive all of their benefits under the terminated arrangement within 12 months of the date the bank irrevocably takes all necessary action to terminate the Plan and the other aggregated arrangements;

(ii) the Plan is irrevocably terminated at a time that is not proximate to a downturn in the financial health of the Bank and (1) all arrangements sponsored by the Bank that would be aggregated with the Plan under Treasury Regulation 1.409A-1(c) if a Participant participated in such arrangements are terminated, (2) no payments are made within 12 months of the date the Bank takes all necessary action to irrevocably terminate the arrangements, other than payments that would be payable under the terms of the arrangements if the termination had not occurred, (3) all payments are made within 24 months of the date the Bank takes all necessary action to irrevocably terminate the arrangements, and (4) the Bank does not adopt a new arrangement that would be aggregated with the Plan under Treasury Regulation 1.409A-1(c) if a Participant participated in both arrangements, at any time within three years following the date the Bank takes all necessary action to irrevocably terminate the Plan; or

(iii) the Plan is terminated within 12 months of a corporate dissolution taxed under Section 331 of the Code, or with the approval of a bankruptcy court

9

pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred by each Participant under the Plan are included in the Participant’s gross income in the later of (1) the calendar year in which the termination of the Plan occurs, or (2) the first calendar year in which the payment is administratively practicable.

23. Claims Procedures

(a) This Section is based on final regulations issued by the Department of Labor and published in the Federal Register on November 21, 2000 and codified at 29 C.F.R. Section 2560.503-1. If any provision of this Section conflicts with the requirements of those regulations, the requirements of those regulations will prevail.

(b) The Participant or any beneficiary who believes he or she is entitled to any benefit under the Plan (a “Claimant”) may file a claim with the Bank. The Bank shall review the claim itself or appoint an individual or an entity to review the claim.

(i) Initial Decision. The Claimant shall be notified within ninety (90) days after the claim is filed whether the claim is allowed or denied, unless the Claimant receives written notice from the Bank or appointee of the Bank prior to the end of the ninety (90) day period stating that special circumstances require an extension of the time for decision, with such extension not to extend beyond the day which is one hundred eighty (180) days after the day the claim is filed.

(ii) Manner and Content of Denial of Initial Claims. If the Bank denies a claim, it must provide to the Claimant, in writing or by electronic communication:

(A) The specific reasons for the denial;

(B) A reference to the provision of the Plan upon which the denial is based;

(C) A description of any additional information or material that the Claimant must provide in order to perfect the claim;

(D) An explanation of why such additional material or information is necessary;

(E) Notice that the Claimant has a right to request a review of the claim denial and information on the steps to be taken if the Claimant wishes to request a review of the claim denial; and

(F) A statement of the Participant’s right to bring a civil action under Section 502(a) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) following a denial on review of the initial denial.

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(c) Review Procedures.

(i) Request for Review. A request for review of a denied claim must be made in writing to the Bank within sixty (60) days after receiving notice of denial. The decision upon review will be made within sixty (60) days after the Bank’s receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision will be rendered not later than one hundred twenty (120) days after receipt of a request for review. A notice of such an extension must be provided to the Claimant within the initial sixty (60) day period and must explain the special circumstances and provide an expected dated of decision.

The reviewer shall afford the Claimant an opportunity to review and receive, without charge, all relevant documents, information and records and to submit issues and comments in writing to the Bank. The reviewer shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim regardless of whether the information was submitted or considered in the initial benefit determination.

(ii) Manner and Content of Notice of Decision on Review. Upon completion of its review of an adverse claim determination, the Bank will give the Claimant, in writing or by electronic notification, a notice containing:

(A) its decision;

(B) the specific reasons for the decision;

(C) the relevant provisions of the Plan upon which its decision is based;

(D) a statement that the Claimant is entitled to receive, upon request and without charge, reasonable access to, and copies of, all documents, records and other information in the Bank’s files which is relevant to the Claimant’s claim for benefits;

(E) a statement describing the Claimant’s right to bring an action for judicial review under Section 502(a) of ERISA; and

(F) if an internal rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination on review, a statement that a copy of the rule, guideline, protocol or other similar criterion will be provided without charge to the Claimant upon request.

(d) For purposes of the time periods specified in this Section, the period of time during which a benefit determination is required to be made begins at the time a claim is filed in accordance with the procedures herein without regard to whether all the information necessary to make a decision accompanies the claim. If a period of time is extended due to a Claimant’s failure to submit all information necessary, the period for making the determination shall be tolled from the date the notification is sent to the Claimant until the date the Claimant responds.

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(e) If the Bank fails to follow the claims procedures required by this Section, a Claimant shall be deemed to have exhausted the administrative remedies available under the Plan and shall be entitled to pursue any available remedy under Section 502(a) of ERISA on the basis that the Plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim. A Claimant’s compliance with the foregoing provisions of this Section is a mandatory requisite to a Claimant’s right to commence any legal action with respect to any claims for benefits under the Plan.

(f) Notwithstanding anything in this Plan to the contrary, the Bank may determine, in its sole and absolute discretion, to review any claim for benefits submitted by a Claimant under this Agreement.

[signature on next page]

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IN WITNESS WHEREOF, Peoples Federal Savings Bank has caused this Amended and Restated Voluntary Deferred Compensation and Supplemental Employee Stock Ownership Plan for Executives to be executed effective as of the      day of                  , 2010.

	PEOPLES FEDERAL SAVINGS BANK
ATTEST:
Secretary	President

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Appendix A

Peoples Federal Savings Bank

Amended and Restated

Voluntary Deferred Compensation

and

Supplemental Employee Stock Ownership Plan

for Executives

Effective Date:                      , 2010

ESOP Participant	Date of Participation
Maurice H. Sullivan, Jr.
Thomas J. Leetch
James J. Gavin

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EX-10.10

Exhibit 10.10

PEOPLES FEDERAL SAVINGS BANK

VOLUNTARY DEFERRED COMPENSATION PLAN

FOR DIRECTORS

(Effective January 1, 2006)

TABLE OF CONTENTS

1. Establishment and Purpose of the Plan	1
2. Administration	1
3. Eligibility	1
4. Deferrals of Compensation	1
5. Accounts under the Plan	1
6. Deemed Investment of Accounts	2
7. Change in Investment Directions	2
8. Crediting of Accounts	2
9. Status of Investments	2
10. Vesting	3
11. Payment of Accounts	3
12. Unforeseeable Emergency	5
13. Designation of Beneficiaries	5
14. Nonalienation	5
15. Indemnification	5
16. Severability	6
17. Waiver	6
18. Notices	6
19. Governing Law	6
20. Construction of Language	6
21. Amendment or Discontinuance	6

ii

VOLUNTARY DEFERRED COMPENSATION PLAN

FOR DIRECTORS

(Effective January 1, 2006)

1. Establishment and Purpose of the Plan. This Voluntary Deferred Compensation Plan for Executives (the “Plan”) is established to enable the members of the Board of Directors of Peoples Federal Savings Bank (the “Bank”) and its subsidiaries to defer a portion of their compensation that would otherwise be paid to them as employees and to, instead, receive such amounts at a later date. The Plan is intended to meet the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and other relevant provisions of the American Jobs Creation Act of 2004, as amended, and the Treasury Regulations promulgated thereunder.

2. Administration. The Plan shall be administered by the Compensation Committee of the Bank or such other committee appointed either by the Board of Directors of the Bank (the “Board”) or by such Compensation Committee (the “Committee”). The Committee shall be authorized to interpret the Plan and make decisions regarding any questions arising thereunder, and any such interpretation or decision of the Committee shall, unless overruled or modified by the Board, be final, conclusive and binding upon all employees of the Bank and its subsidiaries and upon any person claiming benefits or rights under the Plan by or through any such individual. No member of the Committee shall be entitled to act on or decide any matter relating solely to himself or herself or any of his or her rights or benefits under the Plan. The Committee may, in its discretion, designate a person or persons to carry out such duties or functions as the Committee so determines. Notwithstanding any provision of the Plan to the contrary, any duty or function which may be performed by the Committee or its delegates under the Plan may instead be performed by the Board if the Board so determines in its sole discretion.

3. Eligibility. Members of the Board of Directors of the Bank and its subsidiaries which are selected or named by the Compensation Committee shall be permitted to participate in the Plan. To the extent, if any, the provisions of the Employee Retirement Income Security Act of 1974, as amended, apply to this Plan with respect to any employees of the Bank or its subsidiaries, it is intended that this program be limited to a select group of management or highly compensated employees, within the meaning of such law.

4. Deferrals of Compensation. With respect to each year as to which an individual has been designated as eligible to participate in this Plan, the individual may elect to become a Participant in the Plan by submitting to the Committee or its designee a written election to defer receipt of either a percentage of the amount, or specified dollar amount, that would otherwise be earned by the Participant in connection with his or her services as an employee of the Bank or one or more of its subsidiaries in the next following calendar year. Except as otherwise provided by the Committee in accordance with law, such election shall be made on or before the last day of the calendar year preceding the calendar year with respect to which the election relates. With respect to each individual who first becomes an eligible Participant, such an individual may defer receipt of compensation in the same year he/she first becomes eligible to participate in the Plan provided the election applies only to compensation deferred for services preformed subsequent to the date the election is filed with the Committee through the end of the calendar year and the election is made within 30 days after the individual first becomes an eligible Participant.

5. Accounts under the Plan. Amounts deferred by a Participant pursuant to Paragraph 4 hereof (or amounts contributed under paragraph 5, if any) shall be maintained in an Account for such Participant by the Bank or by the subsidiary of the Bank responsible to pay the compensation being deferred by the participant hereunder.

6. Deemed Investment of Accounts. The Account maintained on behalf of each Participant with respect to the amounts deferred by that Participant hereunder with respect to each year of participation by the Participant shall be deemed to be invested in, and shall be adjusted to reflect earnings and losses of, such investments or investment funds as is designated as available from time to time by the Committee. To the extent the Committee makes available alternative deemed investment vehicles with respect to amounts eligible to be deferred under the Plan, each Participant shall, upon making a deferral election hereunder, designate, in the form and manner prescribed by the Committee, that the amounts to be credited to his or her Account be applied in such proportions as he or she may designate, in such multiples as is permitted by the Committee, in each deemed investment made available by the Committee. The Committee may make available different deemed investments for amounts deferred at different times under the Plan, and may change the available deemed investments under the Plan from time to time. The Committee may also designate that only one deemed investment be available with respect to any amounts deferred hereunder, in which event that deemed investment shall apply to all such amounts without regard to any other election that a Participant may desire.

7. Change in Investment Directions. A Participant may, in the form and manner prescribed by the Committee, elect to change his or her investment direction with respect to all or a portion of the amounts then held, or to be held, in such Participant’s Account, with such election and new investment direction becoming effective the first day of any calendar quarter (i.e January 1, April 1, July 1 or October 1), provided such investment direction election is made, and not revoked, prior to the first day of such calendar quarter. Such direction may relate solely to amounts already allocated to the Participant’s Account (in which event it shall constitute a direction to transfer amounts in the Participant’s Account among the various available deemed investments) or may relate solely to amounts to be deferred in the future, or may relate to both amounts already allocated to the Participant’s Account and amounts to be deferred in the future. Any investment direction election made by a Participant shall remain in effect until changed, to the extent such change is permitted under the Plan.

8. Crediting of Accounts. Each Participant’s Account shall be deemed credited at the end of each calendar quarter (or on such other dates as is designated by the Committee) with the earnings or losses that the amount in the Account would have experienced had the Account actually been invested in the deemed investment designated by the Participant or, as appropriate, the Committee.

9. Status of Investments. All investments made by the Bank or any other subsidiary of the Bank pursuant to this Plan will be deemed made solely for the purpose of aiding such entity in measuring and meeting its obligations under the Plan. Further, such entities are not limited to the investments described in the provisions set forth above but are merely obligated to provide payments pursuant to the terms of this Plan that reflect the investment returns offered by the deemed investments made available under the Plan. The Bank or, as applicable, one or more of the subsidiaries of the Bank, will be named sole owner of all such investments and of all rights and privileges conferred by the terms of the instruments evidencing such investments. This Plan places no obligation upon any entity to invest any portion of the amount in a Participant’s Account, to invest or continue to invest in any specific asset, to liquidate any particular investment, or to apply in any specific manner the proceeds from the sale, liquidation, or maturity of any particular investment. Nothing stated herein shall cause such investments to be treated as anything but the general assets of the Bank or, as applicable, other subsidiaries of the Bank, nor will anything stated herein cause such investments to represent the vested, secured or preferred interest of the Participant or his or her beneficiaries designated under this Plan. Participants hereunder

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have the status of unsecured creditors with respect to their Accounts, and it is intended that the Plan be unfunded for tax purposes and, to any extent applicable, for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended.

10. Vesting. Participants shall be fully vested in all amounts in their accounts at all times.

11. (a) Payment of Accounts. At the time a Participant elects to defer compensation hereunder, the Participant shall designate the time and the manner of the payment of the amounts to be allocated to such Participant’s Account with respect to such deferral of compensation. Except as otherwise provided below, payment to a Participant shall commence upon a fixed date selected by the Participant at the time of the deferral chosen from the following dates:

(I) The last day of a calendar quarter ending at least two years from the end of the calendar year in which the deferred compensation would otherwise become payable, but no later than the end of the calendar quarter in which occurs the Participant’s 75^th birthday.

(ii) The last day of any one of the four calendar quarters ending after the service of the Participant as a director of the Bank or any of is subsidiaries terminates (as designated by the Participant at the time of deferral).

Except as otherwise provided below, the form of payment of deferred amounts in a Participant’s Account shall be designated by the Participant at the time the election to defer compensation is made and shall be from among the following options, to the extent such optional forms are made available by the Committee. All forms of payment shall be based on the value of a Participant’s Account attributable to the particular deferral election and all forms of payment shall be actuarially equivalent to each other. The options that may be made available are:

(A) a lump sum;

(B) a number of quarterly installments or annual installments, limited in such manner as is determined by the Committee; or

(C) one or more forms of annuity, with such terms as shall be determined by the Committee

(D) a designated dollar amount (to the extent such amount is allocated to the Participant’s Account with respect to the deferral of compensation in question) or percentage of the Participant’s account at the end of one or more calendar quarters otherwise available for election for the commencement of distributions as described above, with the remainder of the amount subject to such designation to be distributed commencing at such other date chosen by the Participant at the time of the deferral.

In the event that payment is to be made in the form of an annuity, the amount of each annuity payment shall be determined by the Committee or its designee in its sole discretion, which amount shall be based

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on the amounts that could be payable under one or more commercial annuity products that could be purchased with the amount in a Participant’s Account that is to be paid in the form of an annuity at a date set by the Committee that is within 60 days of the starting date of the annuity, with the identity of the commercial annuity products to be used for this purpose to be determined in the sole discretion of the Committee, or by the Committee’s designee in accordance with standards established by the Committee. Any such determination, and the determination by the Committee or its delegates of the amount of any annuity payments to be made hereunder shall be final and binding upon all Participants and beneficiaries. In the event that the Committee or its designee, in their sole and absolute discretion, shall direct that a commercial annuity be purchased in order to fund any payment obligations hereunder, such annuity contract, when purchased, shall be the property of the Bank or other purchasing subsidiary of the Bank, and the Participant will continue to be no more than an unsecured creditor of the Bank or, as applicable, another subsidiary of the Bank, as described above. Each Participant’s Account under the Plan shall be reduced by the amount of any distribution hereunder.

Notwithstanding any provision of the Plan to the contrary, a Participant who is a specified employee as defined in the regulations promulgated under Code Section 409A may not commence receipt of his/her benefit until the first day of the seventh month following his/her separation from service. For purposes of Code Section 409A, the Committee shall determine which Participant are specified employees as of December 31 in accordance with the Regulations promulgated under Section 409A. Such determination by the Committee shall be effective for the twelve month period commencing on April 1.

(b) Payment Upon Unforeseeable Emergency. A Participant may also, solely to the extent permitted by the Committee, direct that a portion of the amounts payable to the Participant be distributed in the event of an Unforeseeable Emergency (as defined below),

(c) Payments Upon Death. To the extent permitted by the Committee, a Participant may elect that if the Participant dies before payments of a deferred amount have otherwise commenced to the Participant, the amount allocated to the Participant’s Account be distributed to the Participant’s Beneficiary (as defined below) either on the last day of the calendar quarter in which the Participant dies (or as soon as practicable thereafter) or on the last day of the first calendar quarter in the calendar year immediately following the date of the Participant’s death; provided, however that if no such election is made, payment shall be made in a single lump sum at the end of the calendar quarter in which the Participant died, or as soon as practicable thereafter. If payments of a deferred amount in the form of installments have already commenced to the Participant, they shall continue to be made after the Participant’s death to the Participant’s Beneficiary in accordance with the Act to avoid acceleration of payment, who shall otherwise be granted the same rights as were held by the Participant hereunder.

(d) Additional Payment Elections. Notwithstanding the preceding provisions of this Paragraph 11 to the contrary, a Participant may subsequently elect, in such form and manner as may be prescribed by the Committee, a revised commencement date for the amounts credited to his or her Account, in lieu of the date(s) initially selected, provided that any such election is not effective until 12 months following such election, that the election provides that payment will be deferred for at least five (5) years from the date such payment would otherwise have been made (except for death as provided above), and the election is made at least 12 months prior to the first scheduled payment. Further, notwithstanding the preceding provisions of this Paragraph 11 to the contrary, a Participant may also subsequently elect, in such form and manner as may be prescribed by the Committee, that the amounts credited to his or her Account be paid in any one of the forms of benefit payment provided under this Paragraph 11 in lieu of the form of payment initially selected, provided that any such election

4

is not effective for 12 months, that the election to modify the form of distribution provides that payment will be deferred for at least five (5) years from the date such payment would otherwise have been made (except for death as provided above), and such election is made at least 12 months prior to the first scheduled payment.

12. Unforeseeable Emergency. A Participant may request, in writing to the Committee, a request for a withdrawal from his/her Account if the Participant experiences an Unforeseeable Emergency. Withdrawals for the purpose of an Unforeseeable Emergency are limited to the extent needed to satisfy the emergency, which cannot be met by the Participant utilizing other resources. The Committee shall make a determination with regard to the Unforeseeable Emergency in accordance with Code Section 409A and the Treasury Regulations promulgated thereunder.

13. Designation of Beneficiaries. In the event that a Participant dies prior to the receipt of all amounts payable to him or her pursuant to the Plan, all remaining amounts credited to his or her Account shall be paid to such one or more Beneficiaries and in such proportions as the Participant may designate, in accordance with the provisions of Paragraph 11. If no Beneficiary has been named by the Participant, or if a named Beneficiary has predeceased the Participant and no successor beneficiary has been named or if a beneficiary designation is otherwise ineffective, payment shall be made to the estate of the Participant, and if any Beneficiary shall die after payments to that Beneficiary have commenced, if any remaining payments would otherwise be made to such Beneficiary, they shall instead be made to the estate of the Beneficiary. A Beneficiary designation pursuant to this Paragraph 13 shall not be effective unless it is in writing and is received by the Committee prior to the death of the Participant making the designation.

14. Nonalienation. The right to receive a benefit under the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or the Participant’s beneficiaries.

15. Indemnification. The Bank shall indemnify, hold harmless and defend each member of the Board, each member of the Committee, each member of the Benefits Committee, and each of their designees who are employees of the Bank or any of its subsidiaries, against any reasonable costs, including legal fees, incurred by them, or arising out of any action, suit or proceeding in which they may be involved, as a result of their efforts, in good faith, to defend or enforce the terms of the Plan.

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16. Severability. A determination that any provision of the Plan is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

17. Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions of the Plan shall not be deemed a waiver of such term, covenant or condition. A waiver of any provision of the Plan must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

18. Notices. Any notice or other communication required or permitted to be given to a party under the Plan shall be deemed given if personally delivered or if mailed, postage prepaid, by certified mail, return receipt requested, to the party at the address listed below, or at such other address as one such party may by written notice specify to the other:

(a) if to the Committee:

Attention:	Chairman -	Compensation Committee
		Peoples Federal Savings Bank
		435 Market Street
		Brighton, MA 02135

(b) if to any party other than the Committee, to such party at the address last published by such party by written notice to the Committee.

19. Governing Law. The Plan shall be construed, administered and enforced according to the laws of the Commonwealth of Massachusetts, except to the extent that such laws are preempted by federal law.

20. Construction of Language. Wherever appropriate in the Plan, words used in the singular may be read in the plural, words in the plural may be read in the singular, and words importing the male gender shall be deemed equally to refer to the feminine or the neuter. Any reference to an Article or Section shall be to an Article or Section of the Plan, unless otherwise indicated.

21. Amendment or Discontinuance. The Board or the Compensation Committee of the Board may amend, discontinue or terminate the Plan at any time in accordance with applicable law; provided, however, that no amendment or discontinuance shall affect the rights of Participants to amounts already allocated to their Accounts under the Plan. The Benefits Committee of the Bank may make any amendment to the Plan that may be necessary or appropriate to facilitate the administration, management, and interpretation of the Plan or to conform the Plan thereto or that may be necessary or appropriate to satisfy requirements of law, provided that any such amendment does not significantly affect the cost to the Bank or any of its subsidiaries of maintaining the Plan. Notwithstanding the foregoing, no amendment by the Compensation Committee of the Board or the Benefits Committee of the Bank shall be made to the extent that any such amendment would cause any Participant who administers any employee benefit plan of the Bank (or any subsidiary of the Bank) and who, in accordance with the terms of

6

any such plan or applicable law, must be ‘disinterested’, to cease to qualify as an ‘outside’ director, within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and the treasury regulations thereunder.

In witness whereof, Peoples Federal Savings Bank has caused this Voluntary Deferred Compensation Plan for Executives to be executed effective as of the 1st day of January, 2006.

Peoples Federal Savings Bank
By:	/s/ Maurice H. Sullivan, Jr.
	Chairman of the Board

Attest:
/s/ Bernard Burke	/s/ Thomas J. Leetch
Secretary	President

7

AMENDMENT NUMBER ONE TO

PEOPLES FEDERAL SAVINGS BANK

VOLUNTARY DEFERRED COMPENSATION PLAN

FOR DIRECTORS

THIS AMENDMENT NUMBER ONE (this “Amendment”) to the Peoples Federal Savings Bank Voluntary Deferred Compensation Plan for Directors (the “Plan”) is made and entered into effective as of December 16, 2008 by Peoples Federal Savings Bank (the “Bank”).

RECITALS:

WHEREAS, the Bank desires to amend the Plan to ensure that the Plan complies with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, the Board of Directors of the Bank may amend the Plan from time to time;

NOW, THEREFORE, in consideration of the premises, the mutual agreements herein set forth and such other consideration the sufficiency of which is hereby acknowledged, the Board hereby amends the Plan as follows:

Section 1. Amendment to Section 11 of the Plan. Section 11 of the Plan is hereby amended to add Section 11(e) to read in its entirety as follows:

“(e) For purposes of this Plan, “terminates” and “separation from service” shall mean “Separation from Service” as defined in Code Section 409A and the Treasury Regulations promulgated thereunder, and shall mean the Participant’s retirement or termination of service from the Board of Directors following a resignation from the Board of Directors or failure to be reappointed or reelected to the Board of Directors. For these purposes, a Participant shall not be deemed to have a Separation from Service if the Participant serves on the Board of the Bank or any member of a controlled group of corporations with the Bank within the meaning of Treasury Regulation §1.409A-1(a)(3).”

Section 2. Amendment to Section 12 of the Plan. Section 12 of the Plan is hereby amended to add Section 12(a) to read in its entirety as follows:

“(a) “Unforeseeable Emergency” shall mean a severe financial hardship to the Participant resulting from (1) an illness or accident of the Participant, the Participant’s spouse, or a dependent of the Participant (within the meaning of Section 152(a) of the Code), (2) a loss of the Participant’s property due to casualty, or (3) other extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The amount of such distribution may not exceed the amounts necessary to satisfy the emergency. The circumstances that will constitute an “Unforeseeable Emergency” will depend on the facts of each case, but, in any case, payment may not be made in the event that such hardship is or may be relieved:

(1) through reimbursement or compensation by insurance or otherwise;

(2) by liquidation of the Participant’s assets, to the extent that liquidation of such assets would not itself cause severe financial hardship; or

(3) by cessation of deferrals under the Plan.”

Section 3. Amendment to Section 21 of the Plan. Section 21 of the Plan is hereby amended to read in its entirety as follows:

“21. Amendment or Termination of the Plan

(a) The Bank reserves the right to amend or terminate the Plan at any time, except that no such amendment will affect the benefits or rights to which any Participant became entitled prior to such amendment or termination. A termination of the Plan will not be a distributable event, except in the three circumstances set forth in Section 21(b) below.

(b) Termination. Under no circumstances may the Plan permit the acceleration of the time or form of any payment under the Plan prior to the payment events specified herein, except as provided in this Section 21(b). The Bank may, in its discretion, elect to terminate the Plan in any of the following three circumstances and accelerate the payment of the entire unpaid balance of the Participant’s benefits as of the date of such payment in accordance with Section 409A of the Code:

(i) the Plan is irrevocably terminated within the 30 days preceding a Change in Control (as defined in Section 409A of the Code, but excluding any conversion of the Bank from mutual to stock form (including, without limitation, through the formation of a stock holding company) or the reorganization of the Bank into the mutual holding company form of organization) and (1) all arrangements sponsored by the Bank that would be aggregated with the Plan under Treasury Regulation §1.409A-1(c)(2) are terminated, and (2) each Participant participating in the Plan and all participants under the other aggregated arrangements receive all of their benefits under the terminated arrangements within 12 months of the date the Bank irrevocably takes all necessary action to terminate the Plan and the other aggregated arrangements;

(ii) the Plan is irrevocably terminated at a time that is not proximate to a downturn in the financial health of the Bank and (1) all arrangements sponsored by the Bank that would be aggregated with the Plan under Treasury Regulation 1.409A-1(c) if a Participant participated in such arrangements are terminated, (2) no payments are made within 12 months of the date the Bank takes all necessary action to irrevocably terminate the arrangements, other than payments that would be payable under the terms of the arrangements if the termination had not occurred, (3) all payments are made within 24 months of the date the Bank takes all necessary action to irrevocably terminate the arrangements, and (4) the Bank does not adopt a new arrangement that would be aggregated with the Plan under Treasury Regulation 1.409A-1(c) if a

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Participant participated in both arrangements, at any time within three years following the date the Bank takes all necessary action to irrevocably terminate the Plan; or

(iii) the Plan is terminated within 12 months of a corporate dissolution taxed under Section 331 of the Code, or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred by each Participant under the Plan are included in the Participant’s gross income in the later of (1) the calendar year in which the termination of the Plan occurs, or (2) the first calendar year in which the payment is administratively practicable.”

Section 4. Addition of a New Section 22 of the Plan. The Plan is hereby amended to add a new Section 22 to read in its entirety as follows:

“22. Claims Procedures

(a) This Section is based on final regulations issued by the Department of Labor and published in the Federal Register on November 21, 2000 and codified at 29 C.F.R. Section 2560.503-1. If any provision of this Section conflicts with the requirements of those regulations, the requirements of those regulations will prevail.

(b) The Participant or any beneficiary who believes he or she is entitled to any benefit under the Plan (a “Claimant”) may file a claim with the Bank. The Bank shall review the claim itself or appoint an individual or an entity to review the claim.

(i) Initial Decision. The Claimant shall be notified within ninety (90) days after the claim is filed whether the claim is allowed or denied, unless the Claimant receives written notice from the Bank or appointee of the Bank prior to the end of the ninety (90) day period stating that special circumstances require an extension of the time for decision, with such extension not to extend beyond the day which is one hundred eighty (180) days after the day the claim is filed.

(ii) Manner and Content of Denial of Initial Claims. If the Bank denies a claim, it must provide to the Claimant, in writing or by electronic communication:

(A) The specific reasons for the denial;

(B) A reference to the provision of the Plan upon which the denial is based;

(C) A description of any additional information or material that the Claimant must provide in order to perfect the claim;

(D) An explanation of why such additional material or information is necessary;

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(E) Notice that the Claimant has a right to request a review of the claim denial and information on the steps to be taken if the Claimant wishes to request a review of the claim denial; and

(F) A statement of the Participant’s right to bring a civil action under Section 502(a) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) following a denial on review of the initial denial.

(c) Review Procedures

(i) Request For Review. A request for review of a denied claim must be made in writing to the Bank within sixty (60) days after receiving notice of denial. The decision upon review will be made within sixty (60) days after the Bank’s receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision will be rendered not later than one hundred twenty (120) days after receipt of a request for review. A notice of such an extension must be provided to the Claimant within the initial sixty (60) day period and must explain the special circumstances and provide an expected date of decision.

The reviewer shall afford the Claimant an opportunity to review and receive, without charge, all relevant documents, information and records and to submit issues and comments in writing to the Bank. The reviewer shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim regardless of whether the information was submitted or considered in the initial benefit determination.

(ii) Manner and Content of Notice of Decision on Review. Upon completion of its review of an adverse claim determination, the Bank will give the Claimant, in writing or by electronic notification, a notice containing:

(A) its decision;

(B) the specific reasons for the decision;

(C) the relevant provisions of the Plan upon which its decision is based;

(D) a statement that the Claimant is entitled to receive, upon request and without charge, reasonable access to, and copies of, all documents, records and other information in the Bank’s files which is relevant to the Claimant’s claim for benefits;

(E) a statement describing the Claimant’s right to bring an action for judicial review under Section 502(a) of ERISA; and

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(F) if an internal rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination on review, a statement that a copy of the rule, guideline, protocol or other similar criterion will be provided without charge to the Claimant upon request.

(d) For purposes of the time periods specified in this Section, the period of time during which a benefit determination is required to be made begins at the time a claim is filed in accordance with the procedures herein without regard to whether all the information necessary to make a decision accompanies the claim. If a period of time is extended due to a Claimant’s failure to submit all information necessary, the period for making the determination shall be tolled from the date the notification is sent to the Claimant until the date the Claimant responds.

(e) If the Bank fails to follow the claims procedures required by this Section, a Claimant shall be deemed to have exhausted the administrative remedies available under the Plan and shall be entitled to pursue any available remedy under Section 502(a) of ERISA on the basis that the Plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim. A Claimant’s compliance with the foregoing provisions of this Section is a mandatory requisite to a Claimant’s right to commence any legal action with respect to any claims for benefits under the Plan.

(f) Notwithstanding anything in this Plan to the contrary, the Bank may determine, in its sole and absolute discretion, to review any claim for benefits submitted by a Claimant under this Agreement.”

Section 5. No Further Modification. Except as expressly amended hereby, the Plan remains unmodified and in full force and effect.

Section 6. Governing Law. This Amendment and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

IN WITNESS WHEREOF, the Bank has duly executed this Amendment as of the day and year first written above.

PEOPLES FEDERAL SAVINGS BANK
By:	/s/ Thomas J. Leetch
Name:	Thomas J. Leetch
Title:	President & CEO

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EX-10.11

Exhibit 10.11

PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

PEOPLES FEDERAL SAVINGS BANK

DIRECTOR RETIREMENT AGREEMENT

THIS DIRECTOR RETIREMENT AGREEMENT (the “Agreement”) is adopted this 29th day of November, 2004, by and between PEOPLES FEDERAL SAVINGS BANK, a federally-chartered corporation located in Boston, Massachusetts (the “Bank”), and MAURICE H. SULLIVAN, JR, (the “Director”).

To encourage the Director to remain a member of the Bank’s Board of Directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets.

The Bank and the Director agree as provided herein.

Article 1

Definitions

Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1 “Accrual Balance” means the liability that should be accrued by the Bank, under Generally Accepted Accounting Principles (“GAAP”), for the Bank’s obligation to the Director under this Agreement, by applying Accounting Principles Board Opinion Number 12 (“APB 12”) as amended by Statement of Financial Accounting Standards Number 106 (“FAS 106”) and the Discount Rate. Any one of a variety of amortization methods may be used to determine the Accrual Balance. However, once chosen, the method must be consistently applied. The Accrual Balance shall be reported by the Bank to the Director on Schedule A.

1.2 “Beneficiary” means each designated person, or the estate of the deceased Director, entitled to benefits, if any, upon the death of the Director determined pursuant to Article 4.

1.3 “Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that the Director completes, signs and returns to the Plan Administrator to designate one or more Beneficiaries.

1.4 “Change in Control” means:

(a) There occurs a “Change in Control” of the Bank, as defined or determined by either the Bank’s primary federal regulator or under regulations promulgated by such regulator;

(b) As a result of, or in connection with, any merger or other business combination, sale of assets or contested election, wherein the persons who were non-employee directors of the Bank before such transaction or event cease to constitute a majority of the Board of Directors of the Bank or any successor to the Bank;

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Director Retirement Agreement

(c) The Bank transfers all or substantially all of its assets to another corporation or entity which is not an affiliate of the Bank;

(d) The Bank is merged or consolidated with another corporation or entity and, as a result of such merger or consolidation, less than sixty percent (60%) of the equity interest in the surviving or resulting corporation is owned by the former shareholders or depositors of the Bank; or

(e) The Bank sells or transfers more than a fifty percent (50%) equity interest in the Bank to another person or entity which is not an affiliate of the Bank, excluding a sale or transfer to a person or persons who are employed by the Bank.

Notwithstanding anything in this Agreement to the contrary, in no event shall the conversion of the Bank from mutual to stock form (including, without limitation, through the formation of a stock holding company) or the reorganization of the Bank into the mutual holding company form of organization constitute a Change in Control for purposes of this Agreement.

1.5 “Code” means the Internal Revenue Code of 1986, as amended.

1.6 “Disability” means the Director’s suffering a sickness, accident or injury which has been determined by the insurance carrier of any individual or group disability insurance policy covering the Director, or by the Social Security Administration, to be a disability rendering the Director totally and permanently disabled. The Director must submit proof to the Plan Administrator of the insurance carrier’s or Social Security Administration’s determination upon the request of the Plan Administrator.

1.7 “Discount Rate” means the rate used by the Plan Administrator for determining the Accrual Balance. The initial Discount Rate is six and one quarter percent (6.25%). However, the Plan Administrator, in its sole discretion, may adjust the Discount Rate to maintain the rate within reasonable standards according to GAAP.

1.8 “Early Termination” means the Termination of Service before Normal Retirement Age for reasons other than death, Disability, Termination for Cause or following a Change in Control.

1.9 “Early Termination Date” means the month, day and year in which Early Termination occurs.

1.10 “Effective Date” means December 1, 2004.

1.11 “Normal Retirement Age” means the Director’s 65^th birthday.

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Director Retirement Agreement

1.12 “Normal Retirement Date” means the later of the Normal Retirement Age or Termination of Service.

1.13 “Plan Administrator” means the plan administrator described in Article 8.

1.14 “Plan Year” means each twelve-month period commencing on the Effective Date.

1.15 “Termination for Cause” has that meaning set forth in Article 5.

1.16 “Termination of Service” means that the Director ceases to be a member of the Bank’s Board of Directors for any reason, voluntarily or involuntarily, other than by reason of a leave of absence approved by the Bank or a Termination for Cause.

Article 2

Benefits During Lifetime

2.1 Normal Retirement Benefit. Upon Termination of Service on or after the Normal Retirement Age for reasons other than death, the Bank shall pay to the Director the benefit described in this Section 2.1 in lieu of any other benefit under this Article.

2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is Seventy Three Thousand Three Hundred and Ninety Dollars ($73,390).

2.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following the Director’s Normal Retirement Date. The annual benefit shall be paid to the Director for twenty (20) years.

2.2 Early Termination Benefit. Upon Early Termination, the Bank shall pay to the Director the benefit described in this Section 2.2 in lieu of any other benefit under this Article.

2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 is the Early Termination Benefit set forth on Schedule A for the Plan Year during which the Early Termination Date occurs. This benefit is determined by vesting the Director in one hundred percent (100%) of the Accrual Balance.

2.2.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following the Director’s attainment of Normal Retirement Age. The annual benefit shall be paid to the Director for twenty (20) years.

2.3 Disability Benefit. Upon Termination of Service due to Disability prior to Normal Retirement Age, the Bank shall pay to the Director the benefit described in this Section 2.3 in lieu of any other benefit under this Article.

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Director Retirement Agreement

2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is the Disability Benefit set forth on Schedule A for the Plan Year during which the Termination of Service occurs. This benefit is determined by vesting the Director in one hundred percent (100%) of the Normal Retirement Benefit.

2.3.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following the Director’s attainment of Normal Retirement Age. The annual benefit shall be paid to the Director for twenty (20) years.

2.4 Change in Control Benefit. Upon a Change in Control, followed by the Director’s Termination of Service within twelve (12) months, the Bank shall pay to the Director the benefit described in this Section 2.4 in lieu of any other benefit under this Article.

2.4.1 Amount of Benefit. The annual benefit under this Section 2.4 is the Change in Control Benefit set forth on Schedule A for the Plan Year during which Termination of Service occurs. This benefit is determined by vesting the Director in one hundred percent (100%) of the Normal Retirement Benefit amount described in Section 2.1.1.

2.4.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following Termination of Service. The annual benefit shall be paid to the Director for twenty (20) years.

Article 3

Death Benefits

3.1 Death During Active Service. If the Director dies while in the active service of the Bank, the Bank shall pay to the Beneficiary the benefit described in this Section 3.1. This benefit shall be paid in lieu of the benefits under Article 2.

3.1.1 Amount of Benefit. The benefit under this Section 3.1 is the Normal Retirement Benefit amount described in Section 2.1.1.

3.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Beneficiary in twelve (12) equal monthly installments commencing on the first day of the month following the date of the Director’s death. The annual benefit shall be paid to the Beneficiary for a period of twenty (20) years.

3.2 Death During Payment of a Benefit. If the Director dies after any benefit payments have commenced under Article 2 of this Agreement, but before receiving all such payments, the Bank shall pay the remaining benefits to the Beneficiary at the same time and in the same amounts they would have been paid to the Director had the Director survived.

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Director Retirement Agreement

3.3 Death After Termination of Service But Before Payment of a Benefit Commences. If the Director is entitled to any benefit payments under Article 2 of this Agreement, but dies prior to the commencement of said benefit payments, the Bank shall pay the same benefit payments to the Beneficiary that the Director was entitled to prior to death except that the benefit payments shall commence on the first day of the month following the date of the Director’s death.

Article 4

Beneficiaries

4.1 Beneficiary Designation. The Director shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefits payable under this Agreement upon the death of the Director. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Bank in which the Director participates.

4.2 Beneficiary Designation: Change. The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. The Director’s Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved. The Director shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and accepted by the Plan Administrator prior to the Director’s death.

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.

4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director’s spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be paid to the personal representative of the Director’s estate.

4.5 Facility of Payment. If the Plan Administrator determines in its discretion that a benefit is to be paid to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct payment of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Director and the Director’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such payment amount.

Article 5

General Limitations

5.1 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement if the Bank’s Board of Directors terminates the Director’s service for:

(a) Personal dishonesty;

(b) Incompetence;

(c) Willful misconduct;

(d) Any breach of fiduciary duty involving personal profit;

(e) Intentional failure to perform stated duties; or

(f) Willful violation of any law, rule, regulation (other than traffic violations or similar offenses), or final cease and desist order.

5.2 Suicide or Misstatement. The Bank shall not pay any benefit under this Agreement if the Director commits suicide within two years after the Effective Date. In addition, the Bank shall not pay any benefit under this Agreement if the Director has made any material misstatement of fact on any application for life insurance owned by the Bank on the Director’s life.

5.3 Competition After Termination of Service. The Bank shall not pay any benefit under this Agreement if the Director, within twelve (12) months following Termination of Service, without the prior written consent of the Bank, engages in, becomes interested in, directly or indirectly, as a sole proprietor, as a partner in a partnership, or as a substantial shareholder in a corporation, or becomes associated with, in the capacity of employee, director, officer, principal, agent, trustee, or in any other capacity whatsoever, any enterprise conducted in the marketing area of the Bank, which enterprise is, or may deemed to be, competitive with any business carried on by the Bank as of the date of termination of the Director’s service or retirement. This section shall not apply following a Change in Control.

5.4 Excess Parachute Payment. Notwithstanding any provision of this Agreement to the contrary, to the extent any benefit would create an excise tax under the excess parachute rules of Section 280G of the Code, the Bank shall reduce the benefit paid under this Agreement to the maximum benefit that would not result in any such excise tax.

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

Article 6

Claims and Review Procedures

6.1 Claims Procedure. A Director or Beneficiary (“claimant”) who has not received benefits under the Agreement that he or she believes should be paid shall make a claim for such benefits as follows:

6.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits.

6.1.2 Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 90 days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

6.1.3 Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

(d) An explanation of the Agreement’s review procedures and the time limits applicable to such procedures; and

(e) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

6.2 Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:

6.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.

6.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

6.2.3 Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

6.2.4 Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

6.2.5 Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and

(d) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

Article 7

Amendments and Termination

This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Director.

Notwithstanding the previous paragraph in this Article 7, the Bank may amend or terminate this Agreement at any time if, pursuant to legislative, judicial or regulatory action, continuation of the Agreement would (i) cause benefits to be taxable to the Director prior to actual receipt, or (ii) result in significant financial penalties or other significantly detrimental ramifications to the Bank (other than the financial impact of paying the benefits). Upon such amendment or termination the Bank shall pay benefits to the Director as if Early Termination occurred on the date of such amendment or termination, regardless of whether Early Termination actually occurs.

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

Article 8

Administration of Agreement

8.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator which shall consist of the Board of Directors of the Bank, or such committee or person(s) as the Board of Directors of the Bank shall appoint. The Director may be a member of the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement.

8.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Bank.

8.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Director or Beneficiary shall be deemed to have any right, vested or nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the Discount Rate.

8.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.

8.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Termination of Service of the Director, and such other pertinent information as the Plan Administrator may reasonably require.

8.6 Annual Statement. The Plan Administrator shall provide to the Director, within 120 days after the end of each Plan Year, a statement setting forth the benefits payable under this Agreement.

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

Article 9

Miscellaneous

9.1 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators and transferees.

9.2 No Guarantee of Service. This Agreement is not an employment policy or contract. It does not give the Director the right to remain a director of the Bank, nor does it interfere with the Bank’s right to terminate the Director’s service. It also does not require the Director to remain a director nor interfere with the Director’s right to terminate service at any time.

9.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

9.4 Tax Withholding. The Bank shall withhold any taxes that, in its reasonable judgment, are required to be withheld from the benefits provided under this Agreement. The Director acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies).

9.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

9.6 Unfunded Arrangement. The Director and Beneficiary are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Director’s life is a general asset of the Bank to which the Director and Beneficiary have no preferred or secured claim.

9.7 Successors. The Bank shall not merge or consolidate into or with another company, or sell substantially all of its assets to another company, firm, or person unless such succeeding or continuing company, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor company.

9.8 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Director as to the subject matter hereof. No rights are granted to the Director by virtue of this Agreement other than those specifically set forth herein.

9.9 Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

9.10 Alternative Action. In the event it shall become impossible for the Bank or the Plan Administrator to perform any act required by this Agreement, the Bank or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Bank.

9.11 Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.

9.12 Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision has never been inserted herein.

9.13 Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Peoples Federal Savings Bank

435 Market Street

Boston, MA 02135

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

Any notice or filing required or permitted to be given to the Director under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Director.

IN WITNESS WHEREOF, the Director and a duly authorized representative of the Bank have signed this Agreement.

DIRECTOR:	BANK:
	PEOPLES FEDERAL SAVINGS BANK
	By
Maurice H. Sullivan, Jr.	Title	PRES. CEO

11

Salary Continuation Plan	Plan Year Reporting
Schedule A

Maurice H Sullivan Jr.

[ILLEGIBLE] [ILLEGIBLE] [ILLEGIBLE] [ILLEGIBLE]					Early Termination			Disability			Change of Control			Pre-retire Death Benefit Monthly Installments
					Monthly Installments Payable at Normal Retirement Date for 10 Years			Monthly Installments Payable at Normal Retirement Date for 10 Years			Monthly Installments Payable at Termination for 10 Years
Period Ending	Discount Rate		Benefit Level	Accrual Balance	Vesting		Based On Accrual	Vesting		Based On Accrual	Vesting		Based On Benefit	Based On Benefit
	(1)		(2)	(3)	(4)		(5)	(6)		(7)	(8)		(9)	(10)
Nov 2005 1	6.25	%	73,390	129,952	100	%	15,089	100	%	73,390	100	%	73,390	73,390

¹ The first line reflects 12 months of data, December 2004 to November 2005.

* IF THERE IS A CONFLICT IN ANY TERMS OR PROVISIONS BETWEEN THIS SCHEDULE A AND THE AGREEMENT, THE TERMS AND PROVISIONS OF THE AGREEMENT SHALL PREVAIL. IF A TRIGGERING EVENT OCCURS, REFER TO THE AGREEMENT TO DETERMINE THE ACTUAL BENEFIT AMOUNT BASED ON THE DATE OF THE EVENT.

PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

BENEFICIARY DESIGNATION FORM

I, Maurice H. Sullivan, Jr., designate the following as beneficiary of benefits under the Agreement payable following my death:

Primary:
The Maurice H. Sullivan, Jr.	100	%
Revocable Trust -2003		%
Contingent:
Vera Lee Sullivan	100	%
		%

Notes:

• Please PENT CLEARLY or TYPE the names of the beneficiaries.

• To name a trust as beneficiary, please provide the name of the trustee(s) and the name and date of the trust agreement.

• To name your estate as beneficiary, please write “Estate of [your name]”.

• Be aware that none of the contingent beneficiaries will receive anything unless ALL of the primary beneficiaries predecease you.

I understand that I may change these beneficiary designations by delivering a new written designation to the Plan Administrator, which shall be effective only upon receipt and acknowledgment by the Plan Administrator prior to my death. I further understand that these designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.

Name:	Maurice H. Sullivan, Jr.
Signature:		Date:	11-29-04

Received by the Plan Administrator this 29^th day of November, 2004.

By:
Title:	Pres. CEO.

FIRST AMENDMENT TO

DIRECTOR RETIREMENT AGREEMENT

First Amendment, dated as of December 16, 2008 (the “Amendment”), to the Director Retirement Agreement, dated as of November 29, 2004 (as amended, the “Director Retirement Agreement”), by and among Peoples Federal Savings Bank (the “Bank”) and Maurice H. Sullivan, Jr. (the “Director”). Capitalized terms which are not defined herein shall have the same meaning as set forth in the Director Retirement Agreement.

W I T N E S S E T H:

WHEREAS, the parties desires to amend the Director Retirement Agreement to comply with the final regulations issued in April 2007 by the Internal Revenue Service under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, pursuant to Article 7 of the Director Retirement Agreement, the parties to the Director Retirement Agreement desire to amend the Director Retirement Agreement;

NOW, THEREFORE, in consideration of the premises, the mutual agreements herein set forth and such other consideration the sufficiency of which is hereby acknowledged, the Bank and the Director hereby amend the Director Retirement Agreement as follows:

Section 1. Amendment to Section 1.6 of the Director Retirement Agreement. Section 1.6 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

““Disability” means the Director: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months. Medical determination of Disability may be made by either the Social Security Administration or by the provider of disability insurance covering employees of the Bank, provided that the definition of “disability” applied under such insurance program complies with the requirements of the preceding sentence. Upon the request of the Plan Administrator, the Director must submit proof to the Plan Administrator of the Social Security Administration’s or the provider’s determination.”

Section 2. Amendment to Section 1.16 of the Director Retirement Agreement. Section 1.16 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

“Termination of Service” shall be construed to mean a Separation from Service, as defined in this Section 1.16, with the Bank’s Board of Directors for reasons other than a bona fide leave of absence that does not exceed six months, a Termination for Cause or death. Whether a Separation from Service has occurred shall be determined in accordance with the requirements of Section 409A of the Code, and shall mean the Director’s retirement or termination of service from the Board of Directors following a resignation from the Board of Directors or failure to be

reappointed or reelected to the Board of Directors. For these purposes, a Director shall not be deemed to have a Separation from Service if the Director serves on the Board of the Bank or any member of a controlled group of corporations with the Bank within the meaning of Treasury Regulation §1.409A-1(a)(3).”

Section 3. New Section 2.5 of the Director Retirement Agreement. Section 2.5 of the Director Retirement Agreement is hereby added to read in its entirety as follows:

“Distributions Upon Income Inclusion Under Section 409A of the Code. Upon the inclusion of any portion of the Accrual Balance into the Director’s income as a result of the failure of this non-qualified deferred compensation plan to comply with the requirements of Section 409A of the Code, to the extent such tax liability can be covered by the Director’s Accrual Balance, a distribution shall be made as soon as is administratively practicable following the discovery of the plan failure.”

Section 4. New Section 2.6 of the Director Retirement Agreement. Section 2.6 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

“Change in Form or Timing of Distributions. For distribution of benefits under this Article 2, the Director and the Bank may, subject to the terms of Article 7, amend the Agreement to delay the timing or change the form of distributions. Any such amendment:

(a) may not accelerate the time or schedule of any distribution, except as provided in Code Section 409A;

(b) must, for benefits distributable under Sections 2.1 and 2.2, be made at least twelve (12) months prior to the first scheduled distribution;

(c) must, for benefits distributable under Sections 2.1, 2.2 and 2.4, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and

(d) must take effect not less than twelve (12) months after the amendment is made.”

Section 5. Amendment to Article 7 of the Director Retirement Agreement. Article 7 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

“7.1 Amendments and Termination Generally. This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Director. If the Bank’s Board of Directors, however, determines that the Director is no longer a member of a select group of management or highly compensated employees, as that phrase applies to ERISA, for reasons other than death, Disability or retirement, the Bank may terminate this Agreement. In the event of such termination, the benefit shall be the Accrual Balance determined as of the date the Agreement is terminated; provided, however, that except as provided in Section 7.2, the termination of this Agreement shall not cause a distribution of

2

benefits under this Agreement. Rather, in the event of such termination, benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3.

Additionally, the Bank may unilaterally amend this Agreement to conform with written directives to the Bank from its auditors or banking regulators or to comply with legislative or tax law, including without limitation Section 409A of the Code and any and all regulations and guidance promulgated thereunder.

7.2 Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 7.2, if the Bank terminates this Agreement in the following circumstances:

(a) Within thirty (30) days before a Change in Control, provided that all distributions are made no later than twelve (12) months following such irrevocable termination of this Agreement and further provided that all of the arrangements sponsored by the Bank that would be aggregated with this Agreement under Treasury Regulation §1.409A-1(c)(2) are terminated so the Director and all participants under the other aggregated arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Bank irrevocably takes all necessary action to terminate such arrangements;

(b) With twelve (12) months of a dissolution of the Bank taxed under Section 331 of the Code or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred under this Agreement are included in the Director’s gross income in the latest of (i) the calendar year in which this Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practicable; or

(c) Upon the Bank’s termination of this and all other arrangements that would be aggregated with this Agreement pursuant to Treasury Regulation §1.409A-1(c) if the Director participated in such arrangements (“Similar Arrangements”), provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank, (ii) no payments are made within twelve (12) months of the termination of the arrangements other than payments that would be payable under the terms of the arrangements if the termination had not occurred, (iii) all termination distributions are made no later than twenty-four (24) months following such termination, and (iv) the Bank does not adopt any new arrangement that would be a Similar Arrangement for a minimum of three (3) years following the date the Bank takes all necessary action to irrevocably terminate and liquidate the Agreement;

the Bank may distribute the Accrual Balance, determined as of the date of the termination of the Agreement, to the Director in a lump sum subject to the above terms.”

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Section 6. Amendment to Section 9.4 of the Director Retirement Agreement. Section 9.4 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

“Tax Withholding and Reporting. The Bank shall withhold any taxes that are required to be withheld, including but limited to taxes owed under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement. The Director acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies). Further, the Bank shall satisfy all applicable reporting requirements, including those under Section 409A of the Code and regulations thereunder.”

Section 7. Effectiveness. This Amendment shall be deemed effective as of the date first above written, as if executed on such date. Except as expressly set forth herein, this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Director Retirement Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect and shall be otherwise unaffected.

Section 8. Governing Law. This Amendment and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

Section 9. Compliance with Section 409A. This Agreement shall be interpreted and administered consistent with Section 409A of the Code.

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IN WITNESS WHEREOF, the Bank has duly executed this Amendment as of the day and year first written above.

PEOPLES FEDERAL SAVINGS BANK
By:	/s/ Thomas J. Leetch
Name:	Thomas J. Leetch
Title:	President & CEO
DIRECTOR
/s/ Maurice H. Sullivan, Jr.
Maurice H. Sullivan, Jr.

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EX-10.12

Exhibit 10.12

PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

PEOPLES FEDERAL SAVINGS BANK

DIRECTOR RETIREMENT AGREEMENT

THIS DIRECTOR RETIREMENT AGREEMENT (the “Agreement”) is adopted this 29th day of November, 2004, by and between PEOPLES FEDERAL SAVINGS BANK, a federally-chartered corporation located in Boston, Massachusetts (the “Bank”), and VINCENT MANNERING, (the “Director”).

To encourage the Director to remain a member of the Bank’s Board of Directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets.

The Bank and the Director agree as provided herein.

Article 1

Definitions

Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1 “Accrual Balance” means the liability that should be accrued by the Bank, under Generally Accepted Accounting Principles (“GAAP”), for the Bank’s obligation to the Director under this Agreement, by applying Accounting Principles Board Opinion Number 12 (“APB 12”) as amended by Statement of Financial Accounting Standards Number 106 (“FAS 106”) and the Discount Rate. Any one of a variety of amortization methods may be used to determine the Accrual Balance. However, once chosen, the method must be consistently applied. The Accrual Balance shall be reported by the Bank to the Director on Schedule A.

1.2 “Beneficiary” means each designated person, or the estate of the deceased Director, entitled to benefits, if any, upon the death of the Director determined pursuant to Article 4.

1.3 “Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that the Director completes, signs and returns to the Plan Administrator to designate one or more Beneficiaries.

1.4 “Change in Control” means:

(a) There occurs a “Change in Control” of the Bank, as defined or determined by either the Bank’s primary federal regulator or under regulations promulgated by such regulator;

(b) As a result of, or in connection with, any merger or other business combination, sale of assets or contested election, wherein the persons who were non-employee directors of the Bank before such transaction or event cease to constitute a majority of the Board of Directors of the Bank or any successor to the Bank;

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Director Retirement Agreement

(c) The Bank transfers all or substantially all of its assets to another corporation or entity which is not an affiliate of the Bank;

(d) The Bank is merged or consolidated with another corporation or entity and, as a result of such merger or consolidation, less than sixty percent (60%) of the equity interest in the surviving or resulting corporation is owned by the former shareholders or depositors of the Bank; or

(e) The Bank sells or transfers more than a fifty percent (50%) equity interest in the Bank to another person or entity which is not an affiliate of the Bank, excluding a sale or transfer to a person or persons who are employed by the Bank.

Notwithstanding anything in this Agreement to the contrary, in no event shall the conversion of the Bank from mutual to stock form (including, without limitation, through the formation of a stock holding company) or the reorganization of the Bank into the mutual holding company form of organization constitute a Change in Control for purposes of this Agreement.

1.5 “Code” means the Internal Revenue Code of 1986, as amended.

1.6 “Disability” means the Director’s suffering a sickness, accident or injury which has been determined by the insurance carrier of any individual or group disability insurance policy covering the Director, or by the Social Security Administration, to be a disability rendering the Director totally and permanently disabled. The Director must submit proof to the Plan Administrator of the insurance carrier’s or Social Security Administration’s determination upon the request of the Plan Administrator.

1.7 “Discount Rate” means the rate used by the Plan Administrator for determining the Accrual Balance. The initial Discount Rate is six and one quarter percent (6.25%). However, the Plan Administrator, in its sole discretion, may adjust the Discount Rate to maintain the rate within reasonable standards according to GAAP.

1.8 “Early Termination” means the Termination of Service before Normal Retirement Age for reasons other than death, Disability, Termination for Cause or following a Change in Control.

1.9 “Early Termination Date” means the month, day and year in which Early Termination occur.

1.10 “Effective Date” means December 1, 2004.

1.11 “Normal Retirement Age” means the Director’s 70^th birthday.

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Director Retirement Agreement

1.12 “Normal Retirement Date” means the later of the Normal Retirement Age or Termination of Service.

1.13 “Plan Administrator” means the plan administrator described in Article 8.

1.14 “Plan Year” means each twelve-month period commencing on the Effective Date.

1.15 “Termination for Cause” has that meaning set forth in Article 5.

1.16 “Termination of Service” means that the Director ceases to be a member of the Bank’s Board of Directors for any reason, voluntarily or involuntarily, other than by reason of a leave of absence approved by the Bank or a Termination for Cause.

Article 2

Benefits During Lifetime

2.1 Normal Retirement Benefit. Upon Termination of Service on or after the Normal Retirement Age for reasons other than death, the Bank shall pay to the Director the benefit described in this Section 2.1 in lieu of any other benefit under this Article.

2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is Fourteen Thousand Six Hundred and Nine Dollars ($14,609).

2.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following the Director’s Normal Retirement Date. The annual benefit shall be paid to the Director for ten (10) years.

2.2 Early Termination Benefit. Upon Early Termination, the Bank shall pay to the Director the benefit described in this Section 2.2 in lieu of any other benefit under this Article.

2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 is the Early Termination Benefit set forth on Schedule A for the Plan Year during which the Early Termination Date occurs. This benefit is determined by vesting the Director in one hundred percent (100%) of the Accrual Balance.

2.2.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following the Director’s attainment of Normal Retirement Age. The annual benefit shall be paid to the Director for ten (10) years.

2.3 Disability Benefit. Upon Termination of Service due to Disability prior to Normal Retirement Age, the Bank shall pay to the Director the benefit described in this Section 2.3 in lieu of any other benefit under this Article.

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Director Retirement Agreement

2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is the Disability Benefit set forth on Schedule A for the Plan Year during which the Termination of Service occurs. This benefit is determined by vesting the Director in one hundred percent (100%) of the Accrual Balance.

2.3.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following the Director’s attainment of Normal Retirement Age. The annual benefit shall be paid to the Director for ten (10) years.

2.4 Change in Control Benefit. Upon a Change in Control, followed by the Director’s Termination of Service within twelve (12) months, the Bank shall pay to the Director the benefit described in this Section 2.4 in lieu of any other benefit under this Article.

2.4.1 Amount of Benefit. The annual benefit under this Section 2.4 is the Change in Control Benefit set forth on Schedule A for the Plan Year during which Termination of Service occurs. This benefit is determined by vesting the Director in one hundred percent (100%) of the Normal Retirement Benefit amount described in Section 2.1.1.

2.4.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following Termination of Service. The annual benefit shall be paid to the Director for ten (10) years.

Article 3

Death Benefits

3.1 Death During Active Service. If the Director dies while in the active service of the Bank, the Bank shall pay to the Beneficiary the benefit described in this Section 3.1. This benefit shall be paid in lieu of the benefits under Article 2.

3.1.1 Amount of Benefit. The benefit under this Section 3.1 is the Normal Retirement Benefit amount described in Section 2.1.1.

3.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Beneficiary in twelve (12) equal monthly installments commencing on the first day of the month following the date of the Director’s death. The annual benefit shall be paid to the Beneficiary for a period of ten (10) years.

3.2 Death During Payment of a Benefit. If the Director dies after any benefit payments have commenced under Article 2 of this Agreement, but before receiving all such payments, the Bank shall pay the remaining benefits to the Beneficiary at the same time and in the same amounts they would have been paid to the Director had the Director survived.

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Director Retirement Agreement

3.3 Death After Termination of Service But Before Payment of a Benefit Commences. If the Director is entitled to any benefit payments under Article 2 of this Agreement, but dies prior to the commencement of said benefit payments, the Bank shall pay the same benefit payments to the Beneficiary that the Director was entitled to prior to death except that the benefit payments shall commence on the first day of the month following the date of the Director’s death.

Article 4

Beneficiaries

4.1 Beneficiary Designation. The Director shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefits payable under this Agreement upon the death of the Director. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Bank in which the Director participates.

4.2 Beneficiary Designation: Change. The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. The Director’s Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved. The Director shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and accepted by the Plan Administrator prior to the Director’s death.

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.

4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director’s spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be paid to the personal representative of the Director’s estate.

4.5 Facility of Payment. If the Plan Administrator determines in its discretion that a benefit is to be paid to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct payment of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate

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Director Retirement Agreement

prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Director and the Director’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such payment amount.

Article 5

General Limitations

5.1 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement if the Bank’s Board of Directors terminates the Director’s service for:

(a) Personal dishonesty;

(b) Incompetence;

(c) Willful misconduct;

(d) Any breach of fiduciary duty involving personal profit;

(e) Intentional failure to perform stated duties; or

(f) Willful violation of any law, rule, regulation (other than traffic violations or similar offenses), or final cease and desist order.

5.2 Suicide or Misstatement. The Bank shall not pay any benefit under this Agreement if the Director commits suicide within two years after the Effective Date. In addition, the Bank shall not pay any benefit under this Agreement if the Director has made any material misstatement of fact on any application for life insurance owned by the Bank on the Director’s life.

5.3 Competition After Termination of Service. The Bank shall not pay any benefit under this Agreement if the Director, within twelve (12) months following Termination of Service, without the prior written consent of the Bank, engages in, becomes interested in, directly or indirectly, as a sole proprietor, as a partner in a partnership, or as a substantial shareholder in a corporation, or becomes associated with, in the capacity of employee, director, officer, principal, agent, trustee, or in any other capacity whatsoever, any enterprise conducted in the marketing area of the Bank, which enterprise is, or may deemed to be, competitive with any business carried on by the Bank as of the date of termination of the Director’s service or retirement. This section shall not apply following a Change in Control.

5.4 Excess Parachute Payment. Notwithstanding any provision of this Agreement to the contrary, to the extent any benefit would create an excise tax under the excess parachute rules of Section 280G of the Code, the Bank shall reduce the benefit paid under this Agreement to the maximum benefit that would not result in any such excise tax.

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

Article 6

Claims and Review Procedures

6.1 Claims Procedure. A Director or Beneficiary (“claimant”) who has not received benefits under the Agreement that he or she believes should be paid shall make a claim for such benefits as follows:

6.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits.

6.1.2 Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 90 days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

6.1.3 Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

(d) An explanation of the Agreement’s review procedures and the time limits applicable to such procedures; and

(e) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

6.2 Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:

6.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.

6.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

6.2.3 Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

6.2.4 Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

6.2.5 Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and

(d) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

Article 7

Amendments and Termination

This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Director.

Notwithstanding the previous paragraph in this Article 7, the Bank may amend or terminate this Agreement at any time if pursuant to legislative, judicial or regulatory action, continuation of the Agreement would (i) cause benefits to be taxable to the Director prior to actual receipt, or (ii) result in significant financial penalties or other significantly detrimental ramifications to the Bank (other than the financial impact of paying the benefits). Upon such amendment or termination the

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

Bank shall pay benefits to the Director as if Early Termination occurred on the date of such amendment or termination, regardless of whether Early Termination actually occurs.

Article 8

Administration of Agreement

8.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator which shall consist of the Board of Directors of the Bank, or such committee or person(s) as the Board of Directors of the Bank shall appoint. The Director may be a member of the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement.

8.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Bank.

8.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Director or Beneficiary shall be deemed to have any right, vested or nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the Discount Rate.

8.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.

8.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Termination of Service of the Director, and such other pertinent information as the Plan Administrator may reasonably require.

8.6 Annual Statement. The Plan Administrator shall provide to the Director, within 120 days after the end of each Plan Year, a statement setting forth the benefits payable under this Agreement.

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

Article 9

Miscellaneous

9.1 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators and transferees.

9.2 No Guarantee of Service. This Agreement is not an employment policy or contract. It does not give the Director the right to remain a director of the Bank, nor does it interfere with the Bank’s right to terminate the Director’s service. It also does not require the Director to remain a director nor interfere with the Director’s right to terminate service at any time.

9.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

9.4 Tax Withholding. The Bank shall withhold any taxes that, in its reasonable judgment, are required to be withheld from the benefits provided under this Agreement. The Director acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies).

9.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

9.6 Unfunded Arrangement. The Director and Beneficiary are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Director’s life is a general asset of the Bank to which the Director and Beneficiary have no preferred or secured claim.

9.7 Successors. The Bank shall not merge or consolidate into or with another company, or sell substantially all of its assets to another company, firm, or person unless such succeeding or continuing company, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor company.

9.8 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Director as to the subject matter hereof. No rights are granted to the Director by virtue of this Agreement other than those specifically set forth herein.

9.9 Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

9.10 Alternative Action. In the event it shall become impossible for the Bank or the Plan Administrator to perform any act required by this Agreement, the Bank or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Bank.

9.11 Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.

9.12 Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision has never been inserted herein.

9.13 Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Peoples Federal Savings Bank

435 Water Street

Boston, MA 02135

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

Any notice or filing required or permitted to be given to the Director under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Director.

IN WITNESS WHEREOF, the Director and a duly authorized representative of the Bank have signed this Agreement.

DIRECTOR:	BANK:
	PEOPLES FEDERAL SAVINGS BANK
	By
Vincent Mannering	Title	Chairman

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Director Retirement Plan	Plan Year Reporting
Schedule A

Vincent Mannering

[ILLEGIBLE] [ILLEGIBLE] [ILLEGIBLE] [ILLEGIBLE]					Early Termination			Disability			Change of Control			Pre-retire Death Benefit Monthly Installments
					Monthly Installments Payable at Normal Retirement Date for 10 Years			Monthly Installments Payable at Normal Retirement Date for 10 Years			Monthly Installments Payable at Termination for 10 Years
Period Ending	Discount Rate		Benefit Level	Accrual Balance	Vesting		Based On Accrual	Vesting		Based On Accrual	Vesting		Based On Benefit	Based On Benefit
	(1)		(2)	(3)	(4)		(5)	(6)		(7)	(8)		(9)	(10)
Nov 2005 1	6.25	%	14,609	3,718	100	%	1,351	100	%	1,351	100	%	14,609	14,609

¹ The first line reflects 12 months of data, December 2004 to November 2005.

* IF THERE IS A CONFLICT IN ANY TERMS OR PROVISIONS BETWEEN THIS SCHEDULE A AND THE AGREEMENT, THE TERMS AND PROVISIONS OF THE AGREEMENT SHALL PREVAIL. IF A TRIGGERING EVENT OCCURS, REFER TO THE AGREEMENT TO DETERMINE THE ACTUAL BENEFIT AMOUNT BASED ON THE DATE OF THE EVENT.

PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

BENEFICIARY DESIGNATION FORM

I, Vincent Mannering, designate the following as beneficiary of benefits under the Agreement payable following my death:

Primary:
Colleen Mannering	100	%
		%
Contingent:
Vincent A., Kevin R. and	331/3% each
James P. Mannering		%

Notes:

• Please PRINT CLEARLY or TYPE the names of the beneficiaries.

• To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date or the trust agreement

• To name your estate as beneficiary, please write “Estate of [your name]”.

• Be aware that none of the contingent beneficiaries will receive anything unless ALL of the primary beneficiaries predecease you.

I understand that I may change these beneficiary designations by delivering a new written designation to the Plan Administrator, which shall be effective only upon receipt and acknowledgment by the Plan Administrator prior to my death. I further understand that these designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.

Name:	Vincent G. Mannering
Signature:		Date:	12/21/04

Received by the Plan Administrator this 29 day of November, 2004.

By:
Title:	Chairman

FIRST AMENDMENT TO

DIRECTOR RETIREMENT AGREEMENT

First Amendment, dated as of December 16, 2008 (the “Amendment”), to the Director Retirement Agreement, dated as of November 29, 2004 (as amended, the “Director Retirement Agreement”), by and among Peoples Federal Savings Bank (the “Bank”) and Vincent Mannering (the “Director”). Capitalized terms which are not defined herein shall have the same meaning as set forth in the Director Retirement Agreement.

W I T N E S S E T H:

WHEREAS, the parties desires to amend the Director Retirement Agreement to comply with the final regulations issued in April 2007 by the Internal Revenue Service under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, pursuant to Article 7 of the Director Retirement Agreement, the parties to the Director Retirement Agreement desire to amend the Director Retirement Agreement;

NOW, THEREFORE, in consideration of the premises, the mutual agreements herein set forth and such other consideration the sufficiency of which is hereby acknowledged, the Bank and the Director hereby amend the Director Retirement Agreement as follows:

Section 1. Amendment to Section 1.6 of the Director Retirement Agreement. Section 1.6 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

““Disability” means the Director: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months. Medical determination of Disability may be made by either the Social Security Administration or by the provider of disability insurance covering employees of the Bank, provided that the definition of “disability” applied under such insurance program complies with the requirements of the preceding sentence. Upon the request of the Plan Administrator, the Director must submit proof to the Plan Administrator of the Social Security Administration’s or the provider’s determination.”

Section 2. Amendment to Section 1.16 of the Director Retirement Agreement. Section 1.16 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

“Termination of Service” shall be construed to mean a Separation from Service, as defined in this Section 1.16, with the Bank’s Board of Directors for reasons other than a bona fide leave of absence that does not exceed six months, a Termination for Cause or death. Whether a Separation from Service has occurred shall be determined in accordance with the requirements of Section 409A of the Code, and shall mean the Director’s retirement or termination of service from the Board of Directors following a resignation from the Board of Directors or failure to be

reappointed or reelected to the Board of Directors. For these purposes, a Director shall not be deemed to have a Separation from Service if the Director serves on the Board of the Bank or any member of a controlled group of corporations with the Bank within the meaning of Treasury Regulation §1.409A-1(a)(3).”

Section 3. New Section 2.5 of the Director Retirement Agreement. Section 2.5 of the Director Retirement Agreement is hereby added to read in its entirety as follows:

“Distributions Upon Income Inclusion Under Section 409A of the Code. Upon the inclusion of any portion of the Accrual Balance into the Director’s income as a result of the failure of this non-qualified deferred compensation plan to comply with the requirements of Section 409A of the Code, to the extent such tax liability can be covered by the Director’s Accrual Balance, a distribution shall be made as soon as is administratively practicable following the discovery of the plan failure.”

Section 4. New Section 2.6 of the Director Retirement Agreement. Section 2.6 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

“Change in Form or Timing of Distributions. For distribution of benefits under this Article 2, the Director and the Bank may, subject to the terms of Article 7, amend the Agreement to delay the timing or change the form of distributions. Any such amendment:

(a) may not accelerate the time or schedule of any distribution, except as provided in Code Section 409A;

(b) must, for benefits distributable under Sections 2.1 and 2.2, be made at least twelve (12) months prior to the first scheduled distribution;

(c) must, for benefits distributable under Sections 2.1, 2.2 and 2.4, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and

(d) must take effect not less than twelve (12) months after the amendment is made.”

Section 5. Amendment to Article 7 of the Director Retirement Agreement. Article 7 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

“7.1 Amendments and Termination Generally. This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Director. If the Bank’s Board of Directors, however, determines that the Director is no longer a member of a select group of management or highly compensated employees, as that phrase applies to ERISA, for reasons other than death, Disability or retirement, the Bank may terminate this Agreement. In the event of such termination, the benefit shall be the Accrual Balance determined as of the date the Agreement is terminated; provided, however, that except as provided in Section 7.2, the termination of this Agreement shall not cause a distribution of

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benefits under this Agreement. Rather, in the event of such termination, benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3.

Additionally, the Bank may unilaterally amend this Agreement to conform with written directives to the Bank from its auditors or banking regulators or to comply with legislative or tax law, including without limitation Section 409A of the Code and any and all regulations and guidance promulgated thereunder.

7.2 Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 7.2, if the Bank terminates this Agreement in the following circumstances:

(a) Within thirty (30) days before a Change in Control, provided that all distributions are made no later than twelve (12) months following such irrevocable termination of this Agreement and further provided that all of the arrangements sponsored by the Bank that would be aggregated with this Agreement under Treasury Regulation §1.409A-1(c)(2) are terminated so the Director and all participants under the other aggregated arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Bank irrevocably takes all necessary action to terminate such arrangements;

(b) With twelve (12) months of a dissolution of the Bank taxed under Section 331 of the Code or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred under this Agreement are included in the Director’s gross income in the latest of (i) the calendar year in which this Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practicable; or

(c) Upon the Bank’s termination of this and all other arrangements that would be aggregated with this Agreement pursuant to Treasury Regulation §1.409A-1(c) if the Director participated in such arrangements (“Similar Arrangements”), provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank, (ii) no payments are made within twelve (12) months of the termination of the arrangements other than payments that would be payable under the terms of the arrangements if the termination had not occurred, (iii) all termination distributions are made no later than twenty-four (24) months following such termination, and (iv) the Bank does not adopt any new arrangement that would be a Similar Arrangement for a minimum of three (3) years following the date the Bank takes all necessary action to irrevocably terminate and liquidate the Agreement;

the Bank may distribute the Accrual Balance, determined as of the date of the termination of the Agreement, to the Director in a lump sum subject to the above terms.”

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Section 6. Amendment to Section 9.4 of the Director Retirement Agreement. Section 9.4 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

“Tax Withholding and Reporting. The Bank shall withhold any taxes that are required to be withheld, including but limited to taxes owed under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement. The Director acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies). Further, the Bank shall satisfy all applicable reporting requirements, including those under Section 409A of the Code and regulations thereunder.”

Section 7. Effectiveness. This Amendment shall be deemed effective as of the date first above written, as if executed on such date. Except as expressly set forth herein, this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Director Retirement Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect and shall be otherwise unaffected.

Section 8. Governing Law. This Amendment and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

Section 9. Compliance with Section 409A. This Agreement shall be interpreted and administered consistent with Section 409A of the Code.

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IN WITNESS WHEREOF, the Bank has duly executed this Amendment as of the day and year first written above.

PEOPLES FEDERAL SAVINGS BANK
By:	/s/ Thomas J. Leetch
Name:	Thomas J. Leetch
Title:	President & CEO
DIRECTOR
/s/ Vincent Mannering
Vincent Mannering

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EX-10.13

Exhibit 10.13

PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

PEOPLES FEDERAL SAVINGS BANK

DIRECTOR RETIREMENT AGREEMENT

THIS DIRECTOR RETIREMENT AGREEMENT (the “Agreement”) is adopted this 29th day of November, 2004, by and between PEOPLES FEDERAL SAVINGS BANK, a federally-chartered corporation located in Boston, Massachusetts (the “Bank”), and JOHN REEN (the “Director”).

To encourage the Director to remain a member of the Bank’s Board of Directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets.

The Bank and the Director agree as provided herein.

Article 1

Definitions

Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1 “Accrual Balance” means the liability that should be accrued by the Bank, under Generally Accepted Accounting Principles (“GAAP”), for the Bank’s obligation to the Director under this Agreement, by applying Accounting Principles Board Opinion Number 12 (“APB 12”) as amended by Statement of Financial Accounting Standards Number 106 (“FAS 106”) and the Discount Rate. Any one of a variety of amortization methods may be used to determine the Accrual Balance. However, once chosen, the method must be consistently applied. The Accrual Balance shall be reported by the Bank to the Director on Schedule A.

1.2 “Beneficiary” means each designated person, or the estate of the deceased Director, entitled to benefits, if any, upon the death of the Director determined pursuant to Article 4.

1.3 “Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that the Director completes, signs and returns to the Plan Administrator to designate one or more Beneficiaries.

1.4 “Change in Control” means:

(a) There occurs a “Change in Control” of the Bank, as defined or determined by either the Bank’s primary federal regulator or under regulations promulgated by such regulator;

(b) As a result of, or in connection with, any merger or other business combination, sale of assets or contested election, wherein the persons who were non-employee directors of the Bank before such transaction or event cease to constitute a majority of the Board of Directors of the Bank or any successor to the Bank;

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Director Retirement Agreement

(c) The Bank transfers all or substantially all of its assets to another corporation or entity which is not an affiliate of the Bank;

(d) The Bank is merged or consolidated with another corporation or entity and, as a result of such merger or consolidation, less than sixty percent (60%) of the equity interest in the surviving or resulting corporation is owned by the former shareholders or depositors of the Bank; or

(e) The Bank sells or transfers more than a fifty percent (50%) equity interest in the Bank to another person or entity which is not an affiliate of the Bank, excluding a sale or transfer to a person or persons who are employed by the Bank.

Notwithstanding anything in this Agreement to the contrary, in no event shall the conversion of the Bank from mutual to stock form (including, without limitation, through the formation of a stock holding company) or the reorganization of the Bank into the mutual holding company form of organization constitute a Change in Control for purposes of this Agreement.

1.5 “Code” means the Internal Revenue Code of 1986, as amended.

1.6 “Disability” means the Director’s suffering a sickness, accident or injury which has been determined by the insurance carrier of any individual or group disability insurance policy covering the Director, or by the Social Security Administration, to be a disability rendering the Director totally and permanently disabled. The Director must submit proof to the Plan Administrator of the insurance carrier’s or Social Security Administration’s determination upon the request of the Plan Administrator.

1.7 “Discount Rate” means the rate used by the Plan Administrator for determining the Accrual Balance. The initial Discount Rate is six and one quarter percent (6.25%). However, the Plan Administrator, in its sole discretion, may adjust the Discount Rate to maintain the rate within reasonable standards according to GAAP.

1.8 “Early Termination” means the Termination of Service before Normal Retirement Age for reasons other than death, Disability, Termination for Cause or following a Change in Control.

1.9 “Early Termination Date” means the month, day and year in which Early Termination occurs.

1.10 “Effective Date” means December 1, 2004.

1.11 “Normal Retirement Age” means the Director’s 70^th birthday.

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Director Retirement Agreement

1.12 “Normal Retirement Date” means the later of the Normal Retirement Age or Termination of Service.

1.13 “Plan Administrator” means the plan administrator described in Article 8.

1.14 “Plan Year” means each twelve-month period commencing on the Effective Date.

1.15 “Termination for Cause” has that meaning set forth in Article 5.

1.16 “Termination of Service” means that the Director ceases to be a member of the Bank’s Board of Directors for any reason, voluntarily or involuntarily, other than by reason of a leave of absence approved by the Bank or a Termination for Cause.

Article 2

Benefits During Lifetime

2.1 Normal Retirement Benefit. Upon Termination of Service on or after the Normal Retirement Age for reasons other than death, the Bank shall pay to the Director the benefit described in this Section 2.1 in lieu of any other benefit under this Article.

2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is Nine Thousand Eight Hundred Sixty Nine Dollars ($9,869).

2.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following the Director’s Normal Retirement Date. The annual benefit shall be paid to the Director for ten (10) years.

2.2 Early Termination Benefit. Upon Early Termination, the Bank shall pay to the Director the benefit described in this Section 2.2 in lieu of any other benefit under this Article.

2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 is the Early Termination Benefit set forth on Schedule A for the Plan Year during which the Early Termination Date occurs. This benefit is determined by vesting the Director in one hundred percent (100%) of the Accrual Balance.

2.2.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following the Director’s attainment of Normal Retirement Age. The annual benefit shall be paid to the Director for ten (10) years.

2.3 Disability Benefit. Upon Termination of Service due to Disability prior to Normal Retirement Age, the Bank shall pay to the Director the benefit described in this Section 2.3 in lieu of any other benefit under this Article.

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Director Retirement Agreement

2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is the Disability Benefit set forth on Schedule A for the Plan Year during which the Termination of Service occurs. This benefit is determined by vesting the Director in one hundred percent (100%) of the Accrual Balance.

2.3.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following the Director’s attainment of Normal Retirement Age. The annual benefit shall be paid to the Director for ten (10) years.

2.4 Change in Control Benefit. Upon a Change in Control, followed by the Director’s Termination of Service within twelve (12) months, the Bank shall pay to the Director the benefit described in this Section 2.4 in lieu of any other benefit under this Article.

2.4.1 Amount of Benefit. The annual benefit under this Section 2.4 is the Change in Control Benefit set forth on Schedule A for the Plan Year during which Termination of Service occurs. This benefit is determined by vesting the Director in one hundred percent (100%) of the Normal Retirement Benefit amount described in Section 2.1.1.

2.4.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following Termination of Service. The annual benefit shall be paid to the Director for ten (10) years.

Article 3

Death Benefits

3.1 Death During Active Service. If the Director dies while in the active service of the Bank, the Bank shall pay to the Beneficiary the benefit described in this Section 3.1. This benefit shall be paid in lieu of the benefits under Article 2.

3.1.1 Amount of Benefit. The benefit under this Section 3.1 is the Normal Retirement Benefit amount described in Section 2.1.1.

3.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Beneficiary in twelve (12) equal monthly installments commencing on the first day of the month following the date of the Director’s death. The annual benefit shall be paid to the Beneficiary for a period of ten (10) years.

3.2 Death During Payment of a Benefit. If the Director dies after any benefit payments have commenced under Article 2 of this Agreement, but before receiving all such payments, the Bank shall pay the remaining benefits to the Beneficiary at the same time and in the same amounts they would have been paid to the Director had the Director survived.

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3.3 Death After Termination of Service But Before Payment of a Benefit Commences. If the Director is entitled to any benefit payments under Article 2 of this Agreement, but dies prior to the commencement of said benefit payments, the Bank shall pay the same benefit payments to the Beneficiary that the Director was entitled to prior to death except that the benefit payments shall commence on the first day of the month following the date of the Director’s death.

Article 4

Beneficiaries

4.1 Beneficiary Designation. The Director shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefits payable under this Agreement upon the death of the Director. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Bank in which the Director participates.

4.2 Beneficiary Designation: Change. The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. The Director’s Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved. The Director shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and accepted by the Plan Administrator prior to the Director’s death.

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.

4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director’s spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be paid to the personal representative of the Director’s estate.

4.5 Facility of Payment. If the Plan Administrator determines in its discretion that a benefit is to be paid to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct payment of such benefit to the guardian, legal representative or person having the care or

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Director Retirement Agreement

custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Director and the Director’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such payment amount.

Article 5

General Limitations

5.1 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement if the Bank’s Board of Directors terminates the Director’s service for:

(a) Personal dishonesty;

(b) Incompetence;

(c) Willful misconduct;

(d) Any breach of fiduciary duty involving personal profit;

(e) Intentional failure to perform stated duties; or

(f) Willful violation of any law, rule, regulation (other than traffic violations or similar offenses), or final cease and desist order.

5.2 Suicide or Misstatement. The Bank shall not pay any benefit under this Agreement if the Director commits suicide within two years after the Effective Date. In addition, the Bank shall not pay any benefit under this Agreement if the Director has made any material misstatement of fact on any application for life insurance owned by the Bank on the Director’s life.

5.3 Competition After Termination of Service. The Bank shall not pay any benefit under this Agreement if the Director, within twelve (12) months following Termination of Service, without the prior written consent of the Bank, engages in, becomes interested in, directly or indirectly, as a sole proprietor, as a partner in a partnership, or as a substantial shareholder in a corporation, or becomes associated with, in the capacity of employee, director, officer, principal, agent, trustee, or in any other capacity whatsoever, any enterprise conducted in the marketing area of the Bank, which enterprise is, or may deemed to be, competitive with any business carried on by the Bank as of the date of termination of the Director’s service or retirement. This section shall not apply following a Change in Control.

5.4 Excess Parachute Payment. Notwithstanding any provision of this Agreement to the contrary, to the extent any benefit would create an excise tax under the excess

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parachute rules of Section 280G of the Code, the Bank shall reduce the benefit paid under this Agreement to the maximum benefit that would not result in any such excise tax.

Article 6

Claims and Review Procedures

6.1 Claims Procedure. A Director or Beneficiary (“claimant”) who has not received benefits under the Agreement that he or she believes should be paid shall make a claim for such benefits as follows:

6.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits.

6.1.2 Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 90 days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

6.1.3 Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

(d) An explanation of the Agreement’s review procedures and the time limits applicable to such procedures; and

(e) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

6.2 Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:

6.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.

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6.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

6.2.3 Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

6.2.4 Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

6.2.5 Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and

(d) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

Article 7

Amendments and Termination

This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Director.

Notwithstanding the previous paragraph in this Article 7, the Bank may amend or terminate this Agreement at any time if, pursuant to legislative, judicial or regulatory action, continuation

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Director Retirement Agreement

of the Agreement would (i) cause benefits to be taxable to the Director prior to actual receipt, or (ii) result in significant financial penalties or other significantly detrimental ramifications to the Bank (other than the financial impact of paying the benefits). Upon such amendment or termination the Bank shall pay benefits to the Director as if Early Termination occurred on the date of such amendment or termination, regardless of whether Early Termination actually occurs.

Article 8

Administration of Agreement

8.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator which shall consist of the Board of Directors of the Bank, or such committee or person(s) as the Board of Directors of the Bank shall appoint. The Director may be a member of the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement.

8.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Bank.

8.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Director or Beneficiary shall be deemed to have any right, vested or nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the Discount Rate.

8.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.

8.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Termination of Service of the Director, and such other pertinent information as the Plan Administrator may reasonably require.

8.6 Annual Statement. The Plan Administrator shall provide to the Director, within 120 days after the end of each Plan Year, a statement setting forth the benefits payable under this Agreement.

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Director Retirement Agreement

Article 9

Miscellaneous

9.1 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators and transferees.

9.2 No Guarantee of Service. This Agreement is not an employment policy or contract. It does not give the Director the right to remain a director of the Bank, nor does it interfere with the Bank’s right to terminate the Director’s service. It also does not require the Director to remain a director nor interfere with the Director’s right to terminate service at any time.

9.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

9.4 Tax Withholding. The Bank shall withhold any taxes that, in its reasonable judgment, are required to be withheld from the benefits provided under this Agreement. The Director acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies).

9.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

9.6 Unfunded Arrangement. The Director and Beneficiary are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Director’s life is a general asset of the Bank to which the Director and Beneficiary have no preferred or secured claim.

9.7 Successors. The Bank shall not merge or consolidate into or with another company, or sell substantially all of its assets to another company, firm, or person unless such succeeding or continuing company, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor company.

9.8 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Director as to the subject matter hereof. No rights are granted to the Director by virtue of this Agreement other than those specifically set forth herein.

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9.9 Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

9.10 Alternative Action. In the event it shall become impossible for the Bank or the Plan Administrator to perform any act required by this Agreement, the Bank or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Bank.

9.11 Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.

9.12 Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision has never been inserted herein.

9.13 Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Peoples Federal Savings Bank

435 Water Street

Boston, MA 02135

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

Any notice or filing required or permitted to be given to the Director under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Director.

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

IN WITNESS WHEREOF, the Director and a duly authorized representative of the Bank have signed this Agreement.

DIRECTOR:	BANK:
	PEOPLES FEDERAL SAVINGS BANK
/s/ John Reen	By:	/s/ Maurice H. Sullivan, Jr.
John Reen	Title:	Chairman

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

BENEFICIARY DESIGNATION FORM

I, John Reen, designate the following as beneficiary of benefits under the Agreement payable following my death:

Primary:
	%
	%
Contingent:
	%
	%

Notes:

• Please PRINT CLEARLY or TYPE the names of the beneficiaries.

• To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement.

• To name your estate as beneficiary, please write “Estate of [your name]”.

• Be aware that none of the contingent beneficiaries will receive anything unless ALL of the primary beneficiaries predecease you.

I understand that I may change these beneficiary designations by delivering a new written designation to the Plan Administrator, which shall be effective only upon receipt and acknowledgment by the Plan Administrator prior to my death. I further understand that these designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.

Name:
Signature:	Date:

Received by the Plan Administrator this      day of             , 20    .

By:

Title:

FIRST AMENDMENT TO

DIRECTOR RETIREMENT AGREEMENT

First Amendment, dated as of December 16, 2008 (the “Amendment”), to the Director Retirement Agreement, dated as of November 29, 2004 (as amended, the “Director Retirement Agreement”), by and among Peoples Federal Savings Bank (the “Bank”) and John Reen (the “Director”). Capitalized terms which are not defined herein shall have the same meaning as set forth in the Director Retirement Agreement.

W I T N E S S E T H:

WHEREAS, the parties desires to amend the Director Retirement Agreement to comply with the final regulations issued in April 2007 by the Internal Revenue Service under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, pursuant to Article 7 of the Director Retirement Agreement, the parties to the Director Retirement Agreement desire to amend the Director Retirement Agreement;

NOW, THEREFORE, in consideration of the premises, the mutual agreements herein set forth and such other consideration the sufficiency of which is hereby acknowledged, the Bank and the Director hereby amend the Director Retirement Agreement as follows:

Section 1. Amendment to Section 1.6 of the Director Retirement Agreement. Section 1.6 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

““Disability” means the Director: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months. Medical determination of Disability may be made by either the Social Security Administration or by the provider of disability insurance covering employees of the Bank, provided that the definition of “disability” applied under such insurance program complies with the requirements of the preceding sentence. Upon the request of the Plan Administrator, the Director must submit proof to the Plan Administrator of the Social Security Administration’s or the provider’s determination.”

Section 2. Amendment to Section 1.16 of the Director Retirement Agreement. Section 1.16 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

“Termination of Service” shall be construed to mean a Separation from Service, as defined in this Section 1.16, with the Bank’s Board of Directors for reasons other than a bona fide leave of absence that does not exceed six months, a Termination for Cause or death. Whether a Separation from Service has occurred shall be determined in accordance with the requirements of Section 409A of the Code, and shall mean the Director’s retirement or termination of service from the Board of Directors following a resignation from the Board of Directors or failure to be

reappointed or reelected to the Board of Directors. For these purposes, a Director shall not be deemed to have a Separation from Service if the Director serves on the Board of the Bank or any member of a controlled group of corporations with the Bank within the meaning of Treasury Regulation §1.409A-1(a)(3).”

Section 3. New Section 2.5 of the Director Retirement Agreement. Section 2.5 of the Director Retirement Agreement is hereby added to read in its entirety as follows:

“Distributions Upon Income Inclusion Under Section 409A of the Code. Upon the inclusion of any portion of the Accrual Balance into the Director’s income as a result of the failure of this non-qualified deferred compensation plan to comply with the requirements of Section 409A of the Code, to the extent such tax liability can be covered by the Director’s Accrual Balance, a distribution shall be made as soon as is administratively practicable following the discovery of the plan failure.”

Section 4. New Section 2.6 of the Director Retirement Agreement. Section 2.6 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

“Change in Form or Timing of Distributions. For distribution of benefits under this Article 2, the Director and the Bank may, subject to the terms of Article 7, amend the Agreement to delay the timing or change the form of distributions. Any such amendment:

(a) may not accelerate the time or schedule of any distribution, except as provided in Code Section 409A;

(b) must, for benefits distributable under Sections 2.1 and 2.2, be made at least twelve (12) months prior to the first scheduled distribution;

(c) must, for benefits distributable under Sections 2.1, 2.2 and 2.4, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and

(d) must take effect not less than twelve (12) months after the amendment is made.”

Section 5. Amendment to Article 7 of the Director Retirement Agreement. Article 7 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

“7.1 Amendments and Termination Generally. This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Director. If the Bank’s Board of Directors, however, determines that the Director is no longer a member of a select group of management or highly compensated employees, as that phrase applies to ERISA, for reasons other than death, Disability or retirement, the Bank may terminate this Agreement. In the event of such termination, the benefit shall be the Accrual Balance determined as of the date the Agreement is terminated; provided, however, that except as provided in Section 7.2, the termination of this Agreement shall not cause a distribution of

2

benefits under this Agreement. Rather, in the event of such termination, benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3.

Additionally, the Bank may unilaterally amend this Agreement to conform with written directives to the Bank from its auditors or banking regulators or to comply with legislative or tax law, including without limitation Section 409A of the Code and any and all regulations and guidance promulgated thereunder.

7.2 Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 7.2, if the Bank terminates this Agreement in the following circumstances:

(a) Within thirty (30) days before a Change in Control, provided that all distributions are made no later than twelve (12) months following such irrevocable termination of this Agreement and further provided that all of the arrangements sponsored by the Bank that would be aggregated with this Agreement under Treasury Regulation §1.409A-1(c)(2) are terminated so the Director and all participants under the other aggregated arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Bank irrevocably takes all necessary action to terminate such arrangements;

(b) With twelve (12) months of a dissolution of the Bank taxed under Section 331 of the Code or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred under this Agreement are included in the Director’s gross income in the latest of (i) the calendar year in which this Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practicable; or

(c) Upon the Bank’s termination of this and all other arrangements that would be aggregated with this Agreement pursuant to Treasury Regulation §1.409A-1(c) if the Director participated in such arrangements (“Similar Arrangements”), provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank, (ii) no payments are made within twelve (12) months of the termination of the arrangements other than payments that would be payable under the terms of the arrangements if the termination had not occurred, (iii) all termination distributions are made no later than twenty-four (24) months following such termination, and (iv) the Bank does not adopt any new arrangement that would be a Similar Arrangement for a minimum of three (3) years following the date the Bank takes all necessary action to irrevocably terminate and liquidate the Agreement;

the Bank may distribute the Accrual Balance, determined as of the date of the termination of the Agreement, to the Director in a lump sum subject to the above terms.”

3

Section 6. Amendment to Section 9.4 of the Director Retirement Agreement. Section 9.4 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

“Tax Withholding and Reporting. The Bank shall withhold any taxes that are required to be withheld, including but limited to taxes owed under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement. The Director acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies). Further, the Bank shall satisfy all applicable reporting requirements, including those under Section 409A of the Code and regulations thereunder.”

Section 7. Effectiveness. This Amendment shall be deemed effective as of the date first above written, as if executed on such date. Except as expressly set forth herein, this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Director Retirement Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect and shall be otherwise unaffected.

Section 8. Governing Law. This Amendment and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

Section 9. Compliance with Section 409A. This Agreement shall be interpreted and administered consistent with Section 409A of the Code.

4

IN WITNESS WHEREOF, the Bank has duly executed this Amendment as of the day and year first written above.

PEOPLES FEDERAL SAVINGS BANK
By:	/s/ Thomas J. Leetch
Name:	Thomas J. Leetch
Title:	President & CEO
DIRECTOR
/s/ John Reen
John Reen

5

EX-10.14

Exhibit 10.14

PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

PEOPLES FEDERAL SAVINGS BANK

DIRECTOR RETIREMENT AGREEMENT

THIS DIRECTOR RETIREMENT AGREEMENT (the “Agreement”) is adopted this 29th day of November, 2004, by and between PEOPLES FEDERAL SAVINGS BANK, a federally-chartered corporation located in Boston, Massachusetts (the “Bank”), and MAURICE H. SULLIVAN III (the “Director”).

To encourage the Director to remain a member of the Bank’s Board of Directors, the Bank is willing to provide retirement benefits to the Director. The Bank will pay the benefits from its general assets.

The Bank and the Director agree as provided herein.

Article 1

Definitions

Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1 “Accrual Balance” means the liability that should be accrued by the Bank, under Generally Accepted Accounting Principles (“GAAP”), for the Bank’s obligation to the Director under this Agreement, by applying Accounting Principles Board Opinion Number 12 (“APB 12”) as amended by Statement of Financial Accounting Standards Number 106 (“FAS 106”) and the Discount Rate. Any one of a variety of amortization methods may be used to determine the Accrual Balance. However, once chosen, the method must be consistently applied. The Accrual Balance shall be reported by the Bank to the Director on Schedule A.

1.2 “Beneficiary” means each designated person, or the estate of the deceased Director, entitled to benefits, if any, upon the death of the Director determined pursuant to Article 4.

1.3 “Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that the Director completes, signs and returns to the Plan Administrator to designate one or more Beneficiaries.

1.4 “Change in Control” means:

(a) There occurs a “Change in Control” of the Bank, as defined or determined by either the Bank’s primary federal regulator or under regulations promulgated by such regulator;

(b) As a result of, or in connection with, any merger or other business combination, sale of assets or contested election, wherein the persons who were

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Director Retirement Agreement

non-employee directors of the Bank before such transaction or event cease to constitute a majority of the Board of Directors of the Bank or any successor to the Bank;

(c) The Bank transfers all or substantially all of its assets to another corporation or entity which is not an affiliate of the Bank;

(d) The Bank is merged or consolidated with another corporation or entity and, as a result of such merger or consolidation, less than sixty percent (60%) of the equity interest in the surviving or resulting corporation is owned by the former shareholders or depositors of the Bank; or

(e) The Bank sells or transfers more than a fifty percent (50%) equity interest in the Bank to another person or entity which is not an affiliate of the Bank, excluding a sale or transfer to a person or persons who are employed by the Bank.

Notwithstanding anything in this Agreement to the contrary, in no event shall the conversion of the Bank from mutual to stock form (including, without limitation, through the formation of a stock holding company) or the reorganization of the Bank into the mutual holding company form of organization constitute a Change in Control for purposes of this Agreement.

1.5 “Code” means the Internal Revenue Code of 1986, as amended.

1.6 “Disability” means the Director’s suffering a sickness, accident or injury which has been determined by the insurance carrier of any individual or group disability insurance policy covering the Director, or by the Social Security Administration, to be a disability rendering the Director totally and permanently disabled. The Director must submit proof to the Plan Administrator of the insurance carrier’s or Social Security Administration’s determination upon the request of the Plan Administrator.

1.7 “Discount Rate” means the rate used by the Plan Administrator for determining the Accrual Balance. The initial Discount Rate is six and one quarter percent (6.25%). However, the Plan Administrator, in its sole discretion, may adjust the Discount Rate to maintain the rate within reasonable standards according to GAAP.

1.8 “Early Termination” means the Termination of Service before Normal Retirement Age for reasons other than death, Disability, Termination for Cause or following a Change in Control.

1.9 “Early Termination Date” means the month, day and year in which Early Termination occurs.

1.10 “Effective Date” means December 1, 2004.

1.11 “Normal Retirement Age” means the Director’s 70^th birthday.

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Director Retirement Agreement

1.12 “Normal Retirement Date” means the later of the Normal Retirement Age or Termination of Service.

1.13 “Plan Administrator” means the plan administrator described in Article 8.

1.14 “Plan Year” means each twelve-month period commencing on the Effective Date.

1.15 “Termination for Cause” has that meaning set forth in Article 5.

1.16 “Termination of Service” means that the Director ceases to be a member of the Bank’s Board of Directors for any reason, voluntarily or involuntarily, other than by reason of a leave of absence approved by the Bank or a Termination for Cause.

Article 2

Benefits During Lifetime

2.1 Normal Retirement Benefit. Upon Termination of Service on or after the Normal Retirement Age for reasons other than death, the Bank shall pay to the Director the benefit described in this Section 2.1 in lieu of any other benefit under this Article.

2.1.1 Amount of Benefit. The annual benefit under this Section 2.1 is Thirty-two Thousand Eleven Dollars ($32,011).

2.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following the Director’s Normal Retirement Date. The annual benefit shall be paid to the Director for ten (10) years.

2.2 Early Termination Benefit. Upon Early Termination, the Bank shall pay to the Director the benefit described in this Section 2.2 in lieu of any other benefit under this Article.

2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 is the Early Termination Benefit set forth on Schedule A for the Plan Year during which the Early Termination Date occurs. This benefit is determined by vesting the Director in one hundred percent (100%) of the Accrual Balance.

2.2.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following the Director’s attainment of Normal Retirement Age. The annual benefit shall be paid to the Director for ten (10) years.

2.3 Disability Benefit. Upon Termination of Service due to Disability prior to Normal Retirement Age, the Bank shall pay to the Director the benefit described in this Section 2.3 in lieu of any other benefit under this Article.

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Director Retirement Agreement

2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is the Disability Benefit set forth on Schedule A for the Plan Year during which the Termination of Service occurs. This benefit is determined by vesting the Director in one hundred percent (100%) of the Accrual Balance.

2.3.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following the Director’s attainment of Normal Retirement Age. The annual benefit shall be paid to the Director for ten (10) years.

2.4 Change in Control Benefit. Upon a Change in Control, followed by the Director’s Termination of Service within twelve (12) months, the Bank shall pay to the Director the benefit described in this Section 2.4 in lieu of any other benefit under this Article.

2.4.1 Amount of Benefit. The annual benefit under this Section 2.4 is the Change in Control Benefit set forth on Schedule A for the Plan Year during which Termination of Service occurs. This benefit is determined by vesting the Director in one hundred percent (100%) of the Normal Retirement Benefit amount described in Section 2.1.1.

2.4.2 Payment of Benefit. The Bank shall pay the annual benefit to the Director in twelve (12) equal monthly installments commencing on the first day of the month following Termination of Service. The annual benefit shall be paid to the Director for ten (10) years.

Article 3

Death Benefits

3.1 Death During Active Service. If the Director dies while in the active service of the Bank, the Bank shall pay to the Beneficiary the benefit described in this Section 3.1. This benefit shall be paid in lieu of the benefits under Article 2.

3.1.1 Amount of Benefit. The benefit under this Section 3.1 is the Normal Retirement Benefit amount described in Section 2.1.1.

3.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Beneficiary in twelve (12) equal monthly installments commencing on the first day of the month following the date of the Director’s death. The annual benefit shall be paid to the Beneficiary for a period of ten (10) years.

3.2 Death During Payment of a Benefit. If the Director dies after any benefit payments have commenced under Article 2 of this Agreement, but before receiving all such payments, the Bank shall pay the remaining benefits to the Beneficiary at the same time and in the same amounts they would have been paid to the Director had the Director survived.

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

3.3 Death After Termination of Service But Before Payment of a Benefit Commences. If the Director is entitled to any benefit payments under Article 2 of this Agreement, but dies prior to the commencement of said benefit payments, the Bank shall pay the same benefit payments to the Beneficiary that the Director was entitled to prior to death except that the benefit payments shall commence on the first day of the month following the date of the Director’s death.

Article 4

Beneficiaries

4.1 Beneficiary Designation. The Director shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefits payable under this Agreement upon the death of the Director. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designation under any other benefit plan of the Bank in which the Director participates.

4.2 Beneficiary Designation: Change. The Director shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. The Director’s Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Director or if the Director names a spouse as Beneficiary and the marriage is subsequently dissolved. The Director shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Director and accepted by the Plan Administrator prior to the Director’s death.

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.

4.4 No Beneficiary Designation. If the Director dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Director, then the Director’s spouse shall be the designated Beneficiary. If the Director has no surviving spouse, the benefits shall be paid to the personal representative of the Director’s estate.

4.5 Facility of Payment. If the Plan Administrator determines in its discretion that a benefit is to be paid to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct payment of such benefit to the guardian, legal representative or person having the care or

5

PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Director and the Director’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such payment amount.

Article 5

General Limitations

5.1 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not pay any benefit under this Agreement if the Bank’s Board of Directors terminates the Director’s service for:

(a) Personal dishonesty;

(b) Incompetence;

(c) Willful misconduct;

(d) Any breach of fiduciary duty involving personal profit;

(e) Intentional failure to perform stated duties; or

(f) Willful violation of any law, rule, regulation (other than traffic violations or similar offenses), or final cease and desist order.

5.2 Suicide or Misstatement. The Bank shall not pay any benefit under this Agreement if the Director commits suicide within two years after the Effective Date. In addition, the Bank shall not pay any benefit under this Agreement if the Director has made any material misstatement of fact on any application for life insurance owned by the Bank on the Director’s life.

5.3 Competition After Termination of Service. The Bank shall not pay any benefit under this Agreement if the Director, within twelve (12) months following Termination of Service, without the prior written consent of the Bank, engages in, becomes interested in, directly or indirectly, as a sole proprietor, as a partner in a partnership, or as a substantial shareholder in a corporation, or becomes associated with, in the capacity of employee, director, officer, principal, agent, trustee, or in any other capacity whatsoever, any enterprise conducted in the marketing area of the Bank, which enterprise is, or may deemed to be, competitive with any business carried on by the Bank as of the date of termination of the Director’s service or retirement. This section shall not apply following a Change in Control.

5.4 Excess Parachute Payment. Notwithstanding any provision of this Agreement to the contrary, to the extent any benefit would create an excise tax under the excess

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

parachute rules of Section 280G of the Code, the Bank shall reduce the benefit paid under this Agreement to the maximum benefit that would not result in any such excise tax.

Article 6

Claims and Review Procedures

6.1 Claims Procedure. A Director or Beneficiary (“claimant”) who has not received benefits under the Agreement that he or she believes should be paid shall make a claim for such benefits as follows:

6.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits.

6.1.2 Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 90 days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

6.1.3 Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

(d) An explanation of the Agreement’s review procedures and the time limits applicable to such procedures; and

(e) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

6.2 Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:

6.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

6.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

6.2.3 Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

6.2.4 Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

6.2.5 Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and

(d) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

Article 7

Amendments and Termination

This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Director.

Notwithstanding the previous paragraph in this Article 7, the Bank may amend or terminate this Agreement at any time if, pursuant to legislative, judicial or regulatory action, continuation

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

of the Agreement would (i) cause benefits to be taxable to the Director prior to actual receipt, or (ii) result in significant financial penalties or other significantly detrimental ramifications to the Bank (other than the financial impact of paying the benefits). Upon such amendment or termination the Bank shall pay benefits to the Director as if Early Termination occurred on the date of such amendment or termination, regardless of whether Early Termination actually occurs.

Article 8

Administration of Agreement

8.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator which shall consist of the Board of Directors of the Bank, or such committee or person(s) as the Board of Directors of the Bank shall appoint. The Director may be a member of the Plan Administrator. The Plan Administrator shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and (ii) decide or resolve any and all questions including interpretations of this Agreement, as may arise in connection with the Agreement.

8.2 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Bank.

8.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement. No Director or Beneficiary shall be deemed to have any right, vested or nonvested, regarding the continued use of any previously adopted assumptions, including but not limited to the Discount Rate.

8.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by the Plan Administrator or any of its members.

8.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Termination of Service of the Director, and such other pertinent information as the Plan Administrator may reasonably require.

8.6 Annual Statement. The Plan Administrator shall provide to the Director, within 120 days after the end of each Plan Year, a statement setting forth the benefits payable under this Agreement.

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Director Retirement Agreement

Article 9

Miscellaneous

9.1 Binding Effect. This Agreement shall bind the Director and the Bank, and their beneficiaries, survivors, executors, successors, administrators and transferees.

9.2 No Guarantee of Service. This Agreement is not an employment policy or contract. It does not give the Director the right to remain a director of the Bank, nor does it interfere with the Bank’s right to terminate the Director’s service. It also does not require the Director to remain a director nor interfere with the Director’s right to terminate service at any time.

9.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

9.4 Tax Withholding. The Bank shall withhold any taxes that, in its reasonable judgment, are required to be withheld from the benefits provided under this Agreement. The Director acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies).

9.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

9.6 Unfunded Arrangement. The Director and Beneficiary are general unsecured creditors of the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise by the Bank to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Director’s life is a general asset of the Bank to which the Director and Beneficiary have no preferred or secured claim.

9.7 Successors. The Bank shall not merge or consolidate into or with another company, or sell substantially all of its assets to another company, firm, or person unless such succeeding or continuing company, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor company.

9.8 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Director as to the subject matter hereof. No rights are granted to the Director by virtue of this Agreement other than those specifically set forth herein.

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

9.9 Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

9.10 Alternative Action. In the event it shall become impossible for the Bank or the Plan Administrator to perform any act required by this Agreement, the Bank or Plan Administrator may in its discretion perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Bank.

9.11 Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.

9.12 Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision has never been inserted herein.

9.13 Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Peoples Federal Savings Bank

435 Water Street

Boston, MA 02135

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

Any notice or filing required or permitted to be given to the Director under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Director.

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

IN WITNESS WHEREOF, the Director and a duly authorized representative of the Bank have signed this Agreement.

DIRECTOR:	BANK:
	PEOPLES FEDERAL SAVINGS BANK
/s/ Maurice H. Sullivan III	By:	/s/ Maurice H. Sullivan, Jr.
Maurice H. Sullivan III	Title:	Chairman

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PEOPLES FEDERAL SAVINGS BANK

Director Retirement Agreement

BENEFICIARY DESIGNATION FORM

I, Maurice H. Sullivan III, designate the following as beneficiary of benefits under the Agreement payable following my death:

Primary:
	%
	%
Contingent:
	%
	%

Notes:

• Please PRINT CLEARLY or TYPE the names of the beneficiaries.

• To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement.

• To name your estate as beneficiary, please write “Estate of _[your name]_”.

• Be aware that none of the contingent beneficiaries will receive anything unless ALL of the primary beneficiaries predecease you.

I understand that I may change these beneficiary designations by delivering a new written designation to the Plan Administrator, which shall be effective only upon receipt and acknowledgment by the Plan Administrator prior to my death. I further understand that these designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.

Name:
Signature:	Date:

Received by the Plan Administrator this      day of                     , 20    .

By:

Title:

FIRST AMENDMENT TO

DIRECTOR RETIREMENT AGREEMENT

First Amendment, dated as of December 16, 2008 (the “Amendment”), to the Director Retirement Agreement, dated as of November 29, 2004 (as amended, the “Director Retirement Agreement”), by and among Peoples Federal Savings Bank (the “Bank”) and Maurice H. Sullivan III (the “Director”). Capitalized terms which are not defined herein shall have the same meaning as set forth in the Director Retirement Agreement.

W I T N E S S E T H:

WHEREAS, the parties desires to amend the Director Retirement Agreement to comply with the final regulations issued in April 2007 by the Internal Revenue Service under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, pursuant to Article 7 of the Director Retirement Agreement, the parties to the Director Retirement Agreement desire to amend the Director Retirement Agreement;

NOW, THEREFORE, in consideration of the premises, the mutual agreements herein set forth and such other consideration the sufficiency of which is hereby acknowledged, the Bank and the Director hereby amend the Director Retirement Agreement as follows:

Section 1. Amendment to Section 1.6 of the Director Retirement Agreement. Section 1.6 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

““Disability” means the Director: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months. Medical determination of Disability may be made by either the Social Security Administration or by the provider of disability insurance covering employees of the Bank, provided that the definition of “disability” applied under such insurance program complies with the requirements of the preceding sentence. Upon the request of the Plan Administrator, the Director must submit proof to the Plan Administrator of the Social Security Administration’s or the provider’s determination.”

Section 2. Amendment to Section 1.16 of the Director Retirement Agreement. Section 1.16 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

“Termination of Service” shall be construed to mean a Separation from Service, as defined in this Section 1.16, with the Bank’s Board of Directors for reasons other than a bona fide leave of absence that does not exceed six months, a Termination for Cause or death. Whether a Separation from Service has occurred shall be determined in accordance with the requirements of Section 409A of the Code, and shall mean the Director’s retirement or termination of service from the Board of Directors following a resignation from the Board of Directors or failure to be

reappointed or reelected to the Board of Directors. For these purposes, a Director shall not be deemed to have a Separation from Service if the Director serves on the Board of the Bank or any member of a controlled group of corporations with the Bank within the meaning of Treasury Regulation §1.409A-1(a)(3).”

Section 3. New Section 2.5 of the Director Retirement Agreement. Section 2.5 of the Director Retirement Agreement is hereby added to read in its entirety as follows:

“Distributions Upon Income Inclusion Under Section 409A of the Code. Upon the inclusion of any portion of the Accrual Balance into the Director’s income as a result of the failure of this non-qualified deferred compensation plan to comply with the requirements of Section 409A of the Code, to the extent such tax liability can be covered by the Director’s Accrual Balance, a distribution shall be made as soon as is administratively practicable following the discovery of the plan failure.”

Section 4. New Section 2.6 of the Director Retirement Agreement. Section 2.6 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

“Change in Form or Timing of Distributions. For distribution of benefits under this Article 2, the Director and the Bank may, subject to the terms of Article 7, amend the Agreement to delay the timing or change the form of distributions. Any such amendment:

(a) may not accelerate the time or schedule of any distribution, except as provided in Code Section 409A;

(b) must, for benefits distributable under Sections 2.1 and 2.2, be made at least twelve (12) months prior to the first scheduled distribution;

(c) must, for benefits distributable under Sections 2.1, 2.2 and 2.4, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made; and

(d) must take effect not less than twelve (12) months after the amendment is made.”

Section 5. Amendment to Article 7 of the Director Retirement Agreement. Article 7 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

“7.1 Amendments and Termination Generally. This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Director. If the Bank’s Board of Directors, however, determines that the Director is no longer a member of a select group of management or highly compensated employees, as that phrase applies to ERISA, for reasons other than death, Disability or retirement, the Bank may terminate this Agreement. In the event of such termination, the benefit shall be the Accrual Balance determined as of the date the Agreement is terminated; provided, however, that except as provided in Section 7.2, the termination of this Agreement shall not cause a distribution of

2

benefits under this Agreement. Rather, in the event of such termination, benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3.

Additionally, the Bank may unilaterally amend this Agreement to conform with written directives to the Bank from its auditors or banking regulators or to comply with legislative or tax law, including without limitation Section 409A of the Code and any and all regulations and guidance promulgated thereunder.

7.2 Plan Terminations Under Section 409A. Notwithstanding anything to the contrary in Section 7.2, if the Bank terminates this Agreement in the following circumstances:

(a) Within thirty (30) days before a Change in Control, provided that all distributions are made no later than twelve (12) months following such irrevocable termination of this Agreement and further provided that all of the arrangements sponsored by the Bank that would be aggregated with this Agreement under Treasury Regulation §1.409A-1(c)(2) are terminated so the Director and all participants under the other aggregated arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Bank irrevocably takes all necessary action to terminate such arrangements;

(b) With twelve (12) months of a dissolution of the Bank taxed under Section 331 of the Code or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred under this Agreement are included in the Director’s gross income in the latest of (i) the calendar year in which this Agreement terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practicable; or

(c) Upon the Bank’s termination of this and all other arrangements that would be aggregated with this Agreement pursuant to Treasury Regulation §1.409A-1(c) if the Director participated in such arrangements (“Similar Arrangements”), provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank, (ii) no payments are made within twelve (12) months of the termination of the arrangements other than payments that would be payable under the terms of the arrangements if the termination had not occurred, (iii) all termination distributions are made no later than twenty-four (24) months following such termination, and (iv) the Bank does not adopt any new arrangement that would be a Similar Arrangement for a minimum of three (3) years following the date the Bank takes all necessary action to irrevocably terminate and liquidate the Agreement;

the Bank may distribute the Accrual Balance, determined as of the date of the termination of the Agreement, to the Director in a lump sum subject to the above terms.”

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Section 6. Amendment to Section 9.4 of the Director Retirement Agreement. Section 9.4 of the Director Retirement Agreement is hereby amended to read in its entirety as follows:

“Tax Withholding and Reporting. The Bank shall withhold any taxes that are required to be withheld, including but limited to taxes owed under Section 409A of the Code and regulations thereunder, from the benefits provided under this Agreement. The Director acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies). Further, the Bank shall satisfy all applicable reporting requirements, including those under Section 409A of the Code and regulations thereunder.”

Section 7. Effectiveness. This Amendment shall be deemed effective as of the date first above written, as if executed on such date. Except as expressly set forth herein, this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Director Retirement Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect and shall be otherwise unaffected.

Section 8. Governing Law. This Amendment and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

Section 9. Compliance with Section 409A. This Agreement shall be interpreted and administered consistent with Section 409A of the Code.

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IN WITNESS WHEREOF, the Bank has duly executed this Amendment as of the day and year first written above.

PEOPLES FEDERAL SAVINGS BANK
By:	/s/ Thomas J. Leetch
Name:	Thomas J. Leetch
Title:	President & CEO
DIRECTOR
/s/ Maurice H. Sullivan III
Maurice H. Sullivan III

5

EX-10.15

Exhibit 10.15

PEOPLES FEDERAL SAVINGS BANK

SPLIT DOLLAR PLAN

Pursuant to due authorization by its Board of Directors, the undersigned, PEOPLES FEDERAL SAVINGS BANK, a federally chartered corporation located in Boston, Massachusetts (the “Bank”), did constitute, establish and adopt the following Split Dollar Plan (the “Plan”), effective December 1, 2004.

The purpose of this Plan is to attract, retain, and reward Employees, by dividing the death proceeds of certain life insurance policies which are owned by the Bank on the lives of the participating Employees with the designated beneficiary of each insured participating Employee. The Bank will pay the life insurance premiums from its general assets.

ARTICLE 1

DEFINITIONS

Whenever used in this Plan, the following terms shall have the meanings specified:

1.1 “Bank” means Peoples Federal Savings Bank and any of its subsidiaries, parent corporations (now in existence or hereafter formed or acquired) or affiliates that have been selected by the Board to participate in the Plan and have adopted the Plan as a sponsor.

1.2 “Bank’s Interest” means the benefit set forth in Section 3.2.

1.3 “Beneficiary” means each designated person, or the estate of a deceased Participant, entitled to benefits, if any, upon the death of a Participant.

1.4 “Beneficiary Designation Form” means the form established from time to time by the Plan Administrator that a Participant completes, signs and returns to the Plan Administrator to designate one or more Beneficiaries.

1.5 “Board” means the Board of Directors of the Bank as constituted from time to time.

1.6 “Change in Control” means:

(a) There occurs a “Change in Control” of the Bank, as defined or determined by either the Bank’s primary federal regulator or under regulations promulgated by such regulator;

(b) As a result of, or in connection with, any merger or other business combination, sale of assets or contested election, wherein the persons who were non-employee directors of the Bank before such transaction or event cease to constitute a majority of the Board of Directors of the Bank or any successor to the Bank;

(c) The Bank transfers all or substantially all of its assets to another corporation or entity which is not an affiliate of the Bank;

(d) The Bank is merged or consolidated with another corporation or entity and, as a result of such merger or consolidation, less than sixty percent (60%) of the equity interest in the surviving or resulting corporation is owned by the former shareholders or depositors of the Bank; or

(e) The Bank sells or transfers more than a fifty percent (50%) equity interest in the Bank to another person or entity which is not an affiliate of the Bank, excluding a sale or transfer to a person or persons who are employed by the Bank.

Notwithstanding anything in this Plan to the contrary, in no event shall the conversion of the Bank from mutual to stock form (including, without limitation, through the formation of a stock holding company) or the reorganization of the Bank into the mutual holding company form of organization constitute a Change in Control for purposes of this Plan.

1.7 “Disability” means the Participant’s suffering a sickness, accident or injury which has been determined by the insurance carrier of any individual or group disability insurance policy covering the Participant, or by the Social Security Administration, to be a disability rendering the Participant totally and permanently disabled. Upon the request of the Plan Administrator, the Participant must submit proof to the Plan Administrator of the insurance carrier’s or Social Security Administration’s determination.

1.8 “Election to Participate” means the form required by the Plan Administrator of an eligible Employee to indicate acceptance of participation in this Plan.

1.9 “Employee” means an active employee of the Bank.

1.10 “Insured” means the individual Participant whose life is insured.

1.11 “Insurer” means the insurance company issuing the life insurance policy on the life of the Insured.

1.12 “Normal Retirement Age” means the Participant attaining age 65.

1.13 “Normal Retirement Date” means the later of Normal Retirement Age or the date of Termination of Employment for any reason other than Termination for Cause.

1.14 “Participant” means an Employee (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs an Election to Participate and a Beneficiary Designation Form, (iv) whose signed Election to Participate and Beneficiary Designation Form are accepted by the Plan Administrator, (v) who commences participation in the Plan, and (vi) whose Participation has not terminated.

1.15 “Participant’s Interest” means the benefit set forth in Section 3.1.

1.16 “Policy” means the individual insurance policy or policies adopted by the Plan Administrator for purposes of insuring a Participant’s life under this Plan.

1.17 “Plan Administrator” means the plan administrator described in Article 10.

1.18 “Termination of Employment” means the termination of Participant’s service before Normal Retirement Age for reasons other than (i) death; (ii) Disability; (iii) Change in Control followed within twelve (12) months by the Participant’s Termination of Employment; or (iv) a leave of absence approved by the Bank.

1.19 “Termination for Cause” means that the Participant’s employment with the Bank has been or is terminated by the Board for any of the following reasons:

(a) Personal dishonesty;

(b) Incompetence;

(c) Willful misconduct;

(d) Any breach of fiduciary duty involving personal profit;

(e) Intentional failure to perform stated duties or;

(f) Willful violation of any law, rule, regulation (other than traffic violations or similar offenses), or final cease and desist order.

ARTICLE 2

PARTICIPATION

2.1 Selection by Plan Administrator. Participation in the Plan shall be limited to those Employees of the Bank selected by the Plan Administrator, in its sole discretion, to participate in the Plan.

2.2 Enrollment Requirements. As a condition to participation, each selected Employee shall complete, execute and return to the Plan Administrator (i) an Election to Participate, and (ii) a Beneficiary Designation Form. In addition, the Plan Administrator shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary.

2.3 Eligibility; Commencement of Participation. Provided an Employee selected to participate in the Plan has met all enrollment requirements set forth in this Plan and required by the Plan Administrator, that Employee will become a Participant, be covered

by the Plan and will be eligible to receive benefits at the time and in the manner provided hereunder, subject to the provisions of the Plan.

2.4 Termination of Participation. A Participant’s rights under this Plan shall automatically cease and his or her participation in this Plan shall automatically terminate upon a Termination for Cause or Termination of Employment. In the event that the Bank decides to maintain the Policy after the Participant’s termination of participation in the Plan, the Bank shall be the direct beneficiary of the entire death proceeds of the Policy.

2.5 Disability. If the Participant’s employment with the Bank is terminated because of the Participant’s Disability, the Bank shall maintain the Policy in full force and effect and, in no event, shall the Bank amend, terminate or otherwise abrogate the Participant’s Interest in the Policy. However, the Bank may replace the Policy with a comparable insurance policy to cover the benefit provided under this Plan.

2.6 Retirement. If the Participant remains in the continuous employ of the Bank, upon the Participant’s Normal Retirement Date, the Bank shall maintain the Policy in full force and effect and in no event shall the Bank amend, terminate or otherwise abrogate the Participant’s Interest in the Policy. However, the Bank may replace the Policy with a comparable insurance policy to cover the benefit under this Plan.

2.7 Change in Control. If the Participant’s employment with the Bank is terminated within twelve (12) months after a Change in Control, other than a Termination for Cause, the Bank shall maintain the Policy in full force and effect and in no event shall the Bank amend, terminate or otherwise abrograte the Participant’s Interest in the Policy. However, the Bank may replace the Policy with a comparable insurance policy to cover the benefit provided under this Plan.

ARTICLE 3

POLICY OWNERSHIP/INTERESTS

3.1 Participant’s Interest. The Participant, or the Participant’s assignee, shall have the right to designate the Beneficiary of an amount of death proceeds equal to Seventy-Five Thousand Dollars ($75,000), subject to:

(a) Forfeiture of Participant’s rights upon Termination for Cause;

(b) Forfeiture of Participant’s rights upon Termination of Employment; or

(c) Forfeiture of the Participant’s rights and interest hereunder that the Bank may reasonably consider necessary to conform with applicable law (including the Sarbanes-Oxley Act of 2002).

3.2 Bank’s Interest. The Bank shall own the Policy and shall have the right to exercise all incidents of ownership except that the Bank shall not sell, surrender or transfer ownership of a Policy so long as a Participant has an interest in the Policy as described in Section 3.1. This provision shall not impair the right of the Bank, subject to Article 9, to

terminate this Plan. With respect to each Policy, the Bank shall be the beneficiary of the remaining death proceeds of the Policy after the Participant’s Interest is determined according to Section 3.1.

ARTICLE 4

PREMIUMS

4.1 Premium Payment. The Bank shall pay all premiums due on all Policies.

4.2 Economic Benefit. The Plan Administrator shall determine the economic benefit attributable to any Participant based on the amount of the current term rate for the Participant’s age multiplied by the aggregate death benefit payable to the Participant’s Beneficiary. The “current term rate” is the minimum amount required to be imputed under Internal Revenue Notice 2002-8, or any subsequent applicable authority.

4.3 Imputed Income. The Bank shall impute the economic benefit to the Participant on an annual basis, by adding the economic benefit to the Participant’s Form W-2, or if applicable, Form 1099.

ARTICLE 5

BENEFICIARIES

5.1 Beneficiary. Each Participant shall have the right, at any time, to designate a Beneficiary(ies) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of the Bank in which the Participant participates.

5.2 Beneficiary Designation; Change. A Participant shall designate a Beneficiary by completing and signing the Beneficiary Designation Form, and delivering it to the Plan Administrator or its designated agent. The Participant’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Participant or if the Participant names a spouse as Beneficiary and the marriage is subsequently dissolved. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Plan Administrator prior to the Participant’s death.

5.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.

5.4 No Beneficiary Designation. If the Participant dies without a valid designation of beneficiary, or if all designated Beneficiaries predecease the Participant, then the Participant’s surviving spouse shall be the designated Beneficiary. If the Participant has no surviving spouse, the benefits shall be made payable to the personal representative of the Participant’s estate.

5.5 Facility of Payment. If the Plan Administrator determines in its discretion that a benefit is to be paid to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct payment of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount.

ARTICLE 6

ASSIGNMENT

Any Participant may irrevocably assign without consideration all or part of such Participant’s Interest in this Plan to any person, entity or trust. In the event a Participant shall transfer all or part of such Participant’s Interest, then all or part of that Participant’s Interest in this Plan shall be vested in his or her transferee, who shall be substituted as a party hereunder, and that Participant shall have no further interest in this Plan.

ARTICLE 7

INSURER

The Insurer shall be bound only by the terms of its given Policy. Any payments the Insurer makes or actions it takes in accordance with a Policy shall fully discharge it from all claims, suits and demands of all persons relating to that Policy. The Insurer shall not be bound by or deemed to have notice of the provisions of this Plan. The Insurer shall have the right to rely on the Plan Administrator’s representations with regard to any definitions, interpretations or Policy interests as specified under this Plan.

ARTICLE 8

CLAIMS AND REVIEW PROCEDURE

8.1 Claims Procedure. A Participant or Beneficiary (“claimant”) who has not received benefits under the Plan that he or she believes should be paid shall make a claim for such benefits as follows:

8.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits.

8.1.2 Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 90 days after receiving the claim. If the Plan Administrator

determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

8.1.3 Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Plan on which the denial is based;

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

(d) An explanation of the Plan’s review procedures and the time limits applicable to such procedures; and

(e) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

8.2 Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:

8.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.

8.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.

8.2.3 Considerations on Review. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

8.2.4 Timing of Plan Administrator’s Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional

time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

8.2.5 Notice of Decision. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Plan on which the denial is based;

(c) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and

(d) A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).

ARTICLE 9

AMENDMENTS AND TERMINATION

9.1 Amendment or Termination of Plan. Except as otherwise provided in Sections 2.5 through 2.7, or as otherwise agreed to in writing, the Bank may amend or terminate this Plan for all Participants or for any Participant at any time prior to a Participant’s death. Such amendment or termination shall be by written notice to the Participant(s). In the event that the Bank decides to maintain the Policy after the Participant’s termination of participation in the Plan, the Bank shall be the direct beneficiary of the entire death proceeds of the Policy.

9.2 Option to Purchase Upon Termination. If the Bank exercises the right to terminate the Plan or a Participant’s participation in the Plan, the Bank shall not sell, surrender or transfer ownership of a Policy without first giving a Participant or the Participant’s transferee the option to purchase the Policy for a period of sixty (60) days from written notice of such intention. The purchase price shall be an amount equal to the cash surrender value of the Policy.

9.3 Waiver of Participation. A Participant may, in the Participant’s sole and absolute discretion, waive his or her rights under the Plan at any time. Any waiver permitted under this Section 9.3 shall be in writing and delivered to the Plan Administrator.

ARTICLE 10

ADMINISTRATION

10.1 Plan Administrator Duties. This Plan shall be administered by a Plan Administrator which shall consist of the Board, or such committee or persons as the Board may choose. Members of the Plan Administrator may be Participants under this Plan. The Plan Administrator shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Plan and (ii) decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan.

10.2 Agents. In the administration of this Plan, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Bank.

10.3 Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.

10.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Plan Administrator or any of its members.

10.5 Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the Compensation of its Participants, the date and circumstances of the retirement, Disability, death or Termination of Employment of its Participants, and such other pertinent information as the Plan Administrator may reasonably require.

ARTICLE 11

MISCELLANEOUS

11.1 Binding Effect. This Plan shall bind each Participant and the Bank, their beneficiaries, survivors, executors, administrators and transferees and any Beneficiary.

11.2 No Guarantee of Employment. This Plan is not an employment policy or contract. It does not give a Participant the right to remain an Employee of the Bank, nor does it interfere with the Bank’s right to discharge a Participant. It also does not require a Participant to remain an Employee nor interfere with a Participant’s right to terminate employment at any time.

11.3 Applicable Law. The Plan and all rights hereunder shall be governed by and construed according to the laws of Massachusetts, except to the extent preempted by the laws of the United States of America.

11.4 Successors. The Bank shall not merge or consolidate into or with another company, or sell substantially all of its assets to another company, firm or person unless such succeeding or continuing company, firm or person agrees to assume and discharge the obligations of the Bank under this Plan. Upon the occurrence of such event, the term “Bank” as used in this Plan shall be deemed to refer to the successor or survivor company.

11.5 Notice. Any notice or filing required or permitted to be given to the Plan Administrator under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Peoples Federal Savings Bank

435 Water Street

Boston, MA 02135

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or the receipt for registration or certification.

Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant.

11.6 Entire Agreement. This Plan, along with a Participant’s Election to Participate, Beneficiary Designation Form and any agreement in writing between the Bank and any Participant, constitute the entire agreement between the Bank and the Participant as to the subject matter hereof. No rights are granted to the Participant under this Plan other than those specifically set forth herein.

IN WITNESS WHEREOF, the Bank executes this Plan as of the date indicated above.

PEOPLES FEDERAL SAVINGS BANK
By:	/s/ Maurice H. Sullivan, Jr.
Title:	Chairman

FIRST AMENDMENT

TO THE

PEOPLES FEDERAL SAVINGS BANK

SPLIT DOLLAR PLAN

DATED DECEMBER 1, 2004

THIS AMENDMENT is adopted this      day of                     , 20    , by and between PEOPLES FEDERAL SAVINGS BANK, a federally-chartered corporation located in Boston, Massachusetts (the “Bank”).

On December 1, 2004, the Bank executed the PEOPLES FEDERAL SAVINGS BANK SPLIT DOLLAR PLAN (the “Plan”).

According to the terms of Section 9.1, the undersigned hereby amends, in part, said Plan for the purpose of increasing the Participant’s interest in the Policy, and to add a definition for Net Death Proceeds. Therefore,

Section 1.20 shall be added to the Plan as follows:

1.20 “Net Death Proceeds” means the total death proceeds of the Policy minus the greater of (i) the cash surrender value or (ii) the aggregate premiums paid by the Bank.

Section 2.4 of the Plan shall be deleted in its entirety and replaced by the new Section 2.4 as follows:

2.4 Termination of Participation. A Participant’s rights under this Plan shall automatically cease and his or her participation in this Plan shall automatically terminate upon a Termination for Cause. In the event that the Bank decides to maintain the Policy after the Participant’s termination of participation in the Plan, the Bank shall be the direct beneficiary of the entire death proceeds of the Policy.

Section 2.6 of the Plan shall be deleted in its entirety and replaced by the new Section 2.6 as follows:

2.6 Participant’s Interest in the Policy. The Bank shall maintain the Policy in full force and effect and in no event shall the Bank amend, terminate or otherwise abrogate the Participant’s Interest in the Policy. However, the Bank may replace the Policy with a comparable insurance policy to cover the benefit under this Plan.

Section 3.1 of the Plan shall be deleted in its entirety and replaced by the new Section 3.1 as follows:

3.1 Participant’s Interest. The Participant, or the Participant’s assignee, shall have the right to designate the Beneficiary of an amount of death proceeds equal to One Hundred Fifty Thousand Dollars ($150,000) provided that such benefit shall not exceed the Net Death Proceeds and shall be subject to:

(a) Forfeiture of Participant’s rights upon Termination for Cause;

(b) Forfeiture of the Participant’s rights and interest hereunder that the Bank may reasonably consider necessary to conform with applicable law (including the Sarbanes-Oxley Act of 2002.)

IN WITNESS OF THE ABOVE, the Bank hereby consents to this First Amendment.

BANK:

Peoples Federal Savings Bank

By

Its

EX-21

Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

Name	Ownership Percentage by the Registrant		Jurisdiction of Incorporation
Peoples Federal Savings Bank	100	%	Federal

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We hereby consent to the use in the Prospectus constituting a part of this Registration Statement on Form S-1 of our report dated November 20, 2009, relating to the consolidated financial statements of Peoples Federal MHC and Subsidiary, which is contained in that Prospectus.

We also consent to the reference to us under the caption “Experts” in the Prospectus.

SHATSWELL, MacLEOD & COMPANY, P.C.

West Peabody, Massachusetts

March 15, 2010

83 PINE STREET • WEST PEABODY, MASSACHUSETTS 01960-3635 • TELEPHONE (978) 535-0206 • FACSIMILE (978) 535-9908

smc@shatswell.com                            www.shatswell.com

EX-23.3

RP^® FINANCIAL, LC.

Financial Services Industry Consultants

March 15, 2010

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp, Inc.

Peoples Federal Savings Bank

435 Market Street

Brighton, Massachusetts 02135

Members of the Boards of Directors:

We hereby consent to the use of our firm’s name in the Form AC Application for Conversion, and any amendments thereto to be filed with Office of Thrift Supervision, and in the Registration Statement on Form S-1, and any amendments thereto to be filed with the Securities and Exchange Commission. We also hereby consent to the inclusion of, summary of and references to our Valuation Appraisal Report and any Valuation Appraisal Report Updates, our statement concerning subscription rights, and our statement concerning liquidation rights in such filings including the prospectus of Peoples Federal Bancshares, Inc. We also consent to the reference to our firm under the heading “Experts” in the prospectus.

Sincerely,

RP^® FINANCIAL, LC.

Washington Headquarters
Three Ballston Plaza	Telephone: (703) 528-1700
1100 North Glebe Road, Suite 1100	Fax No.: (703) 528-1788
Arlington, VA 22201	Toll-Free No.: (866) 723-0594

EX-99.1

Exhibits 99.1

RP^® FINANCIAL, LC.

Serving the Financial Services Industry Since 1988

February 12, 2010

Mr. Maurice H. Sullivan, Jr.

Chief Executive Officer

Peoples Federal MHC

435 Market Street

Brighton, Massachusetts 02135-2715

Mr. Thomas J. Leetch, Jr.

President and Chief Executive Officer

Peoples Federal Savings Bank

435 Market Street

Brighton, Massachusetts 02135-2715

Dear Messrs. Sullivan and Leetch:

This letter sets forth the agreement between Peoples Federal MHC and Peoples Federal Savings Bank, Brighton, Massachusetts (collectively, the “Bank”), and RP^® Financial, LC. (“RP Financial”) for the independent appraisal services in connection with the stock to be issued concurrent with the mutual-to-stock conversion transaction and holding company reorganization. The specific appraisal services to be rendered by RP Financial are described below.

Description of Conversion Appraisal Services

Prior to preparing the valuation report, RP Financial will conduct a financial due diligence, including on-site interviews of senior management and reviews of financial and other documents and records, to gain insight into the Bank’s operations, financial condition, profitability, market area, risks and various internal and external factors which impact the pro forma value of the Bank.

RP Financial will prepare a written detailed valuation report of the Bank that will be fully consistent with applicable regulatory guidelines and standard pro forma valuation practices. In this regard, the applicable regulatory guidelines are those set forth in the Office of Thrift Supervision’s (“OTS”) October 21, 1994 “Guidelines for Appraisal Reports for the Valuation of Savings and Loan Associations Converting from Mutual to Stock Form of Organization,” which have been endorsed by the Federal Deposit Insurance Corporation (“FDIC”) and various state banking agencies.

Washington Headquarters 1100 North Glebe Road, Suite 1100 Arlington, VA 22201 www.rpfinancial.com E-Mail: wpommerening@rpfinanciaI.com Direct: Telephone: Fax No.: Toll-Free No.: (703) 647-6546 (703) 528-1700 (703) 528-1788 (866) 723-0594

Messrs. Maurice H. Sullivan, Jr. and Thomas J. Leetch, Jr.

February 12, 2010

Page 2

The appraisal report will include an in-depth analysis of the Bank’s financial condition and operating results, as well as an assessment of the Bank’s interest rate risk, credit risk and liquidity risk. The appraisal report will describe the Bank’s business strategies, market area, prospects for the future and the intended use of proceeds both in the short term and over the longer term. A peer group analysis relative to publicly-traded savings institutions will be conducted for the purpose of determining appropriate valuation adjustments relative to the group.

We will review pertinent sections of the applications and offering documents to obtain necessary data and information for the appraisal, including the impact of key deal elements on the appraised value, such as dividend policy, use of proceeds and reinvestment rate, tax rate, conversion expenses, characteristics of stock plans and charitable foundation contribution. The appraisal report will conclude with a midpoint pro forma market value that will establish the range of value, and reflect the offering price per share determined by the Bank’s Board of Directors. The appraisal report may be periodically updated prior to the commencement of the conversion offering and the appraisal is required to be updated just prior to the closing of the conversion offering.

RP Financial agrees to deliver the valuation appraisal and subsequent updates, in writing, to the Bank at the above address in conjunction with the filing of the regulatory application. Subsequent updates will be filed promptly as certain events occur which would warrant the preparation and filing of such valuation updates. Further, RP Financial agrees to perform such other services as are necessary or required in connection with the regulatory review of the appraisal and respond to the regulatory comments, if any, regarding the valuation appraisal and subsequent updates.

Fee Structure and Payment Schedule

The Bank agrees to pay RP Financial a fixed fee of $45,000 for preparation and delivery of the original appraisal report, plus reimbursable expenses. Payment of these fees shall be made according to the following schedule:

• $5,000 upon execution of the letter of agreement engaging RP Financial’s appraisal services;

• $40,000 upon delivery of the completed original appraisal report; and

• $5,000 for each valuation update that may be required, provided that the transaction is not delayed for reasons described below.

The Bank will reimburse RP Financial for out-of-pocket expenses incurred in preparation of the valuation. Such out-of-pocket expenses will likely include travel, printing, shipping, computer and data services. RP Financial will agree to limit reimbursable expenses, subject to written authorization from the Bank to exceed such level.

Messrs. Maurice H. Sullivan, Jr. and Thomas J. Leetch, Jr.

February 12, 2010

Page 3

In the event the Bank shall, for any reason, discontinue the proposed mutual-to-stock conversion transaction prior to delivery of the completed documents set forth above and payment of the respective progress payment fees, the Bank agrees to compensate RP Financial according to RP Financial’s standard billing rates for consulting services based on accumulated and verifiable time expenses, not to exceed the respective fee caps noted above, after giving full credit to the initial retainer fee. RP Financial’s standard billing rates range from $75 per hour for research associates to $350 per hour for managing directors.

If during the course of the proposed transaction, unforeseen events occur so as to materially change the nature or the work content of the services described in this contract, the terms of said contract shall be subject to renegotiation by the Bank and RP Financial. Such unforeseen events shall include, but not be limited to, major changes in the conversion regulations, appraisal guidelines or processing procedures as they relate to appraisals, major changes in management or procedures, operating policies or philosophies, and excessive delays or suspension of processing of conversion applications by the regulators such that completion of the transaction requires the preparation by RP Financial of a new appraisal.

Representations and Warranties

The Bank and RP Financial agree to the following:

1. The Bank agrees to make available or to supply to RP Financial such information with respect to its business and financial condition as RP Financial may reasonably request in order to provide the aforesaid valuation. Such information heretofore or hereafter supplied or made available to RP Financial shall include: annual financial statements, periodic regulatory filings and material agreements, debt instruments, off balance sheet assets or liabilities, commitments and contingencies, unrealized gains or losses and corporate books and records. All information provided by the Bank to RP Financial shall remain strictly confidential (unless such information is otherwise made available to the public), and if the mutual-to-stock conversion is not consummated or the services of RP Financial are terminated hereunder, RP Financial shall upon request promptly return to the Bank the original and any copies of such information.

2. The Bank hereby represents and warrants to RP Financial that any information provided to RP Financial does not and will not, to the best of the Bank’s knowledge, at the times it is provided to RP Financial, contain any untrue statement of a material fact or fail to state a material fact necessary to make the statements therein not false or misleading in light of the circumstances under which they were made.

Messrs. Maurice H. Sullivan, Jr. and Thomas J. Leetch, Jr.

February 12, 2010

Page 4

3. (a) The Bank agrees that it will indemnify and hold harmless RP Financial, any affiliates of RP Financial, the respective directors, officers, agents and employees of RP Financial or their successors and assigns who act for or on behalf of RP Financial in connection with the services called for under this agreement (hereinafter referred to as “RP Financial”), from and against any and all losses, claims, damages and liabilities (including, but not limited to, all losses and expenses in connection with claims under the federal securities laws) attributable to (i) any untrue statement or alleged untrue statement of a material fact contained in the financial statements or other information furnished or otherwise provided by the Bank to RP Financial, either orally or in writing; (ii) the omission or alleged omission of a material fact from the financial statements or other information furnished or otherwise made available by the Bank to RP Financial; or (iii) any action or omission to act by the Bank, or the Bank’s respective officers, Directors, employees or agents which action or omission is willful or negligent. The Bank will be under no obligation to indemnify RP Financial hereunder if a court determines that RP Financial was negligent or acted in bad faith with respect to any actions or omissions of RP Financial related to a matter for which indemnification is sought hereunder. Any time devoted by employees of RP Financial to situations for which indemnification is provided hereunder, shall be an indemnifiable cost payable by the Bank at the normal hourly professional rate chargeable by such employee.

(b) RP Financial shall give written notice to the Bank of such claim or facts within thirty days of the assertion of any claim or discovery of material facts upon which RP Financial intends to base a claim for indemnification hereunder. In the event the Bank elects, within ten business days of the receipt of the original notice thereof, to contest such claim by written notice to RP Financial, RP Financial will be entitled to be paid any amounts payable by the Bank hereunder within five days after the final determination of such contest either by written acknowledgement of the Bank or a final judgment (including all appeals therefrom) of a court of competent jurisdiction. If the Bank does not so elect, RP Financial shall be paid promptly and in any event within thirty days after receipt by the Bank of the notice of the claim.

(c) The Bank shall pay for or reimburse the reasonable expenses, including attorneys’ fees, incurred by RP Financial in advance of the final disposition of any proceeding within thirty days of the receipt of such request if RP Financial furnishes the Bank: (1) a written statement of RP Financial’s good faith belief that it is entitled to indemnification hereunder; and (2) a written undertaking to repay the advance if it ultimately is determined in a final adjudication of such proceeding that it or he is not entitled to such indemnification. The Bank may assume the defense of any claim (as to which notice is given in accordance with 3(b)) with counsel reasonably satisfactory to RP Financial, and after notice from the Bank to RP Financial of its election to assume the defense thereof, the Bank will not be liable to RP Financial for any legal or other expenses subsequently incurred by RP Financial (other than reasonable costs of investigation and assistance in discovery and document production matters). Notwithstanding the foregoing, RP Financial shall have the right to employ their own counsel in any action or proceeding if RP Financial shall have concluded that a conflict of interest exists between the Bank and RP Financial which would materially impact the effective representation of RP Financial. In

Messrs. Maurice H. Sullivan, Jr. and Thomas J. Leetch, Jr

February 12, 2010

Page 5

the event that RP Financial concludes that a conflict of interest exists, RP Financial shall have the right to select counsel reasonably satisfactory to the Bank which will represent RP Financial in any such action or proceeding and the Bank shall reimburse RP Financial for the reasonable legal fees and expenses of such counsel and other expenses reasonably incurred by RP Financial. In no event shall the Bank be liable for the fees and expenses of more than one counsel, separate from its own counsel, for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same allegations or circumstances. The Bank will not be liable under the foregoing indemnification provision in respect of any compromise or settlement of any action or proceeding made without its consent, which consent shall not be unreasonably withheld.

(d) In the event the Bank does not pay any indemnified loss or make advance reimbursements of expenses in accordance with the terms of this agreement, RP Financial shall have all remedies available at law or in equity to enforce such obligation.

It is understood that, in connection with RP Financial’s above-mentioned engagement, RP Financial may also be engaged to act for the Bank in one or more additional capacities, and that the terms of the original engagement may be incorporated by reference in one or more separate agreements. The provisions of Paragraph 3 herein shall apply to the original engagement, any such additional engagement, any modification of the original engagement or such additional engagement and shall remain in full force and effect following the completion or termination of RP Financial’s engagement(s). This agreement constitutes the entire understanding of the Bank and RP Financial concerning the subject matter addressed herein, and such contract shall be governed and construed in accordance with the laws of the Commonwealth of Virginia. This agreement may not be modified, supplemented or amended except by written agreement executed by both parties.

The Bank and RP Financial are not affiliated, and neither the Bank nor RP Financial has an economic interest in, or is held in common with, the other and has not derived a significant portion of its gross revenues, receipts or net income for any period from transactions with the other.

* * * * * * * * * * *

Messrs. Maurice H. Sullivan, Jr. and Thomas J. Leetch, Jr

February 12, 2010

Page 6

Please acknowledge your agreement to the foregoing by signing as indicated below and returning to RP Financial a signed copy of this letter, together with the initial retainer fee of $5,000.

Sincerely,

/s/ William E. Pommerening

William E. Pommerening

Chief Executive Officer and

Managing Director

Agreed To and Accepted By:	Maurice H. Sullivan, Jr.	/s/ Maurice H. Sullivan, Jr.
	Chief Executive Officer

Upon Authorization by the Board of Directors For:	Peoples Federal MHC
	Brighton, Massachusetts

Date Executed: 3-3-2010

EX-99.2

Exhibit 99.2

March 15, 2010

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp, Inc.

Peoples Federal Savings Bank

435 Market Street

Brighton, Massachusetts 02135

Re: Plan of Conversion and Reorganization

Peoples Federal MHC

Members of the Boards of Directors:

All capitalized terms not otherwise defined in this letter have the meanings given such terms in the Plan of Conversion and Reorganization (the “Plan”) adopted by the Board of Directors of Peoples Federal MHC (the “MHC”). The Plan provides for the conversion of the MHC into the capital stock form of organization. Pursuant to the Plan, a new Maryland stock holding company named Peoples Federal Bancshares, Inc. (the “Company”) will be organized and will sell shares of common stock in a public offering. When the conversion is completed, all of the capital stock of Peoples Federal Savings Bank will be owned by the Company and all of the common stock of the Company will be owned by public stockholders.

We understand that in accordance with the Plan, subscription rights to purchase shares of common stock in the Company are to be issued to: (1) Eligible Account Holders; (2) Tax-Qualified Employee Benefit Plans including Peoples Federal Savings Bank’s employee stock ownership plan (the “ESOP”); (3) Supplemental Eligible Account Holders; and (4) Other Members. Based solely upon our observation that the subscription rights will be available to such parties without cost, will be legally non-transferable and of short duration, and will afford such parties the right only to purchase shares of common stock at the same price as will be paid by members of the general public in the community and syndicated community offerings, but without undertaking any independent investigation of state or federal law or the position of the Internal Revenue Service with respect to this issue, we are of the belief that, as a factual matter:

(1) the subscription rights will have no ascertainable market value; and,

(2) the price at which the subscription rights are exercisable will not be more or less than the pro forma market value of the shares upon issuance.

Changes in the local and national economy, the legislative and regulatory environment, the stock market, interest rates, and other external forces (such as natural disasters or significant world events) may occur from time to time, often with great unpredictability and may materially impact the value of thrift stocks as a whole or the Company’s value alone. Accordingly, no assurance can be given that persons who subscribe to shares of common stock in the subscription offering will thereafter be able to buy or sell such shares at the same price paid in the subscription offering.

Sincerely,

RP Financial, LC.

Washington Headquarters
Three Ballston Plaza	Telephone: (703) 528-1700
1100 North Glebe Road, Suite 1100	Fax No.: (703) 528-1788
Arlington, VA 22201	Toll-Free No.: (866) 723-0594
www.rpfinancial.com	E-Mail: mail@rpfinancial.com

EX-99.3

Exhibit 99.3

PRO FORMA VALUATION REPORT

PEOPLES FEDERAL BANCSHARES, INC.

Brighton, Massachusetts

PROPOSED HOLDING COMPANY FOR:

PEOPLES FEDERAL SAVINGS BANK

Brighton, Massachusetts

Dated As Of:

February 26, 2010

Prepared By:

RP^® Financial, LC.

1700 North Moore Street

Suite 2210

Arlington, Virginia 22209

February 26, 2010

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp, Inc.

Peoples Federal Savings Bank

435 Market Street

Brighton, Massachusetts 02135

Members of the Boards of Directors:

At your request, we have completed and hereby provide an independent appraisal (“Appraisal”) of the estimated pro forma market value of the common stock which is to be issued in connection with the mutual-to-stock conversion transaction described below.

This Appraisal is furnished pursuant to the conversion regulations promulgated by the Office of Thrift Supervision (“OTS”). Specifically, this Appraisal has been prepared in accordance with the “Guidelines for Appraisal Reports for the Valuation of Savings and Loan Associations Converting from Mutual to Stock Form of Organization” as set forth by the OTS, and applicable regulatory interpretations thereof.

Description of Plan of Conversion and Reorganization

On February 16, 2010, the Board of Directors of Peoples Federal MHC, Brighton, Massachusetts (the “MHC”), a mutual holding company that owns all of the outstanding shares of common stock of Peoples Federal Bancorp, Inc. (“Peoples Federal Bancorp”), adopted the plan of conversion and reorganization, whereby the MHC will convert to stock form. As a result of the conversion, Peoples Federal Bancorp, which currently owns all of the issued and outstanding common stock of Peoples Federal Savings Bank will be succeed by a Maryland corporation with the name of Peoples Federal Bancshares, Inc. (“Peoples Federal Bancshares” or the “Company”). Following the conversion, the MHC will no longer exist. For purposes of this document, the existing consolidated entity will hereinafter be referred to as Peoples Federal Bancshares or the Company.

Peoples Federal Bancshares will offer its common stock in a subscription offering to Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans including Peoples Federal Savings Bank’s employee stock ownership plan (the “ESOP”), Supplemental Eligible Account Holders and Other Members, as such terms are defined for purposes of applicable federal regulatory guidelines governing mutual-to-stock conversions. To the extent that shares remain available for purchase after

Washington Headquarters Three Ballston Plaza 1100 North Glebe Road, Suite 1100 Arlington, VA 22201 www.rpfinancial.com Telephone: (703) 528-1700 Fax No.: (703) 528-1788 Toll-Free No.: (866) 723-0594 E-Mail: mail@rpfinancial.com

Boards of Directors

February 26, 2010

Page 2

satisfaction of all subscriptions received in the subscription offering, the shares may be offered for sale to members of the general public in a community offering and/or a syndicated community offering. A portion of the net proceeds received from the sale of the common stock will be used to purchase all of the then to be issued and outstanding capital stock of Peoples Federal Savings Bank and the balance of the net proceeds will be retained by the Company.

At this time, no other activities are contemplated for the Company other than the ownership of the Bank, a loan to the newly-formed ESOP and reinvestment of the proceeds that are retained by the Company. In the future, Peoples Federal Bancshares may acquire or organize other operating subsidiaries, diversify into other banking-related activities, pay dividends or repurchase its stock, although there are no specific plans to undertake such activities at the present time.

The plan of conversion and reorganization provides for the establishment of Peoples Federal Savings Bank Charitable Foundation (the “Foundation”). The Foundation will be funded with Peoples Federal Bancshares common stock contributed by the Company in an amount equal to 8.0% of the shares of common stock issued in the offering. The purpose of the Foundation is to provide financial support to charitable organizations in the communities in which Peoples Federal Savings Bank operates and to enable those communities to share in Peoples Federal Savings Bank’s long-term growth. The Foundation will be dedicated completely to community activities and the promotion of charitable causes.

RP^® Financial, LC.

RP^® Financial, LC. (“RP Financial”) is a financial consulting firm serving the financial services industry nationwide that, among other things, specializes in financial valuations and analyses of business enterprises and securities, including the pro forma valuation for savings institutions converting from mutual-to-stock form. The background and experience of RP Financial is detailed in Exhibit V-1. For its appraisal services, RP Financial is being compensated on a fixed fee basis for the original appraisal and for any subsequent updates, and such fees are payable regardless of the valuation conclusion or the completion of the conversion offering transaction. We believe that we are independent of the Company, Peoples Federal Savings Bank, the MHC and the other parties engaged by Peoples Federal Savings Bank or the Company to assist in the stock conversion process.

Valuation Methodology

In preparing our Appraisal, we have reviewed the regulatory applications of Peoples Federal Bancshares, Peoples Federal Savings Bank and the MHC, including the prospectus as filed with the OTS and the Securities and Exchange Commission (“SEC”). We have conducted a financial analysis of the Company that has included a

Boards of Directors

February 26, 2010

Page 3

review of audited financial information for the past five years through the fiscal year ended September 30, 2009 and a review of various unaudited information and internal financial reports through December 31, 2009. We have also conducted due diligence related discussions with Peoples Federal Bancshares’ management; Shatswell, MacLeod & Company, P.C., Peoples Federal Bancshares’ independent auditor; Luse Gorman Pomerenk & Schick, P.C., Peoples Federal Bancshares’ conversion counsel; and Sandler O’Neill & Partners, LLP, Peoples Federal Bancshares’ financial and marketing advisor in connection with the stock offering. All assumptions and conclusions set forth in the Appraisal were reached independently from such discussions. In addition, where appropriate, we have considered information based on other available published sources that we believe are reliable. While we believe the information and data gathered from all these sources are reliable, we cannot guarantee the accuracy and completeness of such information.

We have investigated the competitive environment within which Peoples Federal Bancshares operates and have assessed the Company’s relative strengths and weaknesses. We have monitored all material regulatory and legislative actions affecting financial institutions generally and analyzed the potential impact of such developments on Peoples Federal Bancshares and the industry as a whole to the extent we were aware of such matters. We have analyzed the potential effects of the stock conversion on the Company’s operating characteristics and financial performance as they relate to the pro forma market value of Peoples Federal Bancshares. We have reviewed the economy and demographic characteristics of the primary market area in which the Company currently operates. We have compared Peoples Federal Bancshares’ financial performance and condition with publicly-traded thrift institutions evaluated and selected in accordance with the Valuation Guidelines, as well as all publicly-traded thrifts and thrift holding companies. We have reviewed conditions in the securities markets in general and the market for thrifts and thrift holding companies, including the market for new issues.

The Appraisal is based on Peoples Federal Bancshares’ representation that the information contained in the regulatory applications and additional information furnished to us by the Company and its independent auditors, legal counsel, investment bankers and other authorized agents are truthful, accurate and complete. We did not independently verify the financial statements and other information provided by the Company, or its independent auditors, legal counsel, investment bankers and other authorized agents nor did we independently value the assets or liabilities of Peoples Federal Bancshares. The valuation considers Peoples Federal Bancshares only as a going concern and should not be considered as an indication of the Company’s liquidation value.

Our appraised value is predicated on a continuation of the current operating environment for the Company and for all thrifts and their holding companies. Changes in the local and national economy, the federal and state legislative and regulatory

Boards of Directors

February 26, 2010

Page 4

environments for financial institutions, the stock market, interest rates, and other external forces (such as natural disasters or significant world events) may occur from time to time, often with great unpredictability, and may materially impact the value of thrift stocks as a whole or the Company’s value alone. It is our understanding that Peoples Federal Bancshares intends to remain an independent institution and there are no current plans for selling control of the Company as a converted institution. To the extent that such factors can be foreseen, they have been factored into our analysis.

The estimated pro forma market value is defined as the price at which the Company’s stock, immediately upon completion of the offering, would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

Valuation Conclusion

It is our opinion that, as of February 26, 2010, the estimated aggregate pro forma market value of the shares to be issued immediately following the conversion, including shares to be issued to the Foundation, equaled $54,000,000 at the midpoint, equal to 5,400,000 shares offered at a per share value of $10.00. Pursuant to conversion guidelines, the 15% offering range indicates a minimum value of $45,900,000 and a maximum value of $62,100,000. Based on the $10.00 per share offering price determined by the Board, this valuation range equates to total shares outstanding of 4,590,000 at the minimum and 6,210,000 at the maximum. In the event the appraised value is subject to an increase, the aggregate pro forma market value may be increased up to a supermaximum value of $71,415,000 without a resolicitation. Based on the $10.00 per share offering price, the supermaximum value would result in total shares outstanding of 7,141,500. Based on this valuation range, the offering range is as follows: $42,500,000 at the minimum, $50,000,000 at the midpoint, $57,500,000 at the maximum and $66,125,000 at the supermaximum. Based on the $10.00 per share offering price, the number of offering shares is as follows: 4,250,000 at the minimum, 5,000,000 at the midpoint, 5,750,000 at the maximum and 6,612,500 at the supermaximum.

Limiting Factors and Considerations

The valuation is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing shares of the common stock. Moreover, because such valuation is determined in accordance with applicable OTS regulatory guidelines and is necessarily based upon estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of common stock in the conversion will thereafter be able to buy or sell such shares at prices related to the foregoing valuation of the estimated pro forma market value thereof. The appraisal reflects only a valuation range as of this date for the pro forma market value of Peoples Federal Bancshares

Boards of Directors

February 26, 2010

Page 5

immediately upon issuance of the stock and does not take into account any trading activity with respect to the purchase and sale of common stock in the secondary market on the date of issuance of such securities or at anytime thereafter following the completion of the public stock offering.

The valuation prepared by RP Financial in accordance with applicable OTS regulatory guidelines was based on the financial condition and operations of Peoples Federal Bancshares as of December 31, 2009, the date of the financial data included in the prospectus.

RP Financial is not a seller of securities within the meaning of any federal and state securities laws and any report prepared by RP Financial shall not be used as an offer or solicitation with respect to the purchase or sale of any securities. RP Financial maintains a policy which prohibits RP Financial, its principals or employees from purchasing stock of its financial institution clients.

The valuation will be updated as provided for in the OTS conversion regulations and guidelines. These updates will consider, among other things, any developments or changes in the financial performance and condition of Peoples Federal Bancshares, management policies, and current conditions in the equity markets for thrift stocks, both existing issues and new issues. These updates may also consider changes in other external factors which impact value including, but not limited to: various changes in the federal and state legislative and regulatory environments for financial institutions, the stock market, the market for thrift stocks, and interest rates. Should any such new developments or changes be material, in our opinion, to the valuation of the shares, appropriate adjustments to the estimated pro forma market value will be made. The reasons for any such adjustments will be explained in the update at the date of the release of the update.

Respectfully submitted,

RP^® FINANCIAL, LC.

William E. Pommerening

Chief Executive Officer and Managing Director

Gregory E. Dunn

Director

RP® Financial, LC.	TABLE OF CONTENTS
	i

TABLE OF CONTENTS

PEOPLES FEDERAL BANCSHARES, INC.

PEOPLES FEDERAL SAVINGS BANK

Brighton, Massachusetts

DESCRIPTION		PAGE NUMBER
CHAPTER ONE	OVERVIEW AND FINANCIAL ANALYSIS
Introduction		I.1
Plan of Conversion and Reorganization		I.1
Strategic Overview		I.2
Balance Sheet Trends		I.5
Income and Expense Trends		I.9
Interest Rate Risk Management		I.13
Lending Activities and Strategy		I.14
Asset Quality		I.17
Funding Composition and Strategy		I.18
Legal Proceedings		I.19
CHAPTER TWO	MARKET AREA
Introduction		II.1
National Economic Factors		II.1
Market Area Demographics		II.7
Local Economy		II.9
Unemployment Trends		II.11
Market Area Deposit Characteristics and Competition		II.11
CHAPTER THREE	PEER GROUP ANALYSIS
Peer Group Selection		III.1
Financial Condition		III.6
Income and Expense Components		III.9
Loan Composition		III.13
Interest Rate Risk		III.16
Credit Risk		III.16
Summary		III.18

RP® Financial, LC.	TABLE OF CONTENTS
	ii

TABLE OF CONTENTS

PEOPLES FEDERAL BANCSHARES, INC.

PEOPLES FEDERA SAVINGS BANK

Brighton, Massachusetts

(continued)

DESCRIPTION		PAGE NUMBER
CHAPTER FOUR	VALUATION ANALYSIS
Introduction		IV.1
Appraisal Guidelines		IV.1
RP Financial Approach to the Valuation		IV.1
Valuation Analysis		IV.2
1.      Financial Condition		IV.3
2.      Profitability, Growth and Viability of Earnings		IV.4
3.      Asset Growth		IV.6
4.      Primary Market Area		IV.7
5.      Dividends		IV.8
6.      Liquidity of the Shares		IV.9
7.      Marketing of the Issue		IV.10
A.     The Public Market		IV.10
B.     The New Issue Market		IV.15
C.     The Acquisition Market		IV.17
8.      Management		IV.19
9.      Effect of Government Regulation and Regulatory Reform		IV.19
Summary of Adjustments		IV.20
Valuation Approaches:		IV.20
1.      Price-to-Earnings (“P/E”)		IV.22
2.      Price-to-Book (“P/B”)		IV.24
3.      Price-to-Assets (“P/A”)		IV.24
Comparison to Recent Offerings		IV.25
Valuation Conclusion		IV.25

RP® Financial, LC.	LIST OF TABLES
	iii

LIST OF TABLES

PEOPLES FEDERAL BANCSHARES, INC.

PEOPLES FEDERAL SAVINGS BANK

Brighton, Massachusetts

TABLE NUMBER	DESCRIPTION	PAGE
1.1	Historical Balance Sheet Data	I.6
1.2	Historical Income Statements	I.10
2.1	Summary Demographic Data	II.8
2.2	Primary Market Area Employment Sectors	II.10
2.3	Unemployment Trends	II.11
2.4	Deposit Summary	II.12
2.5	Market Area Deposit Competitors	II.14
3.1	Peer Group of Publicly-Traded Thrifts	III.3
3.2	Balance Sheet Composition and Growth Rates	III.7
3.3	Income as a Pct. of Avg. Assets and Yields, Costs, Spreads	III.10
3.4	Loan Portfolio Composition and Related Information	III.14
3.5	Interest Rate Risk Measures and Net Interest Income Volatility	III.15
3.6	Credit Risk Measures and Related Information	III.17
4.1	Market Area Unemployment Rates	IV.8
4.2	Pricing Characteristics and After-Market Trends	IV.16
4.3	Market Pricing Comparatives	IV.18
4.4	Public Market Pricing	IV.23

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.1

I. OVERVIEW AND FINANCIAL ANALYSIS

Introduction

Peoples Federal Savings Bank (“Peoples Federal” or the “Bank”), chartered in 1888, is a federally-chartered stock savings bank headquartered in Brighton, Massachusetts. In 2005, Peoples Federal reorganized into the mutual holding company structure, forming Peoples Federal MHC (the “MHC”). The MHC owns 100% of the outstanding common stock of Peoples Federal Bancorp, Inc. (“Peoples Federal Bancorp”), a federal corporation. Peoples Federal is the wholly owned subsidiary of Peoples Federal Bancorp. Peoples Federal serves the Boston metropolitan area through six banking offices located in the Massachusetts counties of Norfolk and Suffolk. A map of Peoples Federal’s office locations is provided in Exhibit I-1. Peoples Federal is a member of the Federal Home Loan Bank (“FHLB”) system and its deposits are insured up to the maximum allowable amount by the Federal Deposit Insurance Corporation (“FDIC”). As of December 31, 2009, the MHC had consolidated total assets of $482.8 million, total deposits of $370.5 million and total equity of $51.7 million equal to 10.7% of total assets. The MHC’s audited financial statements are included by reference as Exhibit I-2.

Plan of Conversion and Reorganization

On February 16, 2010, the Board of Directors of the MHC adopted the plan of conversion and reorganization, whereby the MHC will convert to stock form. As a result of the conversion, Peoples Federal Bancorp, which currently owns all of the issued and outstanding common stock of Peoples Federal will be succeed by a Maryland corporation with the name of Peoples Federal Bancshares, Inc. (“Peoples Federal Bancshares” or the “Company”). Following the conversion, the MHC will no longer exist. For purposes of this document, the existing consolidated entity will hereinafter be referred to as Peoples Federal Bancshares or the Company.

Peoples Federal Bancshares will offer its common stock in a subscription offering

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.2

to Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans including Peoples Federal’s employee stock ownership plan (the “ESOP”), Supplemental Eligible Account Holders and Other Members, as such terms are defined for purposes of applicable federal regulatory guidelines governing mutual-to-stock conversions. To the extent that shares remain available for purchase after satisfaction of all subscriptions received in the subscription offering, the shares may be offered for sale to members of the general public in a community offering and/or a syndicated community offering. A portion of the net proceeds received from the sale of the common stock will be used to purchase all of the then to be issued and outstanding capital stock of Peoples Federal and the balance of the net proceeds will be retained by the Company.

At this time, no other activities are contemplated for the Company other than the ownership of the Bank, funding a loan to the newly-formed ESOP and reinvestment of the proceeds that are retained by the Company. In the future, Peoples Federal Bancshares may acquire or organize other operating subsidiaries, diversify into other banking-related activities, pay dividends or repurchase its stock, although there are no specific plans to undertake such activities at the present time.

Strategic Overview

Peoples Federal Bancshares maintains a local community banking emphasis, with a primary strategic objective of meeting the borrowing and savings needs of its local customer base. Peoples Federal Bancshares’ operating strategy has been fairly reflective of a traditional thrift operating strategy, in which lending has emphasized originations of 1-4 family residential mortgage loans and funding has been largely generated through retail deposits. In recent years, the Company has supplemented originations of 1-4 family loans with purchases of such loans from other local financial institutions and mortgage lenders. The purchases loans are secured by residences in the Company’s market area.

In September 2007, the Company completed an acquisition of Brookline Co-operative Bank, a Massachusetts-chartered cooperative bank with $58.3 million in total assets, $7.9 million in capital and one full service branch office located in Brookline, Massachusetts. The merger was accounted for under the pooling method of accounting.

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.3

Recent trends in the Company’s balance sheet show asset growth has been sustained by loan growth and an increase in liquidity, funded through growth of retail deposits. The Company maintains a diversified lending strategy, with 1-4 family permanent mortgage loans accounting for the largest concentration of the loan portfolio and primary source of loan growth. Loan growth strategies have been achieved without comprising credit quality; although, the Company has experienced some deterioration in credit quality during recent years, as the recession in the national economy impacted the Company’s lending markets.

Investments serve as a supplement to the Company’s lending activities, although in recent years the investment portfolio has been substantially liquidated. Proceeds from the sale of investments have been largely maintained in cash and cash equivalents for purposes of strengthening the Company’s liquidity and management of interest rate risk.

Recent asset growth has been primarily funded through deposit growth, which has been largely sustained through growth of money market deposit accounts. Growth of money market deposits has been facilitated by offering relatively attractive rates on those deposits. The Company utilizes borrowings as a supplemental funding source to facilitate management of funding costs and interest rate risk, with FHLB advances constituting the sources of borrowings utilized by the Company.

Peoples Federal Bancshares’ earnings base is largely dependent upon net interest income and operating expense levels. In recent periods, the Company has experienced some compression of the net interest margin, largely due to increased levels of very low yielding liquidity maintained on the balance sheet. Operating expenses have generally been maintained at moderate levels, with the higher cost of operating in a large metropolitan area being somewhat offset by limited diversification into areas the generate non-interest operating income. Accordingly, revenues derived from non-interest operating income sources have been a fairly stable, but somewhat limited contributor to the Company’s core earnings base.

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.4

The post-offering business plan of the Company is expected to focus on operating and growing a profitable institution serving retail customers and businesses in local markets. Specifically, Peoples Federal Bancshares will continue to be an independent community-oriented financial institution with a commitment to local real estate and non-mortgage financing with operations funded by retail deposits, borrowings, equity capital and internal cash flows. In addition, the Company will emphasize increasing the diversification of its loan portfolio composition with a particular emphasis on growth of commercial real estate lending relationships. The Company’s strategy is to emphasize growth of core deposits as the primary source to fund asset growth, pursuant to which the Company will seek to establish full service banking relationships with its commercial loan customers. Contemplated growth strategies are expected to improve interest rate spreads, as well as generate additional revenues from sources of non-interest operating income.

The Board of Directors has elected to complete a mutual-to-stock conversion to improve the competitive position of Peoples Federal Bancshares. The capital realized from the stock offering will increase the operating flexibility and overall financial strength of Peoples Federal Bancshares. The additional capital realized from stock proceeds will increase liquidity to support funding of future loan growth and other interest-earning assets. Peoples Federal Bancshares’ higher capital position resulting from the infusion of stock proceeds will also serve to reduce interest rate risk, particularly through enhancing the Company’s interest-earning-assets-to-interest-bearing-liabilities (“IEA/IBL”) ratio. The additional funds realized from the stock offering will provide an alternative funding source to deposits and borrowings in meeting the Company’s future funding needs, which may facilitate a reduction in Peoples Federal Bancshares’ funding costs. Additionally, Peoples Federal Bancshares’ higher equity-to-assets ratio will also better position the Company to take advantage of expansion opportunities as they arise. Such expansion would most likely occur through the establishment or acquisition of additional banking offices or customer facilities that would provide for further penetration in the markets currently served by the Company or nearby surrounding markets. The Company will also be better positioned to pursue growth through acquisition of other financial institutions or financial service providers following the stock offering, given its

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.5

strengthened capital position and its ability to offer stock as consideration. At this time, the Company has no specific plans for expansion, but as part of its business plan has identified expanding its branch network as a growth strategy to be pursued. The projected uses of proceeds are highlighted below.

• Peoples Federal Bancshares, Inc. The Company is expected to retain up to 50% of the net offering proceeds. At present, funds at the Company level, net of the loan to the ESOP, are expected to be invested into short-term investment grade securities and liquid funds. Over time, the funds may be utilized for various corporate purposes, possibly including acquisitions, infusing additional equity into the Bank, repurchases of common stock, and the payment of cash dividends.

• Peoples Federal Savings Bank. Approximately 50% of the net stock proceeds will be infused into the Bank in exchange for all of the Bank’s stock. Cash proceeds (i.e., net proceeds less deposits withdrawn to fund stock purchases) infused into the Bank are anticipated to become part of general operating funds, and are expected to be primarily utilized to fund loan growth over time.

Overall, it is the Company’s objective to pursue growth that will serve to increase returns, while, at the same time, growth will not be pursued that could potentially compromise the overall risk associated with Peoples Federal Bancshares’ operations.

Balance Sheet Trends

Table 1.1 shows the Company’s historical balance sheet data for the past five and one-quarter fiscal years. From fiscal year end 2005 through December 31, 2009, Peoples Federal Bancshares’ assets increased at a 6.9% annual rate. Asset growth was largely driven by loan growth and more recently the build-up of cash and cash equivalents. Asset growth was primarily funded by deposit growth supplemented with increased utilization of borrowings during fiscal years 2006 and 2008. A summary of Peoples Federal Bancshares’ key operating ratios for the past five fiscal years is presented in Exhibit I-3.

Peoples Federal Bancshares’ loans receivable portfolio increased at a 7.0% annual rate from fiscal year end 2005 through December 31, 2009, with the loan portfolio exhibiting the most significant growth during fiscal year 2008. The relatively strong loan growth during fiscal year 2008 was supported by purchases of 1-4 family, as the Company purchased $78 million of 1-4 family loans beginning in 2007 and through 2008. The loans receivable balance at December 31, 2009 was $370.5 million. The Company’s loan and asset growth rates were approximately the same during the period covered in Table 1.1 and, therefore, the loans-to-assets ratio of 77.4% at fiscal year end 2005 essentially matched the 77.5% loans-to-assets ratio maintained at December 31, 2009.

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.6

Table 1.1

Peoples Federal Bancshares, Inc.

Historical Balance Sheet Data

																									9/30/05- 12/31/09 Annual. Growth Rate
	At Fiscal Year Ended September 30,																				At December 31,
	2005				2006				2007				2008				2009				2009
	Amount		Pct(1)		Amount		Pct(1)		Amount		Pct(1)		Amount		Pct(1)		Amount		Pct(1)		Amount		Pct(1)		Pct
	($000)		(%)		($000)		(%)		($000)		(%)		($000)		(%)		($000)		(%)		($000)		(%)		(%)
Total Amount of:
Assets	$	363,172	100.00	%	$	372,665	100.00	%	$	362,184	100.00	%	$	437,623	100.00	%	$	482,828	100.00	%	$	482,758	100.00	%	6.93	%
Cash and cash equivalents		22,942	6.32	%		43,109	11.57	%		28,003	7.73	%		17,339	3.96	%		88,634	18.36	%		80,187	16.61	%	34.24	%
Investment securities		39,439	10.86	%		24,135	6.48	%		25,954	7.17	%		22,149	5.06	%		6,328	1.31	%		955	0.20	%	-58.33	%
Loans receivable, net		281,044	77.39	%		282,357	75.77	%		284,906	78.66	%		373,309	85.30	%		362,667	75.11	%		374,172	77.51	%	6.97	%
FHLB stock		2,682	0.74	%		2,882	0.77	%		2,760	0.76	%		4,339	0.99	%		4,339	0.90	%		4,339	0.90	%	11.99	%
Bank-owned life insurance		6,215	1.71	%		10,026	2.69	%		10,439	2.88	%		10,858	2.48	%		11,249	2.33	%		11,349	2.35	%	15.22	%
Deposits	$	279,544	76.97	%	$	282,882	75.91	%	$	282,073	77.88	%	$	302,954	69.23	%	$	366,464	75.90	%	$	370,508	76.75	%	6.85	%
Borrowings		36,787	10.13	%		41,215	11.06	%		28,639	7.91	%		80,060	18.29	%		58,000	12.01	%		54,000	11.19	%	9.45	%
Equity	$	41,405	11.40	%	$	44,478	11.94	%	$	46,305	12.78	%	$	48,274	11.03	%	$	50,943	10.55	%	$	51,652	10.70	%	5.34	%
Loans/Deposits			100.54	%			99.81	%			101.00	%			123.22	%			98.96	%			100.99	%
Full Service Banking Offices Open		6				6				6				6				6				6

(1) Ratios are as a percent of ending assets.

Sources: Peoples Federal Bancshares’ prospectus, audited and unaudited financial statements and RP Financial calculations.

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.7

Trends in the Company’s loan portfolio composition over the past five and one-quarter fiscal years show that the concentration of 1-4 family loans comprising total loans increasing, which was largely related to purchases of 1-4 family loans that occurred primarily during fiscal year 2008. Overall, 1-4 family loans increased from 62.8% of total loans at fiscal year end 2005 to 66.0% of total loans at December 31, 2009. Commercial real estate/multi-family loans constitute the primary area of lending diversification for the Company, with such loans increasing from 23.5% of total loans at fiscal year end 2005 to 27.5% of total loans at December 31, 2009. The increase in the concentration of commercial real estate/multi-family loans in the Company’s loan portfolio was facilitated by relatively strong growth of commercial real estate loans, while the concentration of multi-family loans comprising total loans remained fairly stable. Other areas of lending diversification for Peoples Federal Bancshares include construction loans (decreasing from 11.9% of total loans at fiscal year end 2005 to 4.6% of total loans at December 31, 2009), commercial business loans (increasing from 0.6% of total loans at fiscal year end 2005 to 1.2% of total loans at December 31, 2009) and consumer loans (decreasing from 1.2% of total loans at fiscal year end 2005 to 0.7% of total loans at December 31, 2009).

The intent of the Company’s investment policy is to provide adequate liquidity and to generate a favorable return within the context of supporting Peoples Federal Bancshares’ overall credit and interest rate risk objectives. It is anticipated that proceeds retained at the holding company level will primarily be invested into investments with short-term maturities. Over the past five fiscal and one-quarter fiscal years, the Company’s level of cash and investment securities (inclusive of FHLB stock) ranged from a low of 10.0% of assets at fiscal year end 2008 to a high of 20.6% of

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.8

assets at fiscal year end 2009. Cash and investments equaled 17.7% of total assets at December 31, 2009. There has been a notable shift in the composition of the Company’s cash and investments since fiscal year end 2008, as the Company elected to liquidate most of its investment holdings and redeploy those proceeds along with cash flows from loan shrinkage and deposit growth into cash and cash equivalents. Accordingly, cash and cash equivalents increased from 4.0% of assets at fiscal year end 2008 to 18.4% of assets at fiscal year end 2009. As of December 31, 2009, the Company maintained $80.2 million of cash and cash equivalents, equal to 16.6% of assets. The decrease in cash and cash equivalents during the quarter ended December 31, 2009 was to fund loan growth and pay down borrowings. Comparatively, from fiscal year end 2008 to December 31, 2009, the investment securities portfolio decreased from 5.1% of assets to 0.2% of assets. As of December 31, 2009, the Company’s entire investment portfolio consisted of $955,000 of mortgage-backed securities guaranteed or insured by Government Sponsored Enterprises (“GSEs”). The mortgage-backed securities portfolio is held as available for sale and reflected a net unrealized gain of $41,000 at December 31, 2009. Exhibit I-4 provides historical detail of the Company’s investment portfolio. The Company also held $4.3 million of FHLB stock at December 31, 2009.

The Company also maintains an investment in bank-owned life insurance (“BOLI”) policies, which cover the lives of some of the Company’s directors and management. The purpose of the investment is to provide funding for the benefit plans of the covered individuals. The life insurance policies earn tax-exempt income through cash value accumulation and death proceeds. As of December 31, 2009, the cash surrender value of the Company’s BOLI equaled $11.3 million.

Over the past five and one-quarter fiscal years, Peoples Federal Bancshares’ funding needs have been addressed through a combination of deposits, borrowings and internal cash flows. From fiscal year end 2005 through December 31, 2009, the Company’s deposits increased at a 6.9% annual rate. Since fiscal year end 2007, deposits have trended steadily higher. Deposit growth was driven by growth of money market deposit accounts, which along with a decrease in certificates of deposit (“CDs”)

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.9

served to increase the concentration of core deposits comprising total deposits in recent years. Core deposits comprised 70.3% of average total deposits for the three months ended December 31, 2009, versus 51.8% of average total deposits for the fiscal year ended September 30, 2007.

Borrowings serve as an alternative funding source for the Company to address funding needs for growth and to support management of deposit costs and interest rate risk. From fiscal ear end 2005 to December 31, 2009, borrowings increased at an annual rate of 9.5%. The Company’s utilization of borrowings reached a peak balance of $80.1 million or 18.3% of assets at fiscal year end 2008 and then decreased during the past one and one-quarter fiscal years to $54.0 million or 11.2% of assets at December 31, 2009. Deposit growth and liquidity were used to fund the pay down of borrowings. The Company’s utilization of borrowings has generally been limited to FHLB advances.

The Company’s equity increased at a 5.3% annual rate from fiscal year end 2005 through December 31, 2009, which was largely related to retention of earnings. All of the Company’s capital is tangible capital, and Peoples Federal maintained capital surpluses relative to all of its regulatory capital requirements at December 31, 2009. The addition of stock proceeds will serve to strengthen the Company’s capital position, as well as support growth opportunities. At the same time, Peoples Federal Bancshares’ ROE will initially be depressed following its stock conversion as the result of the significant increase that will be realized in the Company’s pro forma capital position.

Income and Expense Trends

Table 1.2 shows the Company’s historical income statements for the past five and one-quarter fiscal years. The Company’s reported earnings over the past five fiscal years, ranged from a low of $1.8 million or 0.48% of average assets in fiscal 2007 to a high of $3.5 million or 0.99% of average assets in fiscal 2005. For the twelve months ended December 31, 2009, the Company reported net income of $2.6 million or 0.57% of average assets. Net interest income and operating expenses represent the primary components of the Company’s earnings. Non-interest operating income has been somewhat of limited but stable source of earnings for the Company. Loan loss provisions and gains and losses from the sale of loans and investments have typically had a limited impact on the Company’s earnings over the five and one-quarter fiscal years.

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.10

Table 1.2

Peoples Federal Bancshares, Inc.

Historical Income Statements

	For the Fiscal Year Ended September 30,																									For the 12 months Ended 12/31/09
	2005					2006					2007					2008					2009
	Amount			Pct(1)		Amount			Pct(1)		Amount			Pct(1)		Amount			Pct(1)		Amount			Pct(1)		Amount			Pct(1)
	($000)			(%)		($000)			(%)		($000)			(%)		($000)			(%)		($000)			(%)		($000)			(%)
Interest income	$	19,156		5.38	%	$	21,516		5.86	%	$	22,395		5.96	%	$	22,096		5.65	%	$	22,614		4.99	%	$	21,840		4.76	%
Interest expense		(5,382	)	-1.51	%		(7,844	)	-2.14	%		(9,649	)	-2.57	%		(9,272	)	-2.37	%		(8,687	)	-1.92	%		(8,126	)	-1.77	%
Net interest income	$	13,774		3.87	%	$	13,672		3.72	%	$	12,746		3.39	%	$	12,824		3.28	%	$	13,927		3.07	%	$	13,714		2.98	%
Provision for loan losses		(60	)	-0.02	%		(245	)	-0.07	%		(20	)	-0.01	%		—		0.00	%		(127	)	-0.03	%		(127	)	-0.03	%
Net interest income after provisions	$	13,714		3.85	%	$	13,427		3.65	%	$	12,726		3.39	%	$	12,824		3.28	%	$	13,800		3.05	%	$	13,587		2.96	%
Other operating income	$	1,106		0.31	%	$	1,118		0.30	%	$	1,258		0.33	%	$	1,342		0.34	%	$	1,301		0.29	%	$	1,316		0.29	%
Operating expense		(9,384	)	-2.63	%		(9,606	)	-2.61	%		(11,036	)	-2.94	%		(10,866	)	-2.78	%		(11,263	)	-2.49	%		(11,469	)	-2.50	%
Net operating income	$	5,436		1.53	%	$	4,939		1.34	%	$	2,948		0.78	%	$	3,300		0.84	%	$	3,838		0.85	%	$	3,434		0.75	%
Non-Operating Income
Gain(loss) on sale of loans	$	153		0.04	%	$	197		0.05	%	$	24		0.01	%	$	24		0.01	%	$	307		0.07	%	$	379		0.08	%
Gain(loss) on sale of securities		312		0.09	%		(188	)	-0.05	%		10		0.00	%		43		0.01	%		208		0.05	%		418		0.09	%
Net non-operating income	$	465		0.13	%	$	9		0.00	%	$	34		0.01	%	$	67		0.02	%	$	515		0.11	%	$	797		0.17	%
Net income before tax	$	5,901		1.66	%	$	4,948		1.35	%	$	2,982		0.79	%	$	3,367		0.86	%	$	4,353		0.96	%	$	4,231		0.92	%
Income tax provision		(2,375	)	-0.67	%		(2,009	)	-0.55	%		(1,178	)	-0.31	%		(1,294	)	-0.33	%		(1,681	)	-0.37	%		(1,635	)	-0.36	%
Net income (loss)	$	3,526		0.99	%	$	2,939		0.80	%	$	1,804		0.48	%	$	2,073		0.53	%	$	2,672		0.59	%	$	2,596		0.57	%
Adjusted Earnings
Net income	$	3,526		0.99	%	$	2,939		0.80	%	$	1,804		0.48	%	$	2,073		0.53	%	$	2,672		0.59	%	$	2,596		0.57	%
Add(Deduct): Net gain/(loss) on sale		(465	)	-0.13	%		(9	)	0.00	%		(34	)	-0.01	%		(67	)	-0.02	%		(515	)	-0.11	%		(797	)	-0.17	%
Tax effect (2)		187		0.05	%		4		0.00	%		14		0.00	%		27		0.01	%		207		0.05	%		320		0.07	%
Adjusted earnings	$	3,248		0.91	%	$	2,934		0.80	%	$	1,784		0.47	%	$	2,033		0.52	%	$	2,364		0.52	%	$	2,119		0.46	%
Expense Coverage Ratio (3)		1.47					1.42					1.15					1.18					1.24					1.19
Efficiency Ratio (4)		62.9	%				64.9	%				78.8	%				76.7	%				74.1	%				76.5	%

(1) Ratios are as a percent of average assets.

(2) Assumes a 40.2% effective tax rate.

(3) Expense coverage ratio calculated as net interest income before provisions for loan losses divided by operating expenses.

(4) Efficiency ratio calculated as operating expenses divided by the sum of net interest income before provisions for loan losses plus other income (excluding net gains).

Sources: Peoples Federal Bancshares’ prospectus, audited & unaudited financial statements and RP Financial calculations.

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.11

Over the past five and one-quarter fiscal years, the Company’s net interest income to average assets ratio has trended lower from 3.87% during fiscal 2005 to 2.98% during the twelve months ended December 31, 2009. The downward trend in the Company’s net interest income ratio resulted from more significant increases in funding costs compared to interest-earning asset yields during fiscal years 2006 and 2007, followed by a steeper decline in interest-earning assets yields relative to funding costs since fiscal year end 2007. The decrease in the net interest margin since fiscal year end 2007 reflects the increase in the Company’s liquidity position during a period when short-term interest rates have declined sharply. Overall, the Company’s interest rate spread decreased from 3.84% during fiscal 2005 to 2.79% during the three months ended December 31, 2009. The Company’s net interest rate spreads and yields and costs for the past five and one-quarter fiscal years are set forth in Exhibits I-3 and I-5.

Non-interest operating income has been a fairly stable, but somewhat limited, contributor to the Company’s earnings over the past five and one-quarter fiscal years, reflecting the Company’s limited diversification into products and services that generate non-interest operating income. Throughout the period shown in Table 1.2, sources of non-interest operating income ranged from a low of 0.29% of average assets during fiscal 2009 and for the twelve months ended December 31, 2009 to a high of 0.34% of average assets during fiscal 2008. Customer service fees and income earned on BOLI constitute the largest sources of non-interest operating income for the Company.

Operating expenses represent the other major component of the Company’s earnings, ranging from a low of 2.49% of average assets during fiscal 2009 to a high of 2.94% of average assets during fiscal 2007. For the twelve months ended December 31, 2009, the Company’s operating expenses equaled $11.5 million or 2.50% of average assets. The relatively higher operating expense ratio for fiscal 2007 reflects

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.12

the impact of the Brookline Co-Operative Bank acquisition. Since fiscal 2007, operating expenses have stabilized and, thus, asset growth has served to leverage the Company’s operating expense ratio. Upward pressure will be placed on the Company’s operating expense ratio following the stock offering, due to expenses associated with operating as a publicly-traded company, including expenses related to the stock benefit plans. At the same, the increase in capital realized from the stock offering will increase the Company’s capacity to leverage operating expenses through pursuing a more aggressive growth strategy.

Overall, the general trends in the Company’s net interest margin and operating expense ratio since fiscal 2005 reflect a decrease in core earnings, as indicated by the Company’s expense coverage ratio (net interest income divided by operating expenses). Peoples Federal Bancshares’ expense coverage ratio equaled 1.47 times during fiscal 2005 versus a ratio of 1.19 times during the twelve months ended December 31, 2009. The decrease in the expense coverage ratio resulted from a more significant decrease in the net interest income ratio compared to the decrease in the operating expense ratio. Similarly, Peoples Federal Bancshares’ efficiency ratio (operating expenses, net of amortization of intangibles, as a percent of the sum of net interest income and other operating income) of 62.9% during fiscal 2005 was more favorable than its efficiency ratio of 76.5% for the twelve months ended December 31, 2009.

Over the past five and one-quarter fiscal year years, maintenance of generally favorable credit quality measures served to limit the amount of loan loss provision established during the period. In fact, no loan loss provisions were established in fiscal 2008. For fiscal 2009, loan loss provisions established equaled $127,000 or 0.03% of average assets. Loan growth, an increase in non-performing loans and the prevailing credit cycle were factors that contributed to the higher loan loss provisions established by the Company during fiscal 2009 and for the twelve months ended December 31, 2009. As of December 31, 2009, the Company maintained loan loss allowances of $3.2 million, equal to 0.84% of net loans receivable and 60.15% of non-performing loans. Exhibit I-6 sets forth the Company’s loan loss allowance activity during the past five and one-quarter fiscal years.

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.13

Non-operating income over the past five and one-quarter fiscal years has primarily consisted of gains on the sale of loans and gains and losses on the sale of investment securities, which generally have had a relatively minor impact on the Company’s earnings. Non-operating income was a comparatively larger contributor to the Company earnings during the twelve months ended December 31, 2009, amounting to $797,000 or 0.17% of average assets. Non-operating income for the twelve months ended December 31, 2009 was fairly evenly distributed between loan sale gains and gains on the sale of investment securities. Loan sale gains reflect the sale of fixed rate loan originations to the secondary market for purposes of interest rate risk management and, therefore, represent an ongoing activity for the Company. Comparatively, the other components of the Company’s non-operating income are viewed as non-recurring income items. However, gains realized through secondary market activities are subject to a certain degree of volatility as well, given the dependence of such gains on the interest rate environment and the strength of the regional housing market.

The Company’s effective tax rate ranged from a low of 38.43% during fiscal 2008 to a high of 40.60% during fiscal 2006. As set forth in the prospectus, the Company’s marginal effective statutory tax rate is 40.2%.

Interest Rate Risk Management

The Company’s balance sheet is liability-sensitive in the short-term (less than one year) and, thus, the net interest margin will typically be adversely affected during periods of rising and higher interest rates, as well as in the interest rate environment that generally prevailed during 2006 and 2007, in which the yield curve was flat or inverted. Comparatively, the Company’s interest rate spreads will tend to benefit when short-term interest rates decline and the yield curve steepens. As of December 31, 2009, the OTS Net Portfolio Value (“NPV”) analysis indicated that a 2.0% instantaneous and sustained increase in interest rates would result in an 8% decrease in Peoples Federal Bancshares’ NPV (see Exhibit I-7).

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.14

The Company pursues a number of strategies to manage interest rate risk, particularly with respect to seeking to limit the repricing mismatch between interest rate sensitive assets and liabilities. The Company manages interest rate risk from the asset side of the balance sheet through selling originations of fixed rate 1-4 family loans with terms of 30 years, building up its liquidity position in low interest rate environments and diversifying into other types of lending beyond 1-4 family permanent mortgage loans which consists primarily of shorter term fixed rate loans, adjustable rate loans or balloon loans. As of September 30, 2009, of the Company’s total loans due after September 30, 2010, ARM loans comprised 63.3% of those loans (see Exhibit I-8). On the liability side of the balance sheet, management of interest rate risk has been pursued through utilizing FHLB advances with laddered terms out to five years and through emphasizing growth of lower costing and less interest rate sensitive transaction and savings accounts. Transaction and savings accounts comprised 70.3% of the Company’s average balance of total deposits during the three months ended December 31, 2009.

The infusion of stock proceeds will serve to further limit the Company’s interest rate risk exposure, as most of the net proceeds will be redeployed into interest-earning assets and the increase in the Company’s capital position will lessen the proportion of interest rate sensitive liabilities funding assets.

Lending Activities and Strategy

Peoples Federal Bancshares’ lending activities have traditionally emphasized 1-4 family permanent mortgage loans and such loans continue to comprise the largest component of the Company’s loan portfolio. Beyond 1-4 family loans, lending diversification by the Company has emphasized commercial real estate/multi-family loans followed by construction loans. Other areas of lending diversification for the Company include commercial business loans and consumer loans. Going forward, the Company’s lending strategy is to continue to emphasize diversification of the loan portfolio, particularly with respect to growth of commercial real estate loans. The origination of 1-4 family permanent mortgage loans is expected to remain an active area of lending for the Company, although growth of the 1-4 family loan portfolio will be

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.15

limited as new loan production will be offset by loan sales of most fixed rate originations with terms of more than 15 years and repayments on the existing portfolio. The Company curtailed its construction lending activities in recent years, based on the increased credit risk associated with such lending in the prevailing market environment. Exhibit I-9 provides historical detail of Peoples Federal Bancshares’ loan portfolio composition over the past five and one-quarter fiscal years and Exhibit I-10 provides the contractual maturity of the Company’s loan portfolio by loan type as of September 30, 2009.

Peoples Federal Bancshares’ offers both fixed rate and adjustable rate 1-4 family permanent mortgage loans. Loans are underwritten to secondary market guidelines, as the Company’s current philosophy has been to sell most originations of fixed rate loans with terms of more than 15 years. Loans are sold on a servicing retained basis. ARM loans offered by the Company have initial repricing terms of one, three, five or seven years and then reprice annually for the balance of the loan term. ARM loans are indexed to the comparable term FHLB advance rate. During the 2007 and 2008 period, the Company supplemented originations of 1-4 family loans with approximately $78.0 million of purchased 1-4 family loans. The loans were purchased from other local financial institutions and mortgage lenders and are secured by residences in the Company’s market area. The Company does not originate or purchase any sub-prime loans. As of December 31, 2009, the Company’s outstanding balance of 1-4 family loans equaled $249.1 million or 66.0% of total loans outstanding.

The Company’s 1-4 family loan portfolio includes home equity loans and home equity lines of credit. Home equity loans are fixed rate amortizing loans with terms of up to 15 years. Home equity lines of credit are tied to the prime rate as published in The Wall Street Journal and are offered for terms of up to 20 years with a maximum ten year draw period. The Company will originate home equity loans and lines of credit up to a maximum loan-to value (“LTV”) ratio of 75.0%, inclusive of other liens on the property. As of December 31, 2009, the Company’s outstanding balance of home equity loans and home equity lines of credit totaled $19.1 million or 5.1% of total loans outstanding and 7.7% of the 1-4 family loan portfolio.

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.16

Construction loans originated by the Company consist of loans to finance the construction of 1-4 family residences and commercial/multi-family properties. The Company’s 1-4 family construction lending activities consist mostly of speculative loans that are extended to experienced builders in the Company’s market area. Residential construction loans are offered up to a LTV ratio of 75.0%. Commercial real estate construction loans generally require a commitment for permanent financing to be in place prior to closing construction loan and are originated up to 75.0% of the completed appraised value of the property. Residential and commercial construction loans are interest only loans during the construction period. At December 31, 2009, the largest outstanding commercial construction loan balance was for $3.4 million and was secured by a hotel. This loan was performing in accordance with its terms at December 31, 2009. As of December 31, 2009, Peoples Federal Bancshares’ outstanding balance of construction loans equaled $17.3 million or 4.6% of total loans outstanding

The balance of the mortgage loan portfolio consists of commercial real estate and multi-family loans, which are collateralized by properties in the Company’s regional lending area. Peoples Federal Bancshares originates commercial real estate and multi-family loans up to a maximum LTV ratio of 75.0% and requires a minimum debt-coverage ratio of 1.25 times. Commercial real estate/multi-family loans are generally originated as adjustable rate loans for terms of up to 30 thirty years, which convert to a one ARM loan indexed to the one year FHLB advance rate after an initial fixed rate term of five years. The Company also offers fixed rate commercial real estate/multi-family loans for terms of up to 15 years. Properties securing the commercial real estate loan portfolio include office buildings, retail space, industrial buildings, mixed-use properties and apartments. The largest commercial real estate/multi-family loan in the Company’s loan portfolio at December 31, 2009 was a $3.6 million loan secured by a retail store and apartment building, which was performing in accordance with its terms at December 31, 2009. As of December 31, 2009, the Company’s outstanding balance of commercial real estate/multi-family loans totaled $103.9 million equal to 27.5% of total loans outstanding.

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.17

Peoples Federal Bancshares’ diversification into non-mortgage loans has been somewhat limited, consisting of consumer loans and commercial business loans. The consumer loan portfolio, exclusive of home equity loans and home equity lines of credit, consists of various types of installment loans, loans secured by deposits and personal loans. As of December 31, 2009, the consumer loan portfolio totaled $2.5 million or 0.7% of total loans outstanding.

The commercial business loan portfolio is generated through extending loans to businesses operating in the local market area. Commercial business loans offered by the Company consist of fixed rate term loans and floating rate lines of credit indexed to the prime rate as reported in The Wall Street Journal and generally have terms of seven years or less. The commercial business loan portfolio consists substantially of loans secured by business assets such as accounts receivable, inventory and equipment. The Company also originates working capital lines credit to finance the short-term business needs of businesses. As of December 31, 2009, Peoples Federal Bancshares’ outstanding balance of commercial business loans equaled $4.5 million or 1.2% of total loans outstanding.

Asset Quality

The Company’s historical 1-4 family lending emphasis and lending emphasis on lending in local and familiar markets have generally supported the maintenance of relatively favorable credit quality measures; although, with the onset of the recession in the Company’s lending markets, the Company has experienced some credit quality deterioration in its loan portfolio during the past two and one-quarter fiscal years. Over the past five and one-quarter fiscal years, Peoples Federal Bancshares’ balance of non-performing assets ranged from a low of 0.01% of assets at fiscal year end 2005 to a high of 1.19% of assets at year end 2009. The Company held $5.2 million of non-performing assets at December 31, 2009, equal to 1.08% of total assets. As shown in Exhibit I-11, non-performing assets at December 31, 2009 consisted of $5.2 million of non-accruing loans. Non-accruing loans held by the Company at December 31, 2009 were concentrated in commercial real estate loans ($1.8 million), 1-4 family loans ($1.6 million) and construction loans ($1.5 million).

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.18

To track the Company’s asset quality and the adequacy of valuation allowances, Peoples Federal Bancshares has established detailed asset classification policies and procedures which are consistent with regulatory guidelines. Classified assets are reviewed at least quarterly by senior management and the Board. Pursuant to these procedures, when needed, the Company establishes additional valuation allowances to cover anticipated losses in classified or non-classified assets. As of December 31, 2009, the Company maintained loan loss allowances of $3.2 million, equal to 0.84% of net loans receivable and 60.15% of non-performing loans.

Funding Composition and Strategy

Deposits have consistently served as the Company’s primary funding source and at December 31, 2009 deposits accounted for 87.3% of Peoples Federal Bancshares’ interest-bearing funding composition. Exhibit I-12 sets forth the Company’s deposit composition for the past three and one-quarter fiscal years. Transaction and savings account deposits constituted 70.3% of average total deposits for the three months ended December 31, 2009. Comparatively, transaction and savings account deposits constituted 51.8% of average total deposits for the fiscal year ended September 30, 2007. The increase in the concentration of core deposits comprising total deposits since fiscal year end 2007 was realized through a reduction in CD balances and growth of core deposits. Most of the growth of core deposits has consisted of money market account deposits, which was facilitated by marketing relatively attractive rates on the Company’s money market deposits. Money market account deposits comprised 59.2% of the Company’s average total core deposits for the three months ended December 31, 2009.

The balance of the Company’s deposits consists of CDs, which equaled 29.7% of average total deposits for the three months ended December 31, 3009 compared to 48.2% of average total deposits for the fiscal year ended September 30, 2007. Peoples Federal Bancshares’ current CD composition reflects a higher concentration of short-term

RP® Financial, LC.	OVERVIEW AND FINANCIAL ANALYSIS
	I.19

CDs (maturities of one year or less). The CD portfolio totaled $112.3 million at September 30, 2009 and $92.8 million or 82.6% were scheduled to mature in one year or less. Exhibit I-13 sets forth the maturity schedule of the Company’s CDs as of December 31, 2009. As of December 31, 2009, jumbo CDs (CD accounts with balances of $100,000 or more) amounted to $37.5 million or 34.3% of total CDs. The Company did not maintain any brokered CDs at December 31, 2009.

Borrowings serve as an alternative funding source for the Company to facilitate management of funding costs and interest rate risk. The Company maintained $54.0 million of FHLB advances at December 31, 2009 with a weighted average rate of 3.35%. FHLB advances held by the Company at December 31, 2009 consisted of a mix of short- and long-term borrowings with laddered terms out to five years. Exhibit I-14 provides further detail of the Company’s borrowings activities during the past three and one-quarter fiscal years.

Legal Proceedings

The Company is not currently party to any pending legal proceedings that the Company’s management believes would have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

RP® Financial, LC.	MARKET AREA
	II.1

II. MARKET AREA

Introduction

Peoples Federal Bancshares serves the Boston metropolitan area through the main office in Brighton, Massachusetts and five branch offices. The main office and branch locations in Allston, West Roxbury and Jamaica Plain are part of Suffolk County and the remaining two branch locations in Brookline and Norwood are part of Norfolk County. Exhibit II-1 provides information on the Company’s office properties.

With operations in a major metropolitan area, the Company’s competitive environment includes a significant number of thrifts, commercial banks and other financial services companies, some of which have a regional or national presence and many of which are larger than the Company in terms of deposits, loans, scope of operations, and number of branches. These institutions also have greater resources at their disposal than the Company. The Boston MSA has a highly diversified economy, which tends to parallel trends in the broader national economy. Accordingly, the national recession has rippled through the Boston metropolitan area, with rising unemployment and declining real estate values impacting growth opportunities and credit risk exposure for Boston-based financial institutions in general.

Future growth opportunities for Peoples Federal Bancshares depend on the future growth and stability of the local and regional economy, demographic growth trends, and the nature and intensity of the competitive environment. These factors have been briefly examined to help determine the growth potential that exists for the Company, the relative economic health of the Company’s market area, and the resultant impact on value.

National Economic Factors

The future success of the Company’s operations is partially dependent upon national economic factors and trends. In assessing economic trends over past few quarters, the April 2009 employment data showed that the pace of layoffs slowed in April 2009, but the unemployment rate climbed to 8.9%. Retail sales fell 0.4% in April from March and housing starts hit a low in April, falling 12.8% from March. However, single-family

RP® Financial, LC.	MARKET AREA
	II.2

home construction rose 2.8%. Durable-goods orders rose 1.9% in April, offering some evidence that the manufacturing slump was ending. Some other positive signs that the recovery was gaining strength included a 2.9% increase in existing home sales and consumer confidence shot higher in May to its highest level in eight months. May employment data showed job losses slowed for the fourth straight month, with employers cutting 345,000 jobs. However, the May unemployment rate jumped to 9.4%. Retail sales rose 0.5% in May on higher gas prices. Durable-goods orders rose and new home prices firmed in May, providing the latest evidence the U.S. economy’s free fall was ending.

Signs that the U.S. economy was pulling out of the recession became more evident at the start of the third quarter of 2009; however, overall economic conditions remained weak. The decline in manufacturing activity slowed in June, while June employment data showed more job losses than expected and an increase in the unemployment rate to 9.5%. Service sector activity improved in June and retail sales rose in June, but excluding gasoline and autos, sales fell for the fourth straight month. The index of leading economic indicators was up in June and the housing market showed some signs of recovery, as sales of new and existing homes rose in June. Notably, home prices in major U.S. cities registered the first monthly gain in a nearly a year for the three month period ending in May compared with the three months ending in April. The July employment report showed the fewest job losses in a year and the unemployment rate dipped to 9.4%, its first decline in nine months. Retail sales were down slightly in July, raising concerns over the durability of the recovery. However, sales of existing homes jumped 7.2% in July, the fastest pace in nearly two years. July new home sales were up sharply as well, which supported a 4.9% increase in July durable-goods orders.

August economic data generally indicated that the recession was nearing an end, as manufacturing output grew for the first time since January 2008 and the “cash for clunkers” program fueled a rebound in August retail sales. August employment data showed fewer than expected job losses, while the unemployment rate rose to a 26 year high of 9.7%. The index of leading indicators rose for the fifth straight month in August, providing another sign of recovery. Second quarter GDP declined at a 0.7% annualized rate, which was better than the 1% decline previously estimated. Other economic data

RP® Financial, LC.	MARKET AREA
	II.3

suggested an uneven recovery, as existing home sales slid in August and consumer confidence fell in September. Manufacturing and service sector activity both grew in September, while the U.S. unemployment rate rose to 9.8% in September as employers cut more jobs than expected. As job losses continued to mount, vacancy rates for commercial office space continued to increase during the third quarter. Retail sales fell in September from August as the “cash for clunkers’ program ended, however, excluding autos, retail sales increased slightly in September. New home sales fell in September, while orders for durable goods increased in September. Third quarter GDP increased at a 3.5% annual rate (subsequently revised to 2.2%), marking an apparent end to the recession. Notably, a large portion of GDP growth in the third quarter was generated through federal stimulus programs, bringing into question the sustainability of the recovery without government support.

October 2009 showed further signs of an economic recovery, even as the labor market continued to struggle. U.S. manufacturing activity expanded for the third month in a row in October, while a net loss of 190,000 jobs in October pushed the October unemployment rate up to 10.2%. Retail sales and the index of leading economic indicators both rose in October, while housing data was mixed raising doubts about the strength of the sector’s recovery. New home starts tumbled in October, while sales of existing home showed a strong increase in October. Signs of a slow and uneven economic recovery continued to be reflected in the November data. Manufacturing activity continued to grow in November, while the service sector contracted in November after growing in October. Employment data for November reflected the fewest number of job losses since December 2007, which reduced the unemployment rate to 10.0%. The Federal Reserve’s “beige book” released in early-December showed the economy improving moderately, with consumer spending up but commercial real estate weakening. Additional evidence that strength was returning to the economy included a healthy rise in November durable goods orders and manufacturing activity in December expanding at its fastest pace in more than three years. Sales of existing homes were up solidly in November, although construction spending in November was down slightly. Manufacturing activity expanded in December at its fastest pace in more than three years, while the service sector recorded only modest growth in December. Job losses were

RP® Financial, LC.	MARKET AREA
	II.4

significantly higher than expected in December, dashing hopes of a near term turnaround in employment. Employers cut 85,000 jobs in December, while the December unemployment rate held steady at 10.0%. The index of leading economic indicators rose 1.1% from November to December for its ninth straight month of gains, while housing data for December was less favorable with both new and existing home sales declining in December. The decline in home sales in December was in part related to a surge in home sales during the fall, as first-time home buyers raced to take advantage of a tax credit before it expired. Fourth quarter GDP increased at an annual rate of 5.7%, although much of the growth was tied to companies replenishing low inventories that typically only provides a temporary bump in growth.

Manufacturing activity rose for a sixth straight month in January 2010, with the rate of expansion at its highest point since August 2004. Comparatively, service sector activity remained stable in January. Payrolls unexpectedly fell in January with the loss of 20,000 jobs, but the January unemployment rate surprisingly dropped to a five month low of 9.7%. Retail sales were up in January, although consumer confidence fell in February. Sales of existing homes fell in January and orders for durable goods showed weakness in January, underscoring the uneven progress of the U.S. recovery.

In terms of interest rate trends during the past few quarters, Treasury yields remained at historically low levels through most of April 2009 with the yield on the 10-year Treasury note dipping to 2.76% in mid-April as Treasury bonds rallied on more troublesome economic data. The yield on the 10-year Treasury note edged above 3.0% in late-April and trended higher into mid-May on some positive economic data. In late-May, Treasury yields and mortgage rates surged to their highest level since November 2008, reflecting investor worries that deficit spending to fund stimulus programs could lead to inflation. The yield on the 10-year Treasury note jumped to 3.70% in late-May, providing for a steeper yield curve as the gap between two-year and 10-year Treasury notes widened to 2.75%. Interest rates stabilized in late-May and into the first half of June. The late-June meeting of the Federal Reserve concluded with keeping its target rate near zero.

Interest rates eased lower at the start of the third quarter of 2009, as investors shunned risk ahead of second quarter earnings reports. Some economic data showing an

RP® Financial, LC.	MARKET AREA
	II.5

improving economy and growing belief that the recession was nearing an end pushed long-term Treasury yields up slightly heading into late-July. The upward trend in interest rates continued into the first week of August, as interest rates edged higher following the better-than-expected employment report for July. Long-term Treasury yields eased lower going into the second half of August, as the Federal Reserve concluded its mid-August meeting leaving its key short-term rate near zero and indicated it would stay there for the foreseeable future. Weaker than expected retail sales for July and a decline in July wholesale prices further contributed to the pull back in interest rates. Long-term Treasury yields reversed course after mid-August on the stronger than expected report for July existing home sales. Interest rates stabilized in late-August and remained relatively stable through most of September, as inflation worries remained low amid high unemployment and slack in the economy. News that consumer confidence fell in September pushed Treasury yields lower at the end of the third quarter.

Mixed economic data and no apparent threat of inflationary pressures supported a stable interest rate environment at the beginning of the fourth quarter, providing for the continuation of a relatively steep yield curve. Interest rates remained stable through the balance of October, reflecting uncertainty over the sustainability of the economic recovery with consumer confidence declining for the second month in a row. The Federal Reserve concluded its early-November meeting by keeping its target interest rate near zero, which along with the weaker than expected employment report for October sustained a stable interest rate environment into mid-November. Long-term Treasury yields eased lower heading into the second half of November, following comments by the Federal Reserve Chairman that unemployment and troubles in commercial real estate would weigh on the recovery. Long-term Treasury yields dipped in late-November following news of the credit crisis in Dubai. A better than expected jobs report for November moved interest rates higher in early-December. Following the Federal Reserve’s mid-December meeting and decision to hold its target interest rate steady, the spread between short-term and long-term Treasury yields widened further in the final weeks of 2009 as long-term Treasury yields edged higher amid signs that the U.S. economy was improving.

RP® Financial, LC.	MARKET AREA
	II.6

Interest rates stabilized at the start of 2010 and then edged lower in heading into the second half of January, reflecting uncertainty on the strength of the recovery. The Federal Reserve’s two day meeting in late-January concluded with no change in its key rate target, but offered a slightly rosier economic outlook in its statement. A rise in January consumer confidence, along with the Federal Reserve’s more upbeat assessment of the economy, provided for a slight upward trend in long-term Treasury yields in late-January. Worries that Greece’s debt woes were spreading across Europe and job losses reflected in the January employment report pushed Treasury yields lower in late-January and into early-February. Some positive economic data regarding home prices and industrial output pushed interest rates higher heading in mid-February. Treasury yields rose in mid-February on the Federal Reserve’s decision to raise the discount rate, spurring thoughts of tighter credit for borrowers in general. Weak economic data and indications from the Federal Reserve that short-term interest rates would remain near zero for at least several months pushed long-term Treasury yields lower at the close of February. As of February 26, 2010, the bond equivalent yields for U.S. Treasury bonds with terms of one and ten years equaled 0.32% and 3.61%, respectively, versus comparable year ago yields of 0.73% and 2.98%. Exhibit II-2 provides historical interest rate trends.

Based on the consensus outlook of 52 economists surveyed by The Wall Street Journal, the economy is expected to expand around 3% at a seasonally adjusted annual rate through 2010. GDP growth is not expected to make a significant dent in the unemployment rate, as the surveyed economists on average expect the unemployment rate to stay above 9.5% through 2010. Most of the respondents said the Federal Reserve won’t raise interest rates until the third quarter of 2010 at the earliest.

The 2010 housing forecast from the Mortgage Bankers Association (the “MBA”) was for existing home sales to increase by approximately 11% from 2009 and new home sales are expected to jump 21% in 2010 from very depressed levels in 2009. The MBA predicts that the national average home price declines should abate by early 2010, but will vary by state and home value. The demand is expected to be the highest for entry-level homes. Total mortgage production is forecasted to be down in 2010 to $1.6 trillion compared to $2.0 trillion in 2009. The reduction in 2010 originations is expected to be

RP® Financial, LC.	MARKET AREA
	II.7

exclusively due to a 44% reduction in refinancing volume due to rising interest rates, with refinancing volume forecasted to total $754 billion in 2010. Comparatively, house purchase mortgage originations are predicted to increase by 12% in 2010, with purchase lending forecasted to total $802 billion in 2010.

Market Area Demographics

Demographic and economic growth trends, measured by changes in population, number of households, age distribution and median household income, provide key insight into the health of the market area served by Peoples Federal Bancshares. Demographic data for the primary market counties, which consists of the counties of Norfolk and Suffolk, as well as for Massachusetts and the U.S. is provided in Table 2.1.

The markets served by Peoples Federal Bancshares experienced relatively slow demographic growth during the 2000 to 2009 period, a characteristic typical of mature, densely populated urban markets located throughout the Northeast Corridor. Population and household growth rates for the counties of Norfolk and Suffolk have been and are projected to remain well below the comparable U.S. measures, while approximating the comparable Massachusetts growth rates.

Income measures show Norfolk County is a relatively affluent market, characterized by a high concentration of white collar professionals who work in the Boston MSA. Comparatively, income measures for Suffolk County, which has a relatively broad socioeconomic spectrum, are well below the Norfolk County measures and lower than the Massachusetts income measures as well. Over the next five years, Norfolk County and Suffolk County are projected to sustain growth in household and per capita income that exceed the comparable U.S. growth rates, while remaining consistent with the comparable Massachusetts growth rates. Consistent with the U.S. and Massachusetts, the projected annual growth rates for household and per capita income for the counties of Norfolk and Suffolk are projected to be less than the growth rates experienced during the 2000 to 2009 period. The affluence of the Norfolk County market is further evidenced by a comparison of household income distribution measures, as Norfolk County maintains a lower percentage of households with incomes of less than $25,000 and a much higher percentage of households with incomes over $100,000 relative to Suffolk County as well as the U.S. and Massachusetts. Comparatively, as compared to the U.S. and Massachusetts, Suffolk County showed slightly higher concentrations of households with incomes less $25,000 and greater than $100,000.

RP® Financial, LC.	MARKET AREA
	II.8

Table 2.1

Peoples Federal Bancshares, Inc.

Summary Demographic Data

	Year									Growth Rate
	2000			2009			2014			2000-2009		2009-2014
Population (000)
United States		281,422			309,732			324,063		1.1	%	0.9	%
Massachusetts		6,350			6,499			6,543		0.3	%	0.1	%
Norfolk County		650			662			665		0.2	%	0.1	%
Suffolk County		690			695			700		0.1	%	0.1	%
Households (000)
United States		105,480			116,523			122,109		1.1	%	0.9	%
Massachusetts		2,444			2,517			2,541		0.3	%	0.2	%
Norfolk County		249			256			258		0.3	%	0.2	%
Suffolk County		279			283			285		0.2	%	0.2	%
Median Household Income ($)
United States	$	42,164		$	54,719		$	56,938		2.9	%	0.8	%
Massachusetts		50,539			68,225			71,891		3.4	%	1.1	%
Norfolk County		63,359			88,399			94,027		3.8	%	1.2	%
Suffolk County		39,370			53,416			56,873		3.4	%	1.3	%
Per Capita Income ($)
United States	$	21,587		$	27,277		$	28,494		2.6	%	0.9	%
Massachusetts		25,952			34,904			37,151		3.3	%	1.3	%
Norfolk County		32,484			45,473			49,123		3.8	%	1.6	%
Suffolk County		22,766			30,700			32,601		3.4	%	1.2	%
	Less Than $25,000			$25,000 to 50,000			$50,000 to 100,000			$100,000 +
2009 HH Income Dist. (%)
United States		20.9	%		24.5	%		35.3	%	19.3	%
Massachusetts		22.3	%		25.0	%		34.3	%	18.4	%
Norfolk County		11.5	%		13.9	%		31.1	%	43.5	%
Suffolk County		25.1	%		22.0	%		30.3	%	22.6	%

Source: SNL Financial.

RP® Financial, LC.	MARKET AREA
	II.9

Local Economy

The markets served by the Company have a large and diverse economy, with the area’s many colleges and universities serving to attract industries in need of a highly skilled and educated workforce. Health care, high-tech and financial services companies constitute major sources of employment in the Company’s regional market area, as well as the colleges and universities that populate the Boston MSA. Tourism also is a prominent component of market area’s economy, as Boston is one of the country’s top 10 tourist attractions.

The Company’s lending markets have been adversely affected by the recession, although not as severely as some select bubble markets in the southeast and west where rapidly escalating home prices fueled speculative overbuilding and ultimately significant inventories of unsold homes causing a serve drop in home prices. Recent trends in the Boston housing market show home prices stabilizing following a decline of 10 to 15% since the middle of 2006, with lower home prices supporting a reduction in the inventory of unsold homes on the market. Likewise, erosion in the Boston commercial real estate market has been in evidence, as reflected by rising vacancy rates and lower lease rates for office space in Boston. However, consistent with the residential market, the Boston office market has shown signs of stabilizing as the economy pulled out of the recession in the third quarter of 2009.

Comparative employment data shown in Table 2.2 shows that employment in services constituted the major source of jobs in both primary market area counties, as well as Massachusetts. Norfolk County and Suffolk County maintained lower and higher concentration of service jobs, respectively, compared to Massachusetts, with service jobs accounting for over half the jobs in Suffolk County. Wholesale/retail followed by financial services/real estate represented the second and third largest sources of jobs in Norfolk

RP® Financial, LC.	MARKET AREA
	II.10

County, with the concentration of such jobs exceeds the comparable percentages for Massachusetts. Comparatively, jobs in financial services/real estate followed by government were the second and third largest employers in Suffolk County, with the concentration of such jobs also exceeding the comparable percentages for Massachusetts. The manufacturing industry, once the backbone of the regional economy, has generally experienced a shrinking job base reflecting a trend of manufacturers moving out of urban markets, particularly in the Northeast. Major employers in Norfolk County include General Dynamics Network Systems (telecom services), Shaw Group Inc. (heavy construction) and Technical Futures Inc. (placement firm for jobs in technology), which each maintain over 5,000 employees in Norfolk County. The two largest employers in Suffolk County are Brigham & Women’s Hospital and Massachusetts General Hospital, which each maintain over 10,000 employees. Additionally, Boston University, Children’s Hospital Boston, Deutsche Bank, Fidelity Investments Life Insurance, John Hancock Life Insurance Company and Liberty Mutual Group Inc. maintain over 5,000 employees in Suffolk County.

Table 2.2

Primary Market Area Employment Sectors

(Percent of Labor Force)(1)

Employment Sectors	Massachusetts		Norfolk		Suffolk
Services	47.8	%	44.7	%	55.9	%
Wholesale/Retail Trade	13.4		16.0		6.8
Government	10.6		7.7		12.0
Fin., Ins., Real Estate	9.5		13.2		15.0
Manufacturing	7.3		6.4		1.8
Construction	5.8		6.7		2.7
Information	2.4		2.9		2.4
Transport. & Warehousing	2.3		2.1		3.0
Other	0.9		0.3		0.4
	100.0	%	100.0	%	100.0	%

(1) Data is as of 2007.

Source: Regional Economic Information System Bureau of Economic Analysis.

RP® Financial, LC.	MARKET AREA
	II.11

Unemployment Trends

Comparative unemployment rates for the primary market area counties, as well as for the U.S. and Massachusetts, are shown in Table 2.3. November 2009 unemployment rates for the counties of Norfolk and Suffolk were 7.3% and 8.1%, respectively, which were below the comparable U.S. and Massachusetts unemployment rates of 9.4% and 8.3%, respectively. Evidence of the recession impacting the regional economy is reflected in the notably higher unemployment rates for November 2009 compared to a year ago, which is consistent with the state and national trends.

Table 2.3

Peoples Federal Bancshares, Inc.

Unemployment Trends (1)

Region	December 2008 Unemployment		December 2009 Unemployment
United States	7.2	%	10.0	%
Massachusetts	6.5		9.1
Norfolk County	5.6		7.8
Suffolk County	6.1		8.5

(1) Unemployment rates have not been seasonally adjusted.

Source: U.S. Bureau of Labor Statistics.

Market Area Deposit Characteristics and Competition

The Company’s retail deposit base is closely tied to the economic fortunes of the Boston metropolitan area and, in particular, the markets that are nearby to one of Peoples Federal Bancshares’ office locations. Table 2.4 displays deposit market trends from June 30, 2006 through June 30, 2009 for the primary market counties. Additional data is also presented for the state of Massachusetts. Over the three year period, annual deposit growth rates for Norfolk and Suffolk Counties equaled 4.4% and 0.8%, respectively. Commercial banks maintained a slightly larger market share of deposits compared to savings institutions in Norfolk County and a significantly larger market share of deposits in Suffolk County. For the three year period covered in Table 2.4, savings institutions experienced a decrease in deposit market share in Norfolk County and an increase in deposit market share in Suffolk County.

RP® Financial, LC.	MARKET AREA
	II.12

Table 2.4

Peoples Federal Bancshares, Inc.

Deposit Summary

	As of June 30,										Deposit Growth Rate 2006-2009
	2006					2009
	Deposits		Market Share		# of Branches	Deposits		Market Share		# of Branches
	(Dollars in Thousands)										(%)
State of Massachusetts	$	175,700,000	100.0	%	2,158	$	189,870,000	100.0	%	2,245	2.6	%
Commercial Banks		109,267,000	62.2	%	1,036		115,811,000	61.0	%	1,046	2.0	%
Savings Institutions		66,433,000	37.8	%	1,122		74,059,000	39.0	%	1,199	3.7	%
Norfolk County	$	15,183,000	100.0	%	238	$	17,255,000	100.0	%	245	4.4	%
Commercial Banks		6,505,000	42.8	%	97		8,953,000	51.9	%	116	11.2	%
Savings Institutions		8,678,000	57.2	%	141		8,302,000	48.1	%	129	-1.5	%
Peoples Federal		15,277	0.1	%	1		91,730	0.5	%	2	81.8	%
Suffolk County	$	68,122,000	100.0	%	209	$	69,778,000	100.0	%	224	0.8	%
Commercial Banks		61,439,000	90.2	%	132		61,836,000	88.6	%	144	0.2	%
Savings Institutions		6,683,000	9.8	%	77		7,942,000	11.4	%	80	5.9	%
Peoples Federal		223,667	0.3	%	4		248,252	0.4	%	4	3.5	%

Source: FDIC.

RP® Financial, LC.	MARKET AREA
	II.13

Peoples Federal Bancshares maintains its largest balance of deposits in Suffolk County, where the Company maintains its main office and largest branch presence. However, the Company maintained a larger deposit market share in Norfolk County, reflecting the significantly lower balance of total bank and thrift deposits maintained in Norfolk County. The Company’s $248.3 million of deposits at the main office and three branch locations in Suffolk County represented a 0.4% market share of thrift and bank deposits at June 30, 2009. Comparatively, the two Norfolk County branches had $91.7 million in total deposits and a 0.5% market share of total bank and thrift deposits at June 30, 2009. A 3.5% annual deposit growth rate in Suffolk County provided for a slight increase the Company’s deposit market share during the three year period, while the Company’s 81.8% annual deposit growth rate in Norfolk County served to increase its deposit market share from 0.1% at June 30, 2006 to 0.5% at June 30, 2009. Deposit growth in Norfolk County was supported by the acquisition of Brookline Co-Operative Bank, which added a second branch location in Norfolk County during the three year period.

As implied by the Company’s low market shares of deposits, competition among financial institutions in the Company’s market area is significant. Among the Company’s competitors are much larger and more diversified institutions, which have greater resources than maintained by Peoples Federal Bancshares. Financial institution competitors in the Company’s primary market area include other locally based thrifts and banks, as well as regional, super regional and money center banks. From a competitive standpoint, Peoples Federal Bancshares has sought to emphasize its community orientation in the markets served by its branches. There are a total of 46 banking institutions operating in Norfolk County with Peoples Federal Bancshares holding the 32^nd largest market share of deposits, and 39 banking institutions operating in Suffolk County with Peoples Federal Bancshares holding the 15^th largest market share of deposits. Table 2.5 lists the Company’s largest competitors in the two counties currently served by its branches, based on deposit market share as noted parenthetically.

RP® Financial, LC.	MARKET AREA
	II.14

Table 2.5

Peoples Federal Bancshares, Inc.

Market Area Deposit Competitors

Location	Name
Norfolk County	RBS Citizens, NA (19.1%)
	Bank of America Corp. (17.5%)
	Sovereign Bank (7.4%)
	Peoples Federal (0.5%) - Rank of 32
Suffolk County	Bank of American Corp. (31.0%)
	State Street Corp. (29.6%)
	BONY Mellon Corp. (12.2%)
	Peoples Federal (0.4%) - Rank of 15

Source: FDIC

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.1

III. PEER GROUP ANALYSIS

This chapter presents an analysis of Peoples Federal Bancshares’ operations versus a group of comparable savings institutions (the “Peer Group”) selected from the universe of all publicly-traded savings institutions in a manner consistent with the regulatory valuation guidelines. The basis of the pro forma market valuation of Peoples Federal Bancshares is derived from the pricing ratios of the Peer Group institutions, incorporating valuation adjustments for key differences in relation to the Peer Group. Since no Peer Group can be exactly comparable to Peoples Federal Bancshares, key areas examined for differences are: financial condition; profitability, growth and viability of earnings; asset growth; primary market area; dividends; liquidity of the shares; marketing of the issue; management; and effect of government regulations and regulatory reform.

Peer Group Selection

The Peer Group selection process is governed by the general parameters set forth in the regulatory valuation guidelines. Accordingly, the Peer Group is comprised of only those publicly-traded savings institutions whose common stock is either listed on a national exchange (NYSE or AMEX), or is NASDAQ listed, since their stock trading activity is regularly reported and generally more frequent than non-publicly traded and closely-held institutions. Institutions that are not listed on a national exchange or NASDAQ are inappropriate, since the trading activity for thinly-traded or closely-held stocks is typically highly irregular in terms of frequency and price and thus may not be a reliable indicator of market value. We have also excluded from the Peer Group those companies under acquisition or subject to rumored acquisition, mutual holding companies and recent conversions, since their pricing ratios are subject to unusual distortion and/or have limited trading history. A recent listing of the universe of all publicly-traded savings institutions is included as Exhibit III-1.

Ideally, the Peer Group, which must have at least 10 members to comply with the regulatory valuation guidelines, should be comprised of locally- or regionally-based

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.2

institutions with comparable resources, strategies and financial characteristics. There are approximately 149 publicly-traded institutions nationally and, thus, it is typically the case that the Peer Group will be comprised of institutions with relatively comparable characteristics. To the extent that differences exist between the converting institution and the Peer Group, valuation adjustments will be applied to account for the differences. Since Peoples Federal Bancshares will be a full public company upon completion of the offering, we considered only full public companies to be viable candidates for inclusion in the Peer Group. From the universe of publicly-traded thrifts, we selected ten institutions with characteristics similar to those of Peoples Federal Bancshares. In the selection process, we applied two “screens” to the universe of all public companies that were eligible for consideration:

• Screen #1 New England institutions with assets between $225 million and $1.225 billion, tangible equity-to-assets ratios of greater than 7.5% and positive core earnings. Four companies met the criteria for Screen #1 and all four were included in the Peer Group: LSB Corp. of Massachusetts, Mayflower Bancorp, Inc. of Massachusetts, Newport Bancorp, Inc. of Rhode Island and Westfield Financial, Inc. of Massachusetts. Exhibit III-2 provides financial and public market pricing characteristics of all publicly-traded New England thrifts.

• Screen #2 Mid-Atlantic institutions with assets between $225 million and $1.225 billion, tangible equity-to-assets ratios of greater than 7.5% and positive core earnings. Six companies met the criteria for Screen #2 and all six were included in the Peer Group: Beacon Federal Bancorp of New York, ESSA Bancorp, Inc. of Pennsylvania, Elmira Savings Bank of New York, Rome Bancorp, Inc. of New York, TF Financial Corp. of Pennsylvania and WVS Financial Corp. of Pennsylvania Exhibit III-3 provides financial and public market pricing characteristics of all publicly-traded Mid-Atlantic thrifts.

Table 3.1 shows the general characteristics of each of the 10 Peer Group companies and Exhibit III-4 provides summary demographic and deposit market share data for the primary market areas served by each of the Peer Group companies. While there are expectedly some differences between the Peer Group companies and Peoples Federal Bancshares, we believe that the Peer Group companies, on average, provide a good basis for valuation subject to valuation adjustments. The following sections present a comparison of Peoples Federal Bancshares’ financial condition, income and expense trends, loan composition, interest rate risk and credit risk versus the Peer Group as of the most recent publicly available date.

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.3

Table 3.1

Peer Group of Publicly-Traded Thrifts

February 26, 2010

Ticker	Financial Institution	Exchange	Primary Market	Operating Strategy(1)	Total Assets(2)			Offices	Fiscal Year	Conv. Date	Stock Price		Market Value
											($)		($Mil)
WFD	Westfield Financial Inc. of MA	NASDAQ	Westfield, MA	Thrift	$	1,191		11	12-31	01/07	$	8.29	$	247
BFED	Beacon Federal Bancorp of NY	NASDAQ	East Syracuse NY	Thrift	$	1,070	S	8	12-31	10/07	$	9.00	$	59
ESSA	ESSA Bancorp, Inc. of PA	NASDAQ	Stroudsburg, PA	Thrift	$	1,034		13	09-30	04/07	$	11.70	$	165
LSBX	LSB Corp. of No. Andover MA	NASDAQ	North Andover, MA	Thrift	$	807	S	7	12-31	05/86	$	11.72	$	53
THRD	TF Financial Corp. of Newtown PA	NASDAQ	Newtown, PA	Thrift	$	714		15	12-31	07/94	$	18.75	$	50
ESBK	Elmira Savings Bank, FSB of NY	NASDAQ	Elmira, NY	Thrift	$	506	S	11	12-31	03/85	$	15.61	$	30
NFSB	Newport Bancorp, Inc. of RI	NASDAQ	Newport, RI	Thrift	$	459		5	12-31	07/06	$	11.95	$	46
WVFC	WVS Financial Corp. of PA	NASDAQ	Pittsburgh, PA	Thrift	$	392		6	06-30	11/93	$	14.55	$	30
ROME	Rome Bancorp, Inc. of Rome NY	NASDAQ	Rome, NY	Thrift	$	330		5	12-31	03/05	$	8.55	$	59
MFLR	Mayflower Bancorp, Inc. of MA	NASDAQ	Middleboro, MA	Thrift	$	246		7	04-30	12/87	$	6.99	$	15

NOTES:	(1)	Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage Banker, R.E.=Real Estate Developer, Div.=Diversified and Ret.=Retail Banking.
	(2)	Most recent quarter end available (E=Estimated and P=Pro Forma).

Source: SNL Financial, LC.

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.4

In addition to the selection criteria used to identify the Peer Group companies, a summary description of the key comparable characteristics of each of the Peer Group companies relative to Peoples Federal Bancorp’s characteristics is detailed below.

• Beacon Federal Bancorp of New York. Selected due to comparable size of branch network, similar interest-earning asset composition, comparable return on average assets, comparable concentration of 1-4 family loans and mortgage-backed securities comprising assets, lending diversification emphasis on commercial real estate loans and similar ratio of non-performing assets as a percent of assets.

• ESSA Bancorp, Inc. of Pennsylvania. Selected due to relatively high equity-to-assets ratio, comparable return on average assets, comparable level of operating expenses as a percent of average assets, lending diversification emphasis on commercial real estate loans and similar ratio of non-performing assets as a percent of assets.

• Elmira Savings Bank of New York. Selected due to comparable asset size, similar interest-bearing funding composition, similar net interest margin, comparable concentration of 1-4 family loans and mortgage-backed securities comprising assets, lending diversification emphasis on commercial real estate loans and relatively favorable credit quality measures.

• LSB Corp. of Massachusetts. Selected due to Massachusetts market area, comparable size of branch network, similar earnings contribution from non-interest operating income, lending diversification emphasis on commercial real estate loans and relatively favorable credit quality measures.

• Mayflower Bancorp, Inc. of Massachusetts. Selected due to Massachusetts market area, comparable size of branch network, comparable return on average assets, comparable net interest margin, lending diversification emphasis on commercial real estate loans and relatively favorable credit quality measures.

• Newport Bancorp, Inc. of Rhode Island. Selected due to comparable asset size, comparable size of branch network, relatively high equity-to-assets ratio, similar interest-earning asset composition, comparable net interest margin, comparable concentration of 1-4 family loans as a percent of assets, lending diversification emphasis on commercial real estate loans and relatively favorable credit quality measures.

• Rome Bancorp, Inc. of New York. Selected due to comparable size of branch network, relatively high equity-to-assets ratio, comparable concentration of 1-4 family loans as a percent assets, lending diversification emphasis on commercial real estate loans and relatively favorable credit quality measures.

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.5

• TF Financial Corp. of Pennsylvania. Selected due to similar interest-earning asset composition, similar interest-bearing funding composition, comparable return on average assets, similar earnings contribution from sources of non-interest operating income, comparable level of operating expenses as a percent of average assets, comparable concentration of 1-4 family loans as a percent of assets, lending diversification emphasis on commercial real estate loans and relatively favorable credit quality measures.

• WVS Financial Corp. of Pennsylvania. Selected due to same size of branch network, comparable concentration of 1-4 family loans and mortgage-backed securities as a percent of assets and relatively favorable credit quality measures.

• Westfield Financial Inc. of Massachusetts. Selected due to Massachusetts market area, relatively high equity-to-assets ratio, comparable return on average assets, similar earnings contribution from sources of non-interest operating income, comparable concentration of 1-4 family loans and mortgage-backed securities as a percent of assets, lending diversification emphasis on commercial real estate loans and relatively favorable credit quality measures.

In aggregate, the Peer Group companies maintained a higher level of tangible equity than the industry average (12.0% of assets versus 10.7% for all public companies), generated higher core earnings as a percent of average assets (0.56% core ROAA versus a net loss of 0.24% for all public companies), and earned a higher core ROE (4.91% core ROE versus negative 1.26% for all public companies). Overall, the Peer Group’s average P/TB ratio and average core P/E multiple were above and similar to the respective averages for all publicly-traded thrifts.

	All Publicly-Traded			Peer Group
Financial Characteristics (Averages)
Assets ($Mil)	$	3,033		$	675
Market capitalization ($Mil)	$	354		$	75
Tangible equity/assets (%)		10.70	%		12.00	%
Core return on average assets (%)		(0.24	)		0.56
Core return on average equity (%)		(1.26	)		4.91
Pricing Ratios (Averages)(1)
Core price/earnings (x)		18.55x			19.15x
Price/tangible book (%)		79.28	%		89.61	%
Price/assets (%)		8.16			10.31

(1) Based on market prices as of February 26, 2010.

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.6

Ideally, the Peer Group companies would be comparable to Peoples Federal Bancshares in terms of all of the selection criteria, but the universe of publicly-traded thrifts does not provide for an appropriate number of such companies. However, in general, the companies selected for the Peer Group were fairly comparable to Peoples Federal Bancshares, as will be highlighted in the following comparative analysis.

Financial Condition

Table 3.2 shows comparative balance sheet measures for People Federal Bancshares and the Peer Group, reflecting the expected similarities and some differences given the selection procedures outlined above. The Company’s and the Peer Group’s ratios reflect balances as of December 31, 2009, unless indicated otherwise for the Peer Group companies. Peoples Federal Bancshares’ equity-to-assets ratio of 10.7% was below the Peer Group’s average net worth ratio of 12.4%. However, the Company’s pro forma capital position will increase with the addition of stock proceeds, providing the Company with an equity-to-assets ratio that will exceed the Peer Group’s ratio. Tangible equity-to-assets ratios for the Company and the Peer Group equaled 10.7% and 12.0%, respectively. The increase in Peoples Federal Bancshares’ pro forma capital position will be favorable from a risk perspective and in terms of future earnings potential that could be realized through leverage and lower funding costs. At the same time, the Company’s higher pro forma capitalization will initially depress return on equity. Both Peoples Federal Bancshares’ and the Peer Group’s capital ratios reflected capital surpluses with respect to the regulatory capital requirements.

The interest-earning asset compositions for the Company and the Peer Group were somewhat similar, with loans constituting the bulk of interest-earning assets for both Peoples Federal Bancshares and the Peer Group. The Company’s loans-to-assets ratio of 77.5% was above the comparable Peer Group ratio of 61.4%. Comparatively, the Company’s cash and investments-to-assets ratio of 17.7% was below the comparable ratio for the Peer Group of 33.9%. Overall, Peoples Federal Bancshares’ interest-earning assets amounted to 95.2% of assets, which approximated the comparable Peer Group ratio of 95.3%. The Peer Group’s non-interest earning assets included bank-owned life insurance (“BOLI”) equal to 1.6% of assets and goodwill/intangibles equal to 0.3% of assets, while the Company maintained BOLI equal to 2.4% of assets and a zero balance of goodwill and intangibles.

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.7

Table 3.2

Balance Sheet Composition and Growth Rates

Comparable Institution Analysis

As of December 31, 2009

	Balance Sheet as a Percent of Assets
	Cash & Equivalents		MBS & Invest		BOLI		Loans		Deposits		Borrowed Funds		Subd. Debt		Net Worth		Goodwill & Intang		Tng Net Worth
Peoples Federal Bancshares
December 31, 2009	16.6	%	1.1	%	2.4	%	77.5	%	76.8	%	11.2	%	0.0	%	10.7	%	0.0	%	10.7	%
All Public Companies
Averages	4.7	%	20.4	%	1.4	%	68.7	%	70.9	%	15.9	%	0.5	%	11.5	%	0.9	%	10.7	%
Medians	3.7	%	18.1	%	1.4	%	70.1	%	71.8	%	14.2	%	0.0	%	10.3	%	0.0	%	9.4	%
State of MA
Averages	3.4	%	22.8	%	1.4	%	68.4	%	68.2	%	17.1	%	0.3	%	13.7	%	0.9	%	12.8	%
Medians	3.3	%	19.8	%	1.4	%	70.5	%	68.2	%	15.7	%	0.0	%	14.2	%	0.0	%	11.6	%
Comparable Group
Averages	3.4	%	30.5	%	1.6	%	61.4	%	61.1	%	25.7	%	0.0	%	12.4	%	0.3	%	12.0	%
Medians	2.4	%	24.0	%	1.5	%	67.0	%	61.0	%	25.4	%	0.0	%	10.4	%	0.0	%	9.4	%
Comparable Group
BFED       Beacon Federal Bancorp of NY (1)	1.1	%	19.2	%	1.0	%	76.1	%	63.7	%	26.5	%	0.0	%	9.4	%	0.0	%	9.4	%
ESSA       ESSA Bancorp, Inc. of PA	2.1	%	23.3	%	1.5	%	70.6	%	38.7	%	42.7	%	0.0	%	17.6	%	0.0	%	17.6	%
ESBK       Elmira Savings Bank, FSB of NY (1)	7.2	%	24.7	%	1.5	%	62.0	%	71.2	%	17.2	%	0.0	%	10.7	%	2.6	%	8.1	%
LSBX       LSB Corp. of No. Andover MA (1)	2.3	%	31.2	%	1.4	%	63.4	%	58.4	%	31.6	%	0.0	%	9.5	%	0.0	%	9.5	%
MFLR      Mayflower Bancorp, Inc. of MA	6.3	%	39.6	%	0.0	%	49.9	%	87.7	%	3.5	%	0.0	%	8.3	%	0.0	%	8.3	%
NFSB       Newport Bancorp, Inc. of RI	4.2	%	12.4	%	2.3	%	76.6	%	57.1	%	30.8	%	0.0	%	11.2	%	0.0	%	11.2	%
ROME     Rome Bancorp, Inc. of Rome NY	2.3	%	4.4	%	2.9	%	86.6	%	65.7	%	14.5	%	0.0	%	18.3	%	0.0	%	18.3	%
THRD      TF Financial Corp. of Newtown PA	1.8	%	18.6	%	2.4	%	74.4	%	77.4	%	11.2	%	0.0	%	10.0	%	0.6	%	9.4	%
WVFC     WVS Financial Corp. of PA	4.4	%	78.9	%	0.0	%	15.3	%	36.9	%	54.3	%	0.0	%	7.8	%	0.0	%	7.8	%
WFD        Westfield Financial Inc. of MA	2.4	%	52.4	%	3.3	%	39.4	%	54.4	%	24.2	%	0.0	%	20.8	%	0.0	%	20.8	%
	Balance Sheet Annual Growth Rates														Regulatory Capital
	Assets		MBS, Cash & Investments		Loans		Deposits		Borrows. & Subdebt		Net Worth		Tng Net Worth		Tangible		Core		Reg. Cap.
Peoples Federal Bancshares
December 31, 2009	8.17	%	70.65	%	0.18	%	17.47	%	-27.02	%	5.56	%	5.56	%	10.68	%	10.68	%	17.27	%
All Public Companies
Averages	5.72	%	14.83	%	2.83	%	12.99	%	-15.55	%	3.32	%	3.74	%	10.06	%	9.95	%	16.41	%
Medians	3.34	%	10.37	%	1.08	%	10.15	%	-15.19	%	0.91	%	0.89	%	9.22	%	9.15	%	13.87	%
State of MA
Averages	8.02	%	8.54	%	7.28	%	15.20	%	-9.52	%	6.01	%	4.59	%	14.17	%	11.26	%	17.77	%
Medians	3.13	%	12.72	%	2.69	%	10.44	%	-14.64	%	0.17	%	0.17	%	14.17	%	10.49	%	15.68	%
Comparable Group
Averages	2.36	%	7.58	%	1.92	%	9.05	%	-12.30	%	7.49	%	4.53	%	8.04	%	7.95	%	13.10	%
Medians	3.56	%	1.33	%	0.48	%	8.62	%	-7.79	%	0.07	%	0.04	%	8.04	%	7.95	%	13.10	%
Comparable Group
BFED       Beacon Federal Bancorp of NY (1)	6.07	%	-0.70	%	6.56	%	15.15	%	-8.98	%	0.10	%	0.10	%	NA		NA		NA
ESSA       ESSA Bancorp, Inc. of PA	0.12	%	-5.20	%	1.59	%	7.05	%	-2.79	%	-6.13	%	-6.13	%	NA		NA		NA
ESBK       Elmira Savings Bank, FSB of NY (1)	9.37	%	48.11	%	-2.40	%	5.53	%	14.53	%	34.50	%	NM		NA		NA		NA
LSBX       LSB Corp. of No. Andover MA (1)	10.66	%	-1.55	%	18.62	%	17.73	%	-6.59	%	49.21	%	49.21	%	NA		NA		NA
MFLR      Mayflower Bancorp, Inc. of MA	1.05	%	16.64	%	-7.07	%	4.29	%	-46.52	%	6.52	%	6.60	%	NA		7.86	%	NA
NFSB       Newport Bancorp, Inc. of RI	6.14	%	3.35	%	5.55	%	14.33	%	-2.73	%	-5.38	%	-5.38	%	NA		NA		NA
ROME     Rome Bancorp, Inc. of Rome NY	-2.36	%	22.48	%	-4.30	%	5.20	%	-27.83	%	0.03	%	0.03	%	NA		NA		NA
THRD      TF Financial Corp. of Newtown PA	-2.97	%	-6.88	%	-2.79	%	12.83	%	-52.28	%	3.97	%	4.25	%	NA		NA		NA
WVFC     WVS Financial Corp. of PA	-11.96	%	-14.92	%	4.10	%	-1.85	%	-19.01	%	-3.05	%	-3.05	%	8.04	%	8.04	%	13.10	%
WFD        Westfield Financial Inc. of MA	7.43	%	14.44	%	-0.63	%	10.19	%	29.23	%	-4.86	%	-4.86	%	NA		NA		NA

(1) Financial information is for the quarter ending September 30, 2009.

Source: SNL Financial, LC. and RP^® Financial, LC. calculations. The information provided in this table has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness of such information.

Copyright (c) 2010 by RP^® Financial, LC.

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.8

Peoples Federal Bancshares’ funding liabilities reflected a funding strategy that was somewhat similar to that of the Peer Group’s funding composition. The Company’s deposits equaled 76.8% of assets, which was above the Peer Group’s ratio of 61.1%. Comparatively, the Company maintained a lower level of borrowings than the Peer Group, as indicated by borrowings-to-assets ratios of 11.2% and 25.7% for Peoples Federal Bancshares and the Peer Group, respectively. Total interest-bearing liabilities maintained by the Company and the Peer Group, as a percent of assets, equaled 88.0% and 86.8%, respectively, with the Peer Group’s lower ratio supported by maintenance of a higher capital position.

A key measure of balance sheet strength for a thrift institution is its IEA/IBL ratio. Presently, the Company’s IEA/IBL ratio is slightly lower than the Peer Group’s ratio, based on IEA/IBL ratios of 108.2% and 109.8%, respectively. The additional capital realized from stock proceeds should serve to provide Peoples Federal Bancshares with an IEA/IBL ratio that exceeds the Peer Group’s ratio, as the increase in capital provided by the infusion of stock proceeds will serve to lower the level of interest-bearing liabilities funding assets and will be primarily deployed into interest-earning assets.

The growth rate section of Table 3.2 shows annual growth rates for key balance sheet items. Peoples Federal Bancshares’ and the Peer Group’s growth rates are based on annual growth rates for the fifteen and twelve months ended December 31, 2009, respectively, or the most recent twelve month period available for the Peer Group companies. Peoples Federal Bancshares recorded asset growth of 8.2%, which exceeded the Peer Group’s asset growth rate of 2.4%. Asset growth for Peoples Federal Bancshares was primarily sustained through growth of cash and cash equivalents (70.7% growth rate) supplemented with very modest growth of loans (0.2% growth rate). Asset growth for the Peer Group was sustained by a 1.9% increase in loans and a 7.6% increase in cash and investments.

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.9

Asset growth for Peoples Federal Bancshares was funded with a 17.5% increase in deposits, which funded a 27.0% reduction in borrowings as well. Similarly, deposit growth of 9.1% funded the Peer Group’s asset growth, as well as a 12.3% decrease in borrowings. The Company’s capital increased at an annualized rate of 5.6% during the 15 month period, which was mostly related to the retention of earnings. Comparatively, the Peer Group’s capital increased by 7.5% during the twelve month period, which was supported by retention of earnings as well as the receipt of TARP funds by a few of the Peer Group companies. The Company’s post-conversion capital growth rate will initially be constrained by maintenance of a higher pro forma capital position. Dividend payments and stock repurchases, pursuant to regulatory limitations and guidelines, could also potentially slow the Company’s capital growth rate in the longer term following the stock offering.

Income and Expense Components

Table 3.3 displays statements of operations for the Company and the Peer Group. The Company’s and the Peer Group’s ratios are based on earnings for the twelve months ended December 31, 2009, unless otherwise indicated for the Peer Group companies. Peoples Federal Bancshares and the Peer Group reported net income average assets ratios of 0.57% and 0.60%, respectively. Higher levels of net interest income and net gains and a lower level of loan loss provisions represented earnings advantages for the Company, while a higher level of non-interest operating income and a lower level of operating expenses represented earnings advantages for the Peer Group.

The Company’s stronger net interest margin was realized through maintenance of a lower interest expense ratio, which was partially offset by the Peer Group higher interest income ratio. The Peer Group’s higher interest income ratio was supported by maintaining a slightly higher overall yield earned on interest-earning assets (5.12% versus 5.06% for the Company) and a slightly higher concentration of assets maintained in interest-earning assets. The Company’s lower interest expense ratio was supported by a lower cost of funds (2.17% versus 2.37% for the Peer Group), which was partially offset by the Peer Group’s slightly lower level of interest-bearing liabilities. Overall, Peoples Federal Bancshares and the Peer Group reported net interest income to average assets ratios of 2.98% and 2.81%, respectively.

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.10

Table 3.3

Income as Percent of Average Assets and Yields, Costs, Spreads

Comparable Institution Analysis

For the 12 Months Ended December 31, 2009

	Net Income		Net Interest Income								NII After Provis.		Other Income							Total Other Income
			Income		Expense		NII		Loss Provis. on IEA				Loan Fees		R.E. Oper.			Other Income
Peoples Federal Bancshares
December 31, 2009	0.57	%	4.76	%	1.77	%	2.98	%	0.03	%	2.96	%	0.00	%		0.00	%	0.29	%	0.29	%
All Public Companies
Averages	-0.09	%	4.98	%	2.07	%	2.91	%	0.85	%	2.06	%	0.02	%		-0.06	%	0.80	%	0.76	%
Medians	0.28	%	5.00	%	2.02	%	2.94	%	0.45	%	2.37	%	0.00	%		0.00	%	0.60	%	0.58	%
State of MA
Averages	0.21	%	4.87	%	1.93	%	2.94	%	0.40	%	2.54	%	0.01	%		-0.02	%	0.49	%	0.48	%
Medians	0.33	%	4.89	%	1.85	%	2.96	%	0.26	%	2.70	%	0.00	%		-0.01	%	0.46	%	0.43	%
Comparable Group
Averages	0.60	%	4.87	%	2.06	%	2.81	%	0.23	%	2.58	%	0.01	%		-0.01	%	0.51	%	0.51	%
Medians	0.56	%	5.11	%	2.08	%	2.91	%	0.18	%	2.69	%	0.00	%		0.00	%	0.45	%	0.46	%
Comparable Group
BFED       Beacon Federal Bancorp of NY (1)	0.60	%	5.37	%	2.74	%	2.63	%	0.85	%	1.78	%	0.00	%		0.00	%	0.49	%	0.49	%
ESSA       ESSA Bancorp, Inc. of PA	0.53	%	5.00	%	2.19	%	2.81	%	0.16	%	2.65	%	0.05	%		-0.12	%	0.72	%	0.65	%
ESBK       Elmira Savings Bank, FSB of NY (1)	0.91	%	5.21	%	2.02	%	3.19	%	0.22	%	2.96	%	0.00	%		0.00	%	1.07	%	1.07	%
LSBX       LSB Corp. of No. Andover MA (1)	0.94	%	5.23	%	2.81	%	2.41	%	0.20	%	2.21	%	0.03	%		-0.01	%	0.30	%	0.32	%
MFLR      Mayflower Bancorp, Inc. of MA	0.47	%	4.67	%	1.59	%	3.08	%	0.03	%	3.05	%	0.04	%		-0.03	%	0.41	%	0.42	%
NFSB       Newport Bancorp, Inc. of RI	0.16	%	5.15	%	2.14	%	3.01	%	0.13	%	2.88	%	0.00	%		0.00	%	0.54	%	0.54	%
ROME     Rome Bancorp, Inc. of Rome NY	0.92	%	5.17	%	1.27	%	3.90	%	0.09	%	3.81	%	0.00	%		0.00	%	0.73	%	0.73	%
THRD      TF Financial Corp. of Newtown PA	0.63	%	5.07	%	1.94	%	3.13	%	0.41	%	2.73	%	0.01	%		0.05	%	0.31	%	0.37	%
WVFC     WVS Financial Corp. of PA	0.34	%	3.34	%	2.17	%	1.17	%	-0.08	%	1.25	%	0.00	%		0.00	%	0.17	%	0.17	%
WFD        Westfield Financial Inc. of MA	0.47	%	4.49	%	1.71	%	2.78	%	0.33	%	2.44	%	0.00	%		-0.01	%	0.39	%	0.38	%
	G&A/Other Exp.				Non-Op. Items				Yields, Costs, and Spreads						MEMO: Assets/ FTE Emp.			MEMO: Effective Tax Rate
	G&A Expense		Goodwill Amort.		Net Gains		Extrao. Items		Yield On Assets		Cost Of Funds		Yld-Cost Spread
Peoples Federal Bancshares
December 31, 2009	2.50	%	0.00	%	0.17	%	0.00	%	5.06	%	2.17	%	2.89	%	$	7,205		38.64	%
All Public Companies
Averages	2.71	%	0.11	%	-0.06	%	0.03	%	5.29	%	2.39	%	2.90	%	$	6,125		31.55	%
Medians	2.72	%	0.00	%	0.00	%	0.00	%	5.28	%	2.39	%	2.93	%	$	4,803		32.10	%
State of MA
Averages	2.55	%	0.02	%	-0.11	%	0.00	%	5.14	%	2.27	%	2.87	%	$	4,806		32.60	%
Medians	2.73	%	0.00	%	-0.02	%	0.00	%	5.16	%	2.23	%	2.92	%	$	4,985		32.93	%
Comparable Group
Averages	2.33	%	0.01	%	0.01	%	0.00	%	5.12	%	2.37	%	2.75	%	$	5,902		31.29	%
Medians	2.45	%	0.00	%	-0.02	%	0.00	%	5.36	%	2.33	%	2.80	%	$	4,921		30.08	%
Comparable Group
BFED       Beacon Federal Bancorp of NY (1)	1.60	%	0.00	%	-0.17	%	0.00	%	5.55	%	3.05	%	2.49	%		NM		NM
ESSA       ESSA Bancorp, Inc. of PA	2.53	%	0.00	%	0.02	%	0.00	%	5.20	%	2.71	%	2.49	%	$	5,809		28.99	%
ESBK       Elmira Savings Bank, FSB of NY (1)	2.89	%	0.05	%	-0.09	%	0.00	%	5.56	%	2.29	%	3.27	%		NM		41.57	%
LSBX       LSB Corp. of No. Andover MA (1)	1.67	%	0.00	%	-0.01	%	0.00	%	5.40	%	3.11	%	2.29	%		NM		NM
MFLR      Mayflower Bancorp, Inc. of MA	3.14	%	0.01	%	0.35	%	0.00	%	4.96	%	1.74	%	3.22	%	$	3,727		31.17	%
NFSB       Newport Bancorp, Inc. of RI	2.97	%	0.00	%	-0.06	%	0.00	%	5.50	%	2.44	%	3.06	%		NM		47.59	%
ROME     Rome Bancorp, Inc. of Rome NY	3.15	%	0.00	%	0.03	%	0.00	%	5.52	%	1.58	%	3.94	%		NM		31.52	%
THRD      TF Financial Corp. of Newtown PA	2.37	%	0.00	%	0.15	%	0.00	%	5.32	%	2.18	%	3.14	%	$	4,032		23.61	%
WVFC     WVS Financial Corp. of PA	0.86	%	0.00	%	-0.04	%	0.00	%	3.38	%	2.37	%	1.00	%	$	10,040		28.25	%
WFD        Westfield Financial Inc. of MA	2.12	%	0.00	%	-0.10	%	0.00	%	4.82	%	2.27	%	2.55	%		NM		17.65	%

(1) Financial information is for the quarter ending September 30, 2009.

Source: SNL Financial, LC. and RP^® Financial, LC. calculations. The information provided in this table has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness of such information.

Copyright (c) 2010 by RP^® Financial, LC.

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.11

In another key area of core earnings strength, the Peer Group maintained a lower level of operating expenses than the Company. For the period covered in Table 3.3, the Company and the Peer Group reported operating expense to average assets ratios of 2.50% and 2.34%, respectively. The Company’s higher operating expense ratio is reflective of the higher costs associated with operating in a large metropolitan area, as the Peer Group’s lower operating expense ratio was achieved notwithstanding maintenance of a comparatively lower ratio of assets per full time equivalent employees. Assets per full time equivalent employee equaled $7.2 million for Peoples Federal Bancshares versus $5.9 million for the Peer Group. On a post-offering basis, the Company’s operating expenses can be expected to increase with the addition of stock benefit plans and certain expenses that result from being a publicly-traded company, with such expenses already impacting the Peer Group’s operating expenses. At the same time, Peoples Federal Bancshares’ capacity to leverage operating expenses will be greater than the Peer Group’s leverage capacity following the increase in capital realized from the infusion of net stock proceeds.

When viewed together, net interest income and operating expenses provide considerable insight into a thrift’s earnings strength, since those sources of income and expenses are typically the most prominent components of earnings and are generally more predictable than losses and gains realized from the sale of assets or other non-recurring activities. In this regard, as measured by their expense coverage ratios (net interest income divided by operating expenses), the Company’s and the Peer Group’s earnings were comparable. Expense coverage ratios posted by Peoples Federal Bancshares and the Peer Group equaled 1.19x and 1.20x, respectively.

Sources of non-interest operating income provided a larger contribution to the Peer Group’s earnings, with such income amounting to 0.29% and 0.51% of Peoples Federal Bancshares’s and the Peer Group’s average assets, respectively. The Company’s relatively low earnings contribution realized from non-interest operating

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.12

income is indicative of its limited diversification into areas that generate revenues from non-interest sources. Taking non-interest operating income into account in comparing the Company’s and the Peer Group’s earnings, Peoples Federal Bancshares’ efficiency ratio (operating expenses, net of amortization of intangibles, as a percent of the sum of non-interest operating income and net interest income) of 76.5% percent was less favorable than the Peer Group’s efficiency ratio of 70.2%.

Loan loss provisions had a larger impact on the Peer Group’s earnings, with loan loss provisions established by the Company and the Peer Group equaling 0.03% and 0.23% of average assets, respectively. The level of loan provisions established by both the Company and the Peer Group was indicative of their relatively favorable credit quality measures.

Net gains realized from the sale of assets had a larger impact on the Company’s earnings, as the Company and the Peer Group reported net gains equal to 0.17% and 0.01% of average assets, respectively. Typically, gains and losses generated from the sale of assets are viewed as earnings with a relatively high degree of volatility, particularly to the extent that such gains and losses result from the sale of investments or other assets that are not considered to be part of an institution’s core operations. Comparatively, to the extent that gains have been derived through selling fixed rate loans into the secondary market, which accounted for about half of the Company’s net gains recorded during the twelve month period, such gains may be considered to be an ongoing activity for an institution and, therefore, warrant some consideration as a core earnings factor. However, loan sale gains are still viewed as a more volatile source of income than income generated through the net interest margin and non-interest operating income. Extraordinary items were not a factor in either the Company’s or the Peer Group’s earnings.

Taxes had a larger impact on the Company’s earnings, as the Company and the Peer Group posted effective tax rates of 38.64% and 31.29%, respectively. As indicated in the prospectus, the Company’s effective marginal tax rate is equal to 40.2%.

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.13

Loan Composition

Table 3.4 presents data related to the Company’s and the Peer Group’s loan portfolio compositions (including the investment in mortgage-backed securities). The Company’s loan portfolio composition reflected a lower concentration of 1-4 family permanent mortgage loans and mortgage-backed securities than maintained by the Peer Group (47.9% of assets versus 54.4% for the Peer Group). The Company maintained a higher concentration of 1-4 family permanent mortgage loans, which was more than offset by the higher concentration of mortgage-backed securities maintained by the Peer Group. Loans serviced for others equaled 9.4% and 7.8% of the Company’s and the Peer Group’s assets, respectively, thereby indicating a slightly greater influence of loan servicing income on the Company’s earnings. Both the Company and the Peer Group maintained very modest balances of loan servicing intangibles.

Diversification into higher risk and higher yielding types of lending was fairly comparable for the Company and the Peer Group. Commercial real estate/multi-family loans represented the most significant area of lending diversification for the Company (21.5% of assets), followed by consumer loans, inclusive of home equity loans and lines of credit, (4.5% of assets). Likewise, the Peer Group’s lending diversification also consisted primarily of commercial real estate/multi-family loans (15.8% of assets), with other areas of lending diversification reflecting fairly even distribution between commercial business loans (4.9% of assets), consumer loans (3.3% of assets) and construction/land loans (3.2% of assets). Lending diversification for the Company also included commercial business loans (0.9% of assets) and construction/land loans (3.6% of assets). Overall, the composition of the Company’s assets provides for a slightly higher risk weighted assets-to-assets ratio compared to the Peer Group’s ratio (65.50% versus 62.99% for the Peer Group).

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.14

Table 3.4

Loan Portfolio Composition and Related Information

Comparable Institution Analysis

As of December 31, 2009

		Portfolio Composition as a Percent of Assets
Institution		MBS		1-4 Family		Constr. & Land		5+Unit Comm RE		Commerc. Business		Consumer		RWA/ Assets		Serviced For Others		Servicing Assets
		(%)		(%)		(%)		(%)		(%)		(%)		(%)		($000)		($000)
Peoples Federal Bancshares		0.20	%	47.65	%	3.59	%	21.52	%	0.94	%	4.48	%	65.50	%	$	45,530	$	160
All Public Companies
Averages		12.48	%	35.14	%	5.33	%	22.06	%	4.64	%	2.47	%	65.98	%	$	644,274	$	6,356
Medians		10.12	%	35.37	%	4.06	%	20.03	%	3.52	%	0.66	%	66.52	%	$	48,190	$	152
State of MA
Averages		14.11	%	29.46	%	3.88	%	27.31	%	7.10	%	2.81	%	69.99	%	$	60,984	$	294
Medians		9.85	%	32.22	%	4.45	%	26.20	%	7.53	%	0.50	%	71.08	%	$	48,190	$	148
Comparable Group
Averages		19.63	%	34.79	%	3.18	%	15.82	%	4.90	%	3.33	%	62.99	%	$	52,750	$	357
Medians		15.78	%	35.13	%	2.53	%	14.36	%	3.09	%	0.32	%	62.53	%	$	31,105	$	224
Comparable Group
BFED	Beacon Federal Bancorp of NY (1)	15.03	%	37.37	%	2.25	%	12.78	%	9.45	%	15.99	%	75.28	%	$	125,030	$	900
ESSA	ESSA Bancorp, Inc. of PA	16.53	%	63.14	%	0.83	%	5.15	%	1.88	%	0.18	%	47.86	%	$	43,890	$	323
ESBK	Elmira Savings Bank, FSB of NY (1)	13.91	%	32.89	%	0.37	%	12.12	%	7.59	%	7.84	%	58.72	%	$	128,130	$	1,018
LSBX	LSB Corp. of No. Andover MA (1)	22.18	%	19.64	%	7.78	%	34.46	%	3.97	%	0.08	%	67.64	%	$	18,320	$	0
MFLR	Mayflower Bancorp, Inc. of MA	25.07	%	30.59	%	4.81	%	11.14	%	2.20	%	0.66	%	56.71	%	$	85,190	$	506
NFSB	Newport Bancorp, Inc. of RI	9.78	%	47.04	%	2.81	%	27.05	%	0.41	%	0.05	%	65.64	%	$	5,450	$	0
ROME	Rome Bancorp, Inc. of Rome NY	0.00	%	52.91	%	1.33	%	15.93	%	9.45	%	7.59	%	74.08	%	$	18,100	$	125
THRD	TF Financial Corp. of Newtown PA	11.48	%	49.62	%	5.83	%	18.26	%	0.94	%	0.36	%	58.89	%	$	92,240	$	696
WVFC	WVS Financial Corp. of PA	38.88	%	6.01	%	4.95	%	3.29	%	1.00	%	0.28	%	61.24	%	$	0	$	0
WFD	Westfield Financial Inc. of MA	43.43	%	8.67	%	0.83	%	18.04	%	12.11	%	0.27	%	63.82	%	$	11,150	$	0

(1) Financial information is for the quarter ending September 30, 2009.

Source: SNL Financial LC. and RP^® Financial, LC. calculations. The information provided in this table has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness of such information.

Copyright (c) 2010 by RP^® Financial, LC.

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.15

Table 3.5

Interest Rate Risk Measures and Net Interest Income Volatility

Comparable Institution Analysis

As of December 31, 2009 or Most Recent Date Available

		Balance Sheet Measures
		Equity/ Assets		IEA/ IBL		Non-Earn. Assets/ Assets		Quarterly Change in Net Interest Income
Institution								12/31/2009	9/30/2009	6/30/2009	3/31/2009	12/31/2008	9/30/2008
		(%)		(%)		(%)		(change in net interest income is annualized in basis points)
Peoples Federal Bancshares		10.7	%	108.2	%	4.8	%	-1	-19	-12	-19	-15	29
All Public Companies		10.6	%	106.9	%	6.1	%	6	7	0	-4	-3	10
State of MA		12.8	%	110.9	%	5.3	%	15	9	3	-10	-1	12
Comparable Group
Averages		12.0	%	110.1	%	4.7	%	9	3	-7	-6	0	8
Medians		9.5	%	107.3	%	4.8	%	5	6	3	-3	-4	8
Comparable Group
BFED	Beacon Federal Bancorp of NY (1)	9.4	%	106.9	%	3.6	%	NA	5	5	9	-21	22
ESSA	ESSA Bancorp, Inc. of PA	17.6	%	117.9	%	4.0	%	0	-2	6	1	-6	3
ESBK	Elmira Savings Bank, FSB of NY (1)	8.1	%	106.2	%	6.1	%	NA	20	-62	34	7	22
LSBX	LSB Corp. of No. Andover MA (1)	9.5	%	107.7	%	3.1	%	NA	11	4	6	-15	9
MFLR	Mayflower Bancorp, Inc. of MA	8.3	%	105.0	%	4.3	%	33	7	2	-16	-1	11
NFSB	Newport Bancorp, Inc. of RI	11.2	%	106.0	%	6.8	%	14	9	5	-11	4	-12
ROME	Rome Bancorp, Inc. of Rome NY	18.3	%	116.4	%	6.7	%	9	-1	-2	-9	3	4
THRD	TF Financial Corp. of Newtown PA	9.4	%	106.8	%	5.3	%	5	12	6	10	-7	12
WVFC	WVS Financial Corp. of PA	7.8	%	108.2	%	1.3	%	-3	-26	-16	-77	42	6
WFD	Westfield Financial Inc. of MA	20.8	%	119.9	%	5.8	%	4	-1	-14	-6	-9	5

(1) Financial information is for the quarter ending September 30, 2009.

NA=Change is greater than 100 basis points during the quarter.

Source: SNL Financial LC. and RP^® Financial, LC. calculations. The information provided in this table has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness of such information.

Copyright (c) 2010 by RP^® Financial, LC.

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.16

Interest Rate Risk

Table 3.5 reflects various key ratios highlighting the relative interest rate risk exposure of the Company versus the Peer Group. In terms of balance sheet composition, Peoples Federal Bancshares’ interest rate risk characteristics were considered to be slightly less favorable relative to the comparable measures for the Peer Group. Most notably, the Company’s tangible equity-to-assets ratio and IEA/IBL ratio were slightly below the comparable Peer Group ratios. The Company’s level of non-interest earning assets approximated the Peer Group’s ratio. On a pro forma basis, the infusion of stock proceeds should serve to provide the Company with comparative advantages over the Peer Group’s balance sheet interest rate risk characteristics, with respect to the increases that will be realized in Company’s equity-to-assets and IEA/IBL ratios.

To analyze interest rate risk associated with the net interest margin, we reviewed quarterly changes in net interest income as a percent of average assets for Peoples Federal Bancshares and the Peer Group. In general, the more significant fluctuations in the Company’s ratios implied that the interest rate risk associated with the Company’s net interest income was greater in comparison to the Peer Group, based on the interest rate environment that prevailed during the period covered in Table 3.5. The stability of the Company’s net interest margin should be enhanced by the infusion of stock proceeds, as interest rate sensitive liabilities will be funding a lower portion of Peoples Federal Bancshares’ assets and the proceeds will be substantially deployed into interest-earning assets.

Credit Risk

Overall, based on a comparison of credit quality measures, the Company’s credit risk exposure was considered to be slightly greater than Peer Group’s. As shown in Table 3.6, the Company’s non-performing assets/assets and non-performing loans/loans ratios equaled 1.08% and 1.40%, respectively, versus comparable measures of 0.59% and 0.95% for the Peer Group. The Company’s and Peer Group’s loss reserves as a percent of non-performing loans equaled 60.15% and 128.80%, respectively. Loss reserves maintained as percent of net loans receivable equaled 0.84% for the Company, versus 1.15% for the Peer Group. Net loan charge-offs were lower for the Company, as net loan charge-offs for the Company equaled 0.05% of loans versus 0.27% of loans for the Peer Group.

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.17

Table 3.6

Credit Risk Measures and Related Information

Comparable Institution Analysis

As of December 31, 2009 or Most Recent Date Available

Institution		REO/ Assets		NPAs & 90+Del/ Assets		NPLs/ Loans		Rsrves/ Loans		Rsrves/ NPLs		Rsrves/ NPAs & 90+Del		Net Loan Chargoffs		NLCs/ Loans
		(%)		(%)		(%)		(%)		(%)		(%)		($000)		(%)
Peoples Federal Bancshares		0.00	%	1.08	%	1.40	%	0.84	%	60.15	%	60.15	%	$	185	0.05	%
All Public Companies
Averages		0.45	%	3.24	%	3.40	%	1.49	%	69.04	%	50.16	%	$	1,395	0.65	%
Medians		0.19	%	2.56	%	2.86	%	1.28	%	50.84	%	37.66	%	$	415	0.17	%
State of MA
Averages		0.11	%	1.50	%	1.94	%	1.18	%	106.26	%	66.79	%	$	662	0.33	%
Medians		0.10	%	0.93	%	1.15	%	1.12	%	62.47	%	57.14	%	$	214	0.14	%
Comparable Group
Averages		0.08	%	0.59	%	0.95	%	1.15	%	128.80	%	96.14	%	$	376	0.27	%
Medians		-0.01	%	0.57	%	0.79	%	1.01	%	117.91	%	105.97	%	$	71	0.07	%
Comparable Group
BFED	Beacon Federal Bancorp of NY (1)	0.00	%	1.23	%	1.48	%	1.88	%	124.51	%	116.05	%	$	1,600	0.77	%
ESSA	ESSA Bancorp, Inc. of PA (1)	0.17	%	0.99	%	1.05	%	0.84	%	75.20	%	56.39	%	$	111	0.06	%
ESBK	Elmira Svngs Bank, FSB of NY (1)	0.00	%	0.68	%	0.93	%	1.02	%	109.63	%	89.21	%	$	94	0.11	%
LSBX	LSB Corp. of No. Andover MA (1)	0.00	%	0.36	%	0.58	%	1.34	%	225.83	%	215.88	%	$	8	0.01	%
MFLR	Mayflower Bancorp, Inc. of MA (1)	0.26	%	0.43	%	0.32	%	1.02	%	323.93	%	121.32	%	$	44	0.14	%
NFSB	Newport Bancorp, Inc. of RI (1)	0.00	%	0.00	%	0.00	%	0.98	%	0.00	%	0.00	%	$	1	0.00	%
ROME	Rome Bancorp, Inc. of Rome NY	0.00	%	0.58	%	0.67	%	0.74	%	111.33	%	111.33	%	$	49	0.07	%
THRD	TF Fin. Corp. of Newton PA (1)	0.18	%	0.58	%	0.58	%	0.97	%	138.54	%	104.76	%	$	102	0.08	%
WVFC	WVS Fiancial Corp. of PA	0.00	%	0.42	%	2.72	%	1.07	%	39.30	%	39.30	%	$	0	0.00	%
WFD	Westfield Fin. Inc. of MA	0.14	%	0.60	%	1.15	%	1.60	%	139.76	%	107.19	%	$	1,752	1.47	%

(1) Financial information is for the quarter ending September 30, 2009.

Source: Audited and unaudited financial statements, corporate reports and offering circulars, and RP^® Financial, LC. calculations. The information provided in this table has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness of such information.

Copyright (c) 2008 by RP^® Financial, LC.

RP® Financial, LC.	PEER GROUP ANALYSIS
	III.18

Summary

Based on the above analysis, RP Financial concluded that the Peer Group forms a reasonable basis for determining the pro forma market value of the Company. Such general characteristics as asset size, capital position, interest-earning asset composition, funding composition, core earnings measures, loan composition, credit quality and exposure to interest rate risk all tend to support the reasonability of the Peer Group from a financial standpoint. Those areas where differences exist will be addressed in the form of valuation adjustments to the extent necessary.

RP® Financial, LC.	VALUATION ANALYSIS
	IV.1

IV. VALUATION ANALYSIS

Introduction

This chapter presents the valuation analysis and methodology, prepared pursuant to the regulatory valuation guidelines, and valuation adjustments and assumptions used to determine the estimated pro forma market value of the common stock to be issued in conjunction with the Company’s conversion transaction.

Appraisal Guidelines

The OTS written appraisal guidelines specify the market value methodology for estimating the pro forma market value of an institution pursuant to a mutual-to-stock conversion. Pursuant to this methodology: (1) a peer group of comparable publicly-traded institutions is selected; (2) a financial and operational comparison of the subject company to the peer group is conducted to discern key differences; and (3) a valuation analysis in which the pro forma market value of the subject company is determined based on the market pricing of the peer group as of the date of valuation, incorporating valuation adjustments for key differences. In addition, the pricing characteristics of recent conversions, both at conversion and in the aftermarket, must be considered.

RP Financial Approach to the Valuation

The valuation analysis herein complies with such regulatory approval guidelines. Accordingly, the valuation incorporates a detailed analysis based on the Peer Group, discussed in Chapter III, which constitutes “fundamental analysis” techniques. Additionally, the valuation incorporates a “technical analysis” of recently completed stock conversions, including closing pricing and aftermarket trading of such offerings. It should be noted that these valuation analyses cannot possibly fully account for all the market forces which impact trading activity and pricing characteristics of a particular stock on a given day.

RP® Financial, LC.	VALUATION ANALYSIS
	IV.2

The pro forma market value determined herein is a preliminary value for the Company’s to-be-issued stock. Throughout the conversion process, RP Financial will: (1) review changes in Peoples Federal Bancshares’ operations and financial condition; (2) monitor Peoples Federal Bancshares’ operations and financial condition relative to the Peer Group to identify any fundamental changes; (3) monitor the external factors affecting value including, but not limited to, local and national economic conditions, interest rates, and the stock market environment, including the market for thrift stocks; and (4) monitor pending conversion offerings (including those in the offering phase), both regionally and nationally. If material changes should occur during the conversion process, RP Financial will evaluate if updated valuation reports should be prepared reflecting such changes and their related impact on value, if any. RP Financial will also prepare a final valuation update at the closing of the offering to determine if the prepared valuation analysis and resulting range of value continues to be appropriate.

The appraised value determined herein is based on the current market and operating environment for the Company and for all thrifts. Subsequent changes in the local and national economy, the legislative and regulatory environment, the stock market, interest rates, and other external forces (such as natural disasters or major world events), which may occur from time to time (often with great unpredictability) may materially impact the market value of all thrift stocks, including Peoples Federal Bancshares’ value, or Peoples Federal Bancshares’ value alone. To the extent a change in factors impacting the Company’s value can be reasonably anticipated and/or quantified, RP Financial has incorporated the estimated impact into the analysis.

Valuation Analysis

A fundamental analysis discussing similarities and differences relative to the Peer Group was presented in Chapter III. The following sections summarize the key differences between the Company and the Peer Group and how those differences affect the pro forma valuation. Emphasis is placed on the specific strengths and weaknesses of the Company relative to the Peer Group in such key areas as financial condition, profitability, growth and viability of earnings, asset growth, primary market area,

RP® Financial, LC.	VALUATION ANALYSIS
	IV.3

dividends, liquidity of the shares, marketing of the issue, management, and the effect of government regulations and/or regulatory reform. We have also considered the market for thrift stocks, in particular new issues, to assess the impact on value of the Company coming to market at this time.

1. Financial Condition

The financial condition of an institution is an important determinant in pro forma market value because investors typically look to such factors as liquidity, capital, asset composition and quality, and funding sources in assessing investment attractiveness. The similarities and differences in the Company’s and the Peer Group’s financial strengths are noted as follows:

• Overall A/L Composition. In comparison to the Peer Group, the Company’s interest-earning asset composition showed a higher concentration of loans and a lower concentration of investments. The Company and the Peer Group reflected comparable levels of diversification into higher risk and higher yielding types of loans. Overall, in comparison to the Peer Group, the Company’s interest-earning asset composition provided for a similar yield earned on interest-earning assets and a slightly higher risk weighted assets-to-assets ratio. Peoples Federal Bancshares’ funding composition reflected a higher level of deposits and a lower level of borrowings than the comparable Peer Group ratios, which translated into a lower cost of funds for the Company. Overall, as a percent of assets, the Company maintained a similar level of interest-earning assets and a slightly higher level of interest-bearing liabilities compared to the Peer Group’s ratios, which resulted in a slightly higher IEA/IBL ratio for the Peer Group. After factoring in the impact of the net stock proceeds, the Company’s IEA/IBL ratio should exceed the Peer Group’s ratio. On balance, RP Financial concluded that asset/liability composition was a slightly positive factor in our adjustment for financial condition.

• Credit Quality. The Company’s ratios for non-performing assets and non-performing loans were slightly less favorable than the comparable Peer Group ratios. Loss reserves as a percent of non-performing loans and as a percent of loans were higher for the Peer Group. Net loan charge-offs were a slightly larger factor for the Peer Group. As noted above, the Company’s risk weighted assets-to-assets ratio was slightly higher than the Peer Group’s ratio. Overall, RP Financial concluded that credit quality was a slightly negative factor in our adjustment for financial condition.

• Balance Sheet Liquidity. The Company operated with a lower level of cash and investment securities relative to the Peer Group (17.7% of assets versus

RP® Financial, LC.	VALUATION ANALYSIS
	IV.4

33.9% for the Peer Group). Following the infusion of stock proceeds, the Company’s cash and investments ratio is expected to increase as the proceeds retained at the holding company level will be initially deployed into investments. The Company’s future borrowing capacity was considered to be greater than the Peer Group’s, given the higher level of borrowings currently funding the Peer Group’s assets. Overall, RP Financial concluded that balance sheet liquidity was a slightly positive factor in our adjustment for financial condition.

• Funding Liabilities. The Company’s interest-bearing funding composition reflected a higher concentration of deposits and a lower concentration of borrowings relative to the comparable Peer Group ratios, which translated into a lower cost of funds for the Company. Total interest-bearing liabilities as a percent of assets were slightly higher for the Company compared to the Peer Group’s ratio, which was attributable to Peoples Federal Bancshares’ lower capital position. Following the stock offering, the increase in the Company’s capital position will reduce the level of interest-bearing liabilities funding the Company’s assets. Overall, RP Financial concluded that funding liabilities were a slightly positive factor in our adjustment for financial condition.

• Capital. The Company currently operates with a lower equity-to-assets ratio than the Peer Group. However, following the stock offering, Peoples Federal Bancshares’ pro forma capital position will exceed the Peer Group’s equity-to-assets ratio. The increase in the Company’s pro forma capital position will result in greater leverage potential and reduce the level of interest-bearing liabilities utilized to fund assets. At the same time, the Company’s more significant capital surplus will likely result in a lower ROE. On balance, RP Financial concluded that capital strength was a slightly positive factor in our adjustment for financial condition.

On balance, Peoples Federal Bancshares’ balance sheet strength was considered to be more favorable than the Peer Group’s and, thus, a slight upward adjustment was applied for the Company’s financial condition.

2. Profitability, Growth and Viability of Earnings

Earnings are a key factor in determining pro forma market value, as the level and risk characteristics of an institution’s earnings stream and the prospects and ability to generate future earnings heavily influence the multiple that the investment community will pay for earnings. The major factors considered in the valuation are described below.

RP® Financial, LC.	VALUATION ANALYSIS
	IV.5

• Reported Earnings. The Company’s reported earnings were comparable to the Peer Group’s on a ROAA basis (0.57% of average assets versus 0.60% for the Peer Group). The Company maintained more favorable ratios for net interest income, loan loss provisions and net gains, which were offset by the Peer Group’s more favorable ratios for non-interest operating income operating expenses and effective tax rate. Reinvestment of stock proceeds into interest-earning assets will serve to increase the Company’s earnings, with the benefit of reinvesting proceeds expected to be somewhat offset by higher operating expenses associated with operating as a publicly-traded company and the implementation of stock benefit plans. Overall, the Company’s pro forma reported earnings were considered to be fairly comparable to the Peer Group’s and, thus, RP Financial concluded that no adjustment was appropriate for the Company’s reported earnings.

• Core Earnings. Net interest income, operating expenses, non-interest operating income and loan loss provisions were reviewed in assessing the relative strengths and weaknesses of the Company’s and the Peer Group’s core earnings. In these measures, the Company operated with a higher net interest margin, a higher operating expense ratio and a lower level of non-interest operating income. The Company’s higher ratios for net interest income and operating expenses translated into a similar expense coverage ratio in comparison to the Peer Group’s ratio (equal to 1.19x versus 1.20X for the Peer Group). Comparatively, the Company’s efficiency ratio of 76.5% was less favorable than the Peer Group’s efficiency ratio of 70.2%, as the result of the Peer Group’s higher level of non-interest operating income. Loan loss provisions had a more significant impact on the Peer Group’s earnings. Overall, these measures, as well as the expected earnings benefits the Company should realize from the redeployment of stock proceeds into interest-earning assets and leveraging of post-conversion capital, which will be somewhat negated by expenses associated with the stock benefit plans and operating as a publicly-traded company, indicate that the Company’s pro forma core earnings will be fairly comparable to the Peer Group’s core earnings. Therefore, RP Financial concluded that this was a neutral factor in our adjustment for profitability, growth and viability of earnings.

• Interest Rate Risk. Quarterly changes in the Company’s and the Peer Group’s net interest income to average assets ratios indicated a higher degree of volatility was associated with the Company’s net interest margin. Other measures of interest rate risk, such as capital and IEA/IBL ratios as well level of non-interest earning assets were in general slightly more favorable for the Peer Group. On a pro forma basis, the infusion of stock proceeds can be expected to provide the Company with equity-to-assets and IEA/ILB ratios that will be above the Peer Group ratios, as well as enhance the stability of the Company’s net interest margin through the reinvestment of stock proceeds into interest-earning assets. On balance, RP Financial concluded that interest rate risk was a neutral factor in our adjustment for profitability, growth and viability of earnings.

RP® Financial, LC.	VALUATION ANALYSIS
	IV.6

• Credit Risk. Loan loss provisions were a larger factor in the Peer Group’s earnings (0.23% of average assets versus 0.03% of average assets for the Company). In terms of future exposure to credit quality related losses, the Company maintained a higher concentration of assets in loans, while lending diversification into higher risk types of loans was similar for the Company and the Peer Group. Credit quality measures for non-performing assets and loss reserves as a percent of non-performing loans and loans were more favorable for the Peer Group. Overall, RP Financial concluded that credit risk was a slightly negative factor in our adjustment for profitability, growth and viability of earnings.

• Earnings Growth Potential. Several factors were considered in assessing earnings growth potential. First, the Company maintained a more favorable interest rate spread than the Peer Group, which would tend to support a stronger net interest margin going forward for the Company. Second, the infusion of stock proceeds will provide the Company with more significant growth potential through leverage than currently maintained by the Peer Group. Third, the Peer Group’s higher ratio of non-interest operating income and lower operating expense ratio were viewed as advantages to sustain earnings growth during periods when net interest margins come under pressure as the result of adverse changes in interest rates. Overall, earnings growth potential was considered to be a slightly positive factor in our adjustment for profitability, growth and viability of earnings.

• Return on Equity. Currently, the Company’s core ROE is similar to the Peer Group’s ROE. Accordingly, as the result of the significant increase in capital that will be realized from the infusion of net stock proceeds into the Company’s equity, the Company’s pro forma return on equity on a core earnings basis will be less than the Peer Group’s return on equity ratio. Accordingly, this was a slightly negative factor in the adjustment for profitability, growth and viability of earnings.

On balance, Peoples Federal Bancshares’ pro forma earnings strength was considered to be comparable to the Peer Group’s and, thus, no adjustment was applied for profitability, growth and viability of earnings.

3. Asset Growth

The Company’s asset growth rate exceeded the Peer Group’s growth rate during the period covered in our comparative analysis, based on growth rates of 8.2% and 2.4%, respectively. Asset growth for the Company largely consisted of lower yielding cash and cash equivalents, while the Peer Group’s asset growth consisted of a

RP® Financial, LC.	VALUATION ANALYSIS
	IV.7

combination of loans and cash and investments. On a pro forma basis, the Company’s tangible equity-to-assets ratio will exceed the Peer Group’s tangible equity-to-assets ratio, indicating greater leverage capacity for the Company. On balance, a slight upward adjustment was applied for asset growth.

4. Primary Market Area

The general condition of an institution’s market area has an impact on value, as future success is in part dependent upon opportunities for profitable activities in the local market served. Peoples Federal Bancshares serves the Boston metropolitan area through the main office and five branch locations. Operating in a relatively slow growing densely populated market area provides the Company with growth opportunities, but such growth must be achieved in a highly competitive market environment. The Company competes against significantly larger institutions that provide a larger array of services and have significantly larger branch networks than maintained by Peoples Federal Bancshares. The competitiveness of the market area is highlighted by the Company’s relatively low market share of deposits in the counties where its branches are maintained.

The Peer Group companies generally operate in less densely populated markets compared to Suffolk County, where the Company is headquartered and maintains most of its branches. Population growth for the primary market area counties served by the Peer Group companies reflect a wide range of growth rates, but overall population growth rates in the markets served by the Peer Group companies were viewed to be fairly comparable to Suffolk County’s historical and projected population growth rates. Suffolk County has a slightly high per capita income compared to the Peer Group’s average per capita income, while the Peer Group companies also generally operate in markets with a lower cost of living than Suffolk County. The average and median deposit market shares maintained by the Peer Group companies were significantly above the Company’s market share of deposits in Suffolk County. Overall, the degree of competition faced by the Peer Group companies was viewed as significantly less than faced by the Company, while the growth potential in the markets served by the Peer Group companies was for the most part viewed to be similar as provided by the

RP® Financial, LC.	VALUATION ANALYSIS
	IV.8

Company’s primary market area. Summary demographic and deposit market share data for the Company and the Peer Group companies is provided in Exhibit III-4. As shown in Table 4.1, the average unemployment rate for the primary market area counties served by the Peer Group companies was comparable to the unemployment rate reflected for Suffolk County. On balance, we concluded that no adjustment was appropriate for the Company’s market area.

Table 4.1

Market Area Unemployment Rates

Peoples Federal Bancshares and the Peer Group Companies(1)

	County	December 2009 Unemployment
Peoples Federal Bancshares – MA	Suffolk	8.5	%
Peer Group Average		8.9	%
Beacon Federal Bancorp. – NY	Onondaga	7.6	%
ESSA Bancorp, Inc. – PA	Monroe	9.3
Elmira Savings Bank – NY	Chemung	8.8
LSB Corp. – MA	Essex	9.7
Mayflower Bancorp, Inc. – MA	Plymouth	9.6
Newport Bancorp, Inc. – RI	Newport	11.5
Rome Bancorp, Inc. – NY	Oneida	7.5
TF Financial Corp. – PA	Bucks	7.2
WVS Financial Corp. – PA	Allegheny	7.2
Westfield Financial – MA	Hampden	10.6

(1) Unemployment rates are not seasonally adjusted.

Source: U.S. Bureau of Labor Statistics.

5. Dividends

At this time the Company has not established a dividend policy. Future declarations of dividends by the Board of Directors will depend upon a number of factors, including investment opportunities, growth objectives, financial condition, profitability, tax considerations, minimum capital requirements, regulatory limitations, stock market characteristics and general economic conditions.

RP® Financial, LC.	VALUATION ANALYSIS
	IV.9

Nine out of the ten of the Peer Group companies pay regular cash dividends, with implied dividend yields ranging from 1.71% to 5.12%. The average dividend yield on the stocks of the Peer Group institutions equaled 3.02% as of February 26, 2010. As of February 26, 2010, approximately 64% of all fully-converted publicly-traded thrifts had adopted cash dividend policies (see Exhibit IV-1), exhibiting an average yield of 2.17%. The dividend paying thrifts generally maintain higher than average profitability ratios, facilitating their ability to pay cash dividends.

While the Company has not established a definitive dividend policy prior to converting, the Company will have the capacity to pay a dividend comparable to the Peer Group’s average dividend yield based on pro forma earnings and capitalization. On balance, we concluded that no adjustment was warranted for this factor.

6. Liquidity of the Shares

The Peer Group is by definition composed of companies that are traded in the public markets. Nine of the Peer Group members trade on the NASDAQ and one trades on the AMEX. Typically, the number of shares outstanding and market capitalization provides an indication of how much liquidity there will be in a particular stock. The market capitalization of the Peer Group companies ranged from $14.6 million to $247.3 million as of February 26, 2010, with average and median market values of $75.3 million and $51.5 million, respectively. The shares issued and outstanding to the public shareholders of the Peer Group members ranged from 1.9 million to 29.8 million, with average and median shares outstanding of 7.4 million and 4.2 million, respectively. The Company’s stock offering is expected to have a pro forma market value and shares outstanding that will be within the range of the Peer Group’s averages and medians. Like nine out of the ten Peer Group companies, the Company’s stock will be quoted on the NASDAQ following the stock offering. Overall, we anticipate that the Company’s public stock will have a comparable trading market as the Peer Group companies on average and, therefore, concluded no adjustment was necessary for this factor.

RP® Financial, LC.	VALUATION ANALYSIS
	IV.10

7. Marketing of the Issue

We believe that three separate markets exist for thrift stocks, including those coming to market such as Peoples Federal Bancshares: (1) the after-market for public companies, in which trading activity is regular and investment decisions are made based upon financial condition, earnings, capital, ROE, dividends and future prospects; (2) the new issue market in which converting thrifts are evaluated on the basis of the same factors, but on a pro forma basis without the benefit of prior operations as a fully-converted publicly-held company and stock trading history; and (3) the acquisition market for thrift franchises in Massachusetts. All three of these markets were considered in the valuation of the Company’s to-be-issued stock.

A. The Public Market

The value of publicly-traded thrift stocks is easily measurable, and is tracked by most investment houses and related organizations. Exhibit IV-1 provides pricing and financial data on all publicly-traded thrifts. In general, thrift stock values react to market stimuli such as interest rates, inflation, perceived industry health, projected rates of economic growth, regulatory issues and stock market conditions in general. Exhibit IV-2 displays historical stock market trends for various indices and includes historical stock price index values for thrifts and commercial banks. Exhibit IV-3 displays historical stock price indices for thrifts only.

In terms of assessing general stock market conditions, the performance of the overall stock market has been mixed in recent quarters. The broader stock market started the third quarter of 2009 trending lower, with the Dow Jones Industrial Average (“DJIA”) falling to its lowest level in more than two months amid anxiety about second quarter earnings and a June employment report which showed more job losses than expected. Stocks rallied in mid-July on strong second quarter earnings reports, which included better-than-expected earnings posted by some bank bellwethers. The DJIA moved past 9000 going into late-July on more favorable earnings reports and a positive report for new home sales in June. Fueled by a growing belief that the recession was over and favorable unemployment data for July, the DJIA moved to a new high for 2009 in the first week of August. The broader stock market fluctuated in a narrow range

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	IV.11

through mid-August, reflecting uncertainty over the sustainability of the economic recovery. Better-than-expected economic data for housing and consumer confidence sustained a positive trend in the stock market in late-August, with the DJIA moving to new highs for the year. The broader stock market faltered at the start of September 2009, as investors worried the summer rally would give way to a correction. Encouraging economic data led a rebound in the stock market moving into mid-September, which was followed by a pullback on disappointing housing data for August. Stocks spiked higher in late-September on news of some large merger deals. Despite closing lower at the end of September, the DJIA had its best third quarter since 1939 with a 15% gain for the quarter.

Stocks started October with a sell-off, as investors reacted negatively to economic data showing a slow down in manufacturing activity from August to September and more job losses than expected for September. Energy and material stocks led a stock market rally heading into mid-October, as stock markets rallied around the world. Good earnings reports from J.P. Morgan Chase and Intel pushed the DJIA above a 10000 close in mid-October. Mixed economic data and concerns of the sustainability of the recovery following the removal of the federal stimulus programs provided for volatile trading at the close of October. Stocks moved higher in early-November, with the DJIA topping 10000 again on renewed optimism about the economy aided by a report that manufacturing activity rose around the world in October. Expectations that interest rates and inflation would remain low, following a weaker than expected employment report for October, sustained the rally heading into mid-November. The DJIA hit new highs for the year in mid-November, as investors focused on upbeat earnings from major retailers, signs of economic growth in Asia and the Federal Reserve’s commitment to low interest rates. Stocks traded unevenly through the second half of November, reflecting investor uncertainty over the strength of the economic recovery and Dubai debt worries. Easing fears about the Dubai debt crisis, along with a favorable employment report for November, served to bolster stocks at the end of November and into early-December. Mixed economic data, including a better-than-expected increase in November retail sales and November wholesale inflation rising more than expected, sustained a narrow trading range for the broader stock

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	IV.12

market heading into mid-December. Worries about the state of European economies and the dollar’s surge upended stocks in mid-December. Helped by some positive economic data and acquisition deals in mining and health care, the DJIA posted gains for six consecutive sessions in late-December. Overall, the DJIA closed up 18.8% for 2009, which was 26.4% below its all time high.

Stocks started 2010 in positive territory on mounting evidence of a global manufacturing rebound, while mixed earnings reports provided for an up and down market in mid-January. The DJIA moved into negative territory for the year heading in into late-January, with financial stocks leading the market lower as the White House proposed new limits on the size and activities of big banks. Technology stocks led the broader market lower at the close of January, as disappointing economic reports dampened growth prospects for 2010. Concerns about the global economy and European default worries pressured stocks lower in early-February, as the DJIA closed below 10000 for the first time in three months. Upbeat corporate earnings and some favorable economic news out of Europe and China held stocks to rebound in mid-February. The positive trend in the broader stock market continued into the second half of February, as investors seized on mild inflation data and more signs that the U.S. economy was recovering. Weak economic data pulled stocks lower at the end of February, although the 2.6% increase in the DJIA for the month of February was its strongest showing since November. On February 26, 2010, the DJIA closed at 10325.26, an increase of 46.2% from one year ago and a decrease of 1.0% year-to-date, and the NASDAQ closed at 2238.26, an increase of 62.4% from one year ago and a decrease of 1.4% year-to-date. The Standard & Poor’s 500 Index closed at 1104.49 on February 26, 2010, an increase of 50.3% from one year ago and a decrease of 1.0% year-to-date.

The market for thrift stocks has been somewhat uneven in recent quarters, but in general has underperformed the broader stock market. Thrift stocks followed the broader market lower at the start of the third quarter of 2009, as a disappointing June employment report and uncertainty over forthcoming second quarter earnings reports

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	IV.13

weighed on the sector. Better-than-expected second quarter earnings results posted by some of the large banks fueled a mid-July rally in thrift stocks. Thrift socks traded unevenly heading into late-July, as trading for the sector was impacted by a mix of favorable and disappointing second quarter earnings reports. News that sales of new single-family houses were up in June boosted thrift stocks in late-July, with the upward trend being sustained into early-August on a more optimistic outlook for financial stocks as the economy showed more signs of pulling out of the recession. Thrift stocks pulled back in mid-August on profit taking and worries that earnings improvement could subside for financial stocks in general. Signs that the housing market was improving boosted thrifts stocks heading into late-August, which was followed by a slight pull back for the sector on concerns of more credit losses for thrifts and banks due to erosion in the commercial real estate market. A sell-off in the broader stock market and concerns of more credit losses for thrifts and banks due to erosion in the commercial real estate market pressured thrift stocks lower at the start of September 2009. Thrift stocks rebounded in mid-September on some positive comments regarding the level of loan loss reserves maintained by thrifts generally being in good shape. Concerns about the effects of a possible tightening by the Federal Reserve provided for a modest decline in thrift stocks heading into the close of the third quarter.

Some disappointing economic data pushed thrift stocks along with the broader market lower at the beginning of October. Thrift stocks rebounded modestly through mid-October, aided by a rally in the broader stock market and a strong earnings report from J.P. Morgan Chase. Concerns of more loan losses and a disappointing report on September new home sales provided for a modest retreat in thrift prices in late-October. After bouncing higher on a better-than-expected report for third quarter GDP growth, financial stocks led the broader market lower at the end of October in the face of a negative report on consumer spending. In contrast to the broader market, thrift stocks edged lower following the Federal Reserve’s early-November statement that it would leave the federal funds rate unchanged. Thrift stocks rebounded along with the broader market going into mid-November, following some positive reports on the economy and comments from the Federal Reserve that interest rates would remain low amid concerns that unemployment and troubles in commercial real estate would

RP® Financial, LC.	VALUATION ANALYSIS
	IV.14

weigh on the economic recovery. Fresh economic data that underscored expectations for a slow economic recovery and Dubai debt worries pushed thrift stocks lower during the second half of November. Financial stocks led a broader market rebound at the close of November and into early-December, which was supported by a favorable report for home sales in October and expectations that the Dubai debt crisis would have a limited impact on U.S. banks. The favorable employment report for November added to gains in the thrift sector in early-December. Financial stocks edged higher in mid-December on news that Citigroup was repaying TARP funds, which was followed by a pullback following a report that wholesale inflation rose more than expected in November and mid-December unemployment claims were higher than expected. More attractive valuations supported a snap-back rally in thrift stocks heading into late-December, which was followed by a narrow range for the thrift sector through year end. Overall, the SNL Index for all publicly-traded thrifts was down 10.2% in 2009, which reflects significant declines in the trading prices of several large publicly-traded thrifts during 2009 pursuant to reporting significant losses due to credit quality related deterioration.

Thrift stocks traded in a narrow range during the first few weeks of 2010, as investors awaited fourth quarter earnings reports that would provide further insight on credit quality trends. An unexpected jump in jobless claims and proposed restrictions by the White House on large banks depressed financial stocks in general heading into late-January. Amid mixed earnings reports, thrift stocks traded in a narrow range for the balance of January. Financial stocks led the broader market lower in early-February and then rebounded along with the broader market in mid-February on some positive economic data including signs that prices were rising in some large metropolitan areas. Mild inflation readings for wholesale and consumer prices in January sustained the upward trend in thrift stocks heading into the second half of February. Comments by the Federal Reserve Chairman that short-term interest rates were likely to remain low for at least several months helped thrift stocks to ease higher in late-February. On February 26, 2010, the SNL Index for all publicly-traded thrifts closed at 600.3, an increase of 18.2% from one year ago and an increase of 2.3% year-to-date.

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	IV.15

B. The New Issue Market

In addition to thrift stock market conditions in general, the new issue market for converting thrifts is also an important consideration in determining the Company’s pro forma market value. The new issue market is separate and distinct from the market for seasoned thrift stocks in that the pricing ratios for converting issues are computed on a pro forma basis, specifically: (1) the numerator and denominator are both impacted by the conversion offering amount, unlike existing stock issues in which price change affects only the numerator; and (2) the pro forma pricing ratio incorporates assumptions regarding source and use of proceeds, effective tax rates, stock plan purchases, etc. which impact pro forma financials, whereas pricing for existing issues are based on reported financials. The distinction between pricing of converting and existing issues is perhaps no clearer than in the case of the price/book (“P/B”) ratio in that the P/B ratio of a converting thrift will typically result in a discount to book value whereas in the current market for existing thrifts the P/B ratio may reflect a premium to book value. Therefore, it is appropriate to also consider the market for new issues, both at the time of the conversion and in the aftermarket.

The marketing for converting thrift issues turned more positive in the fourth quarter of 2009, as indicated by an increase in conversion activity and the relative success of those offerings. For the most part, the recent conversion offerings experienced healthy subscription takedowns and have traded above their IPO prices in initial trading activity. Consistent with the broader thrift market, conversion pricing reflects continued investor uncertainty over quality credit trends and the prospects that a strengthening economy will translate into improved real estate market conditions for residential and commercial properties.

As shown in Table 4.2, four standard conversions and two second-step conversions were completed during the past three months. The standard conversion offerings are considered to be more relevant for our analysis, which were all completed in January 2010. All four of the standard conversion offerings were closed at the top of their super ranges. The average closing pro forma price/tangible book ratio of the four recent standard conversion offerings equaled 54.6%. On average, the four standard

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	IV.16

Table 4.2

Pricing Characteristics and After-Market Trends

Recent Conversions Completed (Last Three Months)

Institutional Information			Pre-Conversion Data								Offering Information								Contribution to Charitable Found.			Insider Purchases
			Financial Info.				Asset Quality															% Off Incl. Fdn.
																						Benefit Plans
Institution	Conver. Date	Ticker	Assets		Equity/ Assets		NPAs/ Assets		Res. Cov.		Gross Proc.		% Offered		% of Mid.		Exp./ Proc.		Form	% of Offering		ESOP		Recog. Plans		Stk Option		Mgmt.& Dirs.		Initial Dividend Yield
			($Mil)		(%)		(%)		(%)		($Mil.)		(%)		(%)		(%)			(%)		(%)		(%)		(%)		(%)(2)		(%)
Standard Conversions
OBA Financial Services, Inc., MD*	1/22/10	OBAF-NASDAQ	$	358	10.90	%	0.62	%	67	%	$	46.3	100	%	132	%	3.1	%	N.A.	N.A.		8.0	%	4.0	%	10.0	%	3.8	%	0.00	%
OmniAmerican Bancorp, Inc., TX*	1/21/10	OABC-NASDAQ	$	1,006	9.08	%	1.47	%	158	%	$	119.0	100	%	132	%	2.5	%	N.A.	N.A.		8.0	%	4.0	%	10.0	%	0.3	%	0.00	%
Versailles Financial Corp., OH	1/13/10	VERF-OTCBB	$	43	17.89	%	0.77	%	83	%	$	4.3	100	%	132	%	14.0	%	N.A.	N.A.		8.0	%	4.0	%	10.0	%	23.7	%	0.00	%
Athens Bancshares, Inc., TN	1/7/10	AFCB-NASDAQ	$	246	10.50	%	1.04	%	151	%	$	26.8	100	%	134	%	4.4	%	N.A.	N.A.		8.0	%	4.0	%	10.0	%	11.1	%	0.00	%
Averages - Standard Conversions:			$	413	12.09	%	0.98	%	115	%	$	49.1	100	%	133	%	6.0	%	N.A.	N.A.		8.0	%	4.0	%	10.0	%	9.7	%	0.00	%
Medians - Standard Conversions:			$	302	10.70	%	0.91	%	117	%	$	36.5	100	%	132	%	3.7	%	N.A.	N.A.		8.0	%	4.0	%	10.0	%	7.4	%	0.00	%
Second Step Conversions
Ocean Shore Holding Co., NJ*	12/21/09	OSHC-NASDAQ	$	743	9.08	%	0.36	%	138	%	$	33.5	57	%	85	%	7.5	%	N.A.	N.A.		6.8	%	3.4	%	8.5	%	1.3	%	2.50	%
Northwest Bancshares, Inc.*	12/18/09	NWBI-NASDAQ	$	7,134	9.18	%	1.95	%	54	%	$	688.8	62	%	108	%	3.8	%	C/S	2.0	%	4.0	%	4.0	%	10.2	%	0.1	%	3.91	%
Averages - Second Step Conversions:			$	3,938	9.13	%	1.16	%	96	%	$	361.1	60	%	97	%	5.6	%	N.A.	N.A.		5.4	%	3.7	%	9.3	%	0.7	%	3.21	%
Medians - Second Step Conversions:			$	3,938	9.13	%	1.16	%	96	%	$	361.1	60	%	97	%	5.6	%	N.A.	N.A.		5.4	%	3.7	%	9.3	%	0.7	%	3.21	%
Mutual Holding Company Conversions
Averages - Mutual Holding Company Conversions:
Medians - Mutual Holding Company Conversions:
Averages - All Conversions:			$	1,588	11.11	%	1.04	%	109	%	$	153.1	87	%	121	%	5.9	%	NA	NA		7.1	%	3.9	%	9.8	%	6.7	%	1.07	%
Medians - All Conversions:			$	550	9.84	%	0.91	%	110	%	$	39.9	100	%	132	%	4.1	%	NA	NA		8.0	%	4.0	%	10.0	%	2.5	%	0.00	%

Institutional Information			Pro Forma Data														Post-IPO Pricing Trends
			Pricing Ratios(3)						Financial Charac.								Closing Price:
Institution	Conver. Date	Ticker	P/TB		Core P/E		P/A		Core ROA		TE/A		Core ROE		IPO Price		First Trading Day		% Change		After First Week(4)		% Change		After First Month(5)		% Change		Thru 2/26/10		% Change
			(%)		(x)		(%)		(%)		(%)		(%)		($)		($)		(%)		($)		(%)		($)		(%)		($)		(%)
Standard Conversions
OBA Financial Services, Inc., MD*	1/22/10	OBAF-NASDAQ	59.1	%		NM	11.7	%	-0.1	%	19.7	%	-0.5	%	$	10.00	$	10.39	3.9	%	$	10.11	1.1	%	$	10.31	3.1	%	$	10.51	5.1	%
OmniAmerican Bancorp, Inc., TX*	1/21/10	OABC-NASDAQ	61.7	%		NM	10.7	%	-0.3	%	17.4	%	-1.7	%	$	10.00	$	11.85	18.5	%	$	11.32	13.2	%	$	10.99	9.9	%	$	10.91	9.1	%
Versailles Financial Corp., OH	1/13/10	VERF-OTCBB	40.3	%		30.12	9.6	%	0.3	%	23.7	%	1.1	%	$	10.00	$	10.00	0.0	%	$	10.00	0.0	%	$	10.00	0.0	%	$	10.00	0.0	%
Athens Bancshares, Inc., TN	1/7/10	AFCB-NASDAQ	57.4	%		18.40	10.3	%	0.6	%	18.0	%	3.1	%	$	10.00	$	11.60	16.0	%	$	11.39	13.9	%	$	11.06	10.6	%	$	10.97	9.7	%
Averages - Standard Conversions:			54.6	%		24.26	10.6	%	0.1	%	19.7	%	0.5	%	$	10.00	$	10.96	9.6	%	$	10.71	7.05	%	$	10.59	5.90	%	$	10.60	5.98	%
Medians - Standard Conversions:			58.3	%		24.26	10.5	%	0.1	%	18.9	%	0.3	%	$	10.00	$	11.00	10.0	%	$	10.72	7.15	%	$	10.65	6.50	%	$	10.71	7.10	%
Second Step Conversions
Ocean Shore Holding Co., NJ*	12/21/09	OSHC-NASDAQ	61.5	%		11.11	7.6	%	0.7	%	12.3	%	5.5	%	$	8.00	$	8.60	7.5	%	$	8.98	12.3	%	$	9.05	13.1	%	$	10.46	30.8	%
Northwest Bancshares, Inc.*	12/18/09	NWBI-NASDAQ	101.5	%		20.3	14.3	%	0.7	%	14.4	%	4.3	%	$	10.00	$	11.35	13.5	%	$	11.30	13.0	%	$	11.40	14.0	%	$	11.82	18.2	%
Averages - Second Step Conversions:			81.5	%		15.7x	10.9	%	0.7	%	13.4	%	4.9	%	$	9.00	$	9.98	10.5	%	$	10.14	12.6	%	$	10.23	13.6	%	$	11.14	24.5	%
Medians - Second Step Conversions:			81.5	%		15.7x	10.9	%	0.7	%	13.4	%	4.9	%	$	9.00	$	9.98	10.5	%	$	10.14	12.6	%	$	10.23	13.6	%	$	11.14	24.5	%
Mutual Holding Company Conversions
Averages Mutual Holding Company Conversions:
Medians - Mutual Holding Company Conversions:
Averages - All Conversions:			63.6	%	$	19.98	10.7	%	0.3	%	17.6	%	2.0	%	$	9.67	$	10.63	9.9	%	$	10.52	8.9	%	$	10.47	8.5	%	$	10.78	12.1	%
Medians - All Conversions:			60.3	%	$	19.35	10.5	%	0.4	%	17.7	%	2.1	%	$	10.00	$	10.87	10.5	%	$	10.71	12.6	%	$	10.65	10.3	%	$	10.71	9.4	%

Note: * - - Appraisal performed by RP Financial; BOLD=RP Financial did the Conversion Business Plan. “NT” - Not Traded; “NA” - Not Applicable, Not Available; C/S-Cash/Stock.

(1) Non-OTS regulated thrift.

(2) As a percent of MHC offering for MHC transactions.

(3) Does not take into account the adoption of SOP 93-6.

(4) Latest price if offering is less than one week old.

(5) Latest price if offering is more than one week but less than one month old.

(6) Mutual holding company pro forma data on full conversion basis.

(7) Simultaneously completed acquisition of another financial institution.

(8) Simultaneously converted to a commercial bank charter.

(9) Former credit union.

February 26, 2010

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	IV.17

conversion offerings reflected price appreciation of 7.1% and 5.9% after the first week and first month of trading, respectively. As of February 26, 2010, the four recent standard conversion offerings reflected average price appreciation of 6.0%.

Shown in Table 4.3 are the current pricing ratios for the five companies that have completed fully-converted offerings during the past three months and are traded on NASDAQ or an Exchange. Two of the offering were second-step conversions, which tend to be priced higher on a P/TB basis relative to full standard conversion offerings. The current average P/TB ratio of the publicly-traded recent conversions equaled 77.48% and the current average P/TB ratio of the three standard conversion offering included in Table 4.3 equaled 64.12%.

C. The Acquisition Market

Also considered in the valuation was the potential impact on Peoples Federal Bancshares’ stock price of recently completed and pending acquisitions of other thrift institutions operating in Massachusetts. As shown in Exhibit IV-4, there were 17 Massachusetts thrift acquisitions completed from the beginning of 2006 through February 26, 2010, and there are currently no acquisitions pending of a Massachusetts savings institution. The recent acquisition activity involving Massachusetts savings institutions may imply a certain degree of acquisition speculation for the Company’s stock. To the extent that acquisition speculation may impact the Company’s offering, we have largely taken this into account in selecting companies for the Peer Group which operate in markets that have experienced a comparable level of acquisition activity as the Company’s market and, thus, are subject to the same type of acquisition speculation that may influence Peoples Federal Bancshares’ stock. However, since converting thrifts are subject to a three-year regulatory moratorium from being acquired, acquisition speculation in Peoples Federal Bancshares’ stock would tend to be less compared to the stocks of the Peer Group companies.

* * * * * * * * * * *

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	IV.18

Table 4.3

Market Pricing Comparatives

Prices As of February 26, 2010

		Market				Per Share Data													Dividends(4)						Financial Characteristics(6)
		Capitalization				Core			Book		Pricing Ratios(3)								Amount/ Share		Yield		Payout Ratio(5)		Total Assets		Equity/ Assets		Tang Eq/ Assets		NPAs/ Assets		Reported				Core
Financial Institution		Price/ Share(1)		Market Value		12 Month EPS(2)			Value/ Share		P/E	P/B		P/A		P/TB		P/Core															ROA		ROE		ROA		ROE
		($)		($Mil)		($)			($)		(x)	(%)		(%)		(%)		(x)	($)		(%)		(%)		($Mil)		(%)		(%)		(%)		(%)		(%)		(%)		(%)
All Public Companies		$	9.74	$	298.86	$	(0.11	)	$	12.35	18.29x	82.69	%	10.09	%	91.50	%	19.96x	$	0.26	2.17	%	33.18	%	$	2,705	11.36	%	10.58	%	3.24	%	-0.14	%	-0.42	%	-0.14	%	-0.69	%
Converted Last 3 Months (no MHC)		$	10.93	$	318.64	$	0.25		$	15.09	25.92x	74.42	%	12.31	%	77.48	%	22.26x	$	0.13	1.14	%	20.69	%	$	2,114	6.47	%	6.09	%	1.03	%	0.24	%	3.61	%	0.28	%	3.52	%
Converted Last 3 Months (no MHC)
AFCB	Athens Bancshares, Inc. of TN	$	10.97	$	30.47	$	0.54		$	17.42	20.31x	62.97	%	11.35	%	62.97	%	20.31x	$	0.00	0.00	%	0.00	%	$	269	0.00	%	0.00	%	NA		0.56	%	NM		0.56	%	NM
NWBI	Northwest Bancshares Inc. of PA	$	11.82	$	1,307.79	$	0.37		$	11.90	39.40x	99.33	%	16.30	%	114.65	%	31.95x	$	0.40	3.38	%	NM		$	8,025	16.41	%	14.53	%	1.81	%	0.46	%	4.32	%	0.57	%	5.33	%
OBAF	OBA Financial Serv. Inc. of MD	$	10.51	$	48.65	$	(0.09	)	$	16.92	NM	62.12	%	12.25	%	62.12	%	NM	$	0.00	0.00	%	NM		$	397	0.00	%	0.00	%	NA		-0.30	%	NM		-0.10	%	NM
OSHC	Ocean Shore Holding Co. of NJ	$	10.46	$	76.44	$	0.72		$	13.01	18.03x	80.40	%	9.92	%	80.40	%	14.53x	$	0.24	2.29	%	41.38	%	$	770	7.69	%	7.69	%	0.25	%	0.55	%	7.15	%	0.68	%	8.88	%
OABC	OmniAmerican Bancorp Inc. of TX	$	10.91	$	129.86	$	(0.28	)	$	16.22	NM	67.26	%	11.72	%	67.26	%	NM	$	0.00	0.00	%	NM		$	1,108	8.23	%	8.23	%	NA		-0.05	%	-0.65	%	-0.30	%	-3.66	%

(1) Average of High/Low or Bid/Ask price per share.

(2) EPS (estimate core basis) is based on actual trailing 12 month data, adjusted to omit non-operating items on a tax-effected basis.

(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB = Price to tangible book value; and P/Core = Price to core earnings.

(4) Indicated 12 month dividend, based on last quarterly dividend declared.

(5) Indicated 12 month dividend as a percent of trailing 12 month estimated core earnings.

(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based on trailing 12 month common earnings and average common equity and total assets balances.

(7) Excludes from averages and medians those companies the subject of actual or rumored acquisition activities or unusual operating characteristics.

Source: SNL Financial, LC. and RP^® Financial, LC. calculations. The information provided in this report has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness of such information.

Copyright (c) 2009 by RP^® Financial, LC.

RP® Financial, LC.	VALUATION ANALYSIS
	IV.19

In determining our valuation adjustment for marketing of the issue, we considered trends in both the overall thrift market, the new issue market including the new issue market for thrift conversions and the local acquisition market for thrift stocks. Taking these factors and trends into account, RP Financial concluded that a slight downward adjustment was appropriate in the valuation analysis for purposes of marketing of the issue.

8. Management

The Company’s management team appears to have experience and expertise in all of the key areas of the Company’s operations. Exhibit IV-5 provides summary resumes of the Company’s Board of Directors and senior management. The financial characteristics of the Company suggest that the Board and senior management have been effective in implementing an operating strategy that can be well managed by the Company’s present organizational structure. The Company currently does not have any senior management positions that are vacant.

Similarly, the returns, equity positions and other operating measures of the Peer Group companies are indicative of well-managed financial institutions, which have Boards and management teams that have been effective in implementing competitive operating strategies. Therefore, on balance, we concluded no valuation adjustment relative to the Peer Group was appropriate for this factor.

9. Effect of Government Regulation and Regulatory Reform

In summary, as a fully-converted OTS regulated institution, Peoples Federal Bancshares will operate in substantially the same regulatory environment as the Peer Group members — all of whom are adequately capitalized institutions and are operating with no apparent restrictions. Exhibit IV-6 reflects the Bank’s pro forma regulatory capital ratios. On balance, no adjustment has been applied for the effect of government regulation and regulatory reform.

RP® Financial, LC.	VALUATION ANALYSIS
	IV.20

Summary of Adjustments

Overall, based on the factors discussed above, we concluded that the Company’s pro forma market value should reflect the following valuation adjustments relative to the Peer Group:

Key Valuation Parameters:	Valuation Adjustment
Financial Condition	Slight Upward
Profitability, Growth and Viability of Earnings	No Adjustment
Asset Growth	Slight Upward
Primary Market Area	No Adjustment
Dividends	No Adjustment
Liquidity of the Shares	No Adjustment
Marketing of the Issue	Slight Downward
Management	No Adjustment
Effect of Govt. Regulations and Regulatory Reform	No Adjustment

Valuation Approaches

In applying the accepted valuation methodology promulgated by the OTS and adopted by the FDIC, i.e., the pro forma market value approach, we considered the three key pricing ratios in valuing the Company’s to-be-issued stock — price/earnings (“P/E”), price/book (“P/B”), and price/assets (“P/A”) approaches — all performed on a pro forma basis including the effects of the stock proceeds. In computing the pro forma impact of the conversion and the related pricing ratios, we have incorporated the valuation parameters disclosed in the Company’s prospectus for reinvestment rate, effective tax rate, stock benefit plan assumptions and expenses (summarized in Exhibits IV-7 and IV-8).

In our estimate of value, we assessed the relationship of the pro forma pricing ratios relative to the Peer Group and recent conversion offerings.

RP Financial’s valuation placed an emphasis on the following:

• P/E Approach. The P/E approach is generally the best indicator of long-term value for a stock. Given the similarities between the Company’s and the Peer Group’s operating strategies, earnings composition and overall financial condition, the P/E approach was carefully considered in this valuation. At the

RP® Financial, LC.	VALUATION ANALYSIS
	IV.21

same time, since reported earnings for both the Company and the Peer Group included certain non-recurring items, we also made adjustments to earnings to arrive at core earnings estimates for the Company and the Peer Group and resulting price/core earnings ratios.

• P/B Approach. P/B ratios have generally served as a useful benchmark in the valuation of thrift stocks, particularly in the context of an initial public offering, as the earnings approach involves assumptions regarding the use of proceeds. RP Financial considered the P/B approach to be a useful indicator of pro forma value, taking into account the pricing ratios under the P/E and P/A approaches. We have also modified the P/B approach to exclude the impact of intangible assets (i.e., price/tangible book value or “P/TB”), in that the investment community frequently makes this adjustment in its evaluation of this pricing approach.

• P/A Approach. P/A ratios are generally a less reliable indicator of market value, as investors typically assign less weight to assets and attribute greater weight to book value and earnings. Furthermore, this approach as set forth in the regulatory valuation guidelines does not take into account the amount of stock purchases funded by deposit withdrawals, thus understating the pro forma P/A ratio. At the same time, the P/A ratio is an indicator of franchise value, and, in the case of highly capitalized institutions, high P/A ratios may limit the investment community’s willingness to pay market multiples for earnings or book value when ROE is expected to be low.

The Company will adopt Statement of Position (“SOP”) 93-6, which will cause earnings per share computations to be based on shares issued and outstanding excluding unreleased ESOP shares. For purposes of preparing the pro forma pricing analyses, we have reflected all shares issued in the offering, including all ESOP shares, to capture the full dilutive impact, particularly since the ESOP shares are economically dilutive, receive dividends and can be voted. However, we did consider the impact of the adoption of SOP 93-6 in the valuation.

Based on the application of the three valuation approaches, taking into consideration the valuation adjustments discussed above and the dilutive impact of the stock contribution to the Foundation, RP Financial concluded that, as of February 26, 2010, the pro forma market value of Peoples Federal Bancshares’ conversion stock was $54,000,000 at the midpoint, equal to 5,400,000 shares at $10.00 per share.

RP® Financial, LC.	VALUATION ANALYSIS
	IV.22

1. Price-to-Earnings (“P/E”). The application of the P/E valuation method requires calculating the Company’s pro forma market value by applying a valuation P/E multiple (fully-converted basis) to the pro forma earnings base. In applying this technique, we considered both reported earnings and a recurring earnings base, that is, earnings adjusted to exclude any one-time non-operating items, plus the estimated after-tax earnings benefit of the reinvestment of the net proceeds. The Company’s reported earnings equaled $2.596 million for the twelve months ended December 31, 2009. In deriving Peoples Federal Bancshares’ core earnings, the only adjustments made to reported earnings were to eliminate gains on sale of loans and gains on sale of investment securities, which equaled $379,000 and $418,000, respectively, for the twelve months ended December 31, 2009. As shown below, on a tax effected basis, assuming an effective marginal tax rate of 40.2% for the earnings adjustments, the Company’s core earnings were determined to equal $2.119 million for the twelve months ended December 31, 2009. (Note: see Exhibit IV-9 for the adjustments applied to the Peer Group’s earnings in the calculation of core earnings).

	Amount
	($000)
Net income(loss)	$	2,596
Deduct: Gain on sale of loans(1)		(227	)
Deduct: Gain on sale of investment securities(1)		(250	)
Core earnings estimate	$	2,119

(1) Tax effected at 40.2%.

Based on the Company’s reported and estimated core earnings and incorporating the impact of the pro forma assumptions discussed previously, the Company’s pro forma reported and core P/E multiples at the $54.0 million midpoint value equaled 25.65 times and 33.17 times, respectively, which provided for premiums of 74.1% and 73.2% relative to the Peer Group’s average reported and core P/E multiples of 14.73 times and 19.15 times, respectively (see Table 4.4). In comparison to the Peer Group’s median reported and core earnings multiples which equaled 11.90 times and 19.43 times, respectively, the Company’s pro forma reported and core P/E multiples at the midpoint value indicated premiums of 115.5% and 70.7%, respectively.

RP® Financial, LC.	VALUATION ANALYSIS
	IV.23

Table 4.4

Public Market Pricing

Peoples Federal Bancshares, Inc. and the Comparables

As of February 26, 2010

		Market Capitalization				Per Share Data
						Core			Book										Dividends(4)
		Price/		Market		12 Month			Value/		Pricing Ratios(3)								Amount/				Payout
		Share(1)		Value		EPS(2)			Share		P/E	P/B		P/A		P/TB		P/Core	Share		Yield		Ratio(5)
		($)		($Mil)		($)			($)		(x)	(%)		(%)		(%)		(x)	($)		(%)		(%)
Peoples Federal Bancshares
Superrange		$	10.00	$	71.42	$	0.21		$	15.33	36.61x	65.23	%	13.21	%	65.23	%	48.46x	$	0.00	0.00	%	0.00	%
Maximum		$	10.00	$	62.10	$	0.25		$	16.39	30.54x	61.01	%	11.65	%	61.01	%	39.90x	$	0.00	0.00	%	0.00	%
Midpoint		$	10.00	$	54.00	$	0.30		$	17.61	25.65x	56.79	%	10.26	%	56.79	%	33.17x	$	0.00	0.00	%	0.00	%
Minimum		$	10.00	$	45.90	$	0.37		$	19.25	21.09x	51.95	%	8.84	%	51.95	%	27.00x	$	0.00	0.00	%	0.00	%
All Non-MHC Public Companies (7)
Averages		$	9.79	$	353.88	$	(0.18	)	$	13.78	17.79x	70.60	%	8.16	%	79.28	%	18.55x	$	0.26	2.17	%	32.84	%
Medians		$	9.83	$	49.38	$	0.13		$	13.04	15.97x	70.70	%	6.52	%	77.13	%	16.19x	$	0.20	1.97	%	0.00	%
All Non-MHC State of MA(7)
Averages		$	13.03	$	168.65	$	0.43		$	15.58	19.89x	86.54	%	11.89	%	94.40	%	23.76x	$	0.29	2.18	%	29.39	%
Medians		$	11.04	$	83.71	$	0.23		$	13.44	12.71x	86.07	%	10.76	%	93.36	%	27.70x	$	0.22	2.40	%	0.00	%
Comparable Group Averages
Averages		$	11.71	$	75.33	$	0.81		$	14.27	14.73x	84.34	%	10.31	%	89.61	%	19.15x	$	0.37	3.02	%	30.79	%
Medians		$	11.71	$	51.46	$	0.59		$	13.57	11.90x	87.23	%	7.35	%	89.87	%	19.43x	$	0.26	2.92	%	34.63	%
Comparable Group
BFED	Beacon Federal Bancorp of NY	$	9.00	$	58.87	$	1.12		$	15.40	9.57x	58.44	%	5.50	%	58.44	%	8.04x	$	0.20	2.22	%	21.28	%
ESSA	ESSA Bancorp, Inc. of PA	$	11.70	$	165.25	$	0.38		$	12.90	30.00x	90.70	%	15.98	%	90.70	%	30.79x	$	0.20	1.71	%	51.28	%
ESBK	Elmira Savings Bank, FSB of NY	$	15.61	$	29.96	$	1.80		$	18.72	6.76x	83.39	%	5.92	%	131.40	%	8.67x	$	0.80	5.12	%	34.63	%
LSBX	LSB Corp. of No. Andover MA	$	11.72	$	52.82	$	1.49		$	13.72	7.28x	85.42	%	6.55	%	85.42	%	7.87x	$	0.28	2.39	%	17.39	%
MFLR	Mayflower Bancorp, Inc. of MA	$	6.99	$	14.55	$	0.28		$	9.78	12.71x	71.47	%	5.92	%	71.47	%	24.96x	$	0.24	3.43	%	43.64	%
NFSB	Newport Bancorp, Inc. of RI	$	11.95	$	45.77	$	0.23		$	13.42	NM	89.05	%	9.97	%	89.05	%	NM	$	0.00	0.00	%	0.00	%
ROME	Rome Bancorp, Inc. of Rome NY	$	8.55	$	58.58	$	0.44		$	8.81	19.00x	97.05	%	17.76	%	97.05	%	19.43x	$	0.36	4.21	%	NM
THRD	TF Financial Corp. of Newtown PA	$	18.75	$	50.10	$	1.42		$	26.81	11.09x	69.94	%	7.02	%	74.67	%	13.20x	$	0.80	4.27	%	47.34	%
WVFC	WVS Financial Corp. of PA	$	14.55	$	30.06	$	0.73		$	14.86	21.40x	97.91	%	7.68	%	97.91	%	19.93x	$	0.64	4.40	%	NM
WFD	Westfield Financial Inc. of MA	$	8.29	$	247.30	$	0.21		$	8.29	NM	100.00	%	20.76	%	100.00	%	39.48x	$	0.20	2.41	%	NM

		Financial Characteristics(6)
		Total		Equity/		Tang Eq/		NPAs/		Reported				Core				Offering
		Assets		Assets		Assets		Assets		ROA		ROE		ROA		ROE		Size
		($Mil)		(%)		(%)		(%)		(%)		(%)		(%)		(%)		($Mil)
Peoples Federal Bancshares
Superrange		$	541	20.25	%	20.25	%	0.97	%	0.36	%	1.78	%	0.27	%	1.35	%	$	66.1
Maximum		$	533	19.10	%	19.10	%	0.98	%	0.38	%	2.00	%	0.29	%	1.53	%	$	57.5
Midpoint		$	526	18.07	%	18.07	%	1.00	%	0.40	%	2.21	%	0.31	%	1.71	%	$	50.0
Minimum		$	519	17.01	%	17.01	%	1.01	%	0.42	%	2.46	%	0.33	%	1.92	%	$	42.5
All Non-MHC Public Companies (7)
Averages		$	3,033	10.89	%	10.07	%	3.40	%	-0.21	%	-0.58	%	-0.24	%	-1.26	%
Medians		$	899	9.31	%	8.64	%	2.82	%	0.21	%	2.09	%	0.10	%	1.14	%
All Non-MHC State of MA(7)
Averages		$	1,238	13.47	%	12.62	%	1.50	%	0.19	%	2.16	%	0.26	%	2.55	%
Medians		$	936	13.53	%	10.91	%	0.93	%	0.36	%	2.13	%	0.25	%	2.30	%
Comparable Group Averages
Averages		$	675	12.36	%	12.07	%	0.53	%	0.59	%	5.37	%	0.56	%	4.91	%
Medians		$	610	10.39	%	9.44	%	0.58	%	0.56	%	5.47	%	0.53	%	4.94	%
Comparable Group
BFED	Beacon Federal Bancorp of NY	$	1,070	9.42	%	9.42	%	NA		0.59	%	6.15	%	0.71	%	7.33	%
ESSA	ESSA Bancorp, Inc. of PA	$	1,034	17.62	%	17.62	%	NA		0.53	%	2.94	%	0.51	%	2.87	%
ESBK	Elmira Savings Bank, FSB of NY	$	506	10.73	%	8.35	%	NA		0.91	%	8.82	%	0.71	%	6.87	%
LSBX	LSB Corp. of No. Andover MA	$	807	9.46	%	9.46	%	NA		0.94	%	10.46	%	0.87	%	9.68	%
MFLR	Mayflower Bancorp, Inc. of MA	$	246	8.28	%	8.28	%	NA		0.46	%	5.80	%	0.24	%	2.95	%
NFSB	Newport Bancorp, Inc. of RI	$	459	11.20	%	11.20	%	NA		0.15	%	1.31	%	0.20	%	1.68	%
ROME	Rome Bancorp, Inc. of Rome NY	$	330	18.30	%	18.30	%	0.58	%	0.92	%	5.14	%	0.90	%	5.03	%
THRD	TF Financial Corp. of Newtown PA	$	714	10.04	%	9.46	%	NA		0.63	%	6.44	%	0.53	%	5.41	%
WVFC	WVS Financial Corp. of PA	$	392	7.84	%	7.84	%	0.42	%	0.34	%	4.52	%	0.36	%	4.85	%
WFD	Westfield Financial Inc. of MA	$	1,191	20.76	%	20.76	%	0.60	%	0.46	%	2.09	%	0.54	%	2.44	%

(1) Average of High/Low or Bid/Ask price per share.

(2) EPS (estimate core basis) is based on actual trailing 12 month data, adjusted to omit non-operating items on a tax-effected basis, and is shown on a pro forma basis where appropriate.

(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB = Price to tangible book value; and P/Core = Price to core earnings.

(4) Indicated 12 month dividend, based on last quarterly dividend declared.

(5) Indicated 12 month dividend as a percent of trailing 12 month estimated core earnings.

(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based on trailing 12 month common earnings and average common equity and total assets balances.

(7) Excludes from averages and medians those companies the subject of actual or rumored acquisition activities or unusual operating characteristics.

Source: SNL Financial, LC. and RP^® Financial, LC. calculations. The information provided in this table has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness of such information.

Copyright (c) 2010 by RP^® Financial, LC.

RP® Financial, LC.	VALUATION ANALYSIS
	IV.24

At the top of the super range, the Company’s reported and core P/E multiples equaled 36.61 times and 48.46 times, respectively. In comparison to the Peer Group’s average reported and core P/E multiples, the Company’s P/E multiples at the top of the super range reflected premiums of 148.5% and 153.1%, respectively. In comparison to the Peer Group’s median reported and core P/E multiples, the Company’s P/E multiples at the top of the super range reflected premiums of 207.6% and 149.5%, respectively.

2. Price-to-Book (“P/B”). The application of the P/B valuation method requires calculating the Company’s pro forma market value by applying a valuation P/B ratio, as derived from the Peer Group’s P/B ratio, to the Company’s pro forma book value. Based on the $54.0 million midpoint valuation, the Company’s pro forma P/B and P/TB ratios both equaled 56.79%. In comparison to the average P/B and P/TB ratios for the Peer Group of 84.34% and 89.61%, the Company’s ratios reflected a discount of 32.7% on a P/B basis and a discount of 36.6% on a P/TB basis. In comparison to the Peer Group’s median P/B and P/TB ratios of 87.23% and 89.87%, respectively, the Company’s pro forma P/B and P/TB ratios at the midpoint value reflected discounts of 34.9% and 36.8%, respectively. At the top of the super range, the Company’s P/B and P/TB ratios both equaled 65.23%. In comparison to the Peer Group’s average P/B and P/TB ratios, the Company’s P/B and P/TB ratios at the top of the super range reflected discounts of 22.7% and 27.2%, respectively. In comparison to the Peer Group’s median P/B and P/TB ratios, the Company’s P/B and P/TB ratios at the top of the super range reflected discounts of 25.2% and of 27.4%, respectively. RP Financial considered the discounts under the P/B approach to be reasonable, given the nature of the calculation of the P/B ratio which mathematically results in a ratio discounted to book value. The discounts reflected under the P/B approach were also supported by the premiums reflected in the Company’s P/E multiples.

3. Price-to-Assets (“P/A”). The P/A valuation methodology determines market value by applying a valuation P/A ratio to the Company’s pro forma asset base, conservatively assuming no deposit withdrawals are made to fund stock purchases. In all likelihood there will be deposit withdrawals, which results in understating the pro forma P/A ratio which is computed herein. At the $54.0 million midpoint of the valuation

RP® Financial, LC.	VALUATION ANALYSIS
	IV.25

range, the Company’s value equaled 10.26% of pro forma assets. Comparatively, the Peer Group companies exhibited an average P/A ratio of 10.31%, which implies a discount of 0.5% has been applied to the Company’s pro forma P/A ratio. In comparison to the Peer Group’s median P/A ratio of 7.35%, the Company’s pro forma P/A ratio at the midpoint value reflects a premium of 39.6%.

Comparison to Recent Offerings

As indicated at the beginning of this chapter, RP Financial’s analysis of recent conversion offering pricing characteristics at closing and in the aftermarket has been limited to a “technical” analysis and, thus, the pricing characteristics of recent conversion offerings can not be a primary determinate of value. Particular focus was placed on the P/TB approach in this analysis, since the P/E multiples do not reflect the actual impact of reinvestment and the source of the stock proceeds (i.e., external funds vs. deposit withdrawals). As discussed previously, four standard conversion offerings were completed during the past three months. In comparison to the 54.6% average closing forma P/TB ratio of the recent standard conversions, the Company’s P/TB ratio of 56.8% at the midpoint value reflects an implied premium of 4.0%. At the top of the superrange, the Company’s P/TB ratio of 65.2% reflects an implied premium of 19.4% relative to the recent standard conversions. The current average P/TB ratio of the three recent standard conversions that are publicly-traded equaled 64.1%, based on closing stock prices as of February 26, 2010. In comparison to the current average P/TB ratio of the recent publicly-traded standard conversions, the Company’s P/TB ratio at the midpoint value reflects an implied discount of 11.4% and at the top of the superrange reflects an implied premium of 1.7%.

Valuation Conclusion

Based on the foregoing, it is our opinion that, as of February 26, 2010, the estimated aggregate pro forma market value of the shares to be issued immediately following the conversion, including shares to be issued to the Foundation, equaled $54,000,000 at the midpoint, equal to 5,400,000 shares offered at a per share value of

RP® Financial, LC.	VALUATION ANALYSIS
	IV.28

$10.00. Pursuant to conversion guidelines, the 15% offering range indicates a minimum value of $45,900,000 and a maximum value of $62,100,000. Based on the $10.00 per share offering price determined by the Board, this valuation range equates to total shares outstanding of 4,590,000 at the minimum and 6,210,000 at the maximum. In the event the appraised value is subject to an increase, the aggregate pro forma market value may be increased up to a supermaximum value of $71,415,000 without a resolicitation. Based on the $10.00 per share offering price, the supermaximum value would result in total shares outstanding of 7,141,500. Based on this valuation range, the offering range is as follows: $42,500,000 at the minimum, $50,000,000 at the midpoint, $57,500,000 at the maximum and $66,125,000 at the supermaximum. Based on the $10.00 per share offering price, the number of offering shares is as follows: 4,250,000 at the minimum, 5,000,000 at the midpoint, 5,750,000 at the maximum and 6,612,500 at the supermaximum. The pro forma valuation calculations relative to the Peer Group are shown in Table 4.4 and are detailed in Exhibit IV-7 and Exhibit IV-8.

EX-99.4

Exhibit 99.4

Peoples Federal Bancshares, Inc.

Peoples Federal Savings Bank

3/15/10

PROPOSED MAILING AND INFORMATIONAL MATERIALS

INDEX

Produced by the Financial Printer

1.	Dear Member Letter*
2.	Dear Member Letter for Non Eligible States*
3.	Dear Friend Letter - Eligible Account Holders who are no longer Depositors*
4.	Dear Potential Investor Letter*
5.	Dear Customer Letter - Used as a Cover Letter for States Requiring “Agent” Mailing*
6. – 9	Proxy and Stock Q&A*
10.	Proxy Request Letter (immediate follow-up)
11.	Proxy Request
12.	Stock Order Form (page 1 of 2)*
13.	Stock Order Form Certification (page 2 of 2)*
14.	Stock Order Form Guidelines*
15.	OTS Guidance Letter*
Produced by the Conversion Center
16.	Mailing Insert/Lobby Poster
17.	Invitation Letter - Informational Meetings
18.	Dear Subscriber/Acknowledgment Letter - Initial Response to Stock Order Received
19.	Dear Shareholder - Confirmation Letter
20.	Dear Interested Investor - No Shares Available Letter
21.	Welcome Shareholder Letter - For Initial Certificate Mailing
22.	Dear Interested Subscriber Letter—Subscription Rejection
23.	Letter for Sandler O’Neill Mailing to Clients*

*Accompanied by a Prospectus

Peoples Federal Bancshares, Inc.

Dear Member:

The Board of Directors of Peoples Federal MHC has voted unanimously in favor of a plan of conversion and reorganization whereby Peoples Federal MHC will convert from the mutual form to the stock form of organization. We are converting so that Peoples Federal Savings Bank will be structured in the form of ownership that we believe will best support the Bank’s future growth.

To continue our long-standing commitment to our local communities, we intend to establish and fund through a contribution of shares of our common stock a charitable foundation to be known as the Peoples Federal Savings Bank Charitable Foundation. The foundation will be dedicated to charitable purposes within the communities in which the Bank operates.

To accomplish the conversion and the establishment and funding of the foundation, your participation is extremely important. On behalf of the Board, I ask that you help us meet our goal by reading the enclosed material and then casting your vote in favor of the plan of conversion and reorganization and in favor of the foundation and mailing your signed proxy card immediately in the enclosed postage-paid envelope marked “PROXY RETURN.” If you have an IRA or other Qualified Retirement Plan account for which Peoples Federal Savings Bank acts as trustee and we do not receive a proxy from you, Peoples Federal Savings Bank, as trustee for such account, intends to vote in favor of the plan of conversion and reorganization and in favor of the foundation on your behalf. If you have more than one account, you may receive more than one proxy. Please vote by returning all proxy cards received.

If the plan of conversion and reorganization is approved, let me assure you that:

• deposit accounts will continue to be federally insured to the same extent permitted by law;

• existing deposit accounts and loans will not undergo any change; and

• voting for approval will not obligate you to buy any shares of common stock.

As a qualifying account holder, you may take advantage of your nontransferable rights to subscribe for shares of Peoples Federal Bancshares, Inc. common stock on a priority basis, before the stock is offered to the general public. The enclosed prospectus describes the stock offering and the operations of Peoples Federal Savings Bank and Peoples Federal Bancshares, Inc.

If you wish to subscribe for shares of common stock, please complete the enclosed stock order form and return it to Peoples Federal Bancshares, Inc., together with your payment for the shares, by mail using the enclosed postage-paid envelope marked “STOCK ORDER RETURN,” by hand delivery, or by overnight courier to the Peoples Federal Bancshares, Inc. conversion center located at 435 Market St., Brighton, MA 02135. Stock order forms will not be accepted at any branch offices other than the main office. Your order must be physically received (not postmarked) by Peoples Federal Bancshares, Inc. no later than 3:00 p.m., Eastern time, on      day,              , 2010. Please read the prospectus carefully before making an investment decision.

If you have any questions after reading the enclosed material, please call our conversion center at         -        -        , Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time. Please note that the conversion center will be closed from 12:00 noon Friday, May 28 through 12:00 noon Tuesday, June 1, in observance of the Memorial Day Holiday.

Sincerely,
Maurice H. Sullivan, Jr.	Thomas J. Leetch Jr.
Chairman and Chief Executive Officer	President and Chief Operating Officer

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Peoples Federal Savings Bank, Peoples Federal MHC, Peoples Federal Bancshares, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus.

1

Peoples Federal Bancshares, Inc.

Dear Member:

The Board of Directors of Peoples Federal MHC has voted unanimously in favor of a plan of conversion and reorganization whereby Peoples Federal MHC will convert from the mutual form to the stock form of organization. We are converting so that Peoples Federal Savings Bank will be structured in the form of ownership that we believe will best support the Bank’s future growth.

To continue our long-standing commitment to our local communities, we intend to establish and fund through a contribution of shares of our common stock a charitable foundation to be known as the Peoples Federal Savings Bank Charitable Foundation. The foundation will be dedicated to charitable purposes within the communities in which the Bank operates.

To accomplish the conversion and the establishment and funding of the foundation, your participation is extremely important. On behalf of the Board, I ask that you help us meet our goal by reading the enclosed material and then casting your vote in favor of the plan of conversion and reorganization and in favor of the foundation and mailing your signed proxy card immediately in the enclosed postage-paid envelope marked “PROXY RETURN.” If you have an IRA or other Qualified Retirement Plan account for which Peoples Federal Savings Bank acts as trustee and we do not receive a proxy from you, Peoples Federal Savings Bank, as trustee for such account, intends to vote in favor of the plan of conversion and reorganization and in favor of the foundation on your behalf. If you have more than one account, you may receive more than one proxy. Please vote by returning all proxy cards received.

If the plan of conversion and reorganization is approved let me assure you that:

• deposit accounts will continue to be federally insured to the fullest extent permitted by law; and

• existing deposit accounts and loans will not undergo any change.

We regret that we are unable to offer you common stock in the subscription offering because the laws of your state or jurisdiction require us to register (1) the to-be-issued common stock of Peoples Federal Bancshares, Inc. or (2) an agent of Peoples Federal Savings Bank to solicit the sale of such stock, and the number of eligible subscribers in your state or jurisdiction does not justify the expense of such registration.

If you have any questions after reading the enclosed material, please call our conversion center at         -        -        , Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time. Please note that the conversion center will be closed from 12:00 noon Friday, May 28 through 12:00 noon Tuesday, June 1, in observance of the Memorial Day Holiday.

Sincerely,
Maurice H. Sullivan, Jr.	Thomas J. Leetch Jr.
Chairman and Chief Executive Officer	President and Chief Operating Officer

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Peoples Federal Savings Bank, Peoples Federal MHC, Peoples Federal Bancshares, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus.

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Peoples Federal Bancshares, Inc.

Dear Friend of Peoples Federal Savings Bank:

The Board of Directors of Peoples Federal MHC has voted unanimously in favor of a plan of conversion and reorganization whereby Peoples Federal MHC will convert from the mutual form to the stock form of organization. We are converting so that Peoples Federal Savings Bank will be structured in the form of ownership that we believe will best support the Bank’s future growth.

To continue our long-standing commitment to our local communities, we intend to establish and fund through a contribution of shares of our common stock a charitable foundation to be known as the Peoples Federal Savings Bank Charitable Foundation. The foundation will be dedicated to charitable purposes within the communities in which the Bank operates.

As a former account holder, you may take advantage of your nontransferable right to subscribe for shares of Peoples Federal Bancshares, Inc. common stock on a priority basis, before the stock is offered to the general public. The enclosed prospectus describes the stock offering and the operations of Peoples Federal Savings Bank and Peoples Federal Bancshares, Inc.

If you wish to subscribe for shares of common stock, please complete the enclosed stock order form and return it to Peoples Federal Bancshares, Inc., together with your payment for the shares, by mail using the enclosed postage-paid envelope marked “STOCK ORDER RETURN,” by hand delivery, or by overnight courier to the Peoples Federal Bancshares, Inc. conversion center located at 435 Market St., Brighton, MA 02135. Stock order forms will not be accepted at any branch offices other than the main office. Your order must be physically received (not postmarked) by Peoples Federal Bancshares, Inc. no later than 3:00 p.m., Eastern time, on      day,              , 2010. Please read the prospectus carefully before making an investment decision.

If you have any questions after reading the enclosed material, please call our conversion center at         -        -        , Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time. Please note that the conversion center will be closed from 12:00 noon Friday, May 28 through 12:00 noon Tuesday, June 1, in observance of the Memorial Day Holiday.

Sincerely,
Maurice H. Sullivan, Jr.	Thomas J. Leetch Jr.
Chairman and Chief Executive Officer	President and Chief Operating Officer

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Peoples Federal Savings Bank, Peoples Federal MHC, Peoples Federal Bancshares, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus.

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Peoples Federal Bancshares, Inc.

Dear Potential Investor:

We are pleased to provide you with the enclosed material in connection with the stock offering by Peoples Federal Bancshares, Inc. We are raising capital to support Peoples Federal Savings Bank’s future growth.

This information packet includes the following:

PROSPECTUS: This document provides detailed information about the operations of Peoples Federal Savings Bank and the proposed stock offering by Peoples Federal Bancshares, Inc. Please read it carefully before making an investment decision.

STOCK ORDER FORM: Use this form to subscribe for shares of common stock and return it to Peoples Federal Bancshares, Inc., together with your payment for the shares, by mail using the enclosed postage-paid stock order return envelope, by hand delivery, or by overnight courier to the Peoples Federal Bancshares, Inc. conversion center located at 435 Market St., Brighton, MA 02135. Stock order forms will not be accepted at any branch offices other than the main office. Your order must be physically received (not postmarked) by Peoples Federal Bancshares, Inc. no later than 3:00 p.m., Eastern time, on      day,              , 2010. Please read the prospectus carefully before making an investment decision.

We are pleased to offer you this opportunity to become one of our shareholders. If you have any questions regarding the stock offering or the prospectus, please call our conversion center at         -        -        , Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time.

Sincerely,
Maurice H. Sullivan, Jr.	Thomas J. Leetch Jr.
Chairman and Chief Executive Officer	President and Chief Operating Officer

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Peoples Federal Savings Bank, Peoples Federal MHC, Peoples Federal Bancshares, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus.

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Sandler O’Neill & Partners, L.P.

Dear Customer of Peoples Federal Savings Bank:

At the request of Peoples Federal Savings Bank and its proposed new holding company, Peoples Federal Bancshares, Inc., we have enclosed material regarding the offering of common stock of Peoples Federal Bancshares, Inc. The material is offered in connection with the conversion of Peoples Federal MHC from the mutual to the stock form of organization. These materials include a prospectus and a stock order form, which offer you the opportunity to subscribe for shares of common stock of Peoples Federal Bancshares, Inc.

Please read the prospectus carefully before making an investment decision. If you decide to subscribe for shares, you must return the properly completed and signed stock order form, along with full payment for the shares, to Peoples Federal Bancshares, Inc., by mail using the enclosed postage-paid stock order return envelope, by hand delivery, or by overnight courier to the Peoples Federal Bancshares, Inc. conversion center located at 435 Market St., Brighton, MA 02135. Stock order forms will not be accepted at any branch offices other than the main office. Your order must be physically received (not postmarked) by Peoples Federal Bancshares, Inc. no later than 3:00 p.m., Eastern time, on      day,              , 2010.

If you have any questions after reading the enclosed material, please call the conversion center at         -        -        , Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time, and ask for a Sandler O’Neill representative.

We have been asked to forward these documents to you in view of certain requirements of the securities laws of your jurisdiction. We should not be understood as recommending or soliciting in any way any action by you with regard to the enclosed material.

Sandler O’Neill & Partners, L.P.

Enclosures

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Peoples Federal Savings Bank, Peoples Federal MHC, Peoples Federal Bancshares, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus.

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[cover page]

Questions & Answers About the Conversion

Peoples Federal Bancshares, Inc.

Questions & Answers

About the Conversion

The Boards of Directors of Peoples Federal MHC have voted unanimously in favor of a plan of conversion and reorganization whereby Peoples Federal MHC will convert from the mutual to the stock form of organization, subject to the affirmative vote of a majority of the total number of outstanding votes entitled to be cast by the members of Peoples Federal MHC at a special meeting of members. In connection with the conversion, Peoples Federal Savings Bank’s new holding company, Peoples Federal Bancshares, Inc., is offering shares of its common stock for sale in an initial public offering.

In addition, as part of the offering and in furtherance of the Bank’s long-standing commitment to its local community, the Bank intends to establish and fund, through a contribution of shares of our common stock, a charitable foundation to be known as The Peoples Federal Savings Bank Charitable Foundation. The foundation will be dedicated to the promotion of charitable causes within the communities in which the Bank operates.

Your vote is very important. If you have more than one account, you may receive more than one proxy. Please vote today by returning all proxy cards received.

Your Board of Directors urges you to vote “FOR” the conversion and return your proxy today.

Effect on Deposits and Loans

Q. Will the conversion affect any of my deposit accounts or loans?

A. No. The conversion will have no effect on the balance or terms of any deposit account. Your deposits will continue to be federally insured to the fullest extent permissible. The terms, including interest rates, of your loans with us will also be unaffected by the conversion.

About Voting

Q. Who is eligible to vote on the conversion?

A. Depositors of Peoples Federal Savings Bank as of the close of business on              , 2010 (the “Voting Record Date”) and borrowers who had loans outstanding as of the close of business on January 19, 1983 whose loans as of that date continue to be outstanding as of              , 2010 are eligible to vote at the special meeting of members.

Q. How do I vote?

A. You may vote by mailing your signed proxy card(s) in the enclosed postage-paid envelope marked “PROXY RETURN.” Should you choose to attend the special meeting of members to be held on              , 2010, and decide to change your vote, you may do so by revoking any previously executed proxy.

Q. Am I required to vote?

A. No. Depositors and borrowers members are not required to vote. However, because the conversion will produce a fundamental change in the Bank’s corporate structure, the Board of Directors encourages all members to vote.

Q. Why did I receive several proxies?

A. If you have more than one account, you may have received more than one proxy, depending upon the ownership structure of your accounts. Please vote, sign, date and return all proxy cards that you received.

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Q. Does my vote for the conversion mean that I must buy common stock of Peoples Federal Bancshares, Inc.?

A. No. Voting for the plan of conversion and reorganization does not obligate you to buy shares of common stock of Peoples Federal Bancshares, Inc.

Q. Are two signatures required on the proxy card for a joint account?

A. Only one signature is required on a proxy card for a joint account.

Q. Who must sign proxies for trust or custodian accounts?

A. The trustee or custodian must sign proxies for such accounts, not the beneficiary.

Q. I am the executor (administrator) for a deceased depositor. Can I sign the proxy card?

A. Yes. Please indicate on the card the capacity in which you are signing.

About The Common Stock

Investment in common stock involves certain risks. For a discussion of these risks and other factors, investors are urged to read the accompanying prospectus.

Q. Who can purchase stock?

A. The common stock of Peoples Federal Bancshares, Inc. will be offered in the subscription offering in the following order of priority:

1) Eligible Account Holders - depositors of Peoples Federal Savings Bank with accounts totaling $50 or more as of December 31, 2008;

2) Peoples Federal Savings Bank’s employee stock ownership plan;

3) Supplemental Eligible Account Holders - depositors of Peoples Federal Savings Bank with accounts totaling $50 or more as of March 31, 2010; and

4) Other Members - depositors of Peoples Federal Savings Bank with accounts as of              , 2010 and borrowers as of January 19, 1983 whose loans as of that date continue to be outstanding as of the close of business on              , 2010.

Upon completion of the subscription offering, common stock that is not sold in the subscription offering, if any, will be offered first to certain members of the general public in a community offering and then, to the extent any shares remain, to the general public in a syndicated community offering and/or an underwritten public offering.

Q. Am I guaranteed to receive shares by placing an order?

A. No. It is possible that orders received during the offering period will exceed the number of shares being sold. Such an oversubscription would result in shares being allocated among subscribers starting with subscribers who are Eligible Account Holders. If the offering is oversubscribed in the subscription offering, no orders received in the community offering will be filled.

Q. Will any account I hold with the Bank be converted into stock?

A. No. All accounts remain as they were prior to the conversion.

Q. How many shares of stock are being offered, and at what price?

A. Peoples Federal Bancshares, Inc. is offering for sale a maximum of 5,750,000 shares of common stock at a subscription price of $10 per share. Under certain circumstances, Peoples Federal Bancshares, Inc. may increase the maximum and sell up to 6,612,500 shares.

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Q. How much stock can I purchase?

A. The minimum purchase is $250 (25 shares). As more fully discussed in the plan of conversion and reorganization and in the prospectus, the maximum purchase by any person in the subscription or community offering is $250,000 (25,000 shares); no person by himself or herself, with an associate or group of persons acting in concert, may purchase more than $350,000 (35,000 shares) of common stock in the offering.

Q. How do I order stock?

A. If you decide to subscribe for shares, you must return the properly completed and signed stock order form, along with full payment for the shares, to Peoples Federal Bancshares, Inc., by mail using the enclosed postage-paid envelope marked “STOCK ORDER RETURN,” by hand delivery, or by overnight courier to the Peoples Federal Bancshares, Inc. conversion center located at 435 Market St., Brighton, MA 02135. Stock order forms will not be accepted at any branch offices other than the main office. Your order must be physically received (not postmarked) by Peoples Federal Bancshares, Inc. no later than 3:00 p.m., Eastern time, on      day,              , 2010. Please read the prospectus carefully before making an investment decision.

Q. How can I pay for my shares of stock?

A. You can pay for the common stock by check, money order, or withdrawal from your deposit account or certificate of deposit at Peoples Federal Savings Bank. Checks and money orders must be made payable to Peoples Federal Bancshares, Inc. Withdrawals from a deposit account or a certificate of deposit at Peoples Federal Savings Bank to buy shares of common stock may be made without penalty. Cash must be converted to a bank check or money order. Please do not send cash in the mail.

Q. Can I use my Peoples Federal Savings Bank home equity line of credit to subscribe for shares of common stock?

A. No. Peoples Federal Savings Bank cannot knowingly lend funds to anyone for them to subscribe for shares. This includes the use of funds available through a Peoples Federal Savings Bank home equity line of credit.

Q. When is the deadline to subscribe for stock?

A. An executed stock order form with the required full payment must be physically received (not postmarked) by Peoples Federal Bancshares, Inc. no later than 3:00 p.m., Eastern time on      day,              , 2010.

Q. Can I subscribe for shares using funds in my IRA at Peoples Federal Savings Bank?

A. No. Federal regulations do not permit the purchase of common stock with your existing IRA or other qualified plan at Peoples Federal Savings Bank. To use such funds to subscribe for common stock, you need to establish a “self directed” trust account with an unaffiliated trustee. The transfer of such funds takes time, so please make arrangements as soon as possible. However, if you intend to use other funds to subscribe for common stock due to your eligibility as an IRA account holder, you need not close and transfer the IRA account. Please call our conversion center if you require additional information.

Q. Can I subscribe for shares and add someone else who is not on my account to my stock registration?

A. No. Applicable regulations prohibit the transfer of subscription rights. Adding the names of other persons who are not owners of your qualifying account(s) will result in the loss of your subscription rights and could result in legal action against you.

Q. Can I subscribe for shares in my name alone if I have a joint account?

A. No. With the exception of certain orders placed through an IRA, Keogh or 401(k) plan, a name can be deleted only in the event of the death of a named eligible depositor.

Q. Will payments for common stock earn interest until the conversion closes?

A. Yes. Any payment made in cash or by check or money order will earn interest at Peoples Federal Savings Bank’s statement savings rate from the date of receipt to the completion or termination of the conversion. Depositors who elect to pay for their common stock by a withdrawal authorization will receive interest at the contractual rate on the account until the completion or termination of the offering.

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Q. Will dividends be paid on the stock?

A. We have not determined whether we will pay a dividend on the common stock. After the offering, we will consider a policy of paying regular cash dividends.

Q. Will my stock be covered by deposit insurance?

A. No.

Q. Where will the stock be traded?

A. Upon completion of the conversion, our shares of common stock are expected to be listed on the Nasdaq Capital Market under the symbol “PEOP.”

Q. Can I change my mind after I place an order to subscribe for stock?

A. No. After receipt, your order may not be modified or withdrawn.

About The Charitable Foundation

Q. What is The Peoples Federal Savings Bank Charitable Foundation and why is it being established?

A. In keeping with our long-standing commitment to our community, the plan of conversion and reorganization provides for the establishment and funding of a charitable foundation to be known as The Peoples Federal Savings Bank Charitable Foundation. The foundation will be dedicated to charitable causes within the communities in which Peoples Federal Savings Bank operates.

Q. Will The Peoples Federal Savings Bank Charitable Foundation be established and funded if the conversion is not approved and completed?

A. No. The Peoples Federal Savings Bank Charitable Foundation will only be established and funded if both the Plan of Conversion and the foundation are approved by the members. However, if we receive all approvals we are permitted to complete the conversion without the foundation, if the foundation is not approved by our members.

Additional Information

Q. What if I have additional questions or require more information?

A. Peoples Federal Bancshares, Inc.’s prospectus that accompanies this brochure describes the conversion in detail. Please read the prospectus carefully before subscribing for stock. If you have any questions after reading the enclosed material, you may call our conversion center at         -        -        , Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time. Please note that the conversion center will be closed from 12:00 noon Friday, May 28 through 12:00 noon Tuesday, June 1, in observance of the Memorial Day Holiday. Additional material may only be obtained from the conversion center.

To ensure that each purchaser in the subscription and community offering receives a prospectus at least 48 hours before the applicable expiration date, in accordance with Rule 15c2-8 of the Securities Exchange Act of 1934, as amended, no prospectus will be mailed any later than five days prior to such date or hand delivered any later than two days prior to such date.

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Peoples Federal Savings Bank, Peoples Federal MHC, Peoples Federal Bancshares, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus.

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Peoples Federal Bancshares, Inc.

Dear Member:

As a follow-up to our recent mailing, this is to remind you that your vote is very important.

The Board of Directors of Peoples Federal MHC has voted unanimously in favor of a plan of conversion and reorganization whereby Peoples Federal MHC will convert from the mutual form to the stock form of organization. We are converting so that Peoples Federal Savings Bank will be structured in the form of ownership that we believe will best support the Bank’s future growth.

To accomplish the conversion and the establishment and funding of the charitable foundation, your participation is extremely important. On behalf of the Board, I ask that you help us meet our goal by casting your vote in favor of the plan of conversion and reorganization and mailing your signed proxy card immediately in the enclosed postage-paid envelope marked “PROXY RETURN.” If you have more than one account, you may receive more than one proxy. Please vote by returning all proxy cards received.

If the plan of conversion and reorganization is approved, let me assure you that:

• deposit accounts will continue to be federally insured to the same extent permitted by law;

• existing deposit accounts and loans will not undergo any change; and

• voting for approval will not obligate you to buy any shares of common stock.

If you have any questions after reading the enclosed material, please call our conversion center at         -        -        , Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time. Please note that the conversion center will be closed from 12:00 noon Friday, May 28 through 12:00 noon Tuesday, June 1, in observance of the Memorial Day Holiday.

Sincerely,
Maurice H. Sullivan, Jr.	Thomas J. Leetch Jr.
Chairman and Chief Executive Officer	President and Chief Operating Officer

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Peoples Federal Savings Bank, Peoples Federal MHC, Peoples Federal Bancshares, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus.

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PROXY REQUEST

Logo

WE NEED YOUR VOTE

Dear Member of Peoples Federal Savings Bank:

Your vote on our plan of conversion and reorganization has not yet been received. Your vote is very important to us. Please vote and mail the enclosed proxy today. If you have more than one account, you may receive more than one proxy. Please complete and mail all proxies you receive.

Remember: Voting does not obligate you to buy stock. Your Board of Directors has approved the plan of conversion and reorganization and urges you to vote in favor of the conversion and in favor of the charitable foundation. Your deposit accounts or loans with Peoples Federal Savings Bank will not be affected in any way. Deposit accounts will continue to be federally insured to the legal maximum.

A postage-paid envelope is enclosed with the proxy card. If you have any questions, please call our conversion center at         -        -        , Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time.

Sincerely,
Maurice H. Sullivan, Jr.	Thomas J. Leetch Jr.
Chairman and Chief Executive Officer	President and Chief Operating Officer

If you have more than one account, you may receive more than one proxy.

Please vote today by returning all proxy cards received.

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Read This First

Office of Thrift Supervision Guidance for Accountholders

Your financial institution is in the process of selling stock to the public, in either a mutual-to-stock conversion or a stock issuance by a subsidiary of a mutual holding company. As an accountholder at this institution, you have certain priority subscription rights to purchase stock in the offering. These priority subscription rights are non-transferable. If you subscribe for stock, you will be asked to sign a statement that the purchase is for your own account, and that you have no agreement or understanding regarding the subsequent sale or transfer of any shares you receive.

On occasion, unscrupulous people attempt to persuade accountholders to transfer subscription rights, or to purchase shares in the offering based on the understanding that the shares will subsequently be transferred to others. Such arrangements violate federal regulations. If you participate in these schemes, you are breaking the law and may be subject to prosecution. If someone attempts to persuade you to participate in such a scheme, please contact the Office of Thrift Supervision (OTS) at (202) 906-6202. The OTS is very interested in ensuring that the prohibitions on transfer of subscription rights are not violated.

How will you know if you are being approached illegally? Typically, a fraudulent opportunist will approach you and offer to “loan” you money to purchase a significant amount of stock in the offering. In exchange for that “loan” you most likely will be asked either to transfer control of any stock purchased with that money to an account the other person controls, or sell the stock and give the majority of the profits to the other person. You may be told, untruthfully, that there is no risk to you, that the practice is common, and even if you are caught, that your legal expenses will be covered.

Below is a list of some key concepts that you should keep in mind when considering whether to participate in a mutual-to-stock conversion or stock issuance by a mutual holding company subsidiary. If you have questions, please contact the conversion center listed elsewhere in the literature you are receiving. Alternatively, you can contact us at: ombudsman@ots.treas.gov.

What Investors Need to Know

Key concepts for investors to bear in mind when considering whether to participate in a conversion offering, or a stock offering by a subsidiary of a mutual holding company, include the following:

• Know the Rules — By law, accountholders cannot sell or transfer their priority subscription rights, or the stock itself, prior to the completion of a financial institution’s conversion. Moreover, accountholders cannot enter into agreements or arrangements to sell or transfer either their subscription rights or the underlying conversion stock.

• “Neither a Borrower nor a Lender Be” — If someone offers to lend you money so that you can participate — or participate more fully — in a conversion, be extremely wary. Be even more wary if the source of the money is someone you do not know. The loan agreement may make you unable to certify truthfully that you are the true holder of the subscription rights and the true purchaser of the stock and that you have no agreements regarding the sale or transfer of the stock.

• Watch Out for Opportunists — The opportunist may tell you that he or she is a lawyer — or a consultant or a professional investor or some similarly impressive tale — who has experience with similar mutual conversion transactions. The opportunist may go to extreme lengths to assure you that the arrangement you are entering into is legitimate. They might tell you that they have done scores of these transactions and that this is simply how they work. Or they might downplay the warnings or restrictions in the prospectus or order form, telling you that “everyone” enters into such agreements or that the deal they are offering is legitimate. They may also tell you that you have no risk in the transaction. The cold, hard truth is that these are lies, and if you participate, you are breaking the law.

• Get the Facts from the Source — If you have any questions about the securities offering, ask the savings bank or savings association for more information. If you have any doubts about a transaction proposed to you by someone else, ask the financial institution whether the proposed arrangement is proper. You may be able to find helpful resources on the institution’s website or by visiting a branch office.

The bottom line for investors is always to remember that if an opportunity sounds too good to be true, it probably is too good to be true.

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Peoples Federal Savings Bank

LOGO

Please Support Us

Vote Your Proxy Card Today

If you have more than one account, you may have received more than one proxy depending upon the

ownership structure of your accounts. Please vote, sign and return all proxy cards that you received.

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Peoples Federal Bancshares, Inc.

            , 2010

Dear             :

The Boards of Directors of Peoples Federal Savings Bank and Peoples Federal Bancshares, Inc. have voted unanimously in favor of a plan of conversion and reorganization, whereby Peoples Federal Savings Bank will convert from the mutual to the stock form of organization.

To learn more about the stock offering you are cordially invited to join members of our senior management team at a community meeting to be held on        at         :00 .  , Eastern time.

A member of our staff will be calling to confirm your interest in attending the meeting.

If you would like additional information regarding the meeting or our conversion, please call our conversion center at         -        -        , Monday through Friday between the hours of 10:00 a.m. to 4:00 p.m., Eastern time.

Sincerely,
Maurice H. Sullivan, Jr.	Thomas J. Leetch Jr.
Chairman and Chief Executive Officer	President and Chief Operating Officer

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Peoples Federal Savings Bank, Peoples Federal MHC, Peoples Federal Bancshares, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus.

(Printed by Conversion Center)

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Peoples Federal Bancshares, Inc.

            , 2010

Dear Subscriber:

We hereby acknowledge receipt of your order for shares of Peoples Federal Bancshares, Inc. common stock. If you are issued shares, the shares will be registered as indicated above.

At this time, we cannot confirm the number of shares of Peoples Federal Bancshares, Inc. common stock that will be issued to you. Following completion of the stock offering, shares will be allocated in accordance with the plan of conversion and reorganization.

If you have any questions, please call our conversion center at         -        -        , Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time.

Peoples Federal Bancshares, Inc.

Conversion Center

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Peoples Federal Savings Bank, Peoples Federal MHC, Peoples Federal Bancshares, Inc., the Federal Deposit Insurance Corporation or any other government agency.

(Printed by Conversion Center)

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Peoples Federal Bancshares, Inc.

            , 2010

Dear Shareholder:

Our subscription offering has been completed and we are pleased to confirm your subscription for      shares at a price of $10.00 per share. If your subscription was paid for by check, interest and any refund due to you will be mailed promptly.

The closing of the transaction occurred on             , 2010; this is your stock purchase date. Trading will commence on the Nasdaq Capital Market under the symbol “PEOP” on             , 2010.

Thank you for your interest in Peoples Federal Bancshares, Inc. Your stock certificate will be mailed to you shortly.

Peoples Federal Bancshares, Inc.

Conversion Center

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Peoples Federal Savings Bank, Peoples Federal MHC, Peoples Federal Bancshares, Inc., the Federal Deposit Insurance Corporation or any other government agency.

(Printed by Conversion Center)

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Peoples Federal Bancshares, Inc.

            , 2010

Dear Interested Investor:

We recently completed our subscription offering. Unfortunately, due to the excellent response from our Eligible Account Holders, stock was not available for our Supplemental Eligible Account Holders, Other Members or community friends. If your subscription was paid for by check, a refund of any balance due to you with interest will be mailed promptly.

We appreciate your interest in Peoples Federal Bancshares, Inc. and hope you become an owner of our stock in the future. The stock is expected to trade on the Nasdaq Capital Market under the symbol “PEOP” on             , 2010.

Peoples Federal Bancshares, Inc.

Conversion Center

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Peoples Federal Savings Bank, Peoples Federal MHC, Peoples Federal Bancshares, Inc., the Federal Deposit Insurance Corporation or any other government agency.

(Printed by Conversion Center)

20

Peoples Federal Bancshares, Inc.

            , 2010

Welcome Shareholder:

We are pleased to enclose your stock certificate representing your shares of common stock of Peoples Federal Bancshares, Inc. Please examine your stock certificate to be certain that it is properly registered. If you have any questions about your certificate, you should contact the Transfer Agent immediately at the following address:

Registrar and Transfer Company

Attention: Investor Relations Department

10 Commerce Drive

Cranford, NJ 07016

1 (800) 368-5948

email: info@rtco.com

Please remember that your certificate is a negotiable security that should be stored in a secure place, such as a safe deposit box or on deposit with your stockbroker.

On behalf of the Board of Directors, officers and employees of Peoples Federal Bancshares, Inc., I thank you for supporting our offering.

Sincerely,
Maurice H. Sullivan, Jr.	Thomas J. Leetch Jr.
Chairman and Chief Executive Officer	President and Chief Operating Officer

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Peoples Federal Savings Bank, Peoples Federal MHC, Peoples Federal Bancshares, Inc., the Federal Deposit Insurance Corporation or any other government agency.

(Printed by Conversion Center)

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Peoples Federal Bancshares, Inc.

            , 2010

Dear Interested Subscriber:

We regret to inform you that Peoples Federal Savings Bank and Peoples Federal Bancshares, Inc., the holding company for Peoples Federal Savings Bank, did not accept your order for shares of Peoples Federal Bancshares, Inc. common stock in its community offering. This action is in accordance with our plan of conversion and reorganization, which gives Peoples Federal Savings Bank and Peoples Federal Bancshares, Inc. the absolute right to reject the order of any person, in whole or in part, in the community offering.

If your subscription was paid for by check, enclosed is your original check.

Peoples Federal Bancshares, Inc.

Conversion Center

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Peoples Federal Savings Bank, Peoples Federal MHC, Peoples Federal Bancshares, Inc., the Federal Deposit Insurance Corporation or any other government agency.

(Printed by Conversion Center)

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Sandler O’Neill & Partners, L.P.

            , 2010

To Our Friends:

We are enclosing material in connection with the stock offering by Peoples Federal Bancshares, Inc., the proposed holding company for Peoples Federal Savings Bank. Peoples Federal Bancshares, Inc. is raising capital to support Peoples Federal Savings Bank’s future growth.

Sandler O’Neill & Partners, L.P. is acting as financial and marketing advisor in connection with the subscription offering, which will conclude at     :    p.m., Eastern time, on             , 2010. In the event that all the stock is not sold in the subscription and community offering, Sandler O’Neill may form and manage a syndicated community offering to sell the remaining stock.

Members of the general public are eligible to participate. If you have any questions about this transaction, please do not hesitate to call.

Sandler O’Neill & Partners, L.P.

The shares of common stock being offered are not savings accounts or deposits and are not insured or guaranteed by Peoples Federal Savings Bank, Peoples Federal MHC, Peoples Federal Bancshares, Inc., the Federal Deposit Insurance Corporation or any other government agency.

This is not an offer to sell or a solicitation of an offer to buy common stock. The offer is made only by the prospectus.

(Printed by Sandler O’Neill)

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EX-99.5

Exhibit 99.5

Peoples Federal Bancshares, Inc. Subscription & Community Offering Stock Order Form
Peoples Federal Savings Bank Conversion Center 435 Market St. Brighton, MA 02135             -            -	Expiration Date for Stock Order Forms:      day             , 2010 3:00 p.m., Eastern time (received not postmarked)
IMPORTANT: A properly completed original stock order form must be used to subscribe for common stock. Copies of this form are not required to be accepted. Please read the Stock Ownership Guide and Stock Order Form Instructions as you complete this form.

	(1) Number of Shares	Subscription		(2) Total Payment Due	Minimum number of shares: 25 shares ($250.)
		Price	$		Maximum number of shares: 25,000 shares ($250,000)
		X 10.00 =			Maximum number of shares for associates or group: 35,000 shares ($350,000)
					See Instructions.
(3) Employee/Officer/Director Information ¨ Check here if you are an employee, officer or director of Peoples Federal Savings Bank or member of such person’s immediate family living in the same household.

(4) Method of Payment by Check Enclosed is a check, bank draft or money order payable to Peoples Federal Bancshares, Inc. in the amount indicated in this box.	Total Check Amount	$		.
(5) Method of Payment by Withdrawal - The undersigned authorizes withdrawal from the following account(s) at Peoples Federal Savings Bank. There is no early withdrawal penalty for this form of payment. Individual Retirement Accounts maintained at Peoples Federal Savings Bank cannot be used unless special transfer arrangements are made.
Bank Use	Account Number(s) To Withdraw		$ Withdrawal Amount
		$		.
		$		.

(6) Purchaser Information

Subscription Offering - Check here and list account(s) below if you are:

¨  a. An Eligible Account Holder with a deposit account(s) totaling $50.00 or more on December 31, 2008.

¨  b. A Supplemental Eligible Account Holder with a deposit account(s) totaling $50.00 or more on March 31, 2010 but are not

          an Eligible Account Holder.

¨  c. An Other Member with a deposit account(s) on             , 2010 or a borrower with a loan outstanding as of January 19,

          1983 that continued to be outstanding as of             , 2010 but are not an Eligible Account Holder or Supplemental Eligible

          Account Holder.

Community Offering - Check here if you are:

¨  d. A community member (Indicate county of residence in #9 below).

PLEASE NOTE: FAILURE TO LIST ALL YOUR ACCOUNTS MAY RESULT IN THE LOSS OF PART OR ALL OF YOUR SUBSCRIPTION RIGHTS. SEE REVERSE SIDE FOR ADDITIONAL SPACE.

    Bank Use     Account Number(s) Account Title (Name(s) on Account)

(7) Form of Stock Ownership & SS# or Tax ID#:
¨ Individual	¨ Joint Tenants	¨ Tenants in Common	¨ Fiduciary (i.e., trust, estate)	SS#/Tax ID#	è
¨ Uniform Transfers to Minors Act		¨ Company/Corporation/	¨ IRA or other qualified plan
(Indicate SS# of Minor only)		Partnership	(Both Tax ID# & SS# for IRAs)	SS#/Tax ID#	è

(8) Stock Registration & Address:

Name and address to appear on stock certificate. Shares must be registered as reflected on your qualifying account. Adding or deleting a name or otherwise altering the form of beneficial ownership of a qualifying account will result in a loss of your subscription rights (with certain exceptions for IRA and Keogh purchases).

Name:
Name Continued:
Mail to- Street:
City:			State:	Zip Code:
(9) Telephone Daytime/Evening	(                )                    --	(                )                    --			County of Residence

(10) Associates/Acting in Concert

¨ Check here and complete the reverse side of this form if you or any associates or persons acting in concert with you have submitted other orders for shares.

(11) Acknowledgement

To be effective, this stock order form must be properly completed and physically received (not postmarked) by Peoples Federal Bancshares, Inc. no later than 3:00 p.m., Eastern time, on             , 2010, unless extended; otherwise this stock order form and all subscription rights will be void. The undersigned agrees that after receipt by Peoples Federal Bancshares, Inc., this stock order form may not be modified, withdrawn or canceled without Peoples Federal Bancshares, Inc.’s consent and if authorization to withdraw from deposit accounts at Peoples Federal Savings Bank has been given as payment for shares, the amount authorized for withdrawal shall not otherwise be available for withdrawal by the undersigned. Under penalty of perjury, I hereby certify that the Social Security or Tax ID Number and the information provided on this stock order form are true, correct and complete and that I am not subject to back-up tax withholding. It is understood that this stock order form will be accepted in accordance with, and subject to, the terms and conditions of the plan of conversion and reorganization of Peoples Federal Savings Bank described in the accompanying prospectus.

Federal regulations prohibit any person from transferring, or entering into any agreement, directly or indirectly, to transfer the legal or beneficial ownership of subscription rights or the underlying securities to the account of another. Peoples Federal Savings Bank and Peoples Federal Bancshares, Inc. will pursue any and all legal and equitable remedies in the event they become aware of the transfer of subscription rights and will not honor orders known by them to involve such transfer. Under penalty of perjury, I certify that I am purchasing shares solely for my account and that there is no agreement or understanding regarding the sale or transfer of such shares, or my right to subscribe for shares. By signing below, I also acknowledge that I have read the Certification Form on the reverse side of this form. Bank Use

Signature                                                               Date     è Signature                                                                          Date     è

Item (6) Purchaser Account Information continued:
Bank Use	Account Number(s)	Account Title (Name(s) on Account)

Item (10) Associates/Acting In Concert continued: If you checked the box in item #10 on the reverse side of this form, list below all other orders submitted by you or associates (as defined below) or by persons acting in concert with you (also defined below).
Name(s) listed on other stock order forms	Number of shares ordered
Associate - The term “associate” of a particular person means: (1) a corporation or organization, other than Peoples Federal Savings Bank, Peoples Federal Bancshares, Inc. or a majority-owned subsidiary of Peoples Federal Savings Bank or Peoples Federal Bancshares, Inc., of which a person is a director, officer or partner, or beneficially owns, directly or indirectly, 10% or more of any class of equity securities of such corporation or organization; (2) a trust or other estate in which a person has a substantial beneficial interest or as to which a person serves as trustee or in a similar fiduciary capacity; provided, however, that such term shall not include any tax-qualified employee stock benefit plan of Peoples Federal Savings Bank or Peoples Federal Bancshares, Inc. in which such person has a substantial interest or may serve as trustee or in a similar fiduciary capacity; and (3) any person who is related by blood or marriage and who either has the same home as a person or who is a director or officer of Peoples Federal Savings Bank or Peoples Federal Bancshares, Inc. or any of their subsidiaries. Acting in concert - The term “acting in concert” means: (1) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement; or (2) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. In general, a person who acts in concert with another party will also be deemed to be acting in concert with any person who is also acting in concert with that other party. We may presume that certain persons are acting in concert based upon various facts, among other things, joint account relationships, common addresses on our records and the fact that such persons may have filed joint Schedules 13D or 13G with the Securities and Exchange Commission with respect to other companies.
CERTIFICATION FORM I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, AND IS NOT INSURED OR GUARANTEED BY PEOPLES FEDERAL SAVINGS BANK, PEOPLES FEDERAL BANCSHARES, INC., THE FEDERAL GOVERNMENT OR BY ANY GOVERNMENT AGENCY. THE ENTIRE AMOUNT OF AN INVESTOR’S PRINCIPAL IS SUBJECT TO LOSS. If anyone asserts that this security is federally insured or guaranteed, or is as safe as an insured deposit, I should call Michael Finn, the Regional Director of the Northeast Regional Office of the Office of Thrift Supervision at (201) 413-1000. I further certify that, before purchasing the common stock, par value $0.01 per share, of Peoples Federal Bancshares, Inc. (the “Company”), the holding company for Peoples Federal Savings Bank, I received a prospectus of the Company dated             , 2010 relating to such offer of common stock. The prospectus that I received contains disclosure concerning the nature of the common stock being offered by the Company and describes in the “Risk Factors” section beginning on page xx, the risks involved in the investment in this common stock, including but not limited to the following: Risks Related to Our Business (By Signing the Front of this Form the Investor is Not Waiving Any Rights Under the Federal Securities Laws, Including the Securities Act of 1933 and the Securities Exchange Act of 1934)

Peoples Federal Bancshares, Inc.
Stock Ownership Guide
Individual Include the first name, middle initial and last name of the shareholder. Avoid the use of two initials. Please omit words that do not affect ownership rights, such as “Mrs.”, “Mr.”, “Dr.”, “special account”, “single person”, etc.
Joint Tenants Joint tenants with right of survivorship may be specified to identify two or more owners. When stock is held by joint tenants with right of survivorship, ownership is intended to pass automatically to the surviving joint tenant(s) upon the death of any joint tenant. All parties must agree to the transfer or sale of shares held by joint tenants.
Tenants in Common Tenants in common may also be specified to identify two or more owners. When stock is held by tenants in common, upon the death of one co-tenant, ownership of the stock will be held by the surviving co-tenant(s) and by the heirs of the deceased co-tenant. All parties must agree to the transfer or sale of shares held by tenants in common.
Uniform Transfers to Minors Act (“UTMA”) Stock may be held in the name of a custodian for a minor under the Uniform Transfers to Minors Act of each state. There may be only one custodian and one minor designated on a stock certificate. The standard abbreviation for Custodian is “CUST”, while the Uniform Transfers to Minors Act is “UTMA”. Standard U.S. Postal Service state abbreviations should be used to describe the appropriate state. For example, stock held by John Doe as custodian for Susan Doe under the Massachusetts Uniform Transfers to Minors Act will be abbreviated John Doe, CUST Susan Doe UTMA MA (use minor’s social security number).
Fiduciaries Information provided with respect to stock to be held in a fiduciary capacity must contain the following:
	•	The name(s) of the fiduciary. If an individual, list the first name, middle initial and last name. If a corporation, list the full corporate title (name). If an individual and a corporation, list the corporation’s title before the individual.
	•	The fiduciary capacity, such as administrator, executor, personal representative, conservator, trustee, committee, etc.
	•	A description of the document governing the fiduciary relationship, such as a trust agreement or court order. Documentation establishing a fiduciary relationship may be required to register your stock in a fiduciary capacity.
	•	The date of the document governing the relationship, except that the date of a trust created by a will need not be included in the description.
	•	The name of the maker, donor or testator and the name of the beneficiary.
An example of fiduciary ownership of stock in the case of a trust is: John Doe, Trustee Under Agreement Dated 10-1-93 for Susan Doe.
Stock Order Form Instructions
Items 1 and 2 - Number of Shares and Total Payment Due Fill in the number of shares that you wish to purchase and the total payment due. The amount due is determined by multiplying the number of shares by the subscription price of $10.00 per share. The minimum purchase in the subscription offering is $250 (25 shares) of common stock. As more fully described in the plan of conversion and reorganization outlined in the prospectus, the maximum purchase in any category of the subscription offering is $250,000 (25,000 shares) of common stock, and the maximum purchase in the community offering (if held) by any person, is $250,000 (25,000 shares) of common stock. No person, together with associates and persons acting in concert with such person, may purchase in the aggregate more than $350,000 (35,000 shares) of common stock.
Item 3 - Employee / Officer / Director Information Check this box to indicate whether you are an employee, officer or director of Peoples Federal Savings Bank or a member of such person’s immediate family living in the same household.
Item 4 - Method of Payment by Check If you pay for your stock by check, bank draft or money order, indicate the total amount in this box. Payment for shares may be made by check, bank draft or money order payable to Peoples Federal Bancshares, Inc. Cash must be converted to a bank check or money order. Your funds will earn interest at Peoples Federal Savings Bank’s statement savings rate of interest until the stock offering is completed.
Item 5 - Method of Payment by Withdrawal If you pay for your stock by a withdrawal from a deposit account at Peoples Federal Savings Bank, indicate the account number(s) and the amount of your withdrawal authorization for each account. The total amount withdrawn should equal the amount of your stock purchase. There will be no penalty assessed for early withdrawals from certificate accounts used for stock purchases. This form of payment may not be used if your account is an Individual Retirement Account.
Item 6 - Purchaser Information
Subscription Offering
	a.	Check this box if you had a deposit account(s) totaling $50.00 or more on December 31, 2008 (“Eligible Account Holder”).
	b.	Check this box if you had a deposit account(s) totaling $50.00 or more on March 31, 2010 but are not an Eligible Account Holder (“Supplemental Eligible Account Holder”).
	c.	Check this box if you had a deposit account(s) on             , 2010 or a loan outstanding as of January 19, 1983 that continued to be outstanding as of             , 2010 but are not an Eligible
	Account Holder or Supplemental Account Holder (“Other Member”).
Please list all account numbers and all names on accounts you had on these dates in order to insure proper identification of your purchase rights. Note: Failure to list all your accounts may result in the loss of part or all of your subscription rights. Community Offering
	d.	Check this box if you are a community member (Indicate county of residence in item 9).
Items 7 and 8 - Form of Stock Ownership, SS# or Tax ID#, Stock Registration and Mailing Address Check the box that applies to your requested form of stock ownership and indicate your social security or tax ID number(s) in item 7. Complete the requested stock certificate registration, mailing address in item 8. The stock transfer industry has developed a uniform system of shareholder registrations that will be used in the issuance of your common stock. If you have any questions regarding the registration of your stock, please consult your legal advisor. Stock ownership must be registered in one of the ways described above under “Stock Ownership Guide.” Shares must be registered as reflected on your qualifying account. Adding or deleting a name or otherwise altering the form of beneficial ownership of a qualifying account will result in a loss of your subscription rights. (With certain exceptions for IRA and Keogh purchases).
Item 9 - Telephone Number(s) and County Indicate your daytime and evening telephone number(s) and county. We may need to call you if we have any questions regarding your order or we cannot execute your order as given.
Item 10 - Associates/Acting in Concert Check this box if you or any associate or person acting in concert with you (as defined on the reverse side of the stock order form) has submitted another order for shares and complete the reverse side of the stock form.
Item 11 - Acknowledgement Please review the prospectus carefully before making an investment decision. Sign and date the stock order form where indicated. Before you sign, review the stock order form, including the acknowledgement and certification. Normally, one signature is required. An additional signature is required only when payment is to be made by withdrawal from a deposit account that requires multiple signatures to withdraw funds.
Your properly completed signed stock order form and payment in full (or withdrawal authorization) at the subscription price must be physically received (not postmarked) by Peoples Federal Bancshares, Inc. no later than 3:00 p.m., Eastern time, on                  , 2010 or it will become void. Delivery Instructions: You may deliver your stock order form by mail using the enclosed stock order return envelope, by hand delivery to the Peoples Federal Savings Bank main office, or by overnight courier to the conversion center address indicated on the front of the stock order form. Stock order forms will not be accepted at any of our offices other than the main office. If you have any remaining questions, or if you would like assistance in completing your stock order form, you may call our conversion center at (            )             -            , Monday through Friday, between the hours of 10:00 a.m. and 4:00 p.m., Eastern time. Please note that the conversion center will be closed from 12:00 noon Friday, May 28 through 12:00 noon Tuesday, June 1, in observance of the Memorial Day Holiday. Peoples Federal Savings Bank Conversion Center 435 Market St., Brighton, MA 02135

EX-99.6

Exhibit 99.6

October 12, 2009

Thomas J. Leetch Jr.

Chief Executive Officer

Peoples Federal Savings Bank

435 Market Street

Brighton, MA 02135-2715

Dear Mr. Leetch:

Based upon our recent discussions, FinPro, Inc. (“FinPro”) is pleased to submit this proposal to assist Peoples Federal Saving Bank, (“the Bank”) and Peoples Federal MHC (“the Company”) in compiling a Strategic Business Plan, which will specifically address the deployment of capital raised in the stock offering.

1. Scope of Project

The Study will be specifically designed to build and measure value for a five-year time horizon. As part of the Study compilation, the following major tasks will be included:

• assess the regulatory, social, political and economic environment;

• analyze the existing Bank markets from a:

• demographic standpoint;

• customer segment standpoint;

• product propensity standpoint;

• business standpoint;

• competitive standpoint;

• conduct branch market tour and identify competitive positioning;

• document the internal situation assessment;

• analyze the current ALM position;

• analyze the CRA position;

• compile a historical trend analysis;

• perform detailed peer performance and comparable analysis;

• assess the Bank from a capital markets perspective including comparison to national, regional, and similar size organizations;

• identify and document strengths and weaknesses;

• document the objectives and goals;

• document strategies;

• map the Bank’s general ledger to FinPro’s planning model;

• compile five year projections of performance; and

• prepare assessment of strategic alternatives to enhance value.

20 Church Street — P.O. Box 323 — Liberty Corner, NJ 07938-0323 — Tel: 908.604.9336 — Fax: 908.604.5951

finpro@finpronj.com — www.finpronj.com

As part of this process, FinPro will conduct two planning sessions with the Bank and its Board. The first session will be a situation assessment and the second will be a presentation and detailed discussion of the recommended plan scenario and its alternatives.

2. Requirements of The Bank

To accomplish the tasks set forth in this proposal, the following information and work effort is requested of the Bank:

• provide FinPro with all financial and other information, whether or not publicly available, necessary to familiarize FinPro with the business and operations of the Bank.

• allow FinPro the opportunity, from time to time, to discuss the operation of the Bank business with bank personnel.

• promptly advise FinPro of any material or contemplated material transactions which may have an effect on the day-to-day operations of the Bank.

• have system download capability.

• promptly review all work products of FinPro and provide necessary sign-offs on each work product so that FinPro can move on to the next phase.

• provide FinPro with office space, when FinPro is on-site, to perform its daily tasks. The office space requirements consists of a table with at least two chairs along with access to electrical outlets for FinPro’s computers and a high speed internet connection.

3. Term of the Agreement and Staffing

It is anticipated that it will take approximately six to eight weeks of elapsed time to complete the tasks outlined in this proposal. During this time, FinPro will be on-site at the Bank’s facilities on a regular basis, during normal business hours. Any future work that would require extra expense to the Bank will be proposed on separately from this engagement prior to any work being performed.

2

4. Fees and Expenses

Fees:

FinPro fees to complete the tasks outlined in this proposal will be as follows:

Strategic Business Plan $ 36,000

FinPro’s fee for this engagement is $36,000 plus all out-of-pocket and pass-through expenses as outlined below. This fee shall be payable as follows:

• $10,000 retainer payable at signing of this agreement;

• $15,000 payable at the end of the first board meeting;

• Remainder of the strategic business plan and expenses payable upon final business plan delivery;

Expenses:

In addition to any fees that may be payable to FinPro hereunder, the Bank hereby agrees to reimburse FinPro for the following:

1. Out-of-Pocket - all of FinPro’s reasonable travel and other out-of-pocket expenses incurred in connection with FinPro’s engagement. It is FinPro policy to itemize expenses for each project so that the client can review, by line item, each expense.

2. Data Cost - pass through cost for market data which is equal to $500 per market. A market is defined as each branch market or zip code for which specific market data is provided. In this case FinPro expects to have a data passthrough cost for 6 markets, or $3,000. There is also a pass through cost for competitor financial/regulatory data which is equal to $1,000.

FinPro agrees to execute a suitable confidentiality agreement with the Bank. The Bank acknowledges that all opinions, valuations and advice (written or oral) given by FinPro to the Bank in connection with FinPro’s engagement are intended solely for the benefit and use of the Bank (and its directors, management, and attorneys) in connection with the matters contemplated hereby and the Bank agrees that no such opinion, valuation, or advice shall be used for any other purpose, except with respect to the opinion and valuation which may be used for the proper corporate purposes of the client, or reproduced, or disseminated, quoted or referred to at any time, in any manner or for any purpose, nor shall any public references to FinPro be made by the Bank (or such persons), without the prior written consent of FinPro, which consent shall not be unreasonably withheld.

3

This proposal will expire 30 days from this date unless accepted by you in accordance with the terms below. Any changes to this proposal will require FinPro, Inc. approval.

Please sign and return one of the original copies of this agreement along with the retainer to indicate acceptance of the agreement. We hope that we might be selected to work with the Bank on this endeavor and are excited about building a relationship with the Bank.

By,

/s/ Scott Martorana	/s/ Thomas J. Leetch Jr.
Scott Martorana	Thomas J. Leetch Jr.
Managing Director	Chief Executive Officer
FinPro, Inc.	Peoples Federal Savings Bank
10/12/09	10/22/09
Date	Date

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EX-99.7

Exhibit 99.7

January 22, 2010

Mr. Maurice H. Sullivan, Jr.

Chairman and Chief Executive Officer

Peoples Federal MHC

Peoples Federal Bancorp Inc.

Mr. Thomas J. Leetch

President and Chief Executive Officer

Peoples Federal Savings Bank

435 Market Street

Brighton, Massachusetts 02135

Gentlemen:

Sandler O’Neill & Partners, L.P. (“Sandler O’Neill”) is pleased to act as records management agent for Peoples Federal MHC (the “MHC”), Peoples Federal Bancorp Inc. (together with any successor stock holding company, the “Holding Company”) and Peoples Federal Savings Bank (the “Bank”) in connection with the offer and sale of certain shares of the common stock of the Holding Company to the Bank’s eligible account holders in a Subscription Offering and to members of the Bank’s community in a Direct Community Offering (collectively, the “Offerings”) pursuant to the terms of a Plan of Conversion to be adopted by the Boards of Directors of the MHC, the Holding Company and the Bank (the “Plan”). The MHC, the Holding Company and the Bank are sometimes collectively referred to herein as the “Company.” This letter is to confirm the terms and conditions of our engagement.

SERVICES AND FEES

In our role as Records Management Agent, we anticipate that our services will include the services outlined below, each as may be necessary and as the Company may reasonably request:

I. Consolidation of Accounts and Vote Calculation

II. Design and Preparation of Proxy and Stock Order Forms

III. Organization and Supervision of the Conversion Center

IV. Proxy Solicitation and Special Meeting Services

Mr. Maurice H. Sullivan, Jr.

Mr. Thomas J. Leetch

January 22, 2010

Page 2

V. Subscription Services

Each of these services is further described in Appendix A to this agreement.

For its services hereunder, the Company agrees to pay Sandler O’Neill a fee of $15,000. This fee is based upon the requirements of current regulations and the Plan as currently contemplated. Any unusual or additional items or duplication of service required as a result of a material change in the regulations or the Plan or a material delay or other similar events may result in extra charges that will be covered in a separate agreement if and when they occur. All fees under this agreement shall be payable in cash, as follows: (a) $5,000 payable upon execution of this agreement, which shall be non-refundable; and (b) the balance upon the completion of the Offerings.

COSTS AND EXPENSES

In addition to any fees that may be payable to Sandler O’Neill hereunder, the Company agrees to reimburse Sandler O’Neill, upon request made from time to time, for its reasonable out-of-pocket expenses incurred in connection with its engagement hereunder, regardless of whether the Offerings are consummated, including, without limitation, travel, lodging, food, telephone, postage, listings, forms and other similar expenses; provided, however, that Sandler O’Neill shall document such expenses to the reasonable satisfaction of the Company. It is understood that all expenses associated with the operation of the Conversion Center will be borne by the Company.

RELIANCE ON INFORMATION PROVIDED

The Company will provide Sandler O’Neill with such information as Sandler O’Neill may reasonably require to carry out its duties. The Company recognizes and confirms that Sandler O’Neill (a) will use and rely on such information in performing the services contemplated by this agreement without having independently verified the same, and (b) does not assume responsibility for the accuracy or completeness of the information. The Company will also inform Sandler O’Neill within a reasonable period of time of any changes in the Plan that require changes in Sandler O’Neill’s services. If a substantial expense results from any such change, the parties shall negotiate an equitable adjustment in the fee.

LIMITATIONS

Sandler O’Neill, as Records Management Agent hereunder, (a) shall have no duties or obligations other than those specifically set forth herein; (b) will be regarded as making no

Mr. Maurice H. Sullivan, Jr.

Mr. Thomas J. Leetch

January 22, 2010

Page 3

representations and having no responsibilities as to the validity, sufficiency, value or genuineness of any order form or any stock certificates or the shares represented thereby, and will not be required to and will make no representations as to the validity, value or genuineness of the offer; (c) shall not be liable to any person or entity, including the Company, by reason of any error of judgment or for any act done by it in good faith, or for any mistake of law or fact in connection with this agreement and the performance hereof unless caused by or arising out of its own willful misconduct, bad faith or gross negligence; (d) will not be obliged to take any legal action hereunder which might in its judgment involve any expense or liability, unless it shall have been furnished with reasonable indemnity satisfactory to it; and (e) may rely on and shall be protected in acting in reliance upon any certificate, instrument, opinion, notice, letter, telex, telegram, or other document or security delivered to it and in good faith believed by it to be genuine and to have been signed by the proper party or parties.

Anything in this agreement to the contrary notwithstanding, in no event shall Sandler O’Neill be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if Sandler O’Neill has been advised of the likelihood of such loss or damage and regardless of the form of action.

INDEMNIFICATION

The Company agrees to indemnify and hold Sandler O’Neill and its affiliates and their respective partners, directors, officers, employees, agents and controlling persons (Sandler O’Neill and each such person being an “Indemnified Party”) harmless from and against any and all losses, claims, damages and liabilities, joint or several, to which such Indemnified Party may become subject under applicable federal or state law, or otherwise, related to or arising out of the engagement of Sandler O’Neill pursuant to, and the performance by Sandler O’Neill of the services contemplated by, this letter, and will reimburse any Indemnified Party for all expenses (including reasonable counsel fees and expenses) as they are incurred, including expenses incurred in connection with the investigation of, preparation for or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party. The Company will not be liable under the foregoing indemnification provision to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court of competent jurisdiction to have resulted primarily from Sandler O’Neill’s willful misconduct, bad faith or gross negligence.

MISCELLANEOUS

The following addresses shall be sufficient for written notices to each other:

    If to you: Peoples Federal Savings Bank 345 Market Street Brighton, MA 0213 Attention: Mr. Thomas J. Leetch

Mr. Maurice H. Sullivan, Jr.

Mr. Thomas J. Leetch

January 22, 2010

Page 4

    If to us: Sandler O’Neill & Partners, L.P. 919 Third Avenue New York, New York 10022 Attention: General Counsel

The Agreement and appendix hereto constitute the entire Agreement between the parties with respect to the subject matter hereof and can be altered only by written consent signed by the parties. This Agreement is governed by the laws of the State of New York.

Please confirm that the foregoing correctly sets forth our agreement by signing and returning to Sandler O’Neill the duplicate copy of this letter enclosed herewith.

		Very truly yours,
		Sandler O’Neill & Partners, L.P.
		By:	Sandler O’Neill & Partners Corp.,
			the sole general partner
		By:	/s/ Catherine A. Lawton
			Catherine A. Lawton
			An Officer of the Corporation
	Accepted and agreed to as of the date first above written:
	Peoples Federal MHC
	Peoples Federal Bancorp Inc.	Peoples Federal Savings Bank
By:	/s/ Maurice H. Sullivan, Jr.	By:	/s/ Thomas J. Leetch
	Maurice H. Sullivan, Jr.		Thomas J. Leetch
	Chairman and Chief Executive Officer		President and Chief Executive Officer

APPENDIX A

OUTLINE OF RECORDS MANAGEMENT AGENT SERVICES

I.	Consolidationof Accounts/Vote Calculation
	1	Consolidate files in accordance with regulatory guidelines and create central file.
	2.	Our EDP format will be provided to your data processing department.
	3.	Vote calculation.
II.	Designand Preparation of Proxy and Stock Order Forms
	1.	Assist in designing proxy forms and stock order forms for voting and ordering stock.
	2.	Prepare proxy and stock order forms with account holder data.
	3.	Target group identification for proxy solicitation.
III.	Organizationand Supervision of Conversion Center
	1.	Advising on physical organization of the Conversion Center, including materials requirements.
	2.	Assist in training of all Bank and temporary personnel who will be staffing the Conversion Center.
	3.	Establish reporting procedures.
	4.	On-site supervision of the Conversion Center during the solicitation/offering period.
IV.	Special Meeting Services
	1.	Proxy and ballot tabulation.
	2.	Act as or support inspector of election, it being understood that Sandler O’Neill will not act as inspector of election in the case of a contested election.
	3.	If required, delete voting record date accounts closed prior to special meeting.
	4.	Produce final report of vote.
V.	SubscriptionServices
	1.	Produce list of depositors by state (Blue Sky report).
	2.	Production of subscription rights and research books.
	3.	Stock order form processing.
	4.	Acknowledgment letter to confirm receipt of stock order.
	5.	Daily reports and analysis.
	6.	Proration calculation and share allocation in the event of an oversubscription.
	7.	Produce charter shareholder list.
	8.	Interface with transfer agent for stock certificate issuance.
	9.	Refund and interest calculations.
	10.	Confirmation letter to confirm purchase of stock.
	11.	Notification of full/partial rejection of orders.
	12.	Production of 1099/Debit tape.

A - 1

EX-99.8

Exhibit 99.8

RP^® FINANCIAL, LC.

Serving the Financial Services Industry Since 1988

March 15, 2010

Boards of Directors

Peoples Federal MHC

Peoples Federal Bancorp, Inc.

Peoples Federal Savings Bank

435 Market Street

Brighton, Massachusetts 02135

Re: Plan of Conversion and Reorganization

Peoples Federal MHC

Members of the Boards of Directors:

All capitalized terms not otherwise defined in this letter have the meanings given such terms in the Plan of Conversion and Reorganization (the “Plan”) adopted by the Board of Directors of Peoples Federal MHC (the “MHC”), which is based in Brighton, Massachusetts. The Plan provides for the conversion of the MHC into the stock form of organization. Pursuant to the Plan, the MHC will be merged into Peoples Federal Bancorp, Inc. (the “Mid-Tier”) and the Mid-Tier will merge with Peoples Federal Bancshares, Inc., a newly-formed Maryland corporation (the “Company”) with the Company as the resulting entity, and the MHC will no longer exist. As part of the Plan, the Company will sell shares of common stock in an offering that will represent the ownership interest in the Mid-Tier now owned by the MHC.

We understand that in accordance with the Plan, depositors will receive rights in a liquidation account maintained by the Company representing the amount of (i) the MHC’s ownership interest in the Mid-Tier’s total stockholders’ equity as of the date of the latest statement of financial condition used in the prospectus plus (ii) the value of the net assets of the MHC as of the date of the latest statement of financial condition of the MHC prior to the consummation of the conversion (excluding its ownership of the Mid-Tier). The Company shall continue to hold the liquidation account for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders who continue to maintain deposits in Peoples Federal Savings Bank. We further understand that Peoples Federal Savings Bank will also establish a liquidation account in an amount equal to the Company’s liquidation account, pursuant to the Plan. The liquidation accounts are designed to provide payments to depositors of their liquidation interests in the event of liquidation of Peoples Federal Savings Bank (or the Company and Peoples Federal Savings Bank).

In the unlikely event that either Peoples Federal Savings Bank (or the Company and Peoples Federal Savings Bank) were to liquidate after the conversion, all claims of creditors, including those of depositors, would be paid first, followed by distribution to depositors as of December 31, 2008 and March 31, 2010 of the liquidation account maintained by the Company. Also, in a complete liquidation of both entities, or of Peoples Federal Savings Bank, when the Company has insufficient assets (other than the stock of Peoples Federal Savings Bank), to fund the liquidation account distribution due to Eligible Account Holders and Supplemental Eligible Account Holders and Peoples Federal Savings Bank has positive net worth, Peoples Federal Savings Bank shall immediately make a distribution to fund the Company’s remaining obligations under the liquidation account. The Plan further provides that if the Company is completely liquidated or sold apart from a sale or liquidation of Peoples Federal Savings Bank, then the rights of Eligible Account Holders and Supplemental Eligible Account Holders in the liquidation account maintained by the Company shall be surrendered and treated as a liquidation account in Peoples Federal Savings Bank, the bank liquidation account and depositors shall have an equivalent interest in such bank liquidation account, subject to the same rights and terms as the liquidation account.

Washington Headquarters
Three Ballston Plaza	Telephone: (703) 528-1700
1100 North Glebe Road, Suite 1100	Fax No.: (703) 528-1788
Arlington, VA 22201	Toll-Free No.: (866) 723-0594
www.rpfinancial.com	E-Mail: mail@rpfinancial.com

RP Financial, LC.

Boards of Directors

March 15, 2010

Page 2

Based upon our review of the Plan and our observations that the liquidation rights become payable only upon the unlikely event of the liquidation of Peoples Federal Savings Bank (or the Company and Peoples Federal Savings Bank), that liquidation rights in the Company automatically transfer to Peoples Federal Savings Bank in the event the Company is completely liquidated or sold apart from a sale or liquidation of Peoples Federal Savings Bank, and that after two years from the date of conversion and upon written request of the OTS, the Company will transfer the liquidation account and depositors’ interest in such account to Peoples Federal Savings Bank and the liquidation account shall thereupon become the liquidation account of Peoples Federal Savings Bank no longer subject to the Company’s creditors, we are of the belief that: the benefit provided by the Peoples Federal Savings Bank liquidation account supporting the payment of the liquidation account in the event the Company lacks sufficient net assets does not have any economic value at the time of the transactions contemplated in the first and second paragraphs above. We note that we have not undertaken any independent investigation of state or federal law or the position of the Internal Revenue Service with respect to this issue.

Sincerely,

RP Financial, LC.