As filed with the Securities and Exchange Commission on November 3, 2014.

Registration No. 333-199014

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 2

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Radius Bancorp Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

6035

27-1311446

(State or Other Jurisdiction of

Incorporation or Organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)

One Harbor Street, Suite 201

Boston, Massachusetts 02210

(617) 482-4000

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Michael A. Butler

President and Chief Executive Officer

One Harbor Street, Suite 201

Boston, Massachusetts 02210

(617) 482-4000

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Richard A. Schaberg

Gregory F. Parisi

Hogan Lovells US LLP

555 Thirteenth Street, N.W.

Washington, D.C. 20004

(202) 637-5600

Aaron M. Kaslow

Joseph J. Bradley

Kilpatrick Townsend & Stockton LLP

607 14^th Street NW

Washington, DC 20005

(202) 508-5800

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: ¨

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	¨ (Do not check if a smaller reporting company)	Smaller reporting company	x

CALCULATION OF REGISTRATION FEE

(1)	Reflects the maximum number of shares that may be issued by the registrant or sold by the selling stockholders in connection with the offering. Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)	This amount represents the proposed maximum aggregate offering price of the securities registered hereunder to be sold by the registrant and the selling stockholders.

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 statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, 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.

The information in this preliminary prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

PRELIMINARY—SUBJECT TO COMPLETION—DATED NOVEMBER 3, 2014

Prospectus

5,000,000 Shares

LOGO

This is an initial public offering of common stock of Radius Bancorp Inc. We expect the initial public offering price to be between $11.75 and $13.75 per share. We are offering 1,330,551 shares of our common stock. The selling stockholders identified in this prospectus are selling an additional 3,669,449 shares of common stock. We will not receive any proceeds from the sale of the shares by the selling stockholders.

Prior to this offering, there has been no public market for our common stock. We applied to list our common stock on the NASDAQ Global Market under the symbol “RADB.”

We are an “emerging growth company” as defined by the Jumpstart Our Business Startups Act of 2012 and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 12 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission 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.

Shares of our common stock are not savings accounts, deposits or other obligations of any of our bank or non-bank subsidiaries and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.


	PER SHARE	TOTAL
Initial Public Offering Price	$	$
Underwriting Discounts and Commissions⁽¹⁾	$	$
Proceeds, before expenses, to us	$	$
Proceeds, before expenses, to selling stockholders	$	$

⁽¹⁾	See “Underwriting” for a description of the compensation payable to the underwriters.

The underwriters expect to deliver the shares of common stock to purchasers on or about , 2014. We have granted the underwriters an option for a period of 30 days to purchase up to 750,000 additional shares of common stock solely to cover over-allotments, if any.

Joint Book-Running Managers:


Baird		Sandler O’Neill + Partners, L.P.

Co-Managers:


Janney Montgomery Scott		Wunderlich Securities

The date of this prospectus is , 2014.

LOGO

TABLE OF CONTENTS


	Page

Summary		1

The Offering		10

Risk Factors		12

Special Note Regarding Forward-Looking Statements		25

Selected Historical Consolidated Financial Data		27

Use of Proceeds		30

Dividend Policy		31

Capitalization		32

Dilution		34

Business		36

Management’s Discussion and Analysis of Financial Condition and Results of Operations		49

Management		76

Executive and Director Compensation		86

Certain Relationships And Related Party Transactions		98

Principal and Selling Stockholders		99

Supervision and Regulation		102

Material U.S. Federal Income Tax Consequences to Non-U.S. Holders		113

Description of Capital Stock		116

Shares Eligible for Future Sale		120

Underwriting		122

Legal Matters		126

Experts		126

Where You Can Find Additional Information		126

Index to Consolidated Financial Statements of Radius Bancorp Inc.		F-i

About this Prospectus

You should rely only on the information contained in this prospectus and any free writing prospectus prepared by or on behalf of us or to which we have referred you. We, the selling stockholders and the underwriters have not authorized anyone to provide you with information that is different. We and the selling stockholders are offering to sell shares of our common stock, and seeking offers to buy shares of our common stock, only in jurisdictions where offers and sales are permitted. The information in this prospectus is complete and accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock.

No action is being taken in any jurisdiction outside the United States to permit a public offering of our securities or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about, and to observe, any restrictions as to this offering and the distribution of this prospectus applicable to those jurisdictions.

Industry And Market Data

This prospectus includes industry and market data that we obtained from periodic industry publications, third-party studies and surveys, filings of public companies in our industry and internal company surveys. These sources include government and industry sources. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable. Although we believe the industry and market data to be reliable as of the date of this prospectus, this information could prove to be inaccurate. Industry and market data could be wrong because of the method by which sources obtained their data and because information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. In addition, we do not know all of the assumptions regarding general economic conditions or growth that were used in preparing the forecasts from the sources relied upon or cited herein.

Summary

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. Before you decide to invest in our common stock, you should read this entire prospectus carefully, including our financial statements and the related notes thereto and the matters discussed in the “Risk Factors” section.

Overview

We are the holding company for First Trade Union Bank, or the Bank, which is headquartered in Boston, Massachusetts. We provide financial products and services on a regional and nationwide basis, including through our website, www.ftub.com, and mobile banking and payment applications. We engage in commercial and consumer banking but our business is different from most community banks because:

•

Our retail banking growth strategy is based on providing financial products and services through virtual banking solutions, including online and mobile banking, to meet emerging consumer banking demands, rather than on traditional branches. Our virtual banking solutions allow us to develop consumer client relationships nationwide without the need for physical branch locations and include a paperless account opening process, unlimited ATM rebates, overdraft protection and transaction-oriented mobile banking applications, or apps, for smartphones and tablets.

•

We use affinity-based strategic marketing partnerships to pursue large numbers of deposit relationships utilizing sophisticated marketing analytics in combination with our virtual banking solutions.

•

We attract deposits from and offer related treasury management services to pension fund, union, municipal and not-for-profit entities. Our sophisticated treasury management services, coupled with the deep knowledge and capabilities we have developed through our historical provision of such services, position us to continue to penetrate these markets to access high quality, low cost deposit funding.

•

Our diverse base of loan clients, which includes traditional community bank clients, such as commercial and commercial real estate borrowers, is enhanced by our commitment to specialty financing areas, including SBA lending, lending to high net worth individuals for the purchase of luxury yachts, and other types of lending.

•

Our virtual banking strategy will allow us to achieve increased economies of scale as we grow our business.

We believe that there are significant opportunities for asset and deposit growth through further penetration of our current target markets. We further believe that we can grow our retail deposit franchise through our virtual banking solutions without investment in a traditional branch network.

We are currently owned by New England Carpenters’ Pension Fund and New England Carpenters’ Guaranteed Annuity Fund, together, the New England Carpenters’ Combined Funds, which formed the Bank in 1987, and the Empire State Carpenters’ Pension Fund, which acquired its initial interest in 2006. This offering will provide the capital necessary to support our growth strategy and will allow the New England Carpenters’ Combined Funds and the Empire State Carpenters’ Pension Fund (collectively, the Funds) to reduce their ownership levels below 5.0% so that they will no longer be deemed to be savings and loan holding companies. As savings and loan holding companies, the Funds are required to serve as a source of financial strength for the Bank and are each considered to be a “banking entity” for purposes of section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, also referred to as the Volcker Rule, which prohibits banking entities from engaging in the types of investments that are commonly made by pension funds. Given their status as pension funds, the Funds do not want to remain subject to these limitations. In anticipation of this offering, we have taken, or will take, a number of actions in respect to our operations and structure, including:

•

Undertaking a name change and rebranding in order to better communicate our value proposition and market strategy;

•

Transition to a board of directors comprised of independent members, other than the Chief Executive Officer, a majority of whom will join the board upon the completion of this offering;

•

Converting our New Hyde Park, New York retail branch into a non-deposit gathering business center in alignment with our virtual banking strategy;

•

Execution of deposit retention agreements with each of the Funds, which together (with their related parties) control $159.7 million, or 26.8%, of our deposits as of June 30, 2014, pursuant to which the Funds have agreed to maintain certain deposit relationships with the Bank for a period of no less than three years following the completion of this offering; and

•

Termination of the collective bargaining agreement with Commercial Workers International Union covering sixteen of our employees.

As of June 30, 2014, on a consolidated basis, we had total assets of $702.8 million, total loans and loans held for sale of $566.5 million, total deposits of $596.9 million and stockholders’ equity of $56.3 million. In recent years we have focused on transitioning towards becoming a high performing bank, improving the quality of our loan portfolio and executing our growth strategy while emphasizing enterprise-wide risk management. Our ratio of nonperforming assets to total assets was 1.25% as of June 30, 2014, as compared to 1.92% at December 31, 2011. Additionally, over the same period, total loans and loans held for sale have increased by $177.4 million, or 45.6%, and deposits have increased $123.8 million, or 26.2%. Net income increased $1.1 million, or 131%, to $2.0 million for the year ended December 31, 2013 from $869 thousand for the year ended December 31, 2011.

Our Business Strategy

Our business strategy is to combine traditional community banking activities, such as commercial and consumer banking, with a commitment to specialty financing, treasury management services, and customer acquisition without a traditional branch network.

The primary components of our business strategy are to:

•

Offer a comprehensive virtual banking product suite that allows us to capitalize on growing and evolving demand for online and mobile banking solutions and payment apps;

•

Develop affinity-based strategic marketing partnerships that enable us to market at a relatively low cost directly to partner organizations’ members;

•

Expand the scope of our treasury management services and deposit gathering further into largely underserved pension fund, union, municipal and not-for-profit entities, which represents a significant growth opportunity;

•

Engage in traditional commercial and consumer banking, supplemented by specialty financing in areas that include SBA, yacht lending to high net worth individuals, and other types of lending;

•

Leverage our current infrastructure and technology to grow, achieve economies of scale and deliver higher levels of profitability; and

•

Maintain disciplined risk management, resulting in consistently above-average asset quality.

Our Business Lines

We provide financial products and services to a client base that is comprised of traditional clients, including commercial, middle market and small businesses; specialty financing clients; union, pension fund, municipalities and not-for-profit clients; and consumers. We offer lending and deposit products, services and solutions that are designed to meet our clients’ banking needs while maintaining a disciplined approach to risk management and our focus on generating attractive risk-adjusted returns. Our diversified lending and funding strategy is not dependent upon a traditional bank branch network and positions us well to drive growth and profitability.

Lending

We lend to traditional community bank clients, with a focus on increasing our lending to various specialty clients as well. We believe that the markets for these specialty clients present substantial asset growth opportunities at attractive pricing and risk levels and that we are well positioned, given our experience with such clients, to further penetrate these markets. We are also prepared to pursue growth opportunities with other specialty clients as such opportunities arise.

•

Commercial and Industrial Lending. We provide financing to a number of traditional and specialty finance clients, including small and middle market businesses and SBA loan recipients. We have developed an experienced team that is capable of understanding and lending to these clients. We believe that we can be successful lending to these clients and generate asset growth and revenue opportunities by doing so, including by strategically selling, as we have in the past, SBA loans. At June 30, 2014, we had $68.9 million of commercial and industrial loans representing 12.2% of our loan portfolio, or an increase of 22.7% from December 31, 2013.

•

Commercial Real Estate, Multi-family and Construction Lending. We originate commercial real estate and multi-family loans to experienced investors with an established history of successful investment in a variety of property types including retail, commercial office buildings, multi-family properties, mixed-use properties and owner-occupied commercial real estate (including SBA 504 loans). While the cash flow from income-producing properties is the primary source of repayment in our commercial real estate and multi-family portfolio, a combination of equity invested in each property and generally a required personal guarantee from the investor provides strong secondary support. The majority of our commercial real estate and multi-family loans are made to borrowers and properties located in the greater Boston, Massachusetts market and other markets in the New England region with a smaller proportion of commercial real estate and multi-family loans in New York, predominantly in Suffolk and Nassau counties. At June 30, 2014, we had $174.6 million of commercial real estate and multi-family loans, representing 30.9% of our loan portfolio. Loans made for business purposes, including owner-occupied real estate loans, that are secured by commercial real estate comprised 28.9%, or $50.5 million, of the commercial real estate and multi-family portfolio at June 30, 2014.

Our construction loans are primarily for commercial projects and typically require the personal guarantee of the developer. Properties related to our construction loans are frequently pre-leased at a level that will generate sufficient cash flow to service the fully advanced construction loan on an amortizing basis upon the completion of construction. At June 30, 2014, we had $5.6 million of construction loans, currently all of which are secured by commercial projects located in Massachusetts or New York.

•

Yacht Lending. We have developed substantial expertise in yacht lending and provide financing to high net worth individuals for the purchase of personal luxury yachts generally ranging from $1 million to $5 million in value. We believe that lending within that target market is advantageous to us from a credit risk management perspective in that we predominantly lend to previous yacht owners. The average customer FICO score for borrowers in our yacht loan portfolio was 753 and loan-to-value was 65% as of June 30, 2014. We began making yacht loans in 2009 and we have not experienced any defaults in this portfolio. At June 30, 2014, we had $39.2 million of yacht loans, representing 7.0% of our loan portfolio.

•

Residential Mortgage Lending. We underwrite and purchase high quality, whole jumbo mortgage loans individually, servicing released, from banks and mortgage companies with which we have relationships in the greater Boston, Massachusetts market. While we are not in the business of originating residential mortgage loans, our strategy allows us to maintain a balanced loan portfolio and provides strong risk-adjusted returns without the cost and regulatory compliance concerns associated with the direct origination of these assets. Between December 2010 and December 2013, a period during which

commercial loan demand was weak and the secondary market for jumbo mortgage loans was favorable, we were active purchasers of jumbo mortgage loans in the greater Boston market. Through a combination of normal amortization and opportunistic sales, we expect that this portfolio will decrease over time as the market for commercial and specialty loans continues to improve. At June 30, 2014, we had $269.3 million of residential real estate loans and loans held for sale, representing 47.7% of our loan portfolio. We outsource the servicing of our residential mortgage loans.

Deposit Gathering

Our deposit gathering model is multifaceted insofar as we gather deposits from a range of clients, including commercial banking clients, pension funds, unions, municipal, and not-for-profit organization clients and consumers through our established and growing virtual banking platform. In particular, we believe that pension funds, unions, municipal and not-for-profit clients, and our virtual banking platform represent growing markets that provide substantial client acquisition opportunities at a lower cost than traditional community banks.

•

Pension funds, unions, municipal and not-for-profit organizations. Since its inception, the Bank has served the specialized banking and cash/treasury management needs of pension funds, unions, municipal and not-for-profit organizations. We have developed a suite of deposit products and sophisticated treasury management and other depository services that we believe drive deposit acquisition and retention from these client segments that are not effectively served by our competition. We have built a sales and service culture that recognizes the unique needs of these client segments, which provides us with significant competitive advantages, specifically where longer sales cycles create a barrier to entry. The marketplace for pension fund, union, municipal and not-for-profit organizations is very large and not geographically constrained or dependent upon branch infrastructure, and represents a significant deposit growth opportunity. At June 30, 2014, we had $288.0 million of deposits from pension fund, union, municipal and not-for-profit organizations, representing 48.3% of our deposit portfolio and, excluding our controlling stockholders and their related parties, we had $128.3 million of deposits from pension fund, union, municipal and not-for-profit organizations, representing 21.5% of our deposit portfolio.

•

Virtual Bank. Digital technology has introduced vast changes in the demand for how consumer banking services are delivered. Mobile banking adoption and usage rates continue to rise across all age segments, with growth occurring the fastest in younger, tech-savvy demographics, particularly the 18-29 age group. Our virtual banking platform aligns with this shift and positions us to meet the demands for mobile-oriented banking solutions. We have developed a product set that allows consumers nationwide to bank with us without needing a physical branch, including: paperless online account opening, a robust online banking system with web-based customer service forums, a mobile banking app optimized for smartphones and tablets with on-demand functionality, an innovative mobile payment app called FT Pay that is powered by LevelUp, unlimited debit card ATM rebates, overdraft protection, and personalized customer service. This broad product offering has allowed us to develop affinity-based strategic marketing partnerships with organizations and groups that have large, established and engaged customer and member bases. Through the use of marketing analytics and each partner’s endorsement, we are able to initiate direct marketing campaigns to the group’s membership base, resulting in a comparatively lower cost than traditional prospect marketing campaigns. We believe that our strategic marketing partnerships and our virtual banking platform will constitute an important element of our future growth. Between June 2011, when we began promoting our consumer checking account product, and June 30, 2014, we opened 1,480 new checking accounts. During a recent promotional period from December 2013 through June 30, 2014, we opened 999 new consumer savings accounts and experienced an increase of more than $65.9 million in total deposits in that product.

Competitive Strengths

We believe that we possess a number of competitive strengths that have enabled our recent growth and improvement in asset quality, including the following:

Experienced Management Team and Employee Base. We have a seasoned and experienced executive management team. Each member of our executive management team has at least 15 years of banking industry experience. Michael Butler, our President and Chief Executive Officer, was hired by the Bank in 2008 and is the former President of National Consumer Banking and President of Business Banking and Small Business at KeyCorp, where he served for approximately 26 years. Working closely with Mr. Butler are James Malerba, our Chief Financial Officer, Seth Felix, our Executive Vice President and Head of Commercial Banking, Robert Landstein, our Executive Vice President and Chief Information Officer, Joann Noble, our Executive Vice President—Treasury Management and Client Support, and Shepard Rainie, our Executive Vice President and Chief Risk Officer. Mr. Malerba, our Chief Financial Officer, was appointed in August 2014 and is the former Executive Vice President and Corporate Controller of State Street Corporation, where he served for approximately 10 years. All of the executive team members have served in roles with larger financial institutions, which allows us to deliver “big bank” sophistication in a community banking environment. The vision and focus of our executive management team enabled us to improve the quality of our loan portfolio and emerge from the recent economic recession as a stronger, well-positioned institution with a long-term growth strategy. We have fostered a culture that re-enforces a high-performance, values-oriented team approach and have specifically sought out highly-experienced employees whom we believe fit within that culture. More than 88% of our employees were hired by our current management team.

Embracing Technology as a Driver of Growth and Efficiency. We have embraced the latest technological developments in and around the banking industry, with respect to the banking solutions that we offer our clients. We believe that the expansive suite of mobile and online solutions we offer to our clients, including paperless online account opening, a robust online banking system with web-based customer service forums, a mobile banking app optimized for smartphones and tablets with on-demand functionality, an innovative mobile payment app and other features, positions us well to pursue consumers who prefer internet- and mobile-based banking solutions. We have moved to an open-architecture online and mobile banking platform that allows us to adapt to changing consumer demands. We further believe that technology will enable us to achieve economies of scale and deliver higher levels of profitability and that we have the human and technological infrastructure in place to support a bank of significantly larger scale.

Branchless, Low-Cost Fundraising Strategy. We believe that our branchless funding strategies will deliver structural cost advantages over traditional branch-based strategies as we grow. While branch transactions have declined and cost per branch transaction has steadily increased, the Federal Reserve study Consumer and Mobile Financial Services 2014 showed that mobile banking usage was on the rise, with the most popular mobile banking services—viewing account balances (87% of users), transferring funds (53% of users) and depositing checks (21%)—reducing the reliance on physical branches and being performed at lower costs electronically. This shift towards mobile usage, coupled with the technology infrastructure we have already built, will enable us to achieve economies of scale and a lower all-in cost of deposit funding compared to traditional branch-intensive models as our strategies do not require the fixed cost investment or lead times associated with more expensive, slower-growth branch systems. Additionally, because of our suite of deposit products and sophisticated treasury management and other depository services, we are able to attract and retain deposits from pension fund, municipal, union and not-for-profit organizations that are not effectively served by our competition without needing to invest in branches.

gather deposits from a variety of clients on a regional and, in the case of our retail deposit franchise and yacht lending, nationwide basis. A number of our clients, including our pension fund, municipal, union and not-for-profit organization clients, despite their resources and banking needs, are not traditional community bank clients, and we believe they are not effectively served by our competitors. We believe that we are well positioned, by virtue of our experience with and understanding of these underserved clients, to take advantage of significant growth opportunities within such customer segments. Our technological infrastructure is capable of supporting continued growth and yielding operational efficiencies with scale.

Innovative Digital Marketing Strategy to Gather Deposits. We utilize a digital marketing strategy and analytics to gather retail deposits nationwide though our virtual bank. We are focused on establishing affinity-based strategic partnerships to market directly to partner organizations’ members. We also emphasize pay-per-click advertising and electronic mail campaigns to attract clients and cross sell products to our clients. In addition, we utilize Twitter, Facebook, LinkedIn and YouTube for marketing and social media campaigns to forge stronger relationships with our clients. We believe that our marketing strategy will enable us to acquire clients faster and at lower average customer acquisition costs than would traditional marketing campaigns or branch-based banking.

Unique Understanding of Pension Fund, Municipal, Union and Not-for-Profit Clients, the Yacht Lending Market and the Banking Needs of our Affinity Partners’ Members. Our business strategy includes serving clients in specialized market segments. Our bankers’ deep understanding of clients in these segments is critical to our ability to execute our strategy. That understanding enables us to establish and retain long-term relationships with and knowledgeably take advantage of opportunities within these segments and effectively forge partnerships with organizations that have large, established and engaged members to whom we may directly market. Importantly, that understanding has been developed over many years and cannot easily or quickly be replicated by our competitors.

Our Markets

We gather deposits in our lending markets and on a nationwide basis through the treasury management services we offer to pension funds, unions, municipals and not-for-profit organizations, our affinity-based strategic marketing partnerships and our virtual banking platform.

Additional information about our lending and deposit gathering markets is included in the section of this prospectus entitled “Business—Our Markets.”

Risks Associated with Our Business

Our ability to implement our business strategy is subject to numerous risks and uncertainties. You should carefully consider all of the information set forth in this prospectus and, in particular, the information under the heading “Risk Factors,” prior to making an investment in our common stock. These risks include, among others, the following:

•

Our business strategy includes growth plans, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively;

•

We depend on our management team to implement our business strategy and we could be harmed by the loss of their services;

•

If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings and capital could decrease;

•

A downturn in economic conditions could negatively affect our loan portfolio and lending activities;

•

Changes in interest rates may hurt our profits and asset value; and

•

Changes to capital requirements may adversely impact our return on equity or constrain us from paying dividends or repurchasing shares.

Recent Developments

Name Change

Effective September 19, 2014, we changed our name to “Radius Bancorp Inc.” from First Trade Union Bancorp Inc. We will change the name of the Bank to Radius Bank by October 31, 2014. We have a new corporate logo and will have a new website, marketing materials and social media presence in connection with the name change. We believe that the name change better communicates our value proposition and market strategy.

Partnership with SmarterBucks

On September 16, 2014, in partnership with SmarterBucks, a division of SimpleTuition, we introduced a unique debit card rewards program that helps participants to pay down student debt. The program, which is tied to our FT Checking account product, allows users to earn 1.00% in SmarterBucks rewards on all non-PIN-based purchases made with our debit cards. When rewards, which are uncapped, reach a certain level they are then automatically contributed as an extra payment toward the principal of a user’s student loans linked with the program. The program is designed to provide a simple method of paying down any student debt linked with the program that fits into users’ lives and rewards them for everyday purchases.

Recent Financial Performance

Balance Sheet. Total assets were $699.8 million as of September 30, 2014, decreasing $3.0 million, or 0.4% from $702.8 million as of June 30, 2014. Total loans and loans held for sale grew by $8.3 million, after taking into account $18.6 million in loan sales during the quarter, to $574.8 million as of September 30, 2014 from $566.5 million as of June 30, 2014, an increase of 1.5%, primarily due to growth in the consumer and commercial loan portfolios. Total deposits were $577.3 million as of September 30, 2014, decreasing $19.6 million, or 3.3%, from $596.9 million at June 30, 2014, primarily due to a reduction in money market accounts and certificates of deposit, partially offset by an increase in demand deposit accounts. Book value per common share increased $0.19 to $13.56 as of September 30, 2014 from $13.37 per common share as of June 30, 2014.

Results of Operations. Net income for the three months ended September 30, 2014 was $810 thousand, or $0.19 per diluted share compared to net income of $492 thousand, or $0.12 per diluted share, for the three months ended June 30, 2014. For the three months ended September 30, 2014, the net interest margin was 3.13%, the efficiency ratio was 76.75%, the return on average assets was 0.46% and the return on average equity was 5.68%. Net income for the nine months ended September 30, 2014 increased $750 thousand, or 56.2%, to $2.08 million from $1.33 million during the same period in 2013.

Asset Quality. Nonperforming assets to total assets were 1.10% as of September 30, 2014 compared to 1.25% as of June 30, 2014. Nonperforming loans to total loans were 0.66% as of September 30, 2014 compared to 0.85% as of June 30, 2014. The allowance for loan losses to total loans decreased to 1.25% as of September 30, 2014 from 1.31% at June 30, 2014. The ratio of the allowance for loan losses to nonperforming loans increased to 179.12% at September 30, 2014, from 139.86% at June 30, 2014.

Capital Ratios. The Bank’s leverage ratio increased to 8.20% as of September 30, 2014, from 8.04% as of June 30, 2014. The increase was primarily due to the growth in retained earnings outpacing the growth in total assets for the quarter. Our regulatory capital ratios as of September 30, 2014 remain above the applicable regulatory levels to be categorized as well-capitalized.

Expected Fourth Quarter Expenses

Assuming the successful completion of this Offering, Radius Bancorp anticipates incurring in the fourth quarter of 2014 approximately $1.2 million to $1.3 million in pre-tax charges ($800,000 to $900,000 after tax) in non-capitalized transaction-related and marketing and branding costs.

These estimated charges relate primarily to the payments to be made by the Company pursuant to the Senior Management Transaction Incentive Performance Award agreements discussed under the heading “—Senior Management Transaction Incentive Performance Awards” beginning on page 89 and the termination of our collective bargaining agreement discussed under the heading “Business—Employees” beginning on page 47, and include an estimated $100,000 to $200,000 in marketing and branding costs related to the recently announced rebranding and name change.

Our Corporate Information

We were incorporated under the laws of the State of Delaware in July 2009. The Bank was founded in 1987. Our principal executive offices and branch office are located at One Harbor Street, Suite 201, Boston, Massachusetts 02210, and our telephone number is (617) 482-4000. We also have a loan production office located in New Hyde Park, New York. Our website address is www.ftub.com. Our website and the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this prospectus. You should not rely on any such information in making your decision whether to purchase our common stock.

Proposed Bank Charter Conversion

Implications of Being an Emerging Growth Company

As a company with less than $1.0 billion in gross revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the JOBS Act. An emerging growth company may take advantage of reduced regulatory and reporting requirements that are otherwise generally applicable to public companies. As an emerging growth company:

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we may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, in this prospectus;

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we are exempt from the requirement to obtain an audit of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act;

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we are permitted to provide less extensive disclosure about our executive compensation arrangements; and

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we are not required to hold non-binding advisory votes on executive compensation or golden parachute arrangements.

We may take advantage of these provisions for up to five years unless we earlier cease to be an emerging growth company. We will cease to be an emerging growth company if we have more than $1.0 billion in annual gross revenues, have more than $700.0 million in market value of our common stock held by non-affiliates as of any June 30 before that time, or issue more than $1.0 billion of non-convertible debt in a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We have elected in this prospectus to take advantage of scaled disclosure relating to the presentation of financial information and executive compensation arrangements and we have not obtained an audit of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act.

The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period, and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

The Offering


Common stock to be offered by us		1,330,551 shares

		(or 2,080,551 shares if the underwriters’ over-allotment option is exercised in full)

Common stock to be offered by the selling stockholders		3,669,449 shares

Common stock to be outstanding immediately following this offering		5,543,381 shares

		(or 6,293,381 shares if the underwriters’ over-allotment option is exercised in full)

Use of Proceeds		We estimate that the net proceeds to us from the sale of our common stock in this offering will be approximately $14.3 million, or approximately $23.2 million if the underwriters elect to exercise in full their over-allotment option, assuming an initial public offering price of $12.75 per share, the midpoint of the price range set forth on the cover of this prospectus, and after deducting estimated underwriting discounts and offering expenses. We will not receive any proceeds from the sale of our common stock by the selling stockholders. We intend to use the net proceeds to us from this offering for general corporate purposes, which may include maintaining liquidity at the holding company, providing equity capital to the Bank to fund balance sheet growth or working capital needs and our working capital needs. In addition, we intend to retire the indebtedness relating to our junior subordinated debentures, which are redeemable, at our option, on any quarterly dividend payment date beginning December 22, 2014. There was no accrued interest payable with respect to our junior subordinated debentures at June 30, 2014. For additional information, see “Use of Proceeds.”

Dividends		We currently do not intend to pay dividends on our common stock. Instead, we plan to retain our future earnings to fund our operations and to finance the growth and development of our business. For additional information, see “Dividend Policy.”

Rank		Our common stock is subordinate to our junior subordinated debentures with respect to the payment of dividends and the distribution of assets upon liquidation. In addition, our common stock will be subordinate to any debt that we may issue in the future and may be subordinate to any series of preferred stock that we may issue in the future.


Directed Share Program		At our request, the underwriters have reserved approximately 3.5% of the shares of common stock to be offered by this prospectus for sale, at the initial public offering price, to directors, officers and employees of the Company. The number of shares of common stock available for sale to the general public will be reduced to the extent these individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus. We anticipate our directors and executive management team will purchase approximately $2.2 million of common stock through the directed share program.

Risk factors		You should read the “Risk Factors” section of this prospectus for a discussion of factors to carefully consider before deciding to invest in shares of our common stock.

NASDAQ listing		We have applied to have our common stock approved for listing on The NASDAQ Global Market under the trading symbol “RADB.”

The number of shares of our common stock outstanding immediately following this offering excludes 501,970 shares of common stock reserved for issuance in connection with equity awards granted under our 2014 Omnibus Incentive Plan and our 2009 Deferred Incentive Plan, or the 2009 DIP.

Except as otherwise indicated, the information in this prospectus does not give effect to the exercise by the underwriters of their option to purchase up to 750,000 additional shares of common stock from us solely to cover over-allotments, if any.

Risk Factors

Investing in our common stock involves a high degree of risk. Before making your decision to invest in shares of our common stock, you should carefully consider the risks described below, together with the other information contained in this prospectus, including our financial statements and the related notes appearing at the end of this prospectus. We cannot assure you that none of the events discussed below will occur. These events could have a material and adverse impact on our business, results of operations, financial condition and cash flows. If that were to happen, the trading price of our common stock could decline, and you could lose all or part of your investment.

Risks Related to Our Business

Our business strategy includes growth plans, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.

We have pursued and intend to continue to pursue an organic growth strategy for our business that is focused on engaging in traditional community banking activities with a commitment to specialty financing, treasury management services and customer acquisition without a traditional branch network. There are risks associated with our growth strategy. We may not be able to expand our market presence in our existing market areas or successfully enter new geographic markets and, in addition, our strategic efforts may divert resources from ongoing business operations, may require investment in integration and in development and enhancement of additional operational and reporting processes and controls, and may subject us to additional regulatory scrutiny.

From time to time, we may implement new lines of business or offer new products and services within existing lines of business. While we carefully evaluate many factors before implementing new lines of business, products or services, there are risks and uncertainties associated with these efforts. In developing and marketing new lines of business and/or new products and services we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. If we do not successfully execute our growth plan, it could adversely affect our business, financial condition, results of operations, reputation and growth prospects.

Strong competition could hurt our profits and slow growth.

We face intense competition in making loans and attracting deposits. Price competition for loans and deposits sometimes results in us charging lower interest rates on our loans and paying higher interest rates on our deposits and may reduce our net interest income. Competition also makes it more difficult and costly to attract and retain qualified employees. We face intense competition from existing competitors in the virtual banking space. Many of the institutions with which we compete have substantially greater resources and lending limits than we have and may offer services that we do not provide. We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of non-bank competition in the financial services industry. If we are not able to effectively compete in our market areas and targeted business segments, our profitability may be negatively affected. For more information about our market area and the competition we face, see the section of this prospectus entitled “Business—Our Markets” and “Business —Competition.”

We depend on our management team to implement our business strategy, and we depend on our relationship managers to maintain and grow our commercial relationships; we could be harmed by the loss of their services.

We are dependent upon the services of the members of our executive management team who direct our strategy and operations and we have benefited from our executive management team members’ extensive banking knowledge and experience, in particular our President and Chief Executive Officer. We also rely heavily upon the services of our relationship managers and have benefited from their expertise with respect to our commercial, municipal, union, pension and similar fund customers. Members of our executive management team and our seasoned relationship managers could be difficult to replace. Our loss of these persons, or our inability to hire additional qualified personnel, could impact our ability to implement our business strategy and could have a material adverse effect on our results of operations.

Our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.

Our business plan emphasizes relationship banking. We have benefited from strong relationships with our customers, and also from our relationships with financial intermediaries. As a result, our reputation is an important component of our business. A key component of our business strategy is to leverage our reputation for customer service and knowledge of our customers’ needs to expand our presence by capturing new business opportunities from existing and prospective customers in and outside of our local market areas and through our virtual banking platform. We strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities and markets we serve, caring about and delivering superior service to our customers. If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or by events beyond our control, our business and operating results may be adversely affected.

The New England Carpenters’ Combined Funds and the Empire State Carpenters’ Pension Fund have each entered into a deposit retention agreement with us, however, we may be adversely affected if the Funds reduce their deposits in connection with the terms of those agreements, do not adhere to the terms of those agreements or if they reduce their deposits after the agreements expire.

As of June 30, 2014, the New England Carpenters’ Combined Funds and the Empire State Carpenters’ Pension Fund (collectively, the Funds) controlled, with their related parties, $159.7 million, or 26.8% of our total deposits. Because the Funds use their deposit accounts with us as a source of liquidity, the daily balances in the accounts fluctuate significantly. We have entered into deposit retention agreements with the Funds pursuant to which the Funds have agreed to maintain certain savings, demand deposit and other deposit accounts with the Bank for a period of not less than three years following the completion of this offering, to continue to use such accounts for the same purpose and in the same manner as they have recently, and to continue to obtain deposit and cash management services from the Bank in substantially the same proportion (as compared to other providers of such services) as each of the Funds has recently obtained such services. Each of the Funds has further agreed to maintain its accounts and related deposits in a manner consistent with any applicable governmental authority’s definition of “core deposits” applicable to the Bank. If the Funds do not comply with the terms of the deposit retention agreements, remove a significant portion of their deposits in accordance with the terms of the agreements, which permit the Funds to withdraw deposits in certain circumstances, including if the Bank fails to be deemed “well capitalized” by its regulators, or remove a significant portion of their deposits following the expiration of the agreements, we may be forced to seek other sources of deposits or increase our borrowings, which may increase our costs, thereby adversely affecting our results of operations and financial condition.

Our commercial real estate, commercial and industrial and construction loans generally carry greater credit risk than loans secured by owner occupied one-to-four family real estate, and our credit risk may increase if we succeed in our plan to increase our commercial lending.

At June 30, 2014, $249.0 million, or 44.1%, of our loan portfolio consisted of commercial real estate, commercial and industrial and construction loans. Given their generally larger balances and the complexity of the underlying collateral, commercial real estate, commercial and industrial and construction loans generally expose a lender to greater credit risk than loans secured by owner occupied one-to-four family real estate. While we underwrite such loans with sponsor equity and in most cases with personal guarantees from the sponsors, the principal risks are:

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commercial real estate loans – repayment is generally dependent on income from tenant leases being generated in amounts sufficient to cover operating expenses and debt service;

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commercial and industrial loans – repayment is generally dependent upon the successful operation of the borrower’s business; and

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construction loans – repayment is dependent upon completion, and the subsequent ability of the owner to either sell the completed project, lease the completed property, or obtain permanent financing on the completed project.

If loans that are collateralized by real estate or other business assets become troubled and the value of the collateral has been significantly impaired, then we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time we originated the loan, which could cause us to increase our provision for loan losses and would adversely affect our operating results.

Our business may be adversely affected by credit risk associated with residential property.

At June 30, 2014, one-to-four family residential loans comprised $269.3 million, or 47.7%, of our total loan portfolio, and home equity lines of credit comprised $6.6 million, or 1.2%, of our total loan portfolio. One-to-four family residential mortgage lending, whether owner occupied or non-owner occupied, is generally sensitive to regional and local economic conditions that significantly impact the ability of borrowers to meet their loan payment obligations. Declines in real estate values could cause our residential mortgages to be inadequately collateralized, which would expose us to a risk of loss if we seek to recover on defaulted loans by selling the real estate collateral.

Because our one-to-four family residential portfolio includes jumbo loans, there can be a disproportionate impact on our asset quality if a relatively small number of loans default. We have a relatively small portfolio exposure to home equity loans and lines of credit and many represent second mortgage loans. For those home equity loans and lines of credit secured by a second mortgage, recovering all or a portion of our loan proceeds in the event of default requires us to repay the first mortgage loan and the costs associated with a foreclosure, not all of which may be supported by the value of the property. For these reasons, we may experience higher rates of delinquencies, default and losses on our home equity loans.

The geographic concentrations of our loan portfolio and lending activities make us vulnerable to a downturn in the local or regional economies in which we operate.

A substantial portion of our loan portfolio is comprised of loans secured by collateral located in Massachusetts and New York. This makes us vulnerable to a downturn in these local economies that could affect the level of commercial activity and real estate values in these areas. Adverse conditions in our markets, such as unemployment, recession, a catastrophic event or other factors beyond our control could impact the ability of our borrowers to repay their loans, which could affect our net income, our provision for loan loss expense, or our capital. For more information about our market areas, see the section of this prospectus entitled “Business—Our Markets” and “Business—Competition.”

The Small Business Administration, or SBA, may not honor its guarantees if we do not originate loans in compliance with SBA guidelines.

As of June 30, 2014, SBA 7a program loans of $17.3 million comprised 3.07% of our loan portfolio and we intend to grow this segment of our portfolio in the future. SBA lending programs typically guarantee 75% of the principal on an underlying loan. The SBA may not honor its guarantee if a loan is not underwritten and administered to SBA guidelines. While we follow the SBA’s underwriting guidelines, our ability to do so depends on the knowledge and diligence of our employees and the effectiveness of controls we have established. If our employees do not follow the SBA guidelines in originating loans and if our loan review and audit programs fail to identify and rectify such failures, the SBA may refuse to honor its guarantee obligations and we may incur losses as a result.

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

At June 30, 2014, our allowance for loan losses totaled $6.8 million, which represented 1.31% of gross loans. 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 our loans. In determining the amount of the allowance for loan losses, we review our loss and delinquency experience and we evaluate other factors including, among other things, current economic conditions. If our assumptions are incorrect, or if delinquencies or non-performing loans increase, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, which would require additions to our allowance, and could decrease our net income or reduce our capital.

In addition, our regulators, as an integral part of their examination process, periodically review the allowance for loan losses and may require us to increase the allowance for loan losses by recognizing additional provisions for loan losses charged to expense, or to charge off loans, which, net of any recoveries, would decrease the allowance for loan losses. Any such additional provisions for loan losses or charge-offs could have a material adverse effect on our financial condition and results of operations.

We rely on the accuracy and completeness of information about our clients and counterparties.

In deciding whether to extend credit or enter into other transactions with clients and counterparties, we may rely on information furnished by or on behalf of clients and counterparties, including financial statements and other financial information. We may also rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. While we strive to verify the accuracy and sufficiency of such information, if this information is inaccurate or incomplete, we may be subject to loan losses, regulatory action, reputational harm, or other adverse effects on the operation of our business, results of operations, or financial condition.

Changes in interest rates may hurt our profits and asset value.

Like other financial institutions, we are subject to interest rate risk. Our primary source of income is net interest income, which is the difference between interest earned on loans and investments and the interest paid on deposits and borrowings. Changes in both the general level of interest rates and in the difference between short-term and long-term rates can affect our net interest income. Interest rates are highly sensitive to many factors, including government monetary policies, domestic and international economic and political conditions and other factors beyond our control.

While we pursue an asset/liability strategy designed to mitigate our risk from changes in interest rates, including by seeking to originate variable rate loans and balancing the respective terms of assets and liabilities, changes in interest rates may still have a material adverse effect on our financial condition and results of operations. Changes in the level of interest rates also may negatively affect our ability to originate loans, the

value of our assets and liabilities and our ability to realize gains from the sale of our assets, all of which could affect our earnings. For further discussion of how changes in interest rates could impact us, see the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Market Risk Management.”

Changes in the valuation of our securities could adversely affect us.

Substantially all of the securities in our portfolio are classified as available-for-sale. Accordingly, a decline in the fair value of our securities could cause a material decline in our reported equity or net income. At least quarterly, and more frequently when warranted by economic or market conditions, management evaluates all securities classified as available-for-sale with a decline in fair value below the amortized cost of the investment to determine whether or not the impairment is deemed to be other-than-temporary, or OTTI. For impaired debt securities that are intended to be sold, the full amount of market decline is recognized as OTTI through earnings. For all other impaired debt securities, only credit-related OTTI is recognized through earnings. Non-credit related OTTI for such debt securities is recognized in other comprehensive income, net of applicable taxes.

Financial reform legislation will result in new regulations that are expected to increase our costs of operations.

We are subject to extensive regulation, supervision and examination by the Office of the Comptroller of the Currency, or OCC, the Federal Reserve Board and the FDIC. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations or legislation, could have a material impact on us and our operations.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted on July 21, 2010. The Dodd-Frank Act represented a significant overhaul of many aspects of the regulation of the financial-services industry. Among other things, the Dodd-Frank Act created a new federal Consumer Financial Protection Bureau, or CFPB, tightened capital standards, and generally increased oversight and regulation of financial institutions and financial activities.

In addition to the self-implementing provisions of the statute, the Dodd-Frank Act calls for more than 300 administrative rulemakings by various federal agencies to implement various parts of the legislation. While some rules have been finalized or issued in proposed form, many have yet to be proposed. It is impossible to predict when all such additional rules will be issued or finalized, and what the content of such rules will be. We will have to apply resources to ensure that we are in compliance with all applicable provisions of the Dodd-Frank Act and any implementing rules, which may increase our costs of operations and adversely impact our earnings. The Dodd-Frank Act and any implementing rules that are ultimately issued could have adverse implications on the financial industry, the competitive environment, and/or our ability to conduct business. For more information about the regulations to which we are subject, see the section of this prospectus entitled “Supervision and Regulation.”

We will become subject to more stringent capital requirements, which may adversely impact our return on equity or constrain us from paying dividends or repurchasing shares.

In July 2013, the federal banking agencies substantially amended the regulatory risk-based capital rules applicable to us and the Bank. The final rules implement the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act.

The final rules include new minimum risk-based capital and leverage ratios, which will be effective for us on January 1, 2015, and refines the definition of what constitutes “capital” for purposes of calculating these ratios. The new minimum capital requirements, which will apply to us and the Bank, will be: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total capital ratio

of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4%. The final rule also requires unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital requirements unless a one-time opt-out is exercised. The Bank intends to exercise its one-time option to opt-out of the requirement under the final rule to include certain “available-for-sale” securities holdings for purposes of calculating its regulatory capital requirements. The final rule also establishes a “capital conservation buffer” of 2.5%, and will result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. The new capital conservation buffer requirement would be phased in beginning in January 2016 at 0.625% of risk-weighted assets and will increase each year until fully implemented in January 2019. A banking organization will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations will establish a maximum percentage of eligible retained income that can be utilized for such actions. The application of more stringent capital requirements could, among other things, result in lower returns on equity, require the raising of additional capital, and result in regulatory actions if we were to be unable to comply with such requirements.

Increased FDIC insurance assessments could significantly increase our expenses.

The Dodd-Frank Act eliminated the maximum Deposit Insurance Fund ratio of 1.5% of estimated deposits, and the FDIC has established a long-term ratio of 2.0%. The FDIC has the authority to increase assessments in order to maintain the Deposit Insurance Fund ratio at particular levels. In addition, if our regulators issue downgraded ratings of the Bank in connection with their examinations, the FDIC could impose significant additional fees and assessments on us which could significantly increase our expenses.

We may incur fines, penalties and other negative consequences from regulatory violations, possibly even inadvertent or unintentional violations.

We maintain systems and procedures designed to ensure that we comply with applicable laws and regulations. However, some legal and regulatory frameworks provide for the imposition of fines or penalties for noncompliance even though the noncompliance was inadvertent or unintentional and even though at the time systems and procedures were in place designed to ensure compliance. For example, we are subject to regulations issued by the Office of Foreign Assets Control, or OFAC, that prohibit financial institutions from participating in the transfer of property belonging to the governments of certain foreign countries and designated nationals of those countries. OFAC may impose penalties for inadvertent or unintentional violations even if reasonable processes are in place to prevent the violations. There may be other negative consequences resulting from a finding of noncompliance, including restrictions on certain activities. Such a finding may also damage our reputation as described above and could restrict the ability of institutional investment managers to invest in our securities.

We are dependent on our information technology and telecommunications systems and third-party servicers, and systems failures, interruptions or breaches of security could have an adverse effect on our financial condition and results of operations.

Our business is highly dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems and third-party servicers. We outsource many of our major systems, such as data processing and deposit processing systems. The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt our operations. Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions. If sustained or repeated, a system failure or service denial could result in a deterioration of our ability to provide customer service, compromise our ability to operate effectively, damage our reputation, result in a loss of customer business and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

In addition, we provide our customers the ability to bank remotely, including online over the Internet. The secure transmission of confidential information is a critical element of remote banking. Our network could be vulnerable to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches. We may be required to spend significant capital and other resources to protect against the threat of security breaches and computer viruses, or to alleviate problems caused by security breaches or viruses. Further, we outsource some of the data processing functions used for remote banking, and accordingly we are dependent on the expertise and performance of our third-party providers. To the extent that our activities, the activities of our customers, or the activities of our third-party service providers involve the storage and transmission of confidential information, security breaches and viruses could expose us to claims, litigation and other possible liabilities. Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in our systems and could adversely affect our reputation, results of operations and ability to attract and maintain customers and businesses. In addition, a security breach could also subject us to additional regulatory scrutiny, expose us to civil litigation and possible financial liability and cause reputational damage.

We rely on other companies to provide certain key components of our business infrastructure.

Third party vendors provide certain key components of our business infrastructure, such as data processing and deposit processing systems, mobile payment systems, internet connections, and network access. While we have selected these third party vendors carefully, we do not control their operations. Any failure by these third parties to perform or provide agreed-upon goods and services for any reason or their poor performance of services, could adversely affect our ability to deliver products and services to our customers and otherwise to conduct our business. Replacing these third party vendors could also entail significant delay and expense.

We expect to continually encounter technological change.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Failure to successfully keep pace with technological change affecting the financial services industry generally, and virtual banking in particular, could have a material adverse impact on our business and, in turn, our financial condition and results of operations.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

Upon completion of this offering, we will become subject to the periodic reporting requirements of the Exchange Act. We designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected and any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business results of operations and financial condition.

Further, we qualify as an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal controls over financial reporting.

We face a risk of noncompliance with and enforcement action under the Bank Secrecy Act and other anti-money laundering statutes and regulations.

The federal Bank Secrecy Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the PATRIOT Act, and other laws and regulations require financial institutions, among other duties, to institute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate. The federal Financial Crimes Enforcement Network, established by the U.S. Treasury Department to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service. Federal and state bank regulators also have begun to focus on compliance with Bank Secrecy Act and anti-money laundering regulations. If our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including future acquisition plans, which would negatively impact our business, financial condition and results of operations. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us.

Changes in accounting standards may affect our performance.

Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. From time to time there are changes in the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be difficult to predict and can materially impact how we report and record our financial condition and results of operations.

Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be very high.

We are required by our regulators to maintain adequate levels of capital to support our operations. We believe the net proceeds that we raise in the offering will be sufficient to permit the Bank to maintain regulatory capital compliance for the foreseeable future. Nonetheless, we may at some point need to raise additional capital to support continued growth or to address losses.

Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside of our control, and on our financial condition and performance. Accordingly, we may not be able to raise additional capital if needed on terms that are acceptable to us, or at all. If we cannot raise additional capital when needed, our operations and our financial condition could be materially and adversely affected. In addition, if we are unable to raise additional capital when required by the OCC or the Federal Reserve Board, we may be subject to adverse regulatory action. For more information about the regulations to which we are subject, see the section of this prospectus entitled “Supervision and Regulation.”

If our risk management framework does not effectively identify or mitigate our risks, we could suffer losses.

Our risk management framework seeks to mitigate risk and appropriately balance risk and return. We have established processes and procedures intended to identify, measure, monitor and report the types of risk to which we are subject, including credit risk, operations risk, compliance risk, reputation risk, strategic risk, market risk

and liquidity risk. We seek to monitor and control our risk exposure through a framework of policies, procedures, monitoring and reporting requirements. There may be risks that exist, or that develop in the future, that we have not appropriately anticipated, identified or mitigated. If our risk management framework does not effectively identify or mitigate our risks, we could suffer unexpected losses and could be materially adversely affected.

Our yacht lending business is relatively new; past performance regarding defaults may not be indicative of future performance.

We began making yacht loans in 2009 and, while we have not experienced any defaults in this portfolio to date, it may be difficult for us to assess the future performance of our yacht loans because our relatively limited experience in this type of lending does not provide us with a significant payment history from which to judge future collectability. Accordingly, we may experience higher delinquency or charge-off levels for these loans than our historical yacht loan portfolio experience would suggest, which could adversely affect our future performance. You should not interpret our past performance regarding defaults as indicative of future performance.

Risks Related to This Offering

There may be a limited trading market in our common stock, which would hinder your ability to sell our common stock and may lower the market price of the stock.

We have never issued capital stock in a registered offering, and there is no established market for our common stock. We expect that our common stock will be listed on The NASDAQ Global Market under the symbol “RADB,” subject to completion of the offering and compliance with certain quantitative listing requirements, such as the number and market value of our outstanding shares of common stock, and qualitative listing requirements relating to our corporate governance. Robert W. Baird & Co. Incorporated has advised us that it intends to make a market in our common stock following the offering, but it is under no obligation to do so or to continue to do so once it begins. The development of an active trading market 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 the shares of common stock at any particular time may be limited. Under such circumstances, you could have difficulty selling your shares of common stock on short notice, and, therefore, you should not view the shares of common stock as a short-term investment. In addition, our public “float,” which is the total number of our outstanding shares less shares held by our directors and executive officers, if any, may be quite limited. As a result, it is unlikely that an active trading market for the common stock will develop or that, if it develops, it will continue. If you purchase shares of common stock, you may not be able to sell them at or above your per share purchase price. Purchasers of common stock in this stock offering should have long-term investment intent and should recognize that there will be a limited trading market in the common stock. The limited market for our stock may make it difficult to sell the common stock after the stock offering and may have an adverse impact on the price at which the common stock can be sold.

We have broad discretion in allocating the net proceeds of the offering. Our failure to effectively utilize such net proceeds may have an adverse effect on our financial performance and the value of our common stock.

Our management will have broad discretion in the application of the net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. You will not have the opportunity, as part of your investment decision, to assess whether we are using the proceeds appropriately. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline. For additional information see the section of this prospectus entitled “Use of Proceeds.”

Our stock-based benefit plan will increase our costs, which will reduce our income, and may dilute your ownership interest.

Prior to the completion of this offering, we intend to adopt a stock-based benefit plan, which will allow us to grant participants certain stock and stock-based awards, including restricted 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 our common stock reserved for issuance under this plan will be 500,000 shares in the aggregate. Options granted under the stock-based benefit plan will be expensed by us over their vesting period at the grant-date fair value of the options utilizing a Black-Scholes option pricing analysis. 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.

We have entered into employment agreements and severance, change in control, and non-solicitation agreements with certain of our officers and intend to implement a severance pay plan for employees not covered by such arrangements, which may increase our compensation costs upon the occurrence of certain events or increase the cost of acquiring us.

We have entered into employment agreements with our President and Chief Executive Officer and severance, change in control, and non-solicitation agreements with six other officers. Upon completion of the offering, we intend to enter into a similar severance, change in control, and non-solicitation agreement with our Chief Financial Officer. In the event of termination of employment 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 severance, change in control, and non-solicitation agreements, the agreements will provide for cash severance benefits that would cost us up to $3.6 million in the aggregate. We also intend to implement a severance pay plan in connection with the offering for those eligible employees not covered by an employment or a severance, change in control, and non-solicitation agreement. For additional information see the section of this prospectus entitled “Executive and Director Compensation—Employment Agreements and Severance Arrangements.”

Some provisions of our charter documents, Delaware law and federal banking regulations may have anti-takeover effects that could discourage an acquisition of us and/or the Bank by others, even if an acquisition would benefit our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.

Provisions of our amended and restated certificate of incorporation and amended and restated bylaws, each of which will be effective upon the closing of this offering, and Delaware corporate law that may make it more difficult and expensive to pursue a takeover attempt that the board of directors opposes include:

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a classified board of directors consisting of three classes of directors, with staggered three-year terms; only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms, which may have the effect of delaying a change in control of the board;

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supermajority voting requirements for changes to some provisions of our amended and restated certificate of incorporation and amended and restated bylaws;

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authorizing the issuance of “blank check” preferred stock, the terms of which we may establish and shares of which we may issue without stockholder approval;

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prohibiting cumulative voting in the election of directors, which would otherwise allow for less than a majority of stockholders to elect director candidates;

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prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;

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eliminating the ability of stockholders to call a special meeting of stockholders; and

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establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings.

Additionally, federal banking regulations place limitations on the acquisition of certain percentages of our capital stock and impose restrictions on these significant stockholders. For further information, see the section of this prospectus entitled “Supervision and Regulation—Holding Company Regulations—Acquisition of Control.”

We are an “emerging growth company,” as defined in the in the JOBS Act, and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors and adversely affect the market price of our common stock.

For so long as we remain an “emerging growth company,” as defined in the JOBS Act, we may take advantage of certain exemptions from various requirements applicable to public companies that are not “emerging growth companies” including:

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the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that our independent registered public accounting firm audit the effectiveness of our internal control over financial reporting;

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the “say on pay” provisions (requiring a non-binding stockholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding stockholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Act and some of the disclosure requirements of the Dodd-Frank Act relating to compensation of our chief executive officer;

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the requirement to provide detailed compensation discussion and analysis in proxy statements and reports filed under the Exchange Act and instead provide a reduced level of disclosure concerning executive compensation; and

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any rules that the Public Company Accounting Oversight Board may adopt requiring mandatory audit firm rotation or a supplement to the auditor’s report on the financial statements.

We may take advantage of these exemptions until we are no longer an “emerging growth company.” We would cease to be an “emerging growth company” upon the earliest of: (i) the first fiscal year following the fifth anniversary of this offering; (ii) the first fiscal year after our annual gross revenues are $1 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities; or (iv) as of the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year.

We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile and may decline.

We will incur increased costs as a result of operating as a public company, and our management will devote substantial time to new compliance initiatives because we will need to implement additional financial and accounting systems, procedures and controls in order to satisfy our new public company reporting requirements.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, and these expenses may increase even more after we are no longer an “emerging growth company.” We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a stand-alone public company. However, the measures we take may not be sufficient to satisfy our obligations as a public company. During the period we are an emerging growth company, we are exempt from compliance with Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal control over financial reporting. Any failure to achieve and maintain an effective internal control environment could have a material adverse effect on our business and stock price.

We will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, as well as rules adopted, and to be adopted, by the SEC and The NASDAQ Global Market, except for such requirements that we may elect not to comply with during the period we are an emerging growth company. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, we expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. The increased costs may cause us to incur losses. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the sufficient coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

Our voting common stock is equity and is subordinate to our existing and future indebtedness.

Shares of our voting common stock that you may receive upon settlement will represent equity interests in us and do not constitute indebtedness. Accordingly, the shares of our voting common stock will be subordinate to our junior subordinated debentures with respect to the payment of dividends and the distribution of assets upon liquidation and will rank junior to all of our existing and future indebtedness and to other non-equity claims against us with respect to assets available to satisfy claims against us, including in our liquidation.

We may not pay dividends if we are not able to receive dividends from our subsidiary, the Bank.

We are a separate and distinct legal entity from our banking subsidiary and will depend on the payment of cash dividends from the Bank and our existing liquid assets as the principal sources of funds for paying cash dividends on our common stock. Unless we receive dividends from the Bank or choose to use our liquid assets,

we may not be able to pay dividends. The Bank’s ability to pay dividends is subject to its ability to earn net income and to meet certain regulatory requirements. Additionally, our ability to pay dividends is subject to our meeting certain regulatory requirements. For more information on the restrictions on paying dividends, see “Supervision and Regulation—Dividends”.

Our stock price can be volatile.

Stock price volatility may negatively impact the price at which our common stock may be sold, and may also negatively impact the timing of any sale. Our stock price can fluctuate widely in response to a variety of factors including, the risk factors described herein and, among other things:

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actual or anticipated variations in quarterly operating results;

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recommendations by securities analysts;

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operating and stock price performance of other companies that investors deem comparable to us;

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news reports relating to trends, concerns and other issues in the financial services industry;

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new technology used, or services offered, by competitors;

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perceptions in the marketplace regarding us and/or our competitors;

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significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors;

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failure to integrate acquisitions or realize anticipated benefits from acquisitions;

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additional investments from third parties;

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issuance of additional shares of stock;

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changes in government regulations; or

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geo-political conditions such as acts or threats of terrorism or military conflicts.

General market fluctuations, industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes, credit loss trends or currency fluctuations, could also cause our stock price to decrease regardless of our operating results.

Shares of our voting common stock are not insured deposits and may lose value.

Shares of our voting common stock are not insured deposits or other obligations of any bank and are not insured by the FDIC or any other governmental agency and are subject to investment risk, including possible loss of principal.

Securities analysts may not initiate or continue coverage on our common stock.

The trading market for our common stock will depend in part on the research and reports that securities analysts publish about us and our business. We do not have any control over these securities analysts, and they may not cover our common stock. If securities analysts do not cover our common stock, the lack of research coverage may adversely affect our common stock’s market price. If we are covered by securities analysts, and our common stock is the subject of an unfavorable report, the price of our common stock may decline. If one or more of these analysts cease to cover us or fail to publish regular reports on us, we could lose visibility in the financial markets, which could cause the price or trading volume of our common stock to decline.

Special Note Regarding Forward-Looking Statements

Some of the statements made under “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this prospectus constitute forward-looking statements. In some cases, forward-looking statements can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “believe,” “contemplate,” “continue,” “intend,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:

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statements of our goals, intentions and expectations;

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

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

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estimates of our risks and future costs and benefits.

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:

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adverse changes to economic conditions in our market area;

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adverse changes in the financial industry, securities, credit and national and local real estate markets (including real estate values);

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significant increases in our loan losses, including as a result of our inability to resolve classified and non-performing assets or reduce risks associated with our loans, and management’s assumptions in determining the adequacy of the allowance for loan losses;

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credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and in our allowance for loan losses and provision for loan losses;

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competition among depository and other financial institutions;

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our success in implementing our business strategy, particularly increasing or diversifying our loan portfolios and sources of deposit funding;

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our success in introducing new financial products;

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our ability to attract and maintain deposits;

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our ability to maintain our asset quality even as we increase our lending;

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changes in interest rates generally, including changes in the relative differences between short term and long term interest rates and in deposit interest rates, that may affect our net interest margin and funding sources;

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fluctuations in the demand for loans, which may be affected by numerous factors, including commercial conditions in our market areas and by declines in the value of real estate in our market areas;

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changes in consumer spending, borrowing and saving habits;

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declines in the yield on our assets resulting from the current low interest rate environment;

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risks related to a high concentration of loans secured by real estate located in our market area;

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the results of examinations by our regulators, including the possibility that our regulators may, among other things, require us to increase our reserve for loan losses, write down assets, change our regulatory capital position, limit our ability to borrow funds or maintain or increase deposits, or prohibit us from paying dividends, which could adversely affect our dividends and earnings;

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changes in the level of government support of housing finance;

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

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changes in laws or government regulations or policies affecting financial institutions, including the Dodd-Frank Act and the JOBS Act, which could result in, among other things, increased deposit insurance premiums and assessments, capital requirements (particularly the new capital regulations), regulatory fees and compliance costs and the resources we have available to address such changes;

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changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, or FASB, the SEC and the Public Company Accounting Oversight Board;

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changes in our organization, compensation and benefit plans, and our ability to retain key members of our senior management team and to address staffing needs in response to product demand or to implement our strategic plans;

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loan delinquencies and changes in the underlying cash flows of our borrowers;

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our ability to control costs and expenses, particularly those associated with operating as a publicly traded company;

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our ability to forge affinity-based strategic marketing partnerships;

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the failure or security breaches of computer systems on which we depend;

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the ability of key third-party service providers to perform their obligations to us;

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changes in the financial condition or future prospects of issuers of securities that we own; and

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other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described elsewhere in this prospectus.

These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in this prospectus in greater detail under the section of this prospectus entitled “Risk Factors” and elsewhere in this prospectus. You should not rely upon forward-looking statements as predictions of future events.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, after the date of this prospectus, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise.

Selected Historical Consolidated Financial Data

The selected historical consolidated financial data presented below is derived in part from our consolidated financial statements. The following is only a summary and you should read it in conjunction with the consolidated financial statements and notes beginning on page F-1 and the sections of this prospectus titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Capitalization.” The information at December 31, 2013 and 2012, and for the years then ended, is derived in part from the audited consolidated financial statements that appear in this prospectus. The information at June 30, 2014 and 2013 and for the six months then ended that appear in this prospectus was not audited, but in the opinion of management, reflects all adjustments necessary for a fair presentation. All of these adjustments are normal and recurring. The performance, asset quality and capital ratios are unaudited and derived from the audited financial statements as of and for the years presented. Average balances have been computed using daily averages. Our historical results of operations are not necessarily indicative of the results of operations for any future period.


	(unaudited) At or for the Six Months Ended June 30,				At or for the Year Ended December 31,
	2014		2013		2013		2012		2011
	(Dollars in thousands)
SELECTED BALANCE SHEET DATA
Total assets	$	702,790	$	604,189	$	669,104	$	632,197	$	606,698
Total loans and loans held for sale		566,494		483,640		548,346		463,745		389,100
Allowance for loan losses		6,769		7,970		6,812		7,488		8,733
Securities available for sale		77,898		87,507		78,676		94,210		120,840
Deposits		596,894		482,774		518,918		512,001		473,140
Total stockholders’ equity		56,346		53,526		54,180		54,121		51,843

SELECTED INCOME STATEMENT DATA
Interest income	$	12,229	$	11,221	$	23,388	$	23,006	$	25,180
Interest expense		2,312		2,232		4,251		5,370		7,400

Net interest income		9,917		8,989		19,137		17,636		17,780
Provision for loan losses		50		350		350		0		2,169

Net interest income after provision for loan losses		9,867		8,639		18,787		17,636		15,611
Non-interest income		1,624		1,190		2,241		1,459		1,112
Non-interest expense		9,624		8,618		17,805		17,346		15,520
Income tax expense		592		312		1,216		349		334

Net income	$	1,275	$	899	$	2,007	$	1,400	$	869


	(unaudited) At or for the Six Months Ended June 30,						At or for the Year Ended December 31,
	2014			2013			2013			2012			2011
	(dollars in thousands, except share and per share data)
PER COMMON SHARE DATA⁽¹⁾
Basic earnings per share	$	0.30		$	0.21		$	0.48		$	0.33		$	0.21
Diluted earnings per share		0.30			0.21			0.48			0.33			0.21
Book value per common share		13.37			12.71			12.86			12.85			12.31
Basic weighted average common shares		4,212,700			4,212,700			4,212,700			4,212,700			4,212,700
Diluted weighted average common shares		4,212,830			4,212,830			4,212,830			4,212,830			4,212,830

SELECTED PERFORMANCE RATIOS
Return on average assets⁽²⁾		0.37	%		0.30	%		0.32	%		0.23	%		0.15	%
Return on average stockholders’ equity⁽²⁾		4.57	%		3.32	%		3.72	%		2.64	%		1.72	%
Net interest margin⁽²⁾		3.01	%		3.10	%		3.19	%		3.09	%		3.13	%
Efficiency ratio⁽³⁾		83.61	%		84.66	%		83.51	%		91.10	%		82.30	%

SELECTED ASSET QUALITY RATIOS
Nonaccrual loans to total loans and loans held for sale		0.85	%		2.28	%		0.81	%		2.21	%		3.00	%
Nonaccrual loans and loans past due 90 days and still accruing to total loans		0.85	%		2.28	%		0.81	%		2.29	%		3.00	%
Non-performing assets⁽⁴⁾to total assets		1.25	%		1.83	%		1.36	%		1.61	%		1.92	%
Allowance for loan losses to gross loans		1.31	%		1.65	%		1.25	%		1.62	%		2.25	%
Allowance for loan losses to non-accrual loans		139.86	%		72.51	%		154.19	%		73.35	%		74.89	%
Net loan charge-offs to average loans⁽²⁾		0.02	%		(0.06	)%		0.21	%		0.30	%		1.72	%

CAPITAL RATIOS
Total stockholders’ equity to total assets ratio		8.02	%		8.86	%		8.10	%		8.56	%		8.55	%
Leverage ratio (Bank)		8.04	%		8.64	%		8.11	%		8.15	%		8.48	%
Risk-based Tier 1 capital ratio (Bank)		12.73	%		13.77	%		12.33	%		14.06	%		14.23	%
Risk-based total capital ratio (Bank)		13.98	%		15.03	%		13.58	%		15.43	%		15.49	%

(1)	After giving effect to the 10-for-1 forward stock split of our common stock which occurred on August 7, 2014.

(2)	Six-month data has been annualized.

(3)	“Efficiency ratio” is not recognized under accounting principles generally accepted in the United States (“U.S. GAAP”), and is therefore considered to be a non-U.S. GAAP financial measure. See the section below entitled “Non-U.S. GAAP Financial Measures” for the calculation of the efficiency ratio.

(4)	Non-performing assets consist of nonaccrual loans and other real estate owned.

Non-U.S. GAAP Financial Measures

“Efficiency ratio” is defined as non-interest expenses divided by operating revenue, which is equal to net interest income plus non-interest income excluding gains and losses on sales of securities. In our judgment, the adjustments made to operating revenue allow investors to better assess our operating expenses in relation to our core operating revenue by removing the volatility that is associated with certain one-time items and other discrete items that are unrelated to our core business.

The efficiency ratio is calculated as follows:


	(unaudited) For the Six Months Ended June 30,						For the Year Ended December 31,
	2014			2013			2013			2012			2011
	(Dollars in thousands)
Efficiency Ratio
Non-interest expense (numerator)	$	9,624		$	8,618		$	17,805		$	17,346		$	15,520

Net interest income	$	9,917		$	8,989		$	19,137		$	17,636		$	17,780
Non-interest income		1,624			1,190			2,241			1,459			1,112
Less: gains on sales of fixed assets		(30	)		—			(57	)		—			—
Less: gains on sales of securities		—			—			—			(54	)		(34	)

Adjusted operating revenue (denominator)	$	11,511		$	10,179		$	21,321		$	19,041		$	18,858


Efficiency Ratio		83.61	%		84.66	%		83.51	%		91.10	%		82.30	%

Use of Proceeds

We estimate that the net proceeds to us from the sale of our common stock in this offering will be approximately $14.3 million, or approximately $23.2 million if the underwriters elect to exercise in full their over-allotment option, assuming an initial public offering price of $12.75 per share, the midpoint of the price range set forth on the cover of this prospectus, and after deducting estimated underwriting discounts and offering expenses. Each $1.00 increase (decrease) in the assumed initial public offering price would increase (decrease) the net proceeds to us of this offering by $1.2 million, or $1.9 million if the underwriters elect to exercise in full their over-allotment option, assuming the number of shares we sell, as set forth on the cover of this prospectus, remains the same, after deducting estimated underwriting discounts and offering expenses.

We intend to use the net proceeds to us from this offering for general corporate purposes, which may include maintaining liquidity at the holding company, providing equity capital to the Bank to fund balance sheet growth or working capital needs and our working capital needs. In addition, we intend to retire the indebtedness relating to our junior subordinated debentures, which are redeemable, at our option, on any quarterly dividend payment date beginning December 22, 2014. We have not specifically allocated the amount of net proceeds to us that will be used for these purposes and our management will have broad discretion over how these proceeds are used. We are conducting this offering at this time because we believe that it will allow us to better execute our growth strategies.

We will not receive any proceeds from the sale of our common stock by the selling stockholders.

Dividend Policy

Following completion of the offering, our board of directors will have the authority to declare dividends on our shares of common stock, subject to statutory and regulatory requirements. We have not paid dividends on our common stock in the past and we currently do not intend to pay any cash dividends on our common stock in the foreseeable future. Instead, we anticipate that that all of our future earnings will be used for working capital, to support our operations and to finance the growth and development of our business.

Under applicable Delaware law, we may declare and pay dividends only out of our surplus, as defined under applicable Delaware law, or, if there is no surplus, out of our net profits for the fiscal year in which the dividend is to be declared and/or the preceding fiscal year. If our capital is diminished by depreciation in the value of our property, or by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets, no dividends may be paid out of net profits until the deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets has been repaired.

The Federal Reserve Board has issued a policy statement providing that dividends should be paid only out of current earnings and only if our prospective rate of earnings retention is consistent with our capital needs, asset quality and overall financial condition. Regulatory guidance also provides for prior regulatory consultation with respect to capital distributions in certain circumstances, such as where the holding company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the holding company’s overall rate of earnings retention is inconsistent with the its capital needs and overall financial condition. In determining whether to pay a cash dividend in the future and the amount of any cash dividend, the board of directors is expected to take into account a number of factors, including regulatory capital requirements, our financial condition and results of operations, other uses of funds for the long-term value of stockholders, tax considerations, statutory and regulatory limitations and general economic conditions.

Dividends we can declare and pay will depend, in part, upon receipt of dividends from the Bank, because initially we will have no source of income other than dividends from the Bank and earnings from the investment of proceeds from the sale of shares of common stock. Applicable banking law and OCC regulations impose significant limitations on “capital distributions” by federal savings associations. See the section of this prospectus entitled “Supervision and Regulation—Holding Company Regulation—Dividends” and “Supervision and Regulation—Regulation of Federal Savings Associations—Dividends.” In addition, beginning in 2016, the Bank’s ability to pay dividends will be limited if it does not have the capital conservation buffer required by the new capital rules, which may limit our ability to pay dividends to stockholders. See the sections of this prospectus entitled “Supervision and Regulation—Holding Company Regulation—Capital” and “Supervision and Regulation—Regulation of Federal Savings Associations—Capital Requirements.”

Any payment of dividends by the Bank to us that would be deemed to be drawn out of the Bank’s bad debt reserves would require a payment of taxes at the then-current tax rate by the Bank on the amount of earnings deemed to be removed from the reserves for such distribution. The Bank does not intend to make any distribution to us that would create such a federal tax liability.

Capitalization

The following table shows our capitalization, including regulatory capital ratios, on a consolidated basis, as of June 30, 2014:

•

on an actual basis;

•

on an as-adjusted basis as if the offering had been completed as of June 30, 2014, assuming:

•

the sale of 1,330,551 shares of common stock at an assumed initial public offering price of $12.75 per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and offering expenses payable by us;

•

the redemption of our junior subordinated debentures with the net proceeds from the offering as if such redemption had occurred as of June 30, 2014; and

•

the contribution of 90.0% of the net proceeds to the Company from the offering by Radius Bancorp to the Bank.

The as-adjusted capitalization information below is illustrative only, and our common stock, additional paid-in capital, retained earnings, accumulated other comprehensive income, total stockholders’ equity, and total capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of our initial public offering determined at pricing. You should read the following table in conjunction with the sections titled “Selected Historical Consolidated Financial Data,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.


	As of June 30, 2014
	Actual			As adjusted⁽¹⁾
(dollars in thousands except share and per share data)
Borrowing:
Long-term FHLB Borrowings	$	30,000		$	30,000
Subordinated debentures		3,242			—
Stockholders’ equity:
Preferred stock, $0.0001 par value per share, authorized 2,000,000⁽²⁾shares; outstanding 0 shares		—			—
Common stock, $0.0001 par value per share, authorized 10,000,000⁽²⁾⁽³⁾shares; 4,223,070 shares issued, 4,212,830 shares outstanding actual and 5,543,381 shares as adjusted⁽⁴⁾		—			—
Additional paid-in capital		55,291			69,590
Treasury stock shares at cost, 10,240⁽²⁾ common shares, including shares held in rabbi trust		(176	)		(176	)
Retained earnings		576			576
Accumulated other comprehensive income, net of tax		655			655

Total stockholders’ equity	$	56,346		$	70,645
Total capitalization	$	89,588		$	100,645

Book value per common share⁽²⁾	$	13.37		$	12.74

Bank capital ratios
Tier 1 leverage capital ratio		8.04	%		9.70	%⁽⁵⁾
Tier 1 risk-based capital ratio		12.73	%		15.54	%⁽⁵⁾
Total risk-based capital ratio		13.98	%		16.80	%⁽⁵⁾

(1)	A $1.00 increase (decrease) in the assumed initial public offering price of $12.75 per share would increase (decrease) each of additional paid-in capital and total stockholders’ equity by $1.2 million, assuming that

the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and offering expenses. If the underwriters’ option to purchase additional shares to cover over-allotments is exercised in full, the pro forma as adjusted amount of each of additional paid-in capital and total stockholders’ equity would increase by approximately $8.9 million, after deducting estimated underwriting discounts and offering expenses, and we would have 6,293,381 shares of our common stock issued and outstanding, as adjusted.

(2)	After giving effect to the 10-for-1 forward stock split of our common stock which occurred on August 7, 2014.

(3)	Upon completion of the offering, we will be authorized to issue under our amended and restated certificate of incorporation 25,000,000 shares.

(4)	Assumes no exercise of the underwriters’ over-allotment option.

(5)	Assumes net proceeds of the offering are invested in assets with a 20% risk weighting and assumes 90% of the net proceeds of the offering are contributed to the Bank.

Dilution

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the public offering price per share of our common stock and the as adjusted net book value per share of our common stock immediately after this offering. Net book value per share of our common stock is determined at any date by subtracting our total liabilities from the amount of our total assets and dividing the difference by the number of shares of our common stock deemed to be outstanding at that date.

Our historical net book value as of June 30, 2014, was approximately $56.3 million, or $13.37 per share, based on 4,212,830 shares of common stock outstanding as of June 30, 2014, after giving effect to the 10-for-1 forward stock split of our common stock which occurred on August 7, 2014.

After giving effect to the sale of 1,330,551 shares of our common stock offered in this offering at an assumed public offering price of $12.75 per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our net book value as of June 30, 2014, would have been approximately $70.6 million, or $12.74 per share of common stock. This represents an immediate decrease in net book value of $0.63 per share to existing stockholders and an immediate dilution in net book value of $0.01 per share to new investors purchasing shares of common stock in this offering at the assumed public offering price. The following table illustrates this dilution on a per share basis:


Assumed public offering price per share		$	12.75
Historical net book value per share as of June 30, 2014	13.37
Decrease in net book value per share attributable to new investors	0.63

As adjusted net book value per share after this offering			12.74

Dilution per share to new investors purchasing common stock in this offering		$	0.01

Each $1.00 increase (decrease) in the assumed public offering price of $12.75 per share, would increase (decrease) our as adjusted net book value after this offering by approximately $1.2 million, or approximately $0.22 per share, and the dilution per share to new investors by approximately $0.78 per share, assuming that the number of shares offered by us and the selling stockholders, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise in full the over-allotment option, our as adjusted net book value after this offering would be approximately $12.64 per share, and the immediate dilution to new investors purchasing common stock in this offering would be $0.11 per share.

The following table summarizes, as of June 30, 2014, the number of shares purchased from us, the total consideration paid, and the average price per share paid by existing stockholders and by new investors purchasing shares in this offering, before deducting underwriting discounts and commissions and estimated offering expenses payable by us, at an assumed initial public offering price of $12.75 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus.


	Shares Purchased					Total Consideration					Average Price Per Share
	Number		Percent			Amount		Percent			Average Price Per Share
	(Dollars in thousands, except per share data)
Existing stockholders before offering		4,212,830		76.0	%	$	56,071,037		76.8	%	$	13.31
New investors in this offering		1,330,551		24.0	%		16,964,525		23.2	%		12.75

Total		5,543,381		100	%	$	73,035,562		100	%	$	13.18

A $1.00 increase (decrease) in the assumed initial public offering price of $12.75 per share would increase (decrease) total consideration paid by new investors by $5.0 million, assuming that the number of shares offered, as set forth on the cover page of this prospectus, remains the same.

Sales of shares of our common stock by the selling stockholders in this offering will reduce the number of shares of common stock held by selling stockholders to 543,251, or approximately 9.8% of the total shares of common stock outstanding after this offering, and will increase the number of shares held by new investors to 5,000,000, or approximately 90.2% of the total shares of common stock outstanding after this offering.

After giving effect to the sale of shares in this offering by us and the selling stockholders, if the underwriters’ option to purchase additional shares to cover over-allotments is exercised in full, our selling stockholders would own approximately 8.6% and our new investors would own approximately 91.4% of the total number of shares of our common stock outstanding after this offering.

The information discussed above is illustrative only and will adjust based on the actual public offering price and other terms of this offering determined at pricing. The number of shares of our common stock outstanding immediately following this offering is based on shares of our common stock outstanding as of June 30, 2014, after giving effect to the 10-for-1 forward stock split of our common stock which occurred on August 7, 2014. This number excludes 501,970 shares of common stock reserved for issuance in connection with equity awards granted under our 2014 Omnibus Incentive Plan and our 2009 DIP.

Business

Overview

We are the holding company for First Trade Union Bank, or the Bank, which is headquartered in Boston, Massachusetts. We provide financial products and services on a regional and nationwide basis, including through our website, www.ftub.com, and mobile banking and payment apps. We engage in commercial and consumer banking but our business is different from most community banks because:

•

We use affinity-based strategic marketing partnerships to pursue large numbers of deposit relationships utilizing sophisticated marketing analytics in combination with our virtual banking solutions.

•

Our virtual banking strategy will allow us to achieve increased economies of scale as we grow our business.

We are currently owned by New England Carpenters’ Combined Funds, which formed the Bank in 1987, and the Empire State Carpenters’ Pension Fund, which acquired its initial interest in 2006. This offering will provide the capital necessary to support our growth strategy and will allow the New England Carpenters’ Combined Funds and the Empire State Carpenters’ Pension Fund (collectively, the Funds) to reduce their ownership levels below 5.0% so that they will no longer be deemed to be savings and loan holding companies. As savings and loan holding companies, the Funds are required to serve as a source of financial strength for the Bank and are each considered to be a “banking entity” for purposes of section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, also referred to as the Volcker Rule, which prohibits banking entities from engaging in the types of investments that are commonly made by pension funds. Given their status as pension funds, the Funds do not want to remain subject to these limitations. In anticipation of this offering, we have taken, or will take, a number of actions in respect to our operations and structure, including:

•

Undertaking a name change and rebranding in order to better communicate our value proposition and market strategy;

•

Transition to a board of directors comprised of independent members, other than the Chief Executive Officer, a majority of whom will join the board upon the completion of this offering;

•

Converting of our New Hyde Park, New York retail branch into a non-deposit gathering business center in alignment with our virtual banking strategy; and

•

Our Business Strategy

The primary components of our business strategy are to:

•

Offer a comprehensive virtual banking product suite that allows us to capitalize on growing and evolving demand for online and mobile banking solutions and payment apps;

•

Develop affinity-based strategic marketing partnerships that enable us to market at a relatively low cost directly to partner organizations’ members;

•

Engage in traditional commercial and consumer banking, supplemented by specialty financing in areas that include SBA, yacht lending to high net worth individuals, and other types of lending;

•

Leverage our current infrastructure and technology to grow, achieve economies of scale and deliver higher levels of profitability; and

•

Maintain disciplined risk management, resulting in consistently above-average asset quality.

Competitive Strengths

We believe that we possess a number of competitive strengths that have enabled our recent growth and improvement in asset quality, including the following:

approximately 10 years. All of the executive team members have served in roles with larger financial institutions, which allows us to deliver “big bank” sophistication in a community banking environment. The vision and focus of our executive management team enabled us to improve the quality of our loan portfolio and emerge from the recent economic recession as a stronger, well-positioned institution with a long-term growth strategy. We have fostered a culture that re-enforces a high-performance, values-oriented team approach and have specifically sought out highly-experienced employees whom we believe fit within that culture. More than 88% of our employees were hired by our current management team.

Diversified and Scalable Business Model Provides for Risk Mitigation and Profitable Growth. We possess a diversified and scalable business model, which we believe provides for risk mitigation and sustainable, profitable growth in varied economic conditions. We are not reliant on a particular line of business and instead lend to and gather deposits from a variety of clients on a regional and, in the case of our retail deposit franchise and yacht lending, nationwide basis. A number of our clients, including our pension fund, municipal, union and not-for-profit organization clients, despite their resources and banking needs, are not traditional community bank clients, and we believe they are not effectively served by our competitors. We believe that we are well positioned, by virtue of our experience with and understanding of these underserved clients, to take advantage of significant growth opportunities within such customer segments. Our technological infrastructure is capable of supporting continued growth and yielding operational efficiencies with scale.

Our Markets

Our commercial lending is focused in New England, consisting of the states of Massachusetts, New Hampshire, Connecticut, Vermont, Rhode Island and Maine, and in New York, predominantly in Suffolk and Nassau counties. Our residential mortgage loan portfolio is focused in the greater Boston, Massachusetts market. Our specialty financing activities expand beyond these geographic markets to also encompass, in the case of our SBA lending, Pennsylvania and New Jersey and, in the case of our yacht lending, maritime centers located throughout the country, including Ft. Lauderdale, Florida, Seattle, Washington and Annapolis, Maryland. We expect that these markets, as well as neighboring markets into which we may opportunistically expand, will continue to support our projected growth. We are an approved SBA “Preferred Lender” and we believe that we will be able to leverage our SBA status to expand our SBA lending within our current footprint and over time into additional contiguous geographic markets and eventually the national market. The expansion of the SBA business will be through the addition of experienced relationship managers in selected geographies supported by a centralized underwriting and credit administration group.

We utilize our relationship-based community banking platform to gather deposits from our commercial clients in the Northeast market. We leverage our sophisticated treasury management services to gather deposits from our pension fund, union, municipal and not-for-profit clients in the Northeast, but this market is not geographically constrained and represents a significant growth opportunity. We also gather deposits from our municipal clients located in the Commonwealth of Massachusetts.

While we operate two banking branches, a loan production office and six ATMs located in Boston, Massachusetts and Long Island, New York, we gather deposits on a nationwide basis through our affinity-based strategic marketing partnerships and our virtual banking platform. Our virtual banking platform positions us to meet the demands for mobile-oriented banking solutions and solutions. We have developed a product set that allows consumers nationwide to bank with us without needing a physical branch. In alignment with our virtual banking strategy, we intend to combine our loan production office in Hauppauge, New York with our full-service branch in New Hyde Park, New York and subsequently convert our New Hyde Park facility into a non-deposit gathering business center.

We believe that we will be successful in expanding our activities within the geographic areas in which we operate and, in the case of certain of our lending and deposit gathering activities, to a broader national market. Our growth will leverage our existing infrastructure and be predominantly driven by the addition of client facing sales and sales support professionals and strategic marketing partnerships and more advanced digital marketing.

Loans

Our primary source of income is interest on loans, as our loan portfolio represents the highest yielding component of our earning assets. Our loan products include commercial real estate, multi-family and construction loans, commercial and industrial loans, SBA loans, franchise loans, medallion loans, lines of credit, residential real estate loans, and yacht loans. Our loan portfolio primarily consists of a mix of commercial real estate, multi-family and construction, commercial and industrial, residential real estate and consumer loans. We originate consumer loans principally for the purchase of luxury yachts by high net worth individuals, otherwise we simply offer overdraft protection lines of credit. We underwrite and purchase high quality, whole jumbo

mortgage loans individually from banks and mortgage companies with which we have relationships in the greater Boston, Massachusetts market. We lend to traditional community bank clients, with a focus on increasing our lending to various specialty clients as well.

The following table presents the composition of our loan portfolio (including loans held for sale), by category, as of June 30, 2014.


(dollars in thousands)	June 30, 2014
	Amount			Percent
Commercial⁽¹⁾	$	68,898			12.2	%
Commercial real estate⁽²⁾		174,559			30.9	%
Commercial construction		5,594			1.0	%
Residential real estate		269,343			47.7	%
Home equity		6,604			1.2	%
Consumer⁽¹⁾⁽³⁾		39,206			7.0	%

Total gross loans		564,204			100.0	%

Deferred loan origination costs (fees), net		2,290

Total gross loans including deferred fees		566,494
Allowance for loan losses		(6,769	)

Loans, net	$	559,725

(1)	Loans held for sale consist of $4.3 million of commercial loans and $42.7 million of residential loans.

(2)	Commercial real estate includes multi-family loans. Loans made for business purposes, including owner-occupied real estate loans, that are secured by commercial real estate comprised 28.9%, or $50.5 million, of the commercial real estate and multi-family portfolio at June 30, 2014.

(3)	This portfolio is comprised predominantly of yacht loans.

Commercial and Industrial Loans. Our commercial and industrial loan portfolio includes both conventional loans and lines of credit. Commercial loans and lines of credit are typically made to seasoned small and middle market businesses primarily for purchase or expansion of the business, equipment financing, refinancing existing debt, and working capital support. We have also provided franchise loans and financing for Boston-area taxi cab medallions. These are examples of specialty financing we approve when we believe that we have an ability to recognize and take advantage of scalable market opportunities that will help us to diversify our commercial loan portfolio and sustain long-term growth. Minimum equity investment in the loan transaction is 20% and loan exposure is generally guaranteed by the owners of the business.

We offer flexible terms tailored to the cash flows of the business. Loans generally have 5 to 7 year maturities but may have a longer amortization period depending upon the nature of the assets financed. Loans are typically secured by the assets we finance and usually require a lien on all business assets as well. Commercial loan interest rates are fixed at a margin over comparable term cost of funds. Our lines of credit generally are structured as demand lines or have annual maturities. Interest rates are variable at a fixed margin over a floating rate index. Availability under our lines of credit is typically limited to a percentage of the value of the assets securing the line and may require periodic reporting of assets securing the line.

Cash flow from the borrower’s operations provides the primary source of repayment for these loans, although the financial strength and liquidity of the guarantor provide a critical risk-buffer to support the loan through the business cycle. Commercial lending generally involves different risks than those associated with residential, commercial real estate/multi-family and construction lending. The primary risk associated with commercial and industrial loans is a reduction of or disruption to the borrower’s cash flow due to general economic conditions or from events specific to the borrower. The secondary risk is the potential decline in the value of collateral securing these loans. We work from inception through the life of the loan to understand and

assess the history of the business and its owner(s) and their ability to effectively run the business and consistently generate sufficient cash flow to service the debt. We manage and mitigate such risks within our commercial and industrial loan portfolio throughout the life of each loan. We accomplish this in several ways. We require regular financial reporting by the borrower and guarantor(s). Our relationship managers are the primary point of contact with the client and are incentivized to manage their client relationships by staying in touch with clients and being well acquainted with their business and with the industry. The Credit Department performs annual financial reviews. If there are certain risk indicators such as overdrafts on the borrower’s operating account, delinquent payments, or other evidence of credit stress, we review individual credits in our quarterly asset quality meetings and bring collection expertise to the situation if warranted. Our Loan Review program serves an important role in ensuring risk rating integrity within the portfolio and that credit administration on all clients is current and up to date. For additional information please see “Loan Underwriting and Maintenance of Strong Asset Quality” below.

We focus on making commercial and industrial loans and lines of credit available to privately-owned and locally or regionally-based businesses that are unable to obtain conventional bank financing. SBA financing is particularly well suited to borrowers who may lack sufficient liquidity to provide 20% equity in the business and where the value of collateral offered may not be sufficient to fully secure the loan. Our targeted SBA borrowers are business owners and operators with verifiable experience. Our borrowers own such businesses as restaurants, convenience stores, liquor stores and other retail franchises, wholesalers, small manufacturers, and service businesses such as medical, dental and veterinary professionals and spas/fitness centers. In addition to such uses of loan proceeds as were cited above for our commercial and industrial loans, in our SBA loan portfolio loan proceeds may also be used for acquisition financing, franchise financing, and management buyouts/succession financing. The SBA program allows us to offer loans with longer terms than would ordinarily be available, typically 20 years with fixed interest rates. We benefit from the lending experience of our commercial relationship managers and their relationships with our clients, which results in a better understanding of small business borrowers and their businesses and contributes to our reputation for small business lending. In 2013, we were ranked in the top 10 and top 20 by SBA loan volume for Massachusetts and the New England market, respectively. We expect to continue to emphasize our origination of SBA loans as a growth strategy and to take advantage of opportunities created by our originations to generate non-interest income through strategic pool-sales of the guaranteed portions of SBA 7(a) program loans to other financial institutions.

Commercial Real Estate, Multi-family and Construction Loans. We originate commercial real estate and multi-family loans to experienced investors with an established history of successful investment in a variety of property types including retail, commercial office buildings, multi-family, mixed-use properties and owner-occupied commercial real estate (including SBA 504 loans). While the cash flow from income-producing properties is the primary source of repayment in our commercial real estate and multi-family portfolio, a combination of equity invested in each property and generally a required personal guarantee from the investor provides strong secondary support. We offer flexible loan terms with most loans priced at variable rates. While we may extend the loan term out to 10 years, pricing is typically reset every 5 years to market rates. Amortization periods are generally up to 25 years. The primary risks associated with commercial real estate and multi-family loans include the dependency of repayment upon income generated from the tenants of the property securing the loan, the potential vulnerability of such rental income to changes in market conditions, and the possible difficulty of liquidating collateral securing the loans. We work from inception through the life of the loan to understand the full scope of the guarantor’s real estate portfolio to manage and mitigate such risks within our commercial real estate and multi-family loan portfolio. Our commercial real estate and multi-family portfolio includes loans made for commercial purposes that are secured by real estate.

The majority of our commercial real estate and multi-family loans are made to borrowers and properties located in the greater Boston, Massachusetts market and other markets in the New England region with a smaller proportion of commercial real estate and multi-family loans in New York, predominantly in Suffolk and Nassau counties. Our relationship managers are experienced lenders who are familiar with the trends within their commercial real estate markets.

Our construction loans are primarily for commercial projects and require a minimum of 25% equity in the project. Construction loans typically require the personal guarantee of the developer. We offer flexible loan terms and competitive interest rates, typically structured as floating rates. Generally, our construction loans have a term of 1 to 2 years, and may include an amortizing “mini-perm” loan period of generally 3 to 5 years contingent upon construction completion and the property meeting established debt service coverage levels. Properties related to our construction loans are frequently pre-leased at a level that will generate sufficient cash flow to service the fully advanced construction loan on an amortizing basis upon the completion of construction. The key risks in construction lending are the completion of the project on time and on budget and successful payout of the loan from refinancing into a permanent loan, sale of the properties and/or project, or lease-up of the project. These risks are generally mitigated by professional construction monitoring as well as monitoring by our experienced relationship managers. Additionally, we limit the risk of this portfolio by limiting our total exposure to the business.

The table below shows the composition of our commercial real estate, multi-family and construction loan portfolio as of June 30, 2014.


	June 30, 2014		Percent of CRE Loans			Percent of Total Loans
	(Dollars in thousands)
Real estate loans:
Office	$	15,966		8.9	%		2.8	%
Industrial		11,961		6.6	%		2.1	%
Retail		38,860		21.6	%		6.9	%
Mixed use		21,674		12.0	%		3.8	%
1-4 family		13,480		7.5	%		2.4	%
Other		32,408		18.0	%		5.7	%

Commercial real estate loans		134,379		74.6	%		23.7	%

Multifamily		40,180		22.3	%		7.1	%
Construction		5,594		3.1	%		1.0	%

Total commercial loans secured by real estate	$	180,153		100.0	%		31.8	%

Residential Real Estate Loans. We underwrite and purchase high quality, whole jumbo mortgage loans individually, servicing released, from banks and mortgage companies with which we have relationships in the greater Boston, Massachusetts market. While we are not in the business of originating residential mortgage loans, our strategy allows us to maintain a balanced loan portfolio and provides strong risk-adjusted returns without the cost and regulatory compliance concerns associated with the direct origination of these assets. Between December 2010 and December 2013, a period during which commercial loan demand was weak and the secondary market for jumbo mortgage loans was favorable, we were active purchasers of jumbo mortgage loans in the greater Boston market. Through a combination of normal amortization and opportunistic sales, we expect that this portfolio will decrease over time as the market for commercial and specialty loans continues to improve. We outsource the servicing of our residential mortgage loans.

Consumer Loans. This portfolio is comprised predominantly of yacht loans. We have developed substantial expertise in originating loans to high net worth individuals for the purchase of personal luxury yachts generally ranging from $1 million to $5 million in value. We originate yacht loans nationally, but primarily in maritime centers such as Ft. Lauderdale, Florida, Seattle, Washington and Annapolis, Maryland. We primarily source our yacht loans through a sales professional based in Florida and referral relationships with yacht brokers to whom we pay referral fees. Because yacht loans are structured as personal consumer loans, the primary source of repayment is from the recurring income and resources of the yacht owner. We underwrite all yacht loans from our headquarters using our commercial credit analysts under the direction of our Senior Credit Officer and Chief Risk Officer. We leverage the expertise of our commercial credit analysts to perform a diligent evaluation of the

customer’s source of recurring cash flow because our borrowers typically own one or more businesses or may be real estate investors. The secondary source of repayment is the liquidity and other assets of the borrower(s), analysis of which is similar to the analysis of guarantors on our commercial loans. The tertiary source of repayment is the collateral value of the vessel, which we initially establish and periodically re-evaluate using ship surveys or analysis of comparable vessel sales.

Yacht loans require a minimum of 20% equity and carry terms of 20 years at either fixed or floating interest rates at the borrower’s option. We make yacht loans solely to U.S. citizens. All vessels are documented/registered. Most are registered in the United States with the Coast Guard, while some are registered in other nearby jurisdictions. We limit yacht registration to a small number of non-U.S. jurisdictions where we have diligently worked with local authorities and local counsel to ensure proper legal documentation, incontrovertible registry of the vessel, and surety of the Bank’s lien. We also ensure that there are no jurisdictional concerns under the Bank Secrecy Act and the Office of Foreign Assets Control regulations.

We underwrite our yacht loans using a variety of stringent personal credit metrics including personal debt service coverage, liquidity, net worth, credit score, and avoidance of historical credit problems. Therefore, while there is credit risk associated with our yacht loans, we believe that our lending parameters and targeted yacht and loan size provide an advantage to us from a credit risk management perspective in that we predominantly lend to previous yacht owners and that the market for these yachts enjoys more depth than the market for larger, more luxurious or highly specialized yachts. The average customer FICO score for borrowers in our yacht loan portfolio was 753 and loan-to-value was 65% as of June 30, 2014. We began making yacht loans in 2009 and we have not experienced any defaults in this portfolio. We work from inception through the life of the loan to manage and mitigate the risks within our yacht loan portfolio, including by monitoring values of and periodically reviewing the insurance policies for the yachts.

Loan Underwriting and Maintenance of Strong Asset Quality

Our focus on maintaining strong asset quality pervades all aspects of our lending activities, and it is especially apparent in our loan underwriting function. We are selective in targeting our lending to clients that we believe will meet our high credit quality standards and perform well throughout the economic cycle. Our credit standards are determined by our Chief Risk Officer and approved by the board.

Our underwriting process is disciplined and multilayered. Prospective loan opportunities are first reviewed by our relationship managers and, beyond a certain size or complexity, either with a lending manager or the Senior Credit Officer. Thereafter the credit opportunity is assigned to an experienced commercial credit analyst for detailed analysis and development of a credit underwriting memorandum. All of our lending personnel, from our relationship managers to the members of our Credit Committee, have significant experience that benefits our underwriting process. Our relationship managers do not have any individual signing authority and are incentivized to grow their loan portfolios while maintaining strong asset quality.

Approval authority is dependent upon the risk, size, and complexity of the loan request. Generally, simple or small loans are approved by the lending manager and the Senior Credit Officer. Loans greater than or equal to $1.5 million or more complex loans require approval of the Bank Credit Committee, which is headed by our Chief Risk Officer and includes our Senior Credit Officer, Commercial Lending Executive and head of the SBA lending program.

Each credit approval, renewal, extension, modification or waiver is documented in written form to reflect all pertinent aspects of the transaction. Our underwriting analysis generally includes an evaluation of the borrower’s business, management experience, industry, operating performance and financial condition and frequently includes a sensitivity analysis of the borrower’s ability to repay the loan.

With regard to residential lending, we underwrite and purchase high quality, whole jumbo mortgage loans individually from banks and mortgage companies with which we have relationships in the greater Boston,

Massachusetts market. Our relationship banks and mortgage companies understand our rigorous underwriting criteria and we only determine to fund and purchase loans following our individual loan review and a rigorous secondary evaluation of the compliance, underwriting and loan closing documentation by an independent third party.

We have a comprehensive Loan Review program comprised of an internal Loan Review Officer who provides continuous reviews of select portfolios throughout the year, supplemented by a third-party provider who provides 50% portfolio coverage through an annual review. Additionally, the third-party review includes validation of the sufficiency of and process behind our allowance. Loan reviews assess a review of closing terms and conditions, documentation, ongoing monitoring, risk rating integrity, and appropriate credit administration. We use any findings as an important internal control that identifies any emerging risk trends, process weaknesses, or training needs, as well as a critical source of third line-of-defense risk monitoring. All Loan Review reports are presented to the Loan Committee of the Board of Directors when completed.

For additional information concerning our risk management, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management.”

Loan Portfolio Concentrations

Diversified lending approach. We are committed to developing and maintaining a diversified loan portfolio. We also concentrate on making loans to businesses where we have or can obtain the necessary expertise to understand the credit risks commonly associated with the borrower’s industry. To ensure our lending activities maintain portfolio diversity, we have established internal exposure limits that restrict concentrations of loans within our portfolio to certain maximum percentages of our total loans and our Total Risk-Based capital levels. These exposure limits are approved by the Loan Committee of our board of directors based upon recommendations made by the Chief Risk Officer. Our internal exposure limits are established to avoid unacceptable concentrations, including in our different loan categories and in specific industries and in loans to one obligor.

The following table shows the composition of our commercial loan portfolio by borrower industry as of June 30, 2014.


	June 30, 2014		Percent of Commercial Loans
	(Dollars in thousands)
Industry:
Real estate, rental and leasing	$	122,017		49.0	%
Service		72,997		29.3	%
Manufacturing		5,626		2.2	%
Private household		—		—	%
Wholesale trade		1,710		0.7	%
Construction		8,628		3.5	%
Information		809		0.3	%
Retail trade		16,440		6.6	%
Transportation and warehousing		20,824		8.4	%

Total loans, before deferred loan fees	$	249,051		100.0	%

As shown, our portfolio benefits from the significant diversity of businesses and pledged collateral. Borrowers represented generically within the real estate, rental and leasing and construction categories include retail, office, multi-family, mixed-use and owner-occupied commercial real estate as was described in “Loans–Commercial Real Estate Loans” (above). Loans extended to borrowers within the service, manufacturing, wholesale, retail trade, transportation and warehousing industries include an array of industries including specialty finance sectors and SBA guaranteed loans that were described in “Loans–Commercial and Industrial Loans” (above).

Large Credit Relationships. We originate and maintain large credit relationships with a number of clients in the ordinary course of our business. We have established a formal, internal house lending limit on loans to one borrower of $4.0 million, which is significantly lower than our legal lending limit of approximately $9.3 million as of June 30, 2014. Exceptions to this limit may be made in the case of particularly strong credits. As of June 30, 2014, 15 relationships exceeded our house lending limit with total combined credit risk exposure of $72.0 million, or 116.3%, of Total Risk-Based capital.

The following table summarizes the aggregate committed and outstanding balances of our larger credit relationships as of June 30, 2014.


	At June 30, 2014
	Number of Relationships		Committed Balance		Recorded Investment		Past Due Balance		Nonaccrual Balance
	(Dollars in thousands)
Large credit relationships:
>$4 million to $8 million⁽¹⁾		15	$	72,022	$	63,452		—		—
>$2 million to $4 million		33		98,451		90,793		—		—

(1)	The loans included between $4 million to $8 million are secured by a variety of asset classes including investment real estate (including office, retail, multifamily and owner-occupied), taxi medallions, yachts and other equipment and business assets.

There were no charge offs during the six months ended June 30, 2014 and there was one large credit relationship (>$4 million to $8 million) in the amount of $5.3 million which was transferred to “other real estate owned,” or OREO, in the twelve months ended December 31, 2013, resulting in a charge-off of $0.7 million. We recorded an additional write-down to the asset of $0.65 million in the six months ended June 30, 2014.

There were no charge offs during the six months ended June 30, 2014 in the >$2 million to $4 million category. There was one credit relationship of $2.8 million in 2013 which was partially written down by $1.5 million in the twelve months ended December 31, 2013. The recorded investment in this relationship is $1.3 million at June 30, 2014 is not included in the table above.

Loan Participations

We are not active in the loan participation market, except that we will, in very limited instances, enter into participation agreements primarily in order to sell portions of loans that we originate.

Deposits

Deposits provide the primary source of funding for our lending activities. Our deposit products include demand deposit accounts, NOW accounts, savings accounts, money market deposit accounts, sweep accounts and certificates of deposit. Our treasury management services, which help drive deposit acquisition and retention in our pension fund, union, municipal and not-for-profit client segments, include remote deposit capture, ACH, wire transfers, zero balance accounts, merchant services, account reconciliation, positive pay, and payroll services, all of which are available through our intuitive online business banking and mobile banking systems. Our deposits are insured by the FDIC up to statutory limits.

•

sophisticated treasury management and other depository services that we believe drive deposit acquisition and retention from these client segments that are not effectively served by our competition. We have built a sales and service culture that recognizes the unique needs of these client segments, which provides us with significant competitive advantages, specifically where longer sales cycles create a barrier to entry. The marketplace for pension fund, union, municipal and not-for-profit organizations is very large and not geographically constrained or dependent upon branch infrastructure, and represents a significant deposit growth opportunity. At June 30, 2014, we had $288.0 million of deposits from pension fund, union, municipal and not-for-profit organizations, representing 48.3% of our deposit portfolio and, excluding our controlling stockholders and their related parties, we had $128.3 million of deposits from pension fund, union, municipal and not-for-profit organizations, representing 21.5% of our deposit portfolio.

•

Virtual Bank. Digital technology has introduced vast changes in the demand for how consumer banking services are delivered. Mobile banking adoption and usage rates continue to rise across all age segments, with growth occurring the fastest in younger, tech-savvy demographics, particularly the 18-29 age group. Our virtual banking platform aligns with this shift and positions us to meet the demands for mobile-oriented banking solutions. We have developed a product set that allows consumers nationwide to bank with us without needing a physical branch, including: paperless online account opening, a robust online banking system with web-based customer service forums, a mobile banking app optimized for smartphones and tablets with on-demand functionality, an innovative mobile payment app called FT Pay that is powered by LevelUp, unlimited debit card ATM rebates, overdraft protection, and personalized customer service. This broad product offering has allowed us to develop affinity-based strategic marketing partnerships with organizations and groups that have large, established and engaged customer and member bases. Through the use of marketing analytics and each partner’s endorsement, we are able to initiate direct marketing campaigns to the group’s membership base, resulting in a comparatively lower cost than traditional prospect marketing campaigns. We believe that our strategic marketing partnerships and our virtual banking platform will constitute an important element of our future growth. Between June 2011, when we began promoting our consumer checking account product, and June 30, 2014, we opened 1,484 new checking accounts. During a recent promotional period from December 2013 through June 30, 2014, we opened 999 new consumer savings accounts and experienced an increase of more than $65.9 million in total deposits in that product.

The following table reflects our deposits by source, as of June 30, 2014.


	June 30, 2014					December 31, 2013
	Total Deposits		Percent of Deposits			Total Deposits		Percent of Deposits
(dollars in thousands)
Non-interest bearing checking	$	55,928		9.4	%	$	127,330		24.5	%
Interest bearing checking		169,585		28.3	%		114,026		22.0	%
Money market		87,626		14.7	%		90,553		17.4	%
Savings		131,823		22.1	%		54,765		10.6	%
Time deposits		151,932		25.5	%		132,244		25.5	%

Total deposits	$	596,894		100.0	%	$	518,918		100.0	%

Core deposits	$	444,962		74.5	%	$	386,674		74.5	%

Brokered Deposits

We are not active in the market for brokered deposits, other than $12.5 million of reciprocal deposits obtained through CDARS at June 30, 2014. Our goal is to fund our balance sheet organically and to supplement it with brokered funding from time to time as a secondary source of liquidity.

Competition

We operate in a very competitive industry and face significant competition for clients from bank and non-bank competitors, particularly regional and national institutions, in originating loans, attracting deposits and providing other financial services. We compete for loans and deposits primarily based upon the personal and responsive service offered by our highly experienced relationship bankers and our product suite.

Our management believes that our most direct competition for deposits comes from commercial banks, particularly nationwide and large regional banks that target traditional community bank clients or other clients that we target. We also compete for deposits with other nationwide and large regional banks that have developed virtual banking platforms. Many of the institutions with which we compete have substantially greater resources and lending limits than we have and may offer services that we do not provide. For deposits from clients who do not value our service and product offerings, which we believe differentiate us in the marketplace for deposits, we compete largely based on pricing. Our cost of funds fluctuates with market interest rates and our ability to further reduce our cost of funds may be affected by higher interest rates being offered by other financial institutions. During certain interest rate environments, additional significant competition for deposits may be expected to arise from corporate and government debt securities and money market mutual funds.

Our competition in making loans comes principally from nationwide, regional and large community banks. Many of these have a significant number of branch offices in the areas in which we operate. Aggressive pricing policies by competitors and terms of our competitors’ loans, especially during a period of prolonged low interest rates, may result in a decrease in our loan origination volume and affect the yields on loans. We compete for loans principally through the quality of our responsive service, products and services we provide, competitive interest rates, loan fees and other loan terms.

Our high-touch service and tailored product suite-based approach to business enables us to compete with other financial institutions in attracting loans and deposits. Our relationship managers have significant experience in the banking industry in the markets they serve and are focused on customer service and providing our clients with products that meet their specialized needs, such as treasury management products for our union, not-for-profit and fund clients. By capitalizing on our experience and well-conceived product suite, we have been successful in cultivating stable relationships with our clients and also with financial intermediaries who refer their clients to us for banking services. We believe our approach to customer relationships will assist us in continuing to compete effectively for loans and deposits.

Properties

We lease in the aggregate more than 24,000 square feet for our headquarters, a branch office and ATM locations, each located in Boston, Massachusetts, and a loan production office located in New Hyde Park, New York. We do not own any of the premises through which we conduct our business. The leases for our facilities have terms expiring at dates ranging from 2015, in the case of an ATM lease location, to 2028, in the case of our headquarters. While we expect to continue to expand and diversify our business by hiring additional experienced bankers in our primary markets, we believe that the current facilities are adequate for our current and future levels of operations.

Our principal executive offices and branch office are located at One Harbor Street, Suite 201, Boston, Massachusetts 02210 and our telephone number is (617) 482-4000.

Employees

As of October 24, 2014, we had 87 employees, 85 of whom were full time employees. Sixteen of our employees are covered by a collective bargaining agreement with Commercial Workers Union Local 1445 chartered by the United Food and Commercial Workers International Union, or the UFCW. In August 2013 we entered into an agreement to extend the collective bargaining agreement until the earlier to occur of (1) December 31, 2014 or (2) the date of transfer of ownership of the Bank, at which time the collective

bargaining agreement will terminate. We expect to incur expenses of approximately $225,000 in connection with termination of the collective bargaining agreement in the fourth quarter of 2014. We have not experienced any work stoppages or strikes as a result of labor disputes and we consider our relationships with our employees and the UFCW to be good.

Proceedings

From time to time, we are subject to certain legal proceedings and claims in the ordinary course of business. We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, financial condition or operating results. We establish reserves for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Legal proceedings are subject to inherent uncertainties, and unfavorable rulings could occur that could cause us to adjust our litigation reserves or could have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section presents management’s perspective on our financial condition and results of operations at June 30, 2014, December 31, 2013 and December 31, 2012, and our results of operations for the six months ended June 30, 2014 and 2013 and for the years ended December 31, 2013 and 2012. The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes that appear elsewhere in this prospectus. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may not be indicative of our future financial outcomes. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections titled “Special Note Regarding Forward-Looking Statements and Industry Data” and “Risk Factors.” We assume no obligation to update any of these forward-looking statements.

General

The following discussion and analysis presents our financial condition and results of operations on a consolidated basis. However, because we conduct all of our material business operations through the Bank, the discussion and analysis relates to activities primarily conducted at the Bank.

Executive Overview

We are the holding company for First Trade Union Bank, which is headquartered in Boston, Massachusetts. Our results of operations depend primarily on net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on interest-bearing liabilities. We generate most of our revenue from interest on loans and investments and loan- and deposit-related fees. Our loan portfolio consists of a mix of commercial real estate, multi-family and construction, commercial and industrial, residential real estate and consumer loans (which are predominantly comprised of yacht loans). Our primary source of funding is deposits. Our largest expenses are interest on these deposits and salaries and related employee benefits. We measure our performance primarily through our pre-tax net income, net interest margin, efficiency ratio, return on average assets and return on average equity, earnings per share, and nonperforming assets to total assets, among other metrics, while maintaining appropriate regulatory leverage and risk-based capital ratios. The following table sets forth the key financial metrics we use to measure our performance.


	(unaudited) At or for the Six Months Ended June 30,						At or for the Year Ended December 31,
	2014			2013			2013			2012			2011
(dollars in thousands except per share amounts)
Pre-tax income	$	1,867		$	1,211		$	3,223		$	1,749		$	1,203
Net interest margin		3.01	%		3.10	%		3.19	%		3.09	%		3.13	%
Efficiency ratio⁽¹⁾		83.61	%		84.66	%		83.51	%		91.10	%		82.30	%
Return on average assets⁽²⁾		0.37	%		0.30	%		0.32	%		0.23	%		0.15	%
Return on average common stockholders’ equity⁽²⁾		4.57	%		3.32	%		3.72	%		2.64	%		1.72	%
Basic diluted earnings per share	$	0.30		$	0.21		$	0.48		$	0.33		$	0.21
Non-performing assets⁽³⁾ to total assets		1.25	%		1.83	%		1.36	%		1.61	%		1.92	%

(1)	This measure is not recognized under U.S. GAAP and is therefore considered to be a non-U.S. GAAP financial measure. See “Selected Historical Consolidated Financial Data—Non-GAAP Financial Measures.”

(2)	Six month data has been annualized.

(3)	Non-performing assets are defined as nonaccrual loans plus OREO.

Critical Accounting Policies and Estimates

Certain of our accounting policies are important to the portrayal of our financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances which could affect these judgments include, but are not limited to, changes in interest rates, changes in the performance of the economy and changes in the financial condition of borrowers. Our significant accounting policies are discussed in detail in Note 1 to our Consolidated Financial Statements included elsewhere in this prospectus. Management believes our policies with respect to the methodology for the determination of the allowance for loan losses, other real estate owned and fair value of financial instruments involves a higher degree of complexity and requires management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could materially impact results of operations. These critical policies and their application are periodically reviewed with the Board of Directors.

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses charged to expense, which affects our earnings directly. Loans are charged against the allowance for loan losses when management believes that the collectability of the principal is unlikely. Subsequent recoveries are added to the allowance. The allowance is an amount that reflects management’s estimate of the level of probable incurred losses in the portfolio. Factors considered by management in determining the adequacy of the allowance include, but are not limited to, detailed reviews of individual loans, historical and current trends in loan charge-offs for the various portfolio segments evaluated, the level of the allowance in relation to total loans and to historical loss levels, levels and trends in non-performing and past due loans, volume of and migratory direction of adversely graded loans, external factors including regulatory, reputation, and competition, and management’s assessment of economic conditions. Our board of directors reviews the recommendations of management regarding the appropriate level for the allowance for loan losses based upon these factors.

The provision for loan losses is the charge to operating earnings necessary to maintain an adequate allowance for loan losses. We have developed policies and procedures for evaluating the overall quality of our loan portfolio and the timely identification of problem credits. Management continues to review these policies and procedures and makes further improvements as needed. The adequacy of our allowance for loan losses and the effectiveness of our internal policies and procedures are also reviewed periodically by our regulators and external loan review personnel. Our regulators may advise us to recognize additions to the allowance based upon their judgments about information available to them at the time of their examination. Such regulatory guidance is taken under consideration by management, and we may recognize additions to the allowance as a result.

We continually refine our methodology for determining the allowance for loan losses by comparing historical loss ratios utilized to actual experience and by classifying loans for analysis based on similar risk characteristics. Cash receipts for accruing loans are applied to principal and interest under the contractual terms of the loan agreements; however, cash receipts on impaired and nonaccrual loans for which the accrual of interest has been discontinued are applied to principal and interest income depending upon the overall risk of principal loss to us.

Other Real Estate Owned

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less estimated costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs incurred after acquisition are charged to operations as an expense. Costs related to the development and improvement of real estate owned are capitalized.

Fair Value of Financial Instruments

A significant portion of the Company’s assets are financial instruments carried at fair value. This includes securities available-for-sale, loans held for sale, certain impaired loans, and other real estate owned. At June 30, 2014, December 31, 2013 and December 31, 2012 the percentage of total assets measured at fair value was 12.1%, 12.8% and 16.3%, respectively. The majority of assets carried at fair value are based on either quoted market prices or market prices for similar instruments. See Note 14 “Fair Value Measurements” in the “Notes to Consolidated Financial Statements” herein for additional disclosures regarding the fair value of financial instruments.

Comparison of Financial Condition at June 30, 2014 and December 31, 2013 and 2012

Total Assets. Total assets increased $33.7 million, or 5.0%, from $669.1 million at December 31, 2013 to $702.8 million at June 30, 2014. Total assets increased primarily due to an increase in net loans and loans held for sale by $18.2 million and an increase of cash and due from banks of $17.5 million, from December 31, 2013 to June 30, 2014, as a result of excess cash from deposit growth which we expect to deploy into loans and other interest earning assets in 2015 following the contribution of capital from this offering.

Total assets increased $36.9 million, or 5.8%, from $632.2 million at December 31, 2012 to $669.1 million at December 31, 2013, primarily due to an increase in total net loans of $85.3 million, partially offset by a decrease in cash and cash equivalents of $34.2 million and a decrease in investment securities of $15.5 million.

Loans and loans held for sale. Total loans and loans held for sale increased by $18.2 million, or 3.3%, from $548.3 million at December 31, 2013 to $566.5 million at June 30, 2014. The increase in loans and loans held for sale was due primarily to growth in the residential mortgage and commercial and industrial portfolios partially offset by the sale of yacht loans. We have transferred $78.3 million and $5.6 million of loans from our portfolio to held for sale during the six months ended June 30, 2014 and 2013, respectively, and we have transferred $33.5 million and $3.0 million of loans from our portfolio to held for sale during the years ended December 31, 2013 and 2012, respectively. We did not incur material gains or losses in connection with such transfers and the gains recognized upon the ultimate sale of these loans are discussed below. We generally do not originate or purchase loans with the intent to sell. Sales of residential real estate loans and consumer loans (yachts) were opportunistically executed in consideration of balance sheet management, including interest rate risk associated with residential loans, and because of growth constraints, as we prefer to operate with excess capital regulatory capital levels. Demand for origination of yacht loans increased in 2014. At the same time, demand to purchase yacht loans increased as other financial institutions sought to diversify away from commercial and residential real estate assets, creating liquidity in this asset class. We sold two pools of yacht loans to another organization and subsequently replaced the volume through a strong origination pipeline. Loan growth, adjusted for sales, was $49.5 million or 9.15%, for the six months ended June 30, 2014. The increase in loans reflects our continued focus on strategic initiatives across all portfolio segments.

Loans held for sale at June 30, 2014 include $42.7 million of 30-year fixed rate and 15/1 ARM residential real estate loans that are anticipated to be sold in the third or fourth quarter of 2014, principally for balance sheet and interest rate risk management, and are recorded at the lower of aggregate cost or fair value. These loans were transferred to held for sale as a result of ongoing modeling and analysis of the interest rate risk exposure in the residential portfolio, as well as the loan portfolio as a whole, consistent with our interest rate risk policy

guidelines and our expectation for the direction of interest rates. These loans were originated since 2012 and were transferred to held for sale after analysis of their interest rate risk characteristics so that the level of interest rate risk on the remaining balance of the portfolio was within our risk tolerance.

In addition, we expect to continue to emphasize our origination of SBA loans (included in Commercial categories) as a growth strategy by continuing to hold these loans in the portfolio. However, when pricing has been favorable, we have strategically entered into pool-sales of the guaranteed portion of SBA 7(a) program loans. Our production levels are generally smaller than our competitors who originate for the purposes of selling, as they have a more significant production to pool from to obtain the best pricing. Consequently, we originate all loans with the intent to hold. However, if our production levels allow us to create saleable pools that create an appropriate risk-adjusted return on sale, we will transfer the loans to the held for sale category. At June 30, 2014, there were $4.3 million in SBA 7(a) loans held for sale, and we have determined that there are no other loans that are eligible for sale in pools other than those already transferred to held for sale.

The following table summarized loan sales, related gains recognized as well as the amount of loan premiums and costs that were written off (a reduction to interest income) for the periods indicated.


	Six Months Ended June 30,					Year Ended December 31,
	2014			2013		2013			2012
(dollars in thousands)
Loans sold:
Commercial (SBA)	$	1,905		$	5,629	$	7,256		$	3,019
Residential real estate	$	—		$	—	$	26,247		$	—
Consumer (yachts)	$	29,432		$	—	$	—		$	—

	$	31,337		$	5,629	$	33,503		$	3,019

Gains Recognized:
Commercial (SBA)	$	188		$	566	$	652		$	337
Residential real estate	$	—		$	—	$	367		$	—
Consumer (yachts)	$	809		$	—	$	—		$	—

	$	997		$	566	$	1,019		$	337

Write-off of deferred premiums and costs, net:
Commercial (SBA)	$	—		$	—	$	—		$	—
Residential real estate	$	—		$	—	$	(221	)	$	—
Consumer (yachts)	$	(253	)	$	—	$	—		$	—

	$	(253	)	$	—	$	(221	)	$	—

Total net loans increased by $85.3 million, or 18.7%, from $456.3 million at December 31, 2012 to $541.5 million at December 31, 2013. The increase in loans was due primarily to an increase of $21.2 million, or 9.0%, in residential real estate loans, an increase of $25.0 million or 17.3%, in commercial real estate loans, and an increase of $34.8 million, or 216.0%, in consumer loans during the six months ended June 30, 2014. These increases reflect our continued emphasis on purchasing high quality jumbo mortgage loans and originating commercial and consumer loans during a period of increased loan demand. Home equity lines of credit decreased by $922 thousand, or 11.3%, while construction and land loans increased $1.8 million, or 70.0%, and commercial and industrial loans increased $2.3 million, or 4.2%.

The following tables set forth the composition of our loan portfolio (including loans held for sale) at the dates indicated:


	As of June 30,
(dollars in thousands)	2014						2013
	Amount			Percent			Amount			Percent
Commercial	$	68,898			12.2	%	$	47,845			9.9	%
Commercial real estate		174,559			30.9	%		161,467			33.5	%
Commercial construction		5,594			1.0	%		3,394			0.7	%
Residential real estate		269,343			47.7	%		224,182			46.5	%
Home equity		6,604			1.2	%		7,845			1.6	%
Consumer		39,206			7.0	%		37,425			7.8	%

Total gross loans		564,204			100.0	%		482,158			100.0	%

Deferred loan origination costs (fees), net		2,290						1,482

Total gross loans including deferred fees		566,494						483,640
Allowance for loan losses		(6,769	)					(7,970	)

Total loans, net allowance for loan losses	$	559,725					$	475,670


	As of December 31,
(dollars in thousands)	2013						2012						2011						2010						2009
	Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent
Commercial	$	56,165			10.3	%	$	53,911			11.7	%	$	49,749			12.8	%	$	122,331			36.8	%	$	144,497			27.7	%
Commercial real estate		169,757			31.1	%		144,727			31.3	%		142,789			36.8	%		125,240			20.5	%		156,499			30.0	%
Commercial construction		4,345			0.8	%		2,556			0.6	%		15,084			3.9	%		49,599			11.5	%		79,964			15.3	%
Residential real estate		257,483			47.2	%		236,289			51.2	%		169,346			43.6	%		115,193			26.7	%		114,318			21.9	%
Home equity		7,242			1.3	%		8,164			1.8	%		4,732			1.2	%		5,295			1.2	%		4,269			0.8	%
Consumer		50,918			9.3	%		16,126			3.4	%		6,616			1.7	%		14,070			3.3	%		22,353			4.3	%

Total gross loans		545,910			100.0	%		461,773			100.0	%		388,316			100.0	%		431,728			100.0	%		521,900			100.0	%

Deferred loan origination costs (fees), net		2,436						1,972						784						140						(85	)
Allowance for loan losses		(6,812	)					(7,488	)					(8,733	)					(13,401	)					(13,047	)

Total loans, net of allowance for loan losses	$	541,534					$	456,257					$	380,367					$	418,467					$	508,768

The following table sets forth loan origination activity:


	Total Loans				Total Loans				Total Loans				Total Loans
	For the six months ended June 30, 2014		Number of Loans		For the six months ended June 30, 2013		Number of Loans		For Year ended December 31, 2013		Number of Loans		For Year ended December 31, 2012		Number of Loans
(dollars in thousands)
By Loan Portfolio Class:
Commercial	$	18,175		29	$	12,956		38	$	28,669		95	$	32,157		92
Commercial real estate		15,915		24		25,779		26		50,620		60		20,423		31
Commercial construction		—		—		3,005		3		6,413		5		—		—
Home equity		—		—		—		—		—		—		—		—
Consumer		31,121		20		21,482		15		38,767		25		11,147		7

Total	$	65,211		73	$	63,222		82	$	124,469		185	$	63,727		130

Purchases (residential real estate)	$	24,328		46	$	29,628		42	$	117,517		188	$	126,011		186

We underwrite and purchase whole jumbo residential mortgages individually from banks and mortgage companies with which we have relationships in the greater Boston, Massachusetts market. All loans are purchased as individual whole loans and are underwritten to our standards. Servicing is outsourced to a single servicer.

Loan Maturity. The following table sets forth certain information at June 30, 2014 and December 31, 2013 regarding scheduled contractual maturities during the periods indicated. The tables do not include any estimate of prepayments, which significantly shorten the average life of all loans and may cause our actual repayment experience to differ from that shown below. Demand loans having no stated schedule of repayments and no stated maturity are reported as due in one year or less. The amounts shown below include loans held for sale and exclude net deferred loan fees. Loans held for sale are predominantly maturing in the “more than 10 years” category.


	As of June 30, 2014								As of December 31, 2013
(dollars in thousands)	Due In One Year or Less		Due 1-5 Years		Due After 5 Years		Due More than Ten Years		Due Under One Year		Due 1-5 Years		Due After 5 Years		Due More than Ten Years
By Loan Portfolio Class:
Commercial	$	13,443	$	19,439	$	25,688	$	10,328	$	14,357	$	15,141	$	17,083	$	9,585
Commercial real estate		15,984		46,088		105,235		7,252		17,567		45,326		99,996		6,867
Commercial construction		3,589		—		—		2,005		2,555		—		—		1,790
Residential real estate		1,007		667		2,702		264,967		—		395		2,840		254,248
Home equity		215		2,400		3,483		506		19		322		6,322		579
Consumer		44		2		—		39,160		40		17		4,928		45,933

Total loans	$	34,282	$	68,596	$	137,108	$	324,218	$	34,538	$	61,201	$	131,169	$	319,002

By Interest Rate Type:
Fixed	$	6,817	$	37,844	$	15,524	$	162,700	$	6,067	$	34,222	$	20,102	$	175,590
Adjustable		27,465		30,752		121,584		161,518		28,471		26,979		111,067		143,412

Total loans	$	34,282	$	68,596	$	137,108	$	324,218	$	34,538	$	61,201	$	131,169	$	319,002

Securities. Our securities portfolio is predominately composed of investment grade mortgage-backed securities, bonds issued by corporations and notes issued by municipalities. We classify substantially all of our securities as available-for-sale. We do not engage in securities trading in carrying out our investment strategies.

Securities decreased by $780 thousand, or 1.0%, to $77.9 million at June 30, 2014 from $78.7 million at December 31, 2013. The decrease in the portfolio was primarily due to normal pay downs during the six months ended June 30, 2014 as we chose to invest in other higher yielding assets. Securities decreased by $15.5 million, or 16.5%, to $78.7 million at December 31, 2013, from $94.2 million at December 31, 2012. The decrease in the portfolio was primarily due to normal pay downs during the year ended December 31, 2013. We did not reinvest all of the cash flows from these pay downs in new securities. We instead chose to deploy the funds for loan portfolio growth. Reinvestments were made to maintain the investment portfolio at a level adequate to meet liquidity needs.

The following table sets forth the amortized cost and fair values of our securities portfolio at the dates indicated.


	June 30,				December 31,
(dollars in thousands)	2014				2013				2012				2011
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale:
Corporate bonds	$	10,191	$	10,277	$	10,178	$	10,175	$	9,151	$	8,915	$	10,377	$	9,801
Municipal notes		7,919		8,241		7,918		7,815		6,018		6,561		7,803		8,268
U.S. agency mortgage-backed securities		58,751		59,380		60,953		60,686		76,175		78,734		101,260		102,771

Total available for sale	$	76,861	$	77,898	$	79,049	$	78,676	$	91,344	$	94,210	$	119,440	$	120,840

At June 30, 2014 and December 31, 2013, we had no investments in a single company or entity (other than the U.S. government or an agency of the U.S. government), including both debt and equity securities, that had an aggregate book value in excess of 10% of our equity.

The following table sets forth the stated maturities and weighted average yields of investment securities at June 30, 2014 and December 31, 2013. Certain mortgage-backed securities have adjustable interest rates and will reprice periodically within the various maturity ranges. These repricing schedules are not reflected in the table below.


June 30, 2014	One Year or Less					More than One Year to Five Years					More than Five Years to Ten Years					More than Ten Years					Total
(dollars in thousands)	Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield
Corporate bonds	$	—		—	%	$	4,191		1.67	%	$	5,500		2.48	%	$	500		3.50	%	$	10,191		2.20	%
Municipal notes		—		—	%		140		5.06	%		1,328		2.97	%		6,451		3.40	%		7,919		3.36	%
U.S. agency mortgage-backed securities		—		—	%		848		5.12	%		334		5.27	%		57,569		2.27	%		58,751		2.33	%

Total	$	—		—	%	$	5,179		2.33	%	$	7,162		2.70	%	$	64,520		2.39	%	$	76,861		2.42	%


December 31, 2013	One Year or Less					More than One Year to Five Years					More than Five Years to Ten Years					More than Ten Years					Total
(Dollars in thousands)	Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield
Corporate bonds	$	—		—	%	$	4,178		1.68	%	$	5,500		2.42	%	$	500		3.50	%	$	10,178		2.17	%
Municipal notes		—		—	%		140		5.08	%		1,078		2.75	%		6,700		3.41	%		7,918		3.35	%
U.S. agency mortgage-backed securities		—		—	%		1,042		5.15	%		393		5.30	%		59,518		2.26	%		60,953		2.33	%

Total	$	—		—	%	$	5,360		2.44	%	$	6,971		2.63	%	$	66,718		2.39	%	$	79,049		2.41	%

Deposits. Deposits increased $78.0 million, or 15.0%, to $596.9 million at June 30, 2014 from $518.9 million at December 31, 2013. Deposits increased $6.9 million, or 1.4%, to $518.9 million at December 31, 2013 from $512.0 million at December 31, 2012. At June 30, 2014 and December 31, 2013, our core deposits, which are deposits other than certificates of deposit, were $445.0 million and $386.7 million, respectively, representing 74.5% of total deposits for both periods. We are not active in the market for brokered deposits, other than $12.5 million of reciprocal deposits obtained through CDARS at June 30, 2014, representing 2.1% of total deposits. This level of core deposits shows our continued strategy to shift customers out of certificates of deposit and into deposit products with a greater relationship focus in order to secure less volatile and less costly funding and cross-sell opportunities. Increases in certificates of deposit (time deposit) in the six months ended June 30, 2014 were a result of strategic growth in internet certificates of deposit in the 18-36 month range to extend liabilities for interest rate risk management purposes. The following table sets forth our deposit balance at June 30, 2014 and December 31, 2013.


(dollars in thousands)	June 30, 2014					December 31, 2013
	Amount		Percent			Amount		Percent
Demand, non-interest bearing	$	55,928		9.4	%	$	127,330		24.5	%
Interest bearing checking		169,585		28.3			114,026		22.0
Money market accounts		87,626		14.7			90,553		17.5
Savings		131,823		22.1			54,765		10.6
Time deposits		151,932		25.5			132,244		25.5

Total deposits	$	596,894		100.0	%	$	518,918		100.0	%

Core deposits	$	444,962		74.5	%	$	386,674		74.5	%

The following table sets forth the average balances and weighted average rates of our deposit products at the dates indicated.


	For the Six Months Ended June 30,
	2014								2013
(dollars in thousands)	Average Balance		Percent			Weighted Average Rate			Average Balance		Percent			Weighted Average Rate
Demand, non-interest bearing	$	81,649		14.4	%		—	%	$	91,893		19.0	%		—	%
Interest bearing checking		114,593		20.2	%		0.11	%		111,352		23.0	%		0.13	%
Money market accounts		95,527		16.8	%		0.26	%		98,549		20.4	%		0.33	%
Savings		116,794		20.6	%		0.86	%		54,834		11.3	%		0.57	%
Time deposits		159,336		28.0	%		0.87	%		127,020		26.3	%		1.15	%

Total deposits	$	567,899		100.0	%		0.49	%	$	483,648		100.0	%		0.47	%


	For the Years Ended December 31,
	2013								2012								2011
(dollars in thousands)	Average Balance		Percent			Weighted Average Rate			Average Balance		Percent			Weighted Average Rate			Average Balance		Percent			Weighted Average Rate
Demand, non-interest bearing	$	108,655		22.0	%		—	%	$	77,642		16.3	%		—	%	$	56,435		12.4	%		—	%
Interest bearing checking		117,193		23.7	%		0.12	%		102,899		21.7	%		0.13	%		119,728		26.2	%		0.32	%
Money market accounts		93,047		18.9	%		0.31	%		83,398		17.6	%		0.40	%		83,855		18.4	%		0.80	%
Savings		53,832		10.9	%		0.59	%		59,087		12.4	%		0.60	%		62,297		13.7	%		0.86	%
Time deposits		120,824		24.5	%		1.08	%		152,156		32.0	%		1.35	%		133,967		29.3	%		1.80	%

Total deposits	$	493,551		100.0	%		0.42	%	$	475,182		100.0	%		0.61	%	$	456,282		100.0	%		0.88	%

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


Interest Rate:	At June 30,		At December 31,
(dollars in thousands)	2014		2013		2012		2011
0.00% - 1.00%	$	115,048	$	106,088	$	84,658	$	40,870
1.01 - 2.00%		33,926		17,767		57,474		68,690
2.01 - 3.00%		1,091		1,232		6,952		17,953
3.01 - 4.00%		1,867		6,256		7,911		16,814
4.01 - 5.00%		—		901		1,373		1,483
5.01 - 7.00%		—		—		—		83

Total	$	151,932	$	132,244	$	158,368	$	145,893

As of June 30, 2014 and December 31, 2013, the aggregate amount of our certificates of deposit in amounts greater than or equal to $100 thousand was approximately $136.4 million and $113.6 million, respectively. The following table sets forth the maturity of these certificates as of June 30, 2014 and December 31, 2013.


Maturities: (dollars in thousands)	June 30, 2014		December 31, 2013
3 months or less	$	14,810	$	19,157
3 to 12 months		52,352		56,174
Over one year through 3 years		68,424		37,304
Over 3 years		851		930

Total	$	136,437	$	113,565

Borrowings. We may obtain advances from the FHLB upon the security of certain of our mortgage loans and certain of our mortgage-backed securities as collateral. Such collateral totaled $285.4 million at June 30, 2014 and $203.8 million at December 31, 2013. Such advances may be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. To the extent such borrowings have different terms of repricing than our deposits, they can change our interest rate risk profile. At June 30, 2014 and December 31, 2013, we had $30.0 million and $72.7 million in outstanding advances from the FHLB, respectively. The $42.7 million decrease during the period ended June 30, 2014 was a result of a $10.0 million maturity of longer-term advances as well as the repayment of overnight advances funded by targeted growth in savings accounts. At June 30, 2014 and December 31, 2013, based on available collateral and our ownership of FHLB stock, and based upon our internal policy, we had access to additional FHLB advances of up to $186.6 million and $73.6 million, respectively. There were no overnight advances with FHLB at June 30, 2014 compared to $32.7 million at December 31, 2013. We also have an available line of credit with the FHLB in the amount of approximately $1.5 million as of June 30, 2014 and December 31, 2013. As of those dates, we also had a borrowing line at the Federal Reserve Bank. We may obtain advances from the Federal Reserve Bank upon

the security of certain of our commercial and consumer loans and certain of our mortgage-backed securities. Such collateral totaled $293.7 million at June 30, 2014 and $234.3 million at December 31, 2013. Based on available collateral, we had access to Federal Reserve Bank advances of up to $199.5 million and $159.1 million, as of June 30, 2014 and December 31, 2013, respectively. No borrowings under either of these lines were outstanding at June 30, 2014 or December 31, 2013.

We also borrow funds under repurchase agreements with certain customers. These agreements are recorded as financing transactions as we maintain effective control over the transferred or pledged securities. The dollar amount of the securities underlying the agreements continues to be carried in our securities portfolio while the obligations to repurchase the securities are reported as liabilities. The securities underlying the agreements are delivered to the party with whom each transaction is executed. Those parties agree to resell to us the identical securities we delivered to them at the maturity or call period of the agreement.

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


FHLB Advances	Six Months Ended						Year Ended
(dollars in thousands)	June 30, 2014			June 30, 2013			December 31, 2013			December 31, 2012			December 31, 2011
Balance outstanding at period end	$	30,000		$	47,663		$	72,700		$	49,000		$	65,200
Average amount outstanding during the period	$	44,618		$	52,298		$	60,888		$	55,101		$	75,374
Maximum amount outstanding at any month end	$	59,661		$	50,189		$	89,500		$	60,200		$	87,229
Weighted average interest rate during the period		3.23	%		3.41	%		2.87	%		3.75	%		3.94	%
Weighted average interest rate at period end		4.24	%		3.35			2.25	%		3.69	%		3.80	%


Repurchase Agreements	Six Months Ended						Year Ended
(Dollars in thousands)	June 30, 2014			June 30, 2013			December 31, 2013			December 31, 2012			December 31, 2011
Balance outstanding at period end	$	12,239		$	11,987		$	15,388		$	9,162		$	7,161
Average amount outstanding during the period	$	13,636		$	10,941		$	12,376		$	7,771		$	8,802
Maximum amount outstanding at any month end	$	13,692		$	11,987		$	15,388		$	9,401		$	17,671
Weighted average interest rate during the period		0.10	%		0.16	%		0.16	%		0.13	%		0.21	%
Weighted average interest rate at period end		0.09	%		0.16	%		0.16	%		0.12	%		0.23	%

Junior Subordinated Debentures. In December 2009, First Trade Union Bancorp Capital Trust I issued $3.2 million of capital securities, which pay interest at a fixed rate equal to 13.0%. Trust I purchased $3.2 million of fixed rate junior subordinated debentures from us, which debentures mature on December 31, 2039 but are callable by the Company at par any time after December 31, 2014. The debentures are the sole asset of Trust I. The terms of the junior subordinated debentures are the same as the terms of the capital securities. The interest rate at June 30, 2014 was 13.0%. We make interest payments and other payments under the subordinated debentures to Trust I. Our obligations under the subordinated debentures are unsecured and rank junior to all of our other borrowings, except borrowings that by their terms rank equal or junior to the subordinated debentures. We guarantee the payments by Trust I of the amounts that are required to be paid on the capital securities, to the extent that Trust I has funds available for such payments. The proceeds of these capital securities, which have been contributed to the Bank, are included in the Bank’s capital ratio calculations and treated as Tier I capital. In accordance with the Financial Accounting Standards Board Accounting Standards Codification 810, Consolidations, Trust I is not included in our consolidated financial statements.

Comparison of Operating Results for the Six Months Ended June 30, 2014 and 2013

Net Income. Net income was $1.3 million for the six months ended June 30, 2014, or $0.30 per share, compared to $899 thousand for the six months ended June 30, 2013, or $0.21 per share. The increase in net

income is primarily attributable to growth in net interest and dividend income, after provision for loan loss, relative to non-interest expenses, and increased noninterest income attributable to the sale of selected loans during the period.

Interest and Dividend Income. Total interest and dividend income increased $1.0 million, or 9.0%, to $12.2 million for the six months ended June 30, 2014 compared to the same period in 2013. The increase in interest income was primarily the result of higher loan income due to increased loan volumes in targeted categories. The average balance of loans during the six months ended June 30, 2014 increased $90.4 million, or 19.1%, to $563.5 million from $473.1 million for the six months ended June 30, 2013, while the average yield on loans decreased by 30 basis points to 3.98% for the six months ended June 30, 2014 from 4.28% for the six months ended June 30, 2013. The decline in yield reflects the competitive rate environment and the general level of interest rates. The average balance of investment securities decreased $13.1 million, or 14.3%, to $78.7 million for the six months ended June 30, 2014 from $91.8 million for the six months ended June 30, 2013, and the yield on investment securities increased by 19 basis points to 2.55% for the six months ended June 30, 2014 from 2.36% for the six months ended June 30, 2013.

Interest Expense. Total interest expense increased $80 thousand, or 3.58%, to $2.3 million for the six months ended June 30, 2014 compared to $2.2 million for the six months ended June 30, 2013. Interest expense on interest-bearing deposit accounts for the six months ended June 30, 2014 increased $250 thousand, or 22.2%, over the same period in the prior year to $1.4 million driven by increases in average balances.

Interest expense on FHLB advances decreased $172 thousand, or 19.3%, to $720 thousand for the six months ended June 30, 2014 from $892 thousand for the six months ended June 30, 2013. The average balance of FHLB advances decreased by $7.7 million, or 14.7%, to $44.6 million for the six months ended June 30, 2014 from $52.3 million for the six months ended June 30, 2013. The rate decreased 18 basis points to 3.23% for the six months ended June 30, 2014 from 3.41% for the six months ended June 30, 2013.

Net Interest and Dividend Income. Net interest and dividend income increased $928 thousand, or 10.3%, to $9.9 million for the six months ended June 30, 2014 from $9.0 million for the six months ended June 30, 2013. The increase resulted primarily from a $1.0 million increase in interest income. Our average interest-earning assets increased to $658.3 million for the six months ended June 30, 2014 from $580.7 million for the six months ended June 30, 2013, while our net interest rate spread decreased to 2.88% for the six months ended June 30, 2014 from 2.89% for the six months ended June 30, 2013. Our net interest margin decreased to 3.01% for the six months ended June 30, 2014 from 3.10% for the six months ended June 30, 2013.

Provision for Loan Losses. Based on our analysis of the components of the allowance for loan losses described in “Risk Management—Allowance for Loan Losses,” we recorded a provision for loan losses of $50 thousand for the six months ended June 30, 2014, compared to a provision of $350 thousand for the six months ended June 30, 2013. The allowance for loan losses was $6.8 million, or 1.31% of total loans at June 30, 2014, and reflects the reduction in non-performing loans as well as $47.0 million of loans held for sale. This compares to $8.0 million, or 1.65% of total loans at June 30, 2013. Total nonperforming loans, excluding performing troubled debt restructurings, were $4.8 million at June 30, 2014 compared to $11.0 million at June 30, 2013. The allowance for loan losses reflects the amount we believe to be appropriate to cover probable incurred losses inherent in the loan portfolio at June 30, 2014 and 2013.

Noninterest Income. Noninterest income increased $434 thousand, or 36.5%, to $1.6 million during the six months ended June 30, 2014 from $1.2 million for the six months ended June 30, 2013. The increase is primarily attributed to an increase in gains from the sale of yacht loans.

Noninterest Expense. Noninterest expense increased $1.0 million to $9.6 million for the six months ended June 30, 2014 from $8.6 million for the six months ended June 30, 2013. The increase primarily reflected higher other real estate owned expense of $758 thousand, mainly due to a write-down on OREO property, and an

increase in salaries and employee benefits expense of $372 thousand, offset by a slight decrease in advertising expense. Adjusted for these non-recurring OREO expenses, noninterest expense would have been $8.9 million for the six months ended June 30, 2014, which represents an increase of $248 thousand, or 2.9%, from the same period in 2013.

Income Taxes. Income tax expense for the six months ended June 30, 2014 increased to $592 thousand from $312 thousand for the six months ended June 30, 2013, primarily due to increased income before income taxes. The effective tax rate as a percent of pre-tax income was 31.7% for the six months ended June 30, 2014 and 25.8% for the six months ended June 30, 2013. Taxable income increased while tax-exempt income from municipal investments and bank owned life insurance remained relatively constant, causing the change in the effective tax rate.

Comparison of Operating Results for the Years Ended December 31, 2013 and 2012

Net Income. Net income was $2.0 million for the year ended December 31, 2013, or $0.48 per share, compared to $1.4 million for the year ended December 31, 2012, or $0.33 per share, an increase of $607 thousand, or 43.4%. The increase was primarily due to an increase in interest income of $382 thousand, an increase of $782 thousand in noninterest income, and a decrease of $1.1 million in interest expense, partially offset by an increase of $459 thousand in noninterest expense during the year ended December 31, 2013. Increases in revenue (net interest income and non-interest income) of 12.0% far outpaced increases in non-interest expense of 2.7% as a result of improved scalability and strategic revenue generation and cost savings initiatives.

Interest and Dividend Income. Total interest and dividend income increased $382 thousand, or 1.7%, to $23.4 million for the year ended December 31, 2013 compared to the same period in 2012. The increase in total interest income was primarily the result of a $1.3 million increase in interest on loans, offset by a decrease of $788 thousand in interest on securities and a decrease of $94 thousand in other interest during the year ended December 31, 2013. The average balance of loans during the year ended December 31, 2013 increased $90.0 million, or 22.0%, to $499.5 million from $409.6 million for the year ended December 31, 2012, while the average yield on loans decreased by 63 basis points to 4.27% for the year ended December 31, 2013 from 4.90% for the year ended December 31, 2012. The decrease in yield reflected the focus on originating adjustable loans, portfolio repricing and a change in the loan mix with bias towards lower risk products. The average balance of investment securities decreased $23.1 million, or 21.0%, to $87.3 million for the year ended December 31, 2013 from $110.4 million for the year ended December 31, 2012, and the yield on investment securities decreased by 23 basis points to 2.32% for the year ended December 31, 2013 from 2.55% for the year ended December 31, 2012.

Interest Expense. Total interest expense decreased $1.1 million, or 20.9%, to $4.3 million for the year ended December 31, 2013 from $5.4 million for the year ended December 31, 2012. Interest expense on interest-bearing deposit accounts decreased $827 thousand to $2.0 million for the year ended December 31, 2013 from $2.9 million for the year ended December 31, 2012. The decrease was primarily due to the impact of maturing certificates of deposit renewing at lower rates, a shift in deposit mix toward core deposits and deposit rate reductions in core deposits.

Interest expense on borrowings decreased $315 thousand, or 14.0%, to $1.8 million for the year ended December 31, 2013 from $2.1 million for the year ended December 31, 2012. The average balance of FHLB advances increased by $5.9 million, or 10.7%, to $61 million for the year ended December 31, 2013 from $55.1 million for the year ended December 31, 2012. The rate decreased 88 basis points to 2.87% for the year ended December 31, 2013 from 3.75% for the year ended December 31, 2012.

Net Interest and Dividend Income. Net interest and dividend income increased $1.5 million, or 8.5%, to $19.1 million for the year ended December 31, 2013 from $17.6 million for the year ended December 31, 2012. The increase during the year ended December 31, 2013 resulted primarily from a $1.1 million decrease in interest

expense. Our average interest-earning assets increased by $29.6 million, or 5.2%, to $600.3 million for the year ended December 31, 2013 from $570.7 million for the year ended December 31, 2012, and our net interest rate spread increased 11 basis points to 2.98% for the year ended December 31, 2013 from 2.87% at December 31, 2012. Our net interest margin increased 10 basis points to 3.19% for the year ended December 31, 2013 from 3.09% for the year ended December 31, 2012. The increase in our interest rate spread and net interest margin reflects yields of interest-earning assets declining slower than yields of interest-bearing liabilities in this low rate environment. In addition, we benefited from the repricing of long-term certificates of deposit at maturity in the ordinary course.

Provision for Loan Losses. Based on our analysis of the components of the allowance for loan losses described in “Risk Management—Allowance for Loan Losses,” we recorded a provision for loan losses of $350 thousand for the year ended December 31, 2013, while we did not record a provision for the year ended December 31, 2012. The allowance for loan losses was $6.8 million, or 1.25% of total loans at December 31, 2013, compared to $7.5 million, or 1.62% of total loans at December 31, 2012. Total nonperforming loans, excluding performing troubled debt restructurings, were $4.4 million at December 31, 2013 compared to $10.2 million at December 31, 2012. The allowance for loan losses reflects the estimate we believe to be appropriate to cover probable incurred losses inherent in the loan portfolio at December 31, 2013 and 2012.

Noninterest Income. Noninterest income increased $782 thousand, or 53.6%, to $2.2 million during the year ended December 31, 2013 from $1.5 million for the year ended December 31, 2012. The increase is primarily attributed to a $1.0 million net gain on sales of loans for the year ended December 31, 2013 as compared to $337 thousand for the year ended December 31, 2012 due to opportunistic loan sales from our portfolio.

Noninterest Expense. Noninterest expense increased $459 thousand, or 2.6%, to $17.8 million for the year ended December 31, 2013 from $17.3 million for the year ended December 31, 2012. The increase primarily reflected increases in salaries and employee benefits expense of $598 thousand as a result of improved performance based compensation, an increase of $19 thousand in expenses associated with other-real-estate-owned properties and a decrease of $158 thousand in all other noninterest expenses, which consisted primarily of increased advertising expenses partially offset by decreased expense on professional services during the year ended December 31, 2013.

Income Taxes. Income tax expense for the year ended December 31, 2013 increased $867 thousand to $1.2 million from $349 thousand for the year ended December 31, 2012, due to increased income before income taxes and a higher effective tax rate. The effective tax rate as a percent of pre-tax income was 37.7% and 20.0% for the year ended December 31, 2013 and 2012, respectively.

Analysis of Net Interest Income

Net interest income represents the difference between income we earn on our interest-earning assets and the expense we pay on interest-bearing liabilities. Net interest income depends on the volume of interest-earning assets and interest-bearing liabilities and the interest rates earned on such assets and paid on such liabilities.

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


	For the Six Months Ended June 30,
	2014								2013
(dollars in thousands)	Average Balance⁽¹⁾			Interest		Average Rate			Average Balance⁽¹⁾			Interest		Average Rate
Interest-earning assets:
Investment securities	$	78,699		$	1,003		2.55	%	$	91,849		$	1,085		2.36	%
Loan receivables⁽²⁾		563,478			11,209		3.98	%		473,118			10,120		4.28	%
Federal funds sold and interest-bearing deposits with banks		16,097			17		0.21	%		15,777			16		0.20	%

Total interest-earning assets:		658,274			12,229		3.72	%		580,744			11,221		3.86	%
Allowance for loan losses		(7,009	)							(7,712	)
Non-interest earning assets		38,144								36,031

Total assets	$	689,409							$	609,063


Interest-bearing liabilities:
Interest-bearing checking, money market, savings	$	326,914			684		0.42	%	$	264,735			397		0.30	%
Time deposits		159,336			694		0.87	%		127,020			731		1.15	%

Total interest-bearing deposits		486,250			1,378		0.57	%		391,755			1,128		0.58	%

Borrowings		44,618			720		3.23	%		52,298			892		3.41	%
Repurchase agreements		13,636			7		0.10	%		10,941			9		0.16	%
Junior subordinated debentures		3,242			207		12.77	%		3,242			203		12.52	%
Total interest-bearing liabilities		547,746			2,312		0.84	%		458,236			2,232		0.97	%


Non-interest-bearing deposits		81,649								91,893
Other liabilities		4,204								4,758
Stockholders’ equity		55,809								54,176

Total liabilities and stockholders’ equity	$	689,408							$	609,063

Net interest income				$	9,917							$	8,989

Interest rate spread⁽³⁾							2.88	%							2.89	%
Net interest margin⁽⁴⁾							3.01	%							3.10	%
Ratio of interest-earning assets to interest-bearing liabilities		120.18x								126.73x


	For the Year Ended December 31,
	2013								2012								2011
(dollars in thousands)	Average Outstanding Balance⁽¹⁾			Interest		Average Rate			Average Outstanding Balance			Interest		Average Rate			Average Outstanding Balance⁽¹⁾			Interest		Average Rate
Interest-earning assets:
Investment securities	$	87,284		$	2,029		2.32	%	$	110,420		$	2,817		2.55	%	$	108,564		$	3,156		2.91	%
Loans receivable⁽²⁾		499,480			21,332		4.27	%		409,552			20,068		4.90	%		397,338			21,877		5.51	%
Federal funds sold and interest-bearing deposits with banks		13,571			27		0.20	%		50,768			121		0.24	%		61,952			147		0.24	%

Total interest-earning assets		600,335			23,388		3.90	%		570,740			23,006		4.03	%		567,854			25,180		4.43	%
Allowance for loan losses		(7,712	)							(9,191	)							(12,139	)
Non-interest-earning assets		36,352								38,433								41,360

Total assets	$	628,975							$	599,982							$	597,075


Interest-bearing liabilities:
Interest-bearing checking, money market, savings	$	264,072			740		0.28	%	$	245,384			823		0.34	%	$	265,880			1,587		0.60	%
Time deposits		120,824			1,309		1.08	%		152,156			2,053		1.35	%		133,967			2,418		1.80	%

Total interest-bearing deposits		384,896			2,049		0.53	%		397,540			2,876		0.72	%		399,847			4,005		1.00	%

Borrowings		61,009			1,754		2.87	%		55,101			2,069		3.75	%		75,374			2,967		3.94	%
Repurchase agreements		12,376			20		0.16	%		7,771			10		0.13	%		9,082			19		0.21	%
Junior subordinated debentures		3,242			428		13.20	%		3,242			415		12.80	%		3,242			409		12.62	%

Total interest-bearing liabilities		461,523			4,251		0.92	%		463,654			5,370		1.16	%		487,545			7,400		1.52	%

Non-interest-bearing deposits		108,655								77,642								56,435
Other liabilities		4,861								5,698								2,454
Stockholders’ equity		53,936								52,988								50,641

Total liabilities and stockholders’ equity	$	628,975							$	599,982							$	597,075


Net interest income				$	19,137							$	17,636							$	17,780

Interest rate spread⁽³⁾							2.98	%							2.87	%							2.91	%
Net interest margin⁽⁴⁾							3.19	%							3.09	%							3.13	%
Ratio of interest-earning assets to interest-bearing liabilities		130.08 x								123.10 x								116.47 x

(1)	Average balances are calculated on amortized cost.

(2)	Includes loan fee income, nonaccruing loan balances and interest received on such loans.

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

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

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.


	For the Six Months Ended June 30, 2014 v. 2013									For the Year Ended December 31, 2013 v. 2012									For the Year Ended December 31, 2012 v. 2011
	Increase (Decrease) Due to Change in Average									Increase (Decrease) Due to Change in Average									Increase (Decrease) Due to Change in Average
(dollars in thousands)	Volume			Rate			Net			Volume			Rate			Net			Volume			Rate			Net
Interest Income:
Investment securities	$	(183	)	$	101		$	(82	)	$	(553	)	$	(235	)	$	(788	)	$	55		$	(394	)	$	(339	)
Loan receivable		1,719			(630	)		1,089			3,044			(1,780	)		1,264			701			(2,510	)		(1,809	)
Federal funds sold and interest-bearing deposits with banks		0			1			1			(77	)		(17	)		(94	)		(27	)		1			(26	)

Total interest income		1,536			(528	)		1,008			2,414			(2,032	)		382			729			(2,903	)		(2,174	)


Interest Expense:
Interest-bearing checking, money market, savings		107			180			287			72			(155	)		(83	)		(114	)		(650	)		(764	)
Time deposits		(837	)		800			(37	)		(380	)		(364	)		(744	)		425			(790	)		(365	)
Borrowings		(126	)		(46	)		(172	)		266			(581	)		(315	)		(767	)		(131	)		(898	)
Repurchase Agreements		4			(6	)		(2	)		7			3			10			(2	)		(7	)		(9	)
Junior subordinated debentures		—			4			4			—			13			13			—			6			6

Total interest expense		(852	)		932			80			(35	)		(1,084	)		(1,119	)		(458	)		(1,572	)		(2,030	)

Net interest income	$	2,389		$	(1,461	)	$	928		$	2,457		$	(949	)	$	1,501		$	1,188		$	(1,332	)	$	(144	)

Risk Management

Overview. Managing risk is an essential part of successfully managing a financial institution. See the section of this prospectus entitled “Risk Factors.” Among our most prominent risk exposures are credit risk, market risk, interest rate risk and liquidity risk. Credit risk is the risk of not collecting the interest and/or the principal balance of a loan or security when it is due. Interest rate risk is the potential reduction of net interest income or the reduction in the value of assets and liabilities as a result of changes in interest rates. Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices, commodity prices and/or other relevant market rates or prices. Liquidity risk is the possible inability to fund obligations to depositors, lenders or borrowers when due. Other risks that we face are operational risk, technology and cyber-risk, and reputation risk. Operational risks include risks related to fraud, regulatory compliance, processing errors, technology, and disaster recovery. Cyber-risk is the risk of technological intrusion resulting in loss of customer information, loss of data, denial of service attacks, and cyber-theft. Reputation risk is the risk that negative publicity or press, whether true or not, could cause a decline in our client base or revenue and impact the price of our stock.

Credit Risk Management. Our strategy for credit risk management focuses on having a layered approach to risk involving risk-taking, risk monitoring, and risk mitigation. In our target markets, we field an experienced lending staff supported by a centralized, robust risk management infrastructure working under well-defined credit policies and rigorous underwriting criteria. We have developed portfolio strategies and controls that are conducive to the development of a diversified portfolio including a variety of exposure control limits on different portfolio segments and an internal lending limit that is substantially below our legal lending limit. Regular total portfolio and loan level monitoring ensures timely risk recognition, provides early warning of potential problems and allows prompt

attention to potential problem loans. This strategy emphasizes generally conservative loan-to-value ratios and full recourse to guarantors with substantial net worth on credit exposures. In addition to our portfolio monitoring practices, we have a comprehensive loan review system using both internal and external resources to review at least 70% of portfolio exposure annually. Formal management quarterly problem loan reviews include assessment of risk ratings and loan collateral valuation in order to identify impaired loans.

When a borrower fails to make a required loan payment, management takes a number of steps to have the borrower cure the delinquency and restore the loan to current status. Management makes initial contact with the borrower when the loan becomes 15 days past due. If payment is not then received by the 30^th day of delinquency, additional letters and phone calls generally are made, the loan risk rating is reassessed, and a plan of collection is pursued for each individual loan. Collection efforts may lead to a demand of repayment and foreclosure on collateral securing the loan, depending on the prospects for the borrower bringing the loan current, the financial strength and commitment of any guarantors, the type and value of the collateral securing the loan and other factors. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure sale, the assets or real property securing the loan generally are sold at auction or foreclosure. While we develop loan workout arrangements with most problem loans, we also consider the sale of the nonperforming loans. Management regularly informs the board of directors of the amount and status of delinquent loans, all loans rated special mention or worse, and other real estate owned.

Nonperforming Assets. We consider foreclosed assets, loans that are maintained on a nonaccrual basis, and loans that are impaired to be nonperforming assets, unless such loans are well secured and in process of collection. Loans are generally placed on nonaccrual status when collectability is judged to be uncertain or payments have become 90 days or more past due. On loans where the full collection of principal or interest payments is not probable, the accrual of interest income ceases and any already accrued interest is reversed. Interest income is not accrued on such loans until the borrower’s financial condition and payment record demonstrate an ability to service the debt.

Loans are classified as impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Payments received on a nonaccrual loan are first applied to the outstanding principal balance when collectability of principal is in doubt.

Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned until it is sold. Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired. Any holding costs and declines in fair value after acquisition of the property result in charges to operations as an expense.

Troubled debt restructurings occur when we grant borrowers concessions that we would not otherwise grant but for economic or legal reasons pertaining to the borrower’s financial difficulties. Generally, this occurs when the cash flows of the borrower are insufficient to service the loan under its original terms. We may modify the terms of a loan as a troubled debt restructuring by reducing the loan’s stated interest rate, extending the loan’s maturity or otherwise restructuring the loan terms to enable payment. We may consider permanently reducing the recorded investment in the loan or structuring a non-accruing secondary note in a troubled debt restructuring as well but we generally do not make such concessions. Modifications involving a reduction of the stated interest rate of loans are typically for periods ranging from 2 to 5 years. These modifications are made only when there is a reasonable and attainable workout plan that has been agreed to by the borrower and that is in our best interests. Once the borrower has demonstrated sustained performance with the modified terms, the loan may be upgraded from its classified and/or nonperforming status. Any loans categorized as troubled debt restructurings will continue to retain that designation through the life of the loan.

The following table provides information with respect to our nonperforming assets, including troubled debt restructurings, and loans 90+ days past due and still accruing at the dates indicated.


	As of June 30,						As of December 31,
(dollars in thousands)	2014			2013			2013			2012			2011
Nonaccrual loans:
Commercial	$	1,362		$	3,045		$	1,284		$	2,887		$	279
Commercial real estate		—			5,575			—			5,840			8,485
Commercial construction		—			—			—			—			462
Residential real estate		3,233			2,094			2,871			1,481			2,195
Home equity		245			277			263			—			237
Consumer		—			—			—			—			3

Total nonaccrual loans		4,840			10,991			4,418			10,208			11,661
Other real estate owned		3,950			78			4,678			—			—

Total nonperforming assets⁽¹⁾	$	8,790		$	11,069		$	9,096		$	10,208		$	11,661

Loans 90+ days past due and still accruing	$	—		$	—		$	—		$	351		$	—

Performing troubled debt restructured loans	$	158		$	934		$	387		$	1,284		$	—


Nonaccrual loans to total loans and loans held for sale		0.85	%		2.28	%		0.81	%		2.21	%		3.00	%
Nonaccrual loans and loans past due 90 days and still accruing to total loans and loans held for sale		0.85	%		2.28	%		0.81	%		2.29	%		3.00	%
Non-performing assets to total assets⁽¹⁾⁽²⁾		1.25	%		1.83	%		1.36	%		1.62	%		1.92	%
Total nonperforming assets and performing troubled debt restructurings to total assets		1.27	%		1.99	%		1.42	%		1.82	%		1.92	%

(1)	Non-performing assets are defined as nonaccrual loans plus OREO.

(2)	Loans, including loans held for sale, are presented before allowance for loan losses and do not include deferred loan origination costs (fees)

Interest income that would have been recorded for the six months ended June 30, 2014 and the year ended December 31, 2013, had nonaccruing loans been current according to their original terms amounted to $134 thousand and $161 thousand, respectively. No income related to nonaccrual loans was included in interest income for the six months ended June 30, 2014, and the year ended December 31, 2013.

Total nonperforming loans increased from December 31, 2013 to June 30, 2014, primarily due to the default on a small number of troubled debt restructures. Total nonperforming loans decreased from December 31, 2012 to December 31, 2013, primarily due to collection practices, loan payoffs and foreclosures into other real estate owned.

Special Mention and Classified Assets. Federal regulations require us to review and classify assets on a regular basis. In addition, the OCC has the authority to identify problem assets and, if appropriate, require them to be classified. There are four classifications for problem assets: special mention, substandard, doubtful and loss. We categorize loans into these risk categories based on relevant information about the ability of borrowers and, if appropriate, guarantors to service their debts, and the quality and realizable value of collateral. We analyze loans through quarterly asset quality reviews based on observable risk criteria such as overdrafts, late payments, financial performance and collateral valuations.

“Substandard assets” are inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged. As such they have a well-defined weakness that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are

not corrected. “Doubtful assets” have all the weaknesses inherent in substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified as “loss” is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. When management classifies an asset as substandard or doubtful, a specific allowance for probable and reasonably estimable loan losses is established. If management classifies an asset as loss, an amount equal to 100% of the portion of the asset classified loss is charged to the allowance for loan losses.

The following table shows the aggregate amounts of our assets rated special mention or worse at the dates indicated.


	As of June 30,				As of December 31,
(dollars in thousands)	2014		2013		2013		2012
Classified assets:
Substandard	$	11,283	$	9,234	$	9,417	$	11,136
Doubtful		—		2,800		—		—
Loss		—		—		—		—

Total classified assets		11,283		12,034		4,739		11,136

Special mention assets		3,837		5,816		4,279		3,751

Total classified and special mention assets	$	15,120	$	17,850	$	9,018	$	14,887

Other than as disclosed in the above tables, there are no other loans where management has serious doubts about the ability of the borrowers to comply with the present loan repayment terms.

Delinquencies. The following table provides information about delinquencies in our loan portfolio at the dates indicated.


	At June 30, 2014 Loans Delinquent For:										At June 30, 2014
	30-89 Days					90 Days or more					Total Delinquent Loans
(dollars in thousands)	Amount		% of Total Delinquent Loans 30-89 Days			Amount		% of Total Delinquent Loans 90 Days or more			Amount		% of Total Delinquent
Commercial	$	177		47.3	%	$	1,362		32.9	%	$	1,539		34.0	%
Commercial real estate		—		—	%		—		—	%		—		—	%
Commercial construction		—		—	%		—		—	%		—		—	%
Residential real estate		—		—	%		2,547		61.4	%		2,547		56.4	%
Home equity		197		52.7	%		237		5.7	%		434		9.6	%
Consumer		—		—	%		—		—	%		—		—	%

Total	$	374		100.0	%	$	4,146		100.0	%	$	4,520		100.0	%


	At December 31, 2013 Loans Delinquent For:										At December 31, 2013
	30-89 Days					90 Days or more					Total Delinquent Loans
(dollars in thousands)	Amount		% of Total Delinquent Loans 30-89 Days			Amount		% of Total Delinquent Loans 90 Days or more			Amount		% of Total Delinquent
Commercial	$	—		—	%	$	1,284		29.0	%	$	1,284		14.3	%
Commercial real estate		3,482		76.5	%		—		—	%		3,482		38.8	%
Commercial construction		—		—	%		—		—	%		—		—	%
Residential real estate		967		21.3	%		2,871		65.0	%		3,838		42.9	%
Home equity		99		2.2	%		263		6.0	%		362		4.0	%
Consumer		2		—	%		—		—	%		2		—	%

Total	$	4,550		100.0	%	$	4,418		100.0	%	$	8,968		100.0	%


	At December 31, 2012 Loans Delinquent For:										At December 31, 2012
	30-89 Days					90 Days or more					Total Delinquent Loans
(dollars in thousands)	Amount		% of Total Delinquent Loans 30-89 Days			Amount		% of Total Delinquent Loans 90 Days or more			Amount		% of Total Delinquent
Commercial	$	—		—	%	$	2,887		27.5	%	$	2,887		16.3	%
Commercial real estate		4,346		60.6	%		5,840		55.5	%		10,185		57.6	%
Commercial construction		—		—	%		—		—	%		—		—	%
Residential real estate		2,809		39.1	%		1,788		17.0	%		4,597		26.0	%
Home equity		21		0.3	%		—		—	%		21		0.1	%
Consumer		—		—	%		—		—	%		—		—	%

Total	$	7,176		100.0	%	$	10,515		100.0	%	$	17,690		100.0	%


	At December 31, 2011 Loans Delinquent For:										At December 31, 2011
	30-89 Days					90 Days or more					Total Delinquent Loans
(dollars in thousands)	Amount		% of Total Delinquent Loans 30-89 Days			Amount		% of Total Delinquent Loans 90 Days or more			Amount		% of Total Delinquent
Commercial	$	—		—	%	$	279		2.4	%	$	279		1.6	%
Commercial real estate		2,393		42.4	%		8,485		72.8	%		10,878		62.7	%
Commercial construction		—		—	%		462		4.0	%		462		2.7	%
Residential real estate		3,266		57.3	%		2,195		18.8	%		5,461		31.5	%
Home equity		15		0.3	%		237		2.0	%		252		1.5	%
Consumer		1		—	%		3		—	%		4		—	%

Total	$	5,675		100.0	%	$	11,661		100.0	%	$	17,336		100.0	%

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance for probable incurred credit losses inherent in the loan portfolio. This estimate includes losses associated with specifically identified loans, as well as estimated probable credit losses inherent in the remainder of the loan portfolio. Loan losses are charged against the allowance when, in our judgment, the uncollectability of all or a portion of the loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Reductions to the allowance occur as loans are charged off. We estimate the required amount of the allowance using a number of factors, including past loan loss experience, the nature of the portfolio, environmental conditions, information about specific borrower situations, and estimated collateral values. We evaluate the adequacy of the allowance for loan losses on a quarterly basis, although we may increase the frequency of our reviews as necessary. When additional allowance for loan loss is necessary, a provision for loan losses is charged to earnings.

Our methodology for assessing the sufficiency of the allowance for loan losses consists of a general component related to the significant majority of the loan portfolio, a nonimpairment component, plus a specific component relating to loans that are individually classified as impaired together with a small unallocated portion. Although we determine the amount of each element of the allowance separately, the entire allowance for loan losses is available for the entire portfolio.

As disclosed in the notes to the financial statements, our allowance for loan losses is comprised primarily of general reserves of $6.5 million with a limited amount of specific reserves totaling $286 thousand at June 30, 2014. This compares to $6.5 million of general reserves and $290 thousand of specific reserves at December 31, 2013. Changes in our general reserves primarily relate to an increases of $284 thousand related to our construction portfolio and $297 thousand related to the commercial portfolio. The increases are due primarily to growth in these portfolios. These increases are offset by a decrease in the residential portfolio of $657 thousand. The decrease is related to a continued low level of losses resulting in a declining loss allocation factor as well as the impact on the allowance of the transfer of approximately $47 million in loans to loans held for sale.

General Component. The general component of the allowance for loan losses relates to loans that are not determined to be impaired. Management determines the appropriate loss factor for each segment of loans with similar risk characteristics within the portfolio based on that segment’s loss experience and several other quantitative, qualitative and environmental factors relevant to each segment. While loan segments generally represent groups of loans with similar risk characteristics, we may include loans categorized by loan grade, or any other characteristic that causes a loan’s risk profile to be similar to a group of loans. We consider estimated credit losses associated with each segment of our portfolio to differ from purely historical loss experience due to qualitative factors including changes in lending policies and procedures; changes in the nature and volume of the loan portfolio; and changes in our employees’ experience; quantitative factors including changes in the volume and severity of past due, nonaccrual, and adversely graded loans; changes in concentrations of credit; and changes in the value of underlying collateral for collateral dependent loans; and environmental factors including changes in economic or business conditions; and the effect of competition, legal and regulatory requirements on estimated credit losses. Our quantitative, qualitative, and environmental factors are reviewed on a quarterly basis for each loan segment and our historical loss experience is reviewed annually to ensure that our analysis is reflective of current conditions in our loan portfolio and economy.

Non-impaired Component. Loans that have been downgraded to special mention or substandard, but are not currently impaired, are considered to have a higher inherent of risk of loss than pass rated loans. Management judgment is needed to estimate the additional risk of loss for these types of loans. Risk allocations on non-impaired special mention and substandard loans reflect management’s assessment of the increased risk of loss associated with adversely graded loans. The allocated reserve for these loans is based upon management’s assessment of loss history and risk migration analysis. Additionally, in determining the allocation, management considers the credit attributes of individual loans, including loan to value ratios, past due status, strength and willingness of the guarantors, and other relevant attributes generally found in these groups of loans.

Specific Component. The specific component of the allowance for loan losses relates to loans that are individually evaluated and determined to be impaired. The allowance for each impaired loan is determined 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, if the loan is collateral dependent, by the fair value of the collateral less estimated costs to sell. Impairment for other types of loans is measured using the fair value of the collateral less estimated costs to sell. We identify a loan as impaired when, based upon current information and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. We consider a number of factors in determining impairment, including 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 on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower.

Residential and consumer loans are individually evaluated for impairment when they reach nonperforming status or become subject to a restructuring agreement.

Unallocated Component. In addition to the allowance as previously described, an “unallocated” reserve component may be maintained. This unallocated component is reflective of the fact that the allowance for loan losses is inherently imprecise and involves a high degree of management judgment with many variables to consider.

We identify loans that may need a full or partial charge-off by reviewing the circumstances of all impaired loans. Loan losses are charged against the allowance when we believe the uncollectability of all or a portion of the loan balance is confirmed. A borrower’s inability to make payments under the terms of the loan combined with a shortfall in collateral value would generally result in our charging off the loan to the extent of the loss deemed to be confirmed.

Discussion of Allowance for Loan Losses. At June 30, 2014, our allowance for loan losses was $6.8 million, or 1.31% of gross loans and 139.9% of nonperforming loans. Nonperforming loans include nonaccrual loans and exclude performing troubled debt restructurings. At December 31, 2013, our allowance for loan losses was $6.8 million, or 1.25% of gross loans and 154.2% of nonperforming loans. Nonperforming loans at June 30, 2014 were $4.8 million, or 0.85% of total loans, compared to $4.4 million, or 0.81% of total loans, at December 31, 2013 and $10.2 million, or 2.21% of total loans, at December 31, 2012. The allowance for loan losses is maintained at a level that represents management’s best estimate of probable incurred losses in the loan portfolio at the balance sheet date. However, there can be no assurance that the allowance for loan losses will be adequate to cover losses which may be realized in the future or that additional provisions for loan losses will not be required.

The following table sets forth the breakdown of the allowance for loan losses by loan category at the dates indicated.


	As of June 30, 2014								As of December 31, 2013
Loan Category: (dollars in thousands)	Amount		% of ALL			% of Total Loans in Category			Amount		% of ALL			% of Total Loans in Category
Commercial	$	1,806		26.7	%		12.5	%	$	1,744		25.6	%		10.3	%
Commercial real estate		2,425		35.8	%		33.7	%		2,190		32.2	%		31.1	%
Commercial construction		651		9.6	%		1.1	%		367		5.4	%		0.8	%
Residential real estate		1,403		20.7	%		43.8	%		2,060		30.2	%		47.2	%
Home equity		28		0.4	%		1.3	%		138		2.0	%		1.3	%
Consumer		98		1.5	%		7.6	%		203		3.0	%		9.3	%
Unallocated		358		5.3	%		—	%		110		1.6	%		—	%

Total	$	6,769		100.0	%		100.0	%	$	6,812		100.0	%		100.0	%


	As of December 31, 2012								As of December 31, 2011
Loan Category: (dollars in thousands)	Amount		% of ALL			% of Total Loans in Category			Amount		% of ALL			% of Total Loans in Category
Commercial	$	1,164		15.5	%		11.7	%	$	2,032		23.3	%		12.8	%
Commercial real estate		2,838		37.9	%		31.3	%		3,068		35.2	%		36.8	%
Commercial construction		239		3.2	%		0.6	%		769		8.8	%		3.9	%
Residential real estate		2,654		35.4	%		51.1	%		2,323		26.6	%		43.6	%
Home equity		76		1.0	%		1.8	%		116		1.3	%		1.2	%
Consumer		50		0.7	%		3.5	%		133		1.5	%		1.7	%
Unallocated		467		6.3	%		—	%		292		3.3	%		—	%

Total	$	7,488		100.0	%		100.0	%	$	8,733		100.0	%		100.0	%

Analysis of Loan Loss Experience. The following table sets forth an analysis of the allowance for loan losses for the periods indicated.


	For the Six Months Ended June 30,
(dollars in thousands)	2014			2013
Balance at beginning of period	$	6,812		$	7,488

Provision charged to operating expenses		50			350

Recoveries of loans previously charged-off:
Commercial, commercial real estate, multifamily, construction		57			125
Consumer		—			—
Residential		—			26

Total recoveries		57			151

Loans charged-off:
Commercial, commercial real estate, multifamily, construction		(114	)		(19	)
Consumer		—			—
Residential		—			—

Total charge-offs		(114	)		(19	)

Net (charge-offs) recoveries		(57	)		132

Other		(36	)		—

Balance at end of period	$	6,769		$	7,970

Net charge-offs (recoveries) to average loans outstanding (annualized)		0.02	%		(0.06	)%

Allowance for loan losses to period-end gross loans		1.31	%		1.65	%


	For the Year Ended December 31,
(dollars in thousands)	2013			2012			2011
Balance at beginning of period	$	7,488		$	8,733		$	13,401

Provision charged to operating expenses		350			—			2,169

Recoveries of loans previously charged-off:
Commercial, commercial real estate, multifamily, construction		1,271			1,005			799
Consumer		—			—			—
Residential		41			129			—

Total recoveries		1,312			1,134			799

Loans charged-off:
Commercial, commercial real estate, multifamily, construction		(2,338	)		(1,452	)		(5,469	)
Consumer		—			(3	)		(24	)
Residential		—			(924	)		(2,143	)

Total charge-offs		(2,338	)		(2,379	)		(7,636	)

Net (charge-offs) recoveries		(1,026	)		(1,245	)		(6,837	)

Other		—			—			—

Balance at end of period	$	6,812		$	7,488		$	8,733

Net charge-offs (recoveries) to average loans outstanding (annualized)		0.21	%		0.30	%		1.72	%

Allowance for loan losses to period-end gross loans		1.25	%		1.62	%		2.25	%

Market Risk Management

General. Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices, commodity prices and/or other relevant market rates or prices. We are exposed to market risk as a result of our banking activities. Our market risk is comprised entirely of interest rate risk, as we have no direct currency, equity or commodity risk, and, 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 our exposure to changes in market interest rates. We manage the interest rate sensitivity of our interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment.

A major source of interest rate risk is a difference in the repricing of assets and liabilities. First, there are differences in the timing of rate changes reflecting the maturity and/or repricing of assets and liabilities. For example, the rate earned on a residential mortgage may be fixed for 30 years; the rate paid on a certificate of deposit may be fixed only for a few months. Due to these timing differences, net interest income is sensitive to changes in the level and shape of the yield curve. Second, there are differences in the drivers of rate changes of various assets and liabilities known as basis risk. For example, commercial loans may reprice based on one-month LIBOR or prime; the rate paid on retail money market demand accounts may be only loosely correlated with LIBOR and depend on competitive demand for funds. Due to these basis differences, net interest income is sensitive to changes in spreads between certain indices or repricing rates.

Another important source of interest rate risk relates to the potential exercise of explicit or embedded options. For example, most residential real estate loans can be prepaid without penalty; and most consumer deposits can be withdrawn without penalty. The exercise of such options by customers can exacerbate the timing differences discussed above.

Deposit accounts typically react more quickly to changes in market interest rates than loans because of the shorter maturities of deposits. As a result, sharp increases in interest rates may adversely affect our earnings while decreases in interest rates may benefit our earnings. To reduce the potential volatility of our earnings, we have sought to improve the match between asset and liability maturities and rates, while maintaining an acceptable interest rate spread. Our strategy for managing interest rate risk emphasizes purchasing adjustable-rate loans for retention in our loan portfolio, promoting core deposit products and time deposits, adjusting the maturities of borrowings and adjusting the investment portfolio mix and duration. Specifically, we occasionally use back-to-back interest rate swaps to manage this risk while accommodating customer demand for longer fixed rate products.

We have an Asset and Liability Committee, which includes members of management, to communicate, coordinate and control all aspects involving asset-liability management. The committee establishes and monitors the volume, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals.

Our goal is to manage asset and liability positions to moderate the effects of interest rate fluctuations on net interest and net income and control exposure to interest rate risk within policy limits approved by our board of directors. These limits and guidelines reflect our tolerance for interest rate risk over both short-term and long-term horizons. We analyze our sensitivity to changes in interest rates through our net interest income simulation model which is provided to us by an independent third party. Exposures are reported on a quarterly basis to the Asset and Liability Committee and at meetings of our board of directors.

Net Interest Income Simulation Analysis. 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 we pay on our interest-bearing liabilities, such as deposits and borrowings.

Income simulation is the primary tool for measuring the interest rate risk inherent in our balance sheet at a given point in time by showing the effect on net interest income, over specified time horizons, under a range of interest rate ramp and shock scenarios. These simulations take into account repricing, maturity and prepayment characteristics of individual products. We estimate what our net interest income would be for a one- and two-year horizon based on current interest rates. We then calculate what the net interest income would be for the same period under different interest rate assumptions.

These estimates require us to make certain assumptions including loan and mortgage-related investment prepayment speeds, reinvestment rates, and deposit maturities and decay rates. These assumptions are inherently uncertain and, as a result, we cannot precisely predict the impact of changes in interest rates on our net interest income. Although the net interest income table below provides an indication of our interest rate risk exposure at a particular point in time, such estimates are not intended to, and do not, provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.

The following table shows the estimated impact on net interest income for the one- and two-year periods beginning June 30, 2014 resulting from potential changes in interest rates. The net interest income simulation analyses assume a static balance sheet and do not include possible future actions that management might undertake to mitigate this risk.


Rate Shift	Net Interest Income Year 1 Forecast		Year 1 Change from Base			Net Interest Income Year 2 Forecast		Year 2 Change from Base
	(dollars in thousands)					(dollars in thousands)
+400 bps	$	19,182		–13.3	%	$	20,101		–9.1	%
+300 bps		19,948		–9.9	%		20,783		–6.1	%
+200 bps		20,741		–6.3	%		21,490		–2.9	%
+100 bps		21,429		–3.2	%		21,822		–1.4	%
Base		22,136		—	%		21,125		—	%
–100 bps		21,839		–1.3	%		20,851		–5.8	%

As of June 30, 2014, net interest income simulation indicated that our exposure to changing interest rates was within our internal policy guidelines. As the table illustrates, our balance sheet is liability-sensitive over a one- and two-year time horizon: net interest income would decrease as interest rates increase. It should be noted that the magnitude of any possible decline in interest rates is constrained by the low absolute starting levels of rates. While immediate, parallel and severe shifts in interest rates upward were used as part of this analysis, we believe that any actual shift in interest rates would likely be more gradual and would therefore have a more modest impact.

Depending on the relationship between long-term and short-term interest rates, market conditions and consumer preference, we may place greater emphasis on maximizing our net interest margin than on strictly matching the interest rate sensitivity of our assets and liabilities. We believe that the increased net income which may result from an acceptable mismatch in the actual maturity or re-pricing of our assets and liabilities can, during periods of declining or stable interest rates, provide sufficient returns to justify an increased exposure to sudden and unexpected increases in interest rates. We believe that our level of interest rate risk is acceptable using this approach.

Economic Value of Equity Analysis. We also analyze the sensitivity of our financial condition to changes in interest rates through our economic value of equity model, which is also provided to us by an independent third party. This analysis measures the difference between predicted changes in the present value of our assets and predicted changes in the present value of our liabilities assuming various changes in current interest rates. As with the net interest income simulation model, the estimates of changes in the economic value of our equity require certain assumptions to be made. These assumptions include loan and mortgage-related investment prepayment speeds, reinvestment rates, and deposit maturities and decay rates. These assumptions are inherently uncertain and, as a result, we cannot precisely predict the impact of changes in interest rates on the economic

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

Our economic value of equity analysis as of June 30, 2014 is set forth below. The impact on our economic value of equity under all scenarios referenced in the table below are within policy guidelines.


Rate Shift⁽¹⁾	Economic Value of Equity		% Change In
	(dollars in thousands)
+400	$	39,497		–40.8	%
+300		46,399		–30.4	%
+200		52,901		–20.7	%
+100		60,204		–9.7	%
Base		66,684		—	%
–100		64,534		–3.2	%

(1)	The calculated changes assume an immediate and parallel shock of the static yield curve.

Liquidity Management and Capital Resources

Liquidity is the ability to meet current and future financial obligations of a short-term and long-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of securities and borrowings from the FHLB. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows, calls of investment securities and borrowed funds and prepayments on loans are greatly influenced by general interest rates, economic conditions and competition.

Management regularly adjusts our investments in liquid assets based upon an assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities, (4) the objectives of our interest-rate risk and investment policies and (5) the risk tolerance of management and our board of directors.

Our cash flows are composed of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $1.1 million, $4.8 million, $7.7 million, and $(418) thousand for the six months ended June 30, 2014 and 2013 and for the years ended December 31, 2013 and 2012, respectively. Net cash used in investing activities, which consists primarily of purchases of and proceeds from the sale, maturities/calls, and principal repayments of securities available for sale, as well as loan purchases, sales and originations, net of repayments was $(15.5) million, $(15.5) million, $(78.5) million, and $(47.9) million for the six months ended June 30, 2014 and 2013 and for the years ended December 31, 2013 and 2012, respectively. Net cash provided by financing activities, consisting primarily of the activity in deposit accounts, repurchase agreements and FHLB advances, was $31.9 million, $(28.2) million, $36.5 million, and $24.8 million for the six months ended June 30, 2014 and 2013 and for the years ended December 31, 2013 and 2012, respectively.

At June 30, 2014, the Bank exceeded all of its regulatory capital requirements with a Tier 1 leverage capital of $56.4 million, or 8.04% of adjusted total assets, which is above the required level of $35.0 million, or 5.00% of adjusted total assets, and total risk-based capital of $61.9 million, or 13.98% of risk-weighted assets, which is above the required level of $44.3 million, or 10.00% of risk-weighted assets. For a discussion of certain other sources of liquidity, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Borrowing.”

At the holding company level, our primary sources of liquidity are dividends from the Bank, investment income and net proceeds from investment sales, borrowings and capital offerings. The main uses of liquidity are the payment of principal and interest to holders of our junior subordinated debentures and purchases of available for sale securities. There are certain restrictions on the payment of dividends by the Bank to us, which are described in the section captioned “Supervision and Regulation—Regulation of Federal Savings Associations—Dividends.” At June 30, 2014, there were $3.2 million of retained earnings available for the payment of dividends by the Bank to us. The Bank paid us $550 thousand in dividends during the year ended December 31, 2013.

Off-Balance Sheet Arrangements

In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of commitments to extend credit. For information about our off-balance sheet arrangements, see Note 11 to our Consolidated Financial Statements located elsewhere in this prospectus.

At June 30, 2014, we had outstanding commitments to originate loans of $15.2 million and unadvanced funds on loans of $27.9 million. We anticipate that we will have sufficient funds available to meet our current loan origination commitments. Certificates of deposit that are scheduled to mature in one year or less from June 30, 2014 totaled $78.1 million. If a substantial portion of these deposits is not retained, we may utilize FHLB advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

At June 30, 2014, we had two irrevocable stand-by-letter of credits from the Federal Home Loan Bank of Boston (FHLB) totaling $10 million for the benefit of depositors of public funds. The purpose of the letters of credit is to collateralize the deposits held by the municipalities.

For the six months ended June 30, 2014, and years ended December 31, 2013 and 2012, we did not engage in any off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Effect of Inflation and Changing Prices

The consolidated financial statements and related financial data presented in this prospectus have been prepared according to generally accepted accounting principles in the United States, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs and the effect that general inflation may have on both short-term and long-term interest rates. Virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution’s performance than do general levels of inflation. Although inflation expectations do affect interest rates, interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

Management

Shared Management Structure

The directors of the Company are the same persons who are the directors of the Bank. In addition, each executive officer of the Company is also an executive officer of the Bank. We expect that the Company and the Bank will continue to have common executive officers until there is a business reason to establish separate management structures.

Directors Immediately Following the Completion of this Offering

The members of our current board of directors were appointed in accordance with the Stockholders Agreement, dated as of April 10, 2006 and as amended, between the selling stockholders and the Bank, which will terminate upon the completion of this offering. As a result, all but three of our current directors are resigning effective as of the completion of this offering and five new directors have agreed to join our board of directors at such time. The following table sets forth information regarding the directors of the Company and the Bank upon completion of this offering, and their ages as of October 24, 2014. Each of our directors also currently serves or will serve as a director of the Bank.


Name	Age		Position	Director Since		Current Term Expiration
Michael Butler		55	President, Chief Executive Officer and Director		2009		2015
Dale Stuhlmiller		71	Chairman of the Board		2009		2015
Howard Newburg⁽¹⁾		59	Director		2012		2015
Christopher Flynn⁽²⁾		68	Director		—		—
Bradford Kopp⁽²⁾		62	Director		—		—
Robert Kozik⁽²⁾		60	Director		—		—
Alicia Lopez⁽²⁾		60	Director		—		—
Robert McCambridge⁽²⁾		56	Director		—		—
Robert Sullivan⁽²⁾		55	Director		—		—

(1)	Prior to his current term, Mr. Newburg previously served on our board of directors from 2004 to 2006.

(2)	Will become a director of the Company and the Bank upon the completion of this offering.

The following includes a brief biography for each of the directors who will serve on our board immediately following the completion of this offering, including information regarding the experiences, qualifications, attributes or skills that caused our board of directors to determine that each member should serve as a director. There are no family relationships among any of our directors or executive officers. Unless otherwise stated, each director has held his or her current occupation for the last five years.

Michael Butler is our President and Chief Executive Officer and has served in those roles and as a member of our board of directors since December 2009. Mr. Butler has also served as the President and Chief Executive Officer and as a director of the Bank since March 2008 and is the President and a director of Radius Organization Corp., and a director of Radius Security Corporation, all of which are our wholly owned subsidiaries. Prior to assuming these roles, Mr. Butler was the President of KeyCorp’s national consumer finance division, a position which entailed managing six distinct business units with more than $15 billion in managed assets. Before that, Mr. Butler held other senior management positions at KeyCorp, including President of National Business Banking, Executive Vice President of Portfolio Management, and Senior Vice President of Loan Review and Mergers and Acquisitions. Mr. Butler received his undergraduate degree from Providence College and is a graduate of the Stonier Graduate School of Banking. He currently serves as a trustee of the Thompson Island Outward Bound Education Center and is active in the Habitat for Humanity Program. Mr. Butler was selected to serve as a director because of his extensive experience as a corporate leader in the financial services industry, deep operational and expertise and his service to and knowledge of the communities in our market area.

Dale Stuhlmiller is Chairman of our board of directors and has served in that capacity since June 2012. He has been a member of our board since December 2009 and a member of the Bank’s board since May 2008. Mr. Stuhlmiller also serves on the board of directors of Radius Organization Corp. Between 1995 and 2011, he was the President, Chief Executive Officer, and owner of Hudson Valley Acoustical and Plastering Co., Inc., a commercial sub-contracting company, and for the twenty years prior to 1995, Mr. Stuhlmiller was the Vice President, Chief Operating Officer, and a co-owner of that firm. He attended Michigan State University and the University of Buffalo. Mr. Stuhlmiller has served as a director of several different organizations including the Master Builders of the Hudson Valley and the Construction Contractors Association. He was chairman and trustee of the Empire State Carpenters Benefit Funds, Hudson Valley District Council of Carpenters Benefit Funds, and Carpenters Local 19 Benefit Funds. Mr. Stuhlmiller was selected to serve as our Chairman and a director because of his managerial experience and knowledge and understanding of segments of our client base in our market area.

Howard Newburg served as a member of our board of directors from January 2004 through March 2006, and rejoined the board in June 2012. He was appointed Chairman of the Audit Committee of our board of directors in July 2013. For more than thirty years, Mr. Newburg has provided accounting, auditing, and tax advising services to clients in our market area. He is the Chief Executive Officer and Managing Partner of Newburg & Company, LLP, which is a certified public accounting firm headquartered in Waltham, Massachusetts. He is also the Chief Financial Officer and Co-Chief Executive Officer of Glycosyn Management, LLC, a biotechnology therapeutics and diagnostics company headquartered in Waltham, Massachusetts, which researches, develops, and markets products to help reduce infant and childhood diarrhea worldwide. Mr. Newburg received his undergraduate degree from the University of Massachusetts Amherst and his master’s degree from Bentley College. He currently serves on the board of directors of Glycosyn Management, LLC and has previously served as a board member of the American Heart Association and the Boston Estate Planning Council. In addition, he was on the financial statement review committee of the Massachusetts Society of Certified Public Accountants, the board of trustees at Chapel Hill-Chauncy Hall School, and was the vice president of finance and operations at Temple Aliyah. He also served as the chairman of the Financial Oversight Commission for the Town of Dover, Massachusetts. Mr. Newburg was selected to serve as a director because of his extensive experience in advising on relevant accounting matters and deep knowledge of and service to communities in our market area.

Christopher Flynn will join the board effective upon completion of this offering. He was the Senior Executive Vice President of Pentagon Federal Credit Union, or PenFed, between 2001 and 2014. During Mr. Flynn’s tenure in this position, PenFed grew from $3.5 billion in assets to more than $18 billion. Between 2011 and 2014, Mr. Flynn also served as PenFed’s Community Reinvestment Act Officer and President and Chief Executive Officer of the PenFed Foundation. Prior to PenFed, Mr. Flynn held a number of senior management positions in the financial services industry including President and Chief Executive Officer of Primary Bank in Peterborough, New Hampshire, Senior Vice President of Shawmut Bank of Boston, and Vice President and Senior Fixed Income Portfolio Manager at Bank of New England. Mr. Flynn received his undergraduate degree from Boston College and advanced management certificates from Williams College School of Banking and Babson College. Mr. Flynn has given a number of financial education lectures throughout the military community and at various universities. He served as a member of the board of trustees of Franklin Pierce University for fifteen years, and served as chair and head of the audit and finance committees for ten of those years. He also served on the board of directors of Monadnock Hospital for ten years, serving as chairman of the board for three of those years, and has served as president of the New Hampshire Banking Association. Mr. Flynn was selected to serve on our board of directors because of his extensive management experience in the financial services industry, his experience serving as a director, and his service to and familiarity with communities in our market area.

Bradford Kopp will join the board effective upon completion of this offering. He is an independent advisor in the financial services industry, a position he has held since 2012. Mr. Kopp has held several executive officer positions at large financial institutions including serving from 2010 to 2012 as President and Chief Executive

Officer at Bank of N.T. Butterfield and Son Limited. Mr. Kopp also served from 2007 to 2009 as Head of Strategy and Corporate Development at RBS America, and previously served as Group Executive Vice President, Chief Financial Officer and Head of Strategy at Citizens Financial Group, Inc. Mr. Kopp received his undergraduate degree from Harvard College and his MBA from Harvard Business School. Mr. Kopp currently serves as a member of the board of directors of TGR Financial, Inc. He previously served on the boards of Bank of N.T. Butterfield and Son Limited, Cooley Group, Providence Mutual Fire Insurance Company, FNBNY Bancorp, Inc. and Blue Cross Blue Shield of Rhode Island. Mr. Kopp also serves on the board of the Museum of American Finance in New York and has previously served on numerous other community boards including Family Service of Rhode Island, Rhode Island Foundation Finance Committee, Rhode Island Public Expenditures Council, and Rhode Island Historical Preservation Commission. Mr. Kopp was selected to serve on our board of directors because of his expertise in financial management, strategic planning and acquisitions, general business management, and risk management and his experience as a director. Mr. Kopp was also selected for his extensive understanding of the communities in our market area.

Robert Kozik will join the board effective upon completion of this offering. He is the partner in charge of the tax risk division at KPMG LLP for the company’s Northeast Region, a position he has held since 2007. During his more-than thirty years at KPMG, Mr. Kozik has held other positions including partner in charge of the tax practice in New England and Upstate New York. Mr. Kozik received his undergraduate degree from Providence College and his master’s degree from Bryant College. He currently serves on the board of two not-for-profit entities: Millennium Place South and Commaquid Golf Club. Mr. Kozik was selected to serve on our board of directors because of his extensive experience in providing tax advising services to publicly-held financial institutions and his service to and knowledge of communities in our market area.

Alicia Lopez will join the board effective upon completion of this offering. She retired in 2011 as Vice President of Corporate Affairs at Haemonetics Corp., a publicly traded global medical devices company, where she was responsible for overseeing world-wide legal affairs, external affairs and environmental health and safety. Previously at Haemonetics, she was responsible for quality, regulatory, medical and clinical affairs as well as human resources. Ms. Lopez began her career as General Counsel at Haemonetics in 1988, after spending nine years as a litigator in private legal practice at Sullivan & Worcester LLP in Boston, Massachusetts. Ms. Lopez received her undergraduate degree from The Ohio State University and her J.D. from Yale Law School. She currently serves on the board of Cathedral High School, the national advisory board of the National Policy Research Center for Women & Families and the Canton Community Preservation Committee. She has previously served on the not-for-profit boards of MassMedic, Employability and the New England Legal Foundation. Ms. Lopez was selected to serve on our board of directors because of her extensive legal and management experience and her service to and familiarity with the communities in our market area.

Robert McCambridge will join the board effective upon completion of this offering. He has been a managing member of Harvest Partners since 2014, a Seattle, Washington-based private equity firm providing growth capital and strategic advisory services to early stage and middle market companies. From 2012 until 2014, Mr. McCambridge served in various positions with Kymeta Corporation, a wireless technology company, including as President and Chief Operating Officer. Prior to joining Kymeta, Mr. McCambridge was an “executive in residence” with Spire Capital, a New York-based private equity investment company. From 2010 until 2012, Mr. McCambridge was the lead independent director and chair of the audit and compensation committees at SkyMall, where he participated in the successful recapitalization and sale of SkyMall to Direct Brands. From 2009 until 2012, Mr. McCambridge advised Colorado National Bank and served as interim Chief Operating Officer in connection with the acquisition of Palisades Bank, where he led core loan management and mobile banking systems integration efforts. From 2005 to 2008 he served as Chief Executive Officer and President of Key Business Services, a division of Key Bank, where he led several technology lines of business including credit and debit card processing for retail merchants nationwide. Mr. McCambridge attended The University of Minnesota and the Executive Program at Kellogg School of Management at Northwestern University. He is currently a member of the board of regents at Gonzaga University and Jesuit Commons, and is a former principal and board member at Freestone Capital Group. He is a former board chair of Special Olympics

Washington, the Minnesota Council for Quality, Greenpoint Technologies and Key Merchant Services. Mr. McCambridge was selected to serve on our board of directors because of his extensive management experience in the financial services and technology industries and his experience serving as a director.

Robert Sullivan will join the board effective upon completion of this offering. He is the Senior Client and Managing Director of the Boston office of Korn Ferry, an executive recruitment firm, joining the firm in 1994. Mr. Sullivan has more than two decades of recruiting experience and has successfully carried out searches for senior level positions in financial services and corporate organizations, including for the Federal Reserve Bank of Boston and Boston Private Bank. Prior to joining Korn Ferry in 1994, Mr. Sullivan was the director of recruiting for Deloitte Consulting, where he was responsible for experienced hiring across all disciplines. Prior to Deloitte, Mr. Sullivan worked with Fidelity Investments, where he specialized in recruiting experienced investment, financial, accounting and marketing professionals. Mr. Sullivan received his undergraduate degree from Villanova University. He currently serves on the board of directors of the Massachusetts Business Roundtable and the Big Brothers Big Sisters of Massachusetts and is a former director of Fallon, Hynes O’Connor. He is also a member of the Boston College Club and the CEO Club of Boston. Mr. Sullivan was selected to serve on our board of directors because of his extensive experience in identifying and recruiting top talent in the financial services industry and his knowledge of and service to communities in our market area.

Current Directors

The following table sets forth information regarding the current directors of the Company and the Bank and their ages as of October 24, 2014.


Name	Age		Position	Director Since		Current Term Expiration
Michael Butler		55	President, Chief Executive Officer and Director		2009		2015
Dale Stuhlmiller		71	Chairman of the Board		2009		2015
Stephan Adamic⁽¹⁾		69	Director		2012		2015
Robert Carlino⁽¹⁾		65	Director		2009		2015
Georgina Macdonald⁽¹⁾		68	Director		2009		2015
Thomas Mackell, Jr.⁽¹⁾		72	Director		2012		2015
William Mausert⁽¹⁾		74	Director		2009		2015
Howard Newburg⁽²⁾		59	Director		2012		2015
Albert Peciaro⁽¹⁾		53	Director		2009		2015
Raymond Weaving⁽¹⁾		73	Director		2009		2015

(1)	Will resign as director of the Company and the Bank upon completion of this offering.

(2)	Prior to his current term, Mr. Newburg previously served on our board of directors from 2004 to 2006.

The following includes a brief biography for each of our current directors who will resign from the board effective upon completion of this offering. Unless otherwise stated, each director has held his or her current occupation for the last five years.

Stephan Adamic has served as a member of our board of directors and as a director of the Bank since 2012. Prior to his retirement in 2000, Mr. Adamic held a number of senior management positions including President at Shaughnessy Crane Service; Vice President at O’Connor Constructors; Chief Executive Officer, President, and Chief Financial Officer at Mercury Company; and Director of Finance at Raytheon’s data systems division. Mr. Adamic received his undergraduate degree from Babson College. Mr. Adamic is currently an arbitrator for the construction division of the American Arbitration Association and for the Commonwealth of Massachusetts Office of Consumer Affairs. He is also a board and council member of the Eastman Community Association and heads the Eastman Buying Group, which purchases volume fuels for upcoming heating seasons at below-market prices.

Robert Carlino has served as a member of our board of directors since 2009. He has also served on the Bank’s board of directors since 2006. Mr. Carlino is the President of Cascading Enterprises, Inc., which provides professional pension fund management trustee services and advocates to state and local officials on behalf of private clients in the labor and transportation industry, a position he has held since June 2006. Before Cascading Enterprises, Mr. Carlino was Executive Director of the Long Island Contractors’ Association, where he led the Association’s lobbying efforts with the New York State Legislature. He received his undergraduate degree from St. John Fisher College.

Georgina Macdonald has served as a member of our board of directors since 2009. She has also served since 2000 as a member of the board of the Bank and is a director of Radius Security Corporation. Ms. Macdonald is a Managing Director of Promontory Growth and Innovation, LLC, an affiliate of Promontory Financial Group, the world’s premier consulting group specializing in financial institution regulatory issues, a position she has held since 2011. Prior to Promontory, Ms. Macdonald held several senior management positions including President at Morgan Group, LLC; President and Chief Executive Officer at Fleet Real Estate Capital; Senior Vice President and division head at RECOLL Management Corp.; and Director of Corporate Communications and Senior Vice President of Commercial Lending at FleetBoston Financial Corporation. Ms. Macdonald received her undergraduate degree from Indiana University Bloomington. She has lectured at Massachusetts Institute of Technology on real estate finance and entrepreneurship. Ms. Macdonald is also on the advisory board of Spectrum Financial, which is a Pennsylvania real estate fund, and is a board member and the finance committee chair for Preserve Rhode Island. In addition, Ms. Macdonald is a member of the Massachusetts Women’s Forum.

Thomas Mackell, Jr. has served as a member of our board of directors and as a director of the Bank since 2012. Dr. Mackell is Special Advisor to the International President of the International Longshoresmen’s Association, the AFL-CIO for political, legislative and public affairs and the Chairman of the Advisory Board of Med-Tech Health Solutions, Inc. He previously was the administrator of the Marine Engineers Beneficial Association’s jointly-administered trust funds and has worked for more than thirty years in the management and administration of employee benefit funds in the financial services industry. Dr. Mackell received his undergraduate degree from Seton Hall University, his master’s degree from Long Island University, and his doctorate from Rutgers University. In 2003, Dr. Mackell was appointed to the board of directors of the Federal Reserve Bank of Richmond and served at different times as both deputy chairman and chairman during his five-year appointment. He was also a White House appointee to the ERISA Advisory Council to the Secretary of Labor from 1997 through 1999. In addition, Dr. Mackell was a professor at C.W. Post Center, which is Long Island University’s School of Health and Public Affairs. Currently, Dr. Mackell serves on the board of directors of the Inter-American Dialogue, the Foundation for Fiduciary Studies, and he serves on the editorial advisory board of Institutional Real Estate, Inc. Previously, Dr. Mackell was a member of the National Association of Corporate Directors, the board of directors of the American Benefits Council, and the board of directors of the Association of Investment Management Sales Executives.

William Mausert has served as a member of our board of directors since 2009. He has also served as a member of the Bank’s board of directors since 2006. Since 2004, Mr. Mausert has served as the First Vice President of Commercial Banking at State Bank of Long Island. Prior to State Bank of Long Island, Mr. Mausert held numerous other senior executive positions, including Senior Vice President for Cash Management Services at KeyBank NA, Administrative Vice President of KeyBank of Southeastern New York, and Senior Vice President and Senior Lending Officer of KeyBank Long Island. Mr. Mausert received an undergraduate degree from Russell Sage College and a marketing certificate from Rensselaer Polytechnic Institute. He also graduated from Stonier Graduate School of Banking. Previously, Mr. Mausert served on the National Board of the YMCA of USA, was Chairman of the NY State YMCA Funds and Chairman of the Long Island YMCA, of which he currently serves on its’ Corporate Board and Board of Trustees. He was the chairman of the development committee for the Staller Center for the Performing Arts at SUNY, Stony Brook and has served in advisory roles for the Boy Scouts of America, the Rotary Club of Sayville, the Long Island Maritime Museum, and the Sayville United Methodist Church.

Al Peciaro has served as a member of our board of directors since 2009 and as a director of the Bank since 2008. For nearly ten years, Mr. Peciaro has served as the Director of Contractor Relations for the New England Regional Council of Carpenters and since 2012 has served as the Executive Director of the New England Carpenters Labor Management Fund. He has held a number of other leadership positions over his career as a labor organizer in the metropolitan Boston area. Mr. Peciaro attended Northeastern University. He currently serves as a trustee of the New England Carpenters Training Fund and, from 2005 to 2012, chaired the board of directors of the New England Carpenters Labor Management Fund.

Raymond Weaving has served as a member of our board of directors since 2009. Since 1998, he has served as a director of the Bank and is also on the board of directors of Radius Security Corporation. Mr. Weaving was the Director of Lending for Massachusetts Housing Investment Corporation, or MHIC. Prior to MHIC, he held several senior management positions, including Vice President and Team Leader at Baybank Boston, Inc. and Division Executive over regional banks and wholesale real estate lending at Bank of Boston. Mr. Weaving received his undergraduate degree from Northeastern University and his master’s degree from Babson College. He has volunteered for a number of different organizations including the Economic Development and Industrial Commission in Framingham, Massachusetts; the Real Estate Finance Association in Boston, Massachusetts; and the Massachusetts Community Banking Council.

Executive Officers

The following table sets forth information regarding the executive officers of the Company and the Bank, who are not also directors listed above, and their ages as of October 24, 2014. The executive officers of the Company and the Bank are elected annually.


Name	Age	Title
Seth Felix	47	Executive Vice President, Head of Commercial Banking
Robert Landstein	45	Executive Vice President, Chief Information Officer
James Malerba	60	Executive Vice President, Chief Financial Officer
Joann Noble	61	Executive Vice President, Treasury Management and Client Support
Shepard Rainie	62	Executive Vice President, Chief Risk Officer

The following includes a brief biography for each of our executive officers who are not also directors.

Seth Felix is our Executive Vice President and Head of Commercial Banking and is responsible for managing our commercial banking team throughout our markets. Mr. Felix has been in the financial services industry for 20 years, and has over 14 years of lending experience. Prior to joining us in March 2012, he most recently held the title of Business Banking Team Leader at Eastern Bank for three years. He also previously served as Business Banking Senior Client Manager at Bank of America in Burlington, MA. Mr. Felix holds a Bachelor of Arts degree from the University of California at San Diego and an MBA from the University of Washington.

Robert Landstein is our Executive Vice President and Chief Information Officer and is responsible for all of our information technology initiatives. He has over 23 years of experience in both financial and non-financial related organizations. Prior to joining us, Mr. Landstein was employed by JP Morgan Chase where he was Vice President, Business Management Lead Treasury Services. He received his undergraduate degree from Columbia University and an MBA in Finance and Organizational Management from Columbia Business School. He also holds an MS in Telecommunications and Computing Management from Polytechnic University.

James Malerba is our Executive Vice President and Chief Financial Officer. Mr. Malerba joined us in August 2014 from State Street Corporation, where he served as the Executive Vice President and Corporate Controller. He joined State Street in 2004. Prior to State Street, Mr. Malerba held a number of senior management positions in the financial services industry including Executive Vice President and Deputy Controller at FleetBoston Financial Corporation, Executive Vice President and Corporate Controller at KeyCorp, and senior manager at Ernst & Young. Mr. Malerba received his undergraduate degree from Boston College.

Joann Noble is our Executive Vice President, Treasury Management and Client Support. Ms. Noble joined us in 2008 with more than 20 years of financial services experience and a proven track record for designing and implementing strategies for growth. Prior to joining us, Ms. Noble served as Vice President, Consulting Services for Veritude, a Fidelity Investments Company. She earned her undergraduate and M.Ed. from Pennsylvania State University. Ms. Noble serves as a trustee for the Family Service of Greater Boston.

Shepard Rainie is our Executive Vice President and Chief Risk Officer and has served in those roles since June 2010. Mr. Rainie is also the Executive Vice President and Chief Risk Officer of the Bank and the Assistant Secretary of the Radius Organization Corp. Before June 2010, Mr. Rainie was the Executive Vice President and Chief Risk Officer of Berkshire Bank, which is a publicly traded company headquartered in Massachusetts. He has held other senior management positions in the financial services industry including Senior Vice President of Credit Review at Bank of America and Managing Director of Strategic Risk Assessment at FleetBoston Financial Corporation. Mr. Rainie currently serves on the Personnel Board of the Town of Sharon, Massachusetts. Mr. Rainie received his undergraduate degree from Harvard College and his MBA from the Carroll School of Management at Boston College.

Composition of the Board of Directors

Our amended and restated certificate of incorporation provides that the size of our board of directors will be determined from time to time by resolution of our board of directors. Our board of directors currently consists of 10 directors, 9 of whom qualify as independent directors under the rules and regulations of the SEC and the NASDAQ Marketplace Rules, or the NASDAQ Listing Rules.

Election of Directors

Immediately prior to the completion of this offering, our amended and restated certificate of incorporation will provide for a classified board of directors consisting of three classes of directors. We will have 3 directors in Class I, 3 directors in Class II and 3 directors in Class III, each serving a staggered three-year term. At each annual meeting of stockholders, our stockholders will elect successors to directors whose terms then expire to serve from the time of election and qualification until the third annual meeting following election. After the completion of this offering, our directors will be divided among the three classes as follows:

•

Class I directors will be Robert McCambridge, Howard Newburg and Robert Sullivan, and their terms will expire at the annual meeting of stockholders to be held in 2015;

•

Class II directors will be Christopher Flynn, Bradford Kopp and Alicia Lopez, and their terms will expire at the annual meeting of stockholders to be held in 2016; and

•

Class III directors will be Michael Butler, Robert Kozik and Dale Stuhlmiller, and their terms will expire at the annual meeting of stockholders to be held in 2017.

The classification of our board of directors may have the effect of delaying or preventing changes in control of our Company. We expect that additional directorships resulting from an increase in the number of directors, if any, will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.

Independence of the Board of Directors and Board Committees

Under the rules of the Nasdaq Stock Market, independent directors must comprise a majority of our board of directors within a specified period of time of this offering. The rules of the Nasdaq Stock Market, as well as those of the SEC, also impose several other requirements with respect to the independence of our directors. Our board of directors has evaluated the independence of its members based upon the rules of the Nasdaq Stock Market and the SEC and the transactions referenced under the section of this prospectus titled “Certain Relationships and Related Party Transactions.” Applying these standards, our board of directors determined that none of the

directors who will serve immediately following the completion of this offering, other than Mr. Butler, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under Rule 5605(a)(2) of the NASDAQ Listing Rules. Mr. Butler is not considered independent because he currently serves as our President and Chief Executive Officer. Our board of directors also determined that each director who will serve as a member of the audit, compensation, and nominating and corporate governance committees following completion of this offering satisfies the independence standards for such committees established by the SEC and the NASDAQ Listing Rules, as applicable. In making these determinations on the independence of our future directors, our board of directors considered the relationships that each such non-employee director has with our Company and all other facts and circumstances our board of directors deemed relevant in determining independence, including the expected beneficial ownership of our capital stock by each non-employee director.

Board Leadership Structure and the Role of the Board in Risk Oversight

Board Leadership Structure. The positions of our chairman of the board and chief executive officer are separated. Separating these positions allows our chief executive officer to focus on our day-to-day business, while allowing the chairman of the board to lead our board of directors in its fundamental role of providing advice to and independent oversight of management. Our board of directors recognizes the time, effort and energy that the chief executive officer must devote to his position in the current business environment, as well as the commitment required to serve as our chairman, particularly as our board of directors’ oversight responsibilities continue to grow. Our board of directors also believes that this structure ensures a greater role for the independent directors in the oversight of the Company and active participation of the independent directors in setting agendas and establishing priorities and procedures for the work of our board of directors.

Although our amended and restated bylaws that will be in effect immediately prior to the completion of this offering will not require that we separate the chairman of the board and chief executive officer positions, our board of directors believes that having separate positions is the appropriate leadership structure for us at this time. Our board recognizes that depending on the circumstances, other leadership models, such as combining the role of chairman of the board with the role of chief executive officer, might be appropriate. Accordingly, our board may periodically review its leadership structure.

Our independent directors will meet alone in executive session periodically. The purpose of these executive sessions is to promote open and candid discussion among the independent directors.

Role of the Board in Risk Oversight. The board of directors is actively involved in oversight of risks that could affect us including credit risk, interest rate risk, liquidity risk, operational risk, strategic risk and reputation risk. This oversight is conducted in part through committees of the board of directors, but the full board of directors has retained responsibility for general oversight of risks. The board of directors satisfies this responsibility through full reports by each committee regarding its considerations and actions, regular reports directly from officers responsible for oversight of particular risks within the Company as well as through internal and external audits. Risks relating to the direct operations of the Bank are further overseen by the board of directors of the Bank, who are the same individuals who serve on the board of directors of the Company. Further, the board of directors oversees risks through the establishment of policies and procedures that are designed to guide daily operations in a manner consistent with applicable laws, regulations and risks acceptable to the organization.

Committees of the Board

Our board of directors has a standing audit committee, compensation committee, enterprise risk committee, and governance and nominating committee. Following the completion of the offering, our board of directors will have the same audit committee, compensation committee, enterprise risk committee, and nominating and corporate governance committee. The composition and responsibilities of each committee are described below.

Members serve, and will serve, on committees until their resignation or until otherwise determined by our board. Each of these committees has adopted a written charter that satisfies the applicable standards of the SEC and the NASDAQ Listing Rules, which we will post on our website upon completion of this offering.

Audit Committee. The audit committee is responsible for assisting our board of directors in its oversight of the integrity of our financial statements, the qualifications and independence of our independent auditors, and our internal financial and accounting controls. The audit committee has direct responsibility for the appointment, compensation, retention (including termination) and oversight of our independent auditors, and our independent auditors report directly to the audit committee. The audit committee is also responsible for preparing the audit committee report that the SEC requires to be included in our annual proxy statement. The audit committee also has primary oversight for regulatory compliance.

The members of the audit committee are Ms. Macdonald and Messrs. Mackell, Jr., Newburg and Stuhlmiller. Mr. Newburg serves as chair of the audit committee. Following the completion of the offering, the members of the audit committee will be Ms. Lopez and Messrs. Flynn, Kozik, Newburg and Stuhlmiller, and Mr. Newburg will serve as the chair. Each member of the audit committee following the completion of the offering will qualify as an independent director under the corporate governance standards of the NASDAQ Listing Rules and the independence requirements of Rule 10A-3 of the Exchange Act. Our board of directors has determined that Mr. Newburg qualifies as an “audit committee financial expert” as such term is currently defined in Item 407(d)(5) of Regulation S-K.

Enterprise Risk Committee. The enterprise risk committee has primary oversight for credit risk, interest rate and liquidity risks, operational risk, reputation risk and strategic risk. The committee is responsible for establishing and recommending to the board appropriate risk parameters governing the overall level of such risks. The enterprise risk committee is responsible for reviewing reports and receiving presentations covering such risks including enterprise wide risks, stress testing, and both position and trend summaries across various disciplines within the Company and the Bank.

The members of the enterprise risk committee are Messrs. Mausert, Adamic, Carlino, Peciaro, and Weaving, and Messrs. Adamic and Mausert serve as co-chair of the enterprise risk committee. Following the completion of the offering, the members of the enterprise risk committee will be Messrs. Flynn, Kopp, Kozik, McCambridge and Sullivan, and Mr. Kopp will serve as the chair. Following the completion of the offering, each member of the enterprise risk committee will be a non-employee director within the meaning of Rule 16b-3 of the rules promulgated under the Exchange Act and an outside director as defined by Section 162(m) of the Code, and each will be an independent director as defined by the NASDAQ Listing Rules, including NASDAQ Listing Rule 5606(d)(2).

Compensation Committee. The compensation committee approves the compensation objectives for the Company, approves the compensation of the chief executive officer and approves or recommends to our board of directors for approval of the compensation for other executives. The compensation committee reviews all compensation components, including base salary, cash and stock incentives, benefits and other perquisites.

The members of the compensation committee are Messrs. Adamic, Carlino, Mausert, Peciaro and Stuhlmiller. Mr. Stuhlmiller serves as chair of the compensation committee. Following the completion of the offering, the members of the compensation committee will be Ms. Lopez and Messrs. Kopp, McCambridge, Stuhlmiller and Sullivan, and Mr. Sullivan will serve as the chair. Following the completion of the offering, each member of the compensation committee will be a non-employee director within the meaning of Rule 16b-3 of the rules promulgated under the Exchange Act and an outside director as defined by Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, and each will be an independent director as defined by the NASDAQ Listing Rules, including NASDAQ Listing Rule 5606(d)(2).

Nominating and Corporate Governance Committee. The governance and nominating committee, which will be renamed the nominating and corporate governance committee upon the effectiveness of the offering, is

responsible for making recommendations to our board of directors regarding candidates for directorships and the structure and composition of our board and the board committees. In addition, the committee is responsible for developing and recommending to our board corporate governance guidelines applicable to the Company and advising our board on corporate governance matters.

The members of the governance and nominating committee are Messrs. Mausert, Newburg and Stuhlmiller and Ms. Macdonald. Mr. Stuhlmiller serves as the chair of the governance and nominating committee. Following the completion of this offering, the members will be the chairman of the board and the chairpersons of the audit, compensation, and enterprise risk committees. Mr. Stuhlmiller, the chairman of the board, will serve as chair of the committee. Following the completion of the offering, Mr. Stuhlmiller will continue to serve as the chair. Each member of the nominating and corporate governance committee will be a non-employee director within the meaning of Rule 16b-3 of the rules promulgated under the Exchange Act and an independent director as defined by the NASDAQ Listing Rules.

Code of Business Conduct and Ethics

Prior to the completion of this offering, we will adopt a code of business conduct and ethics that applies to all of our employees, officers and directors including those officers responsible for financial reporting. Upon completion of this offering, we will post the code of business conduct and ethics on our website. We intend to disclose future amendments to the code or any waivers of its requirements on our website to the extent permitted by the applicable rules and exchange requirements.

Executive and Director Compensation

Executive Compensation

Summary Compensation Table. The following table sets forth information regarding compensation awarded to or earned by our named executive officers for service during the last completed fiscal year:


Name and Principal Positions	Year		Salary⁽¹⁾ ($)		Bonus⁽¹⁾ ($)		Stock Awards⁽²⁾ ($)		All Other Compensation⁽³⁾ ($)		Total ($)
Michael A. Butler President and Chief Executive Officer		2013		367,500		257,250		196,613		44,417		865,780

Paul S. Musgrove⁽⁴⁾ Former Executive Vice President, Chief Financial Officer		2013		222,995		50,000		52,500		25,350		350,845

Shepard D. Rainie Executive Vice President, Chief Risk Officer		2013		210,000		80,000		50,000		17,850		357,850

(1)	Amounts reflect amounts earned during the fiscal year ended December 31, 2013, whether or not actually paid during 2013.

(2)

Amounts reflect the grant date fair value, determined in accordance with FASB ASC Topic 718, of the target number of phantom performance units granted under the Phantom Performance Unit Program of First Trade Union Bank and Radius Bancorp Inc. for the 2013-2015 Cycle to each named executive officer during fiscal year 2013. Depending on performance during the performance cycle, the named executive officer may earn a number of phantom performance units ranging from 50% (threshold) to 150% (maximum) of the target number of phantom performance units. The grant date fair value of the maximum number of phantom performance units that may be earned is approximately $294,920 for Mr. Butler, $78,750 for Mr. Musgrove, and $75,000 for Mr. Rainie. Upon his departure from the Company on June 27, 2014, Mr. Musgrove forfeited his phantom performance units and all rights to receive payment thereunder.

(3)

Amounts reflect 401(k) matching and/or profit-sharing contributions and certain non-cash perquisites and personal benefits as set forth in the table below. In addition, for each named executive officer, we provide certain non-cash perquisites and personal benefits that include, but are not limited to, automobile leases, car insurance and club dues. The named executive officers participate in certain group life, health, disability insurance and medical reimbursement plans, not disclosed in the Summary Compensation Table, that are generally available to salaried employees and do not discriminate in scope, terms and operation.


	401(k) Matching and Profit-Sharing Contributions ($)		Insurance Premiums Paid ($)		Perquisites ($)		Total ($)
Michael A. Butler		17,850		3,765		22,802		44,417
Paul S. Musgrove⁽⁴⁾		17,850		—		7,500		25,350
Shepard D. Rainie		17,850		—		—		17,850

(4)	On June 27, 2014, Mr. Musgrove left the Company. On August 18, 2014 the Company hired James Malerba as its Executive Vice President and Chief Financial Officer. Because Mr. Malerba was not employed by the Company during the last completed fiscal year, he is not included in the table above.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information regarding outstanding equity awards held by our named executive officers as of December 31, 2013:


		Stock Awards
Name		Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($)⁽¹⁾
Michael A. Butler
	(2)		1,479		176,267
	(3)		1,038		123,683

Paul S. Musgrove⁽⁴⁾
	(2)		366		43,606
	(3)		277		33,011

Shepard D. Rainie
	(2)		338		40,243
	(3)		264		31,484

(1)	Payout value is calculated by multiplying the closing market price of the Company’s common stock as of December 30, 2013 ($119.20) by the number of units that have not yet vested.

(2)

Represents the number of phantom performance units (without regard to the 10-for-1 forward stock split of our common stock which occurred on August 7, 2014) granted under the Phantom Performance Unit Program of First Trade Union Bank and Radius Bancorp Inc. for the 2012-2014 Cycle, which will be earned, if at all, based on the Bank’s performance during the performance cycle ending December 31, 2014 and the value of which will be paid in a single lump sum payment of cash (less any required tax withholdings) on June 5, 2015, subject to the recipient’s continued employment through such payment date. The target number of phantom performance units (without regard to the 10-for-1 forward stock split of our common stock which occurred on August 7, 2014) granted was 1,625 to Mr. Butler, 402 to Mr. Musgrove, and 371 to Mr. Rainie. Depending on performance during the performance cycle, the recipient may earn a number of phantom performance units ranging from 50% (threshold) to 150% (maximum) of the target number of phantom performance units. The Bank satisfied or exceeded the target performance goals for 2012 and 2013. The number of units reported in the table above is based on achieving target performance goals for 2012 and 2013 and threshold performance goals for 2014.

(3)

Represents the number of phantom performance units (without regard to the 10-for-1 forward stock split of our common stock which occurred on August 7, 2014) granted under the Phantom Performance Unit Program of First Trade Union Bank and Radius Bancorp Inc. for the 2013-2015 Cycle, which will be earned, if at all, based on the Bank’s performance during the performance cycle ending December 31, 2015 and which will be paid in a single lump sum payment of cash (less any required tax withholdings) on June 10, 2016, subject to the recipient’s continued employment through such payment date. The target number of phantom performance units (without regard to the 10-for-1 forward stock split of our common stock which occurred on August 7, 2014) granted was 1,701 to Mr. Butler, 454 to Mr. Musgrove, and 433 to Mr. Rainie. Depending on performance during the performance cycle, the recipient may earn a number of phantom performance units ranging from 50% (threshold) to 150% (maximum) of the target number of phantom performance units. The Bank satisfied or exceeded the target performance goals for 2013. The number of units reported in the table above is based on achieving target performance goals for 2013 and threshold performance goals for 2014 and 2015.

(4)

Upon his departure from the Company on June 27, 2014, Mr. Musgrove forfeited his phantom performance units and all rights to receive payment thereunder. On August 18, 2014 the Company hired James Malerba as its Executive Vice President and Chief Financial Officer. Because Mr. Malerba was not employed by the Company during the last completed fiscal year, he is not included in the table above.

Employment Agreements and Severance Arrangements

Employment Agreements with Michael Butler. Prior to the offering, both the Company and the Bank entered into substantially identical employment agreements with Michael Butler to secure his services as the Company’s and the Bank’s President and Chief Executive Officer. Mr. Butler’s employment agreements are being amended and restated in connection with, and effective as of, the closing of the offering. The amended and restated employment agreements establish the terms of Mr. Butler’s employment with the Company and the Bank. The employment agreements do not provide for duplicate benefits. Mr. Butler’s employment agreement with the Company sets forth the aggregate compensation and benefits payable for all services rendered to the Company and the Bank.

The amended and restated employment agreements will have a fixed term beginning on the date of effectiveness of the registration statement and ending on December 15, 2015. These employment agreements provide for a minimum annual base salary of $378,525, which is subject to regular review in accordance with the Company’s and the Bank’s practices and policies. In addition to base salary, the executive is eligible for a short-term cash incentive plan target of up to 50% of his base salary (or a greater amount as approved by our board of directors) and for a long-term cash or equity incentive plan target of up to 50% of his base salary (or a greater amount as approved by our board of directors), each upon the attainment of certain performance goals or objectives. Additionally, the Company and the Bank will provide the executive with term life insurance, supplemental disability insurance, use of a Company-owned automobile and country club dues reimbursement.

The Company and the Bank may terminate the executive’s employment, and the executive may resign, at any time with or without cause. In the event of termination of the executive’s employment during the term without “cause” within one year following, or six months preceding, a change in control, the Company and the Bank will continue to pay the executive an amount, in installments for 36 months, equal to three times the average of the executive’s base salary and short- and long-term incentive compensation for each of the past three years; and will provide continuation of, or reimbursement for the executive’s continuation of, the executive’s health, life, and disability insurance for 12 months. The same severance benefits would be payable if the executive resigns for “good reason” within the same period following an adverse change in the executive’s status or positions at the Company or the Bank; a material reduction in the executive’s base salary or short-term incentive plan target bonus opportunity, unless mandated by any regulatory authority having jurisdiction over the Company or the Bank; an involuntary relocation of the executive’s principal place of employment to a location more than 30 miles from the executive’s current principal place of employment; the failure to elect or reelect the executive as a director or the removal of the executive from such position; or the failure of the Company and the Bank to obtain an agreement from any successor to assume and perform the employment agreements within 15 days of a change in control. In the event of termination of the executive’s employment during the term without “cause” or if the executive resigns for “good reason,” the Company and the Bank will continue to pay the executive’s base salary, in installments, for 12 months; will pay the executive a lump sum payment equal to the sum of the executive’s pro-rated short-term incentive compensation and the long-term incentive compensation due as if a change in control had occurred; and will provide continuation of, or reimbursement for the executive’s continuation of, the executive’s health, life, and disability insurance for 12 months. The receipt of severance payments and benefits are contingent on the executive’s timely execution and non-revocation of a release of claims.

The agreements contain confidentiality restrictions and, except upon certain terminations in connection with a change in control, non-competition and non-solicitation clauses prohibiting the executive from directly or indirectly soliciting current or former customers of the Company or the Bank or directly or indirectly soliciting or attempting to solicit or induce any current or future employee of the Company or the Bank to leave the Company or the Bank, as applicable, for a period of one year following the executive’s termination of employment.

If we experience a change in ownership, a change in effective ownership or control, or a change in the ownership of a substantial portion of our assets as contemplated by Section 280G of the Code, a portion of any severance payments under the employment agreements might constitute an “excess parachute payment” under

current federal tax laws. Any excess parachute payment would be subject to a federal excise tax payable by Mr. Butler and would be non-deductible by us for federal income tax purposes. The employment agreements do not provide a tax indemnity.

Severance, Change in Control, and Non-Solicitation Agreements. The Bank is currently party to Severance, Change in Control, and Non-Solicitation Agreements with Mr. Rainie and five of its executive officers who are not named executive officers which are being amended in connection with the offering to revise the definition of change in control to conform to that of the amended and restated employment agreements. Their purpose is to prevent the executive from leaving to pursue other employment out of concern for the security of his or her job. Upon completion of the offering, the Bank intends to enter into a similar severance, change in control, and non-solicitation agreement with Mr. Malerba as is currently in effect with Mr. Rainie.

In the event of an applicable executive’s termination of employment without “cause,” the Bank will pay the executive a severance payment equal to one year of the executive’s annual salary in effect as of the date of termination and will pay the executive’s COBRA premiums for one year. The same severance benefit would be payable in the event of an applicable executive’s termination of employment by the Bank without “cause” or by the executive for “good reason,” in each case within one year following, or six months preceding, a change in control except in the case of Messrs. Malerba and Rainie in which case the cash severance benefit is two years of the executive’s annual salary. The agreements contain non-competition and non-solicitation clauses prohibiting the executives from directly or indirectly soliciting current or former customers of the Bank or directly or indirectly soliciting or attempting to solicit or to induce any current or future employee of the Bank to leave the Bank for a period of one year following each executive’s termination of employment. The receipt of severance payments and benefits are contingent on the executive’s timely execution and non-revocation of a release of claims.

In the event that any amounts payable or benefits to be provided under these agreements would be nondeductible to us by reason of Section 280G of the Code, then such amounts shall be reduced to the extent necessary that such payments will no longer be ineligible for deduction by reason of Section 280G of the Code.

Severance Pay Plan. Effective as of the offering, the Bank will implement a Severance Pay Plan that provides severance benefits to eligible employees and officers, other than those individuals covered by a separate employment agreement or a severance, change in control, and non-solicitation agreement, whose employment is terminated without “cause” or by the employee or officer following a forced relocation, forced reduction in annual base salary, or a material adverse change in the employee’s or officer’s title, position, or responsibilities during the period commencing three months prior to a change in control and ending one year following the change in control. An employee or officer whose employment terminates under these circumstances is entitled to a lump sum payment equal to two weeks’ base salary, multiplied by the employee’s whole years of service, but such severance payment will not exceed 52 weeks of salary, nor shall it be less than four weeks of salary.

Senior Management Transaction Incentive Performance Awards. In 2012, the Bank entered into Senior Management Transaction Incentive Performance Award agreements with Mr. Butler, Mr. Musgrove, Mr. Rainie, and one of its executive officers who is not a named executive officer. Pursuant to each agreement, the recipient is eligible to receive a lump sum bonus payment upon the occurrence of an “exit transaction” during the three-year period beginning on June 1, 2012 and ending on May 31, 2015 where the value received in such exit transaction attains certain valuation metrics. While the completion of the offering does not constitute an exit transaction under these awards, our board of directors intends to make payment under these agreements to each recipient, with the exception of Mr. Musgrove, who left the company on June 27, 2014, in exchange for the cancellation of these agreements by each recipient. The payments to Mr. Butler, Mr. Rainie and one other officer who is not a named executive officer will be $394,181, $225,247 and $202,722, respectively, and will be made in connection with the closing of the offering. The net after-tax proceeds from these lump sum bonus payments will be reinvested in shares of Company common stock purchased in the offering by each recipient.

Retirement Benefits

401(k) Plan. The Bank currently sponsors the First Trade Union Bank Incentive Savings Plan, or the 401(k) Plan, which is a defined contribution profit-sharing plan with a salary deferral feature under Section 401(k) of the Code. The 401(k) Plan is intended to qualify as a tax-qualified plan under Section 401 of the Code so that contributions to the 401(k) Plan and income earned on such contributions are not taxable to participants until withdrawn or distributed from the 401(k) Plan. With certain exceptions, all employees who have attained age 18 are eligible to make elective deferrals to the 401(k) Plan as of their date of hire and are eligible to receive matching contributions and/or profit-sharing contributions after their completion of six months of eligibility service.

A participant may contribute up to 100% of his or her compensation to the 401(k) Plan on a pre-tax and after-tax basis, subject to the contribution limits imposed by the Code. For 2014, the elective deferral contribution limit is $17,500; provided, however, that a participant over age 50 may contribute, on a pre-tax basis, an additional $5,500 to the 401(k) Plan. In addition to pre-tax and after-tax elective deferral contributions, the 401(k) Plan provides that the Bank may make discretionary matching contributions and/or profit-sharing contributions to each participant’s account. A participant is always 100% vested in his or her elective deferral contributions. However, participants will vest in their employer matching contributions and/or profit-sharing contributions, if any, at a rate of 25% per year, beginning after the completion of their second year of service, such that the participants will be 100% vested upon completion of five years of service. The 401(k) Plan permits a participant to direct the investment of his or her own account into various investment options.

Supplemental Executive Retirement Plans. The Bank has entered into an Amended & Restated Supplemental Executive Retirement Benefit Agreement and an Amended & Restated Executive Shared Control Insurance Agreement, each dated May 27, 1999, with one of the Bank’s executives who is not a named executive officer. The agreements call for the executive to be paid a monthly targeted retirement benefit for 15 years with the annual amount of the targeted benefit equal to 30% of the average annual base salary paid to such executive in the three years prior termination of employment. The agreements provide for the Bank to fund the purchase of split-dollar life insurance policies on the life of the executive. The Bank’s interest in the policy is the accumulated premiums paid, and the executive’s interest is the cash surrender value in excess of such accumulated premiums. If the value of the policy is sufficient to pay the executive the targeted retirement benefit, then any excess value is returned to the Bank for reimbursement of the premiums paid. If the value of the policy is insufficient to pay the executive the targeted retirement benefit, the Bank has no further obligation beyond the release of its interest in the policy. If the executive’s employment is terminated on account of death or disability, by the executive for “good reason” following a change in control, or by the Bank without “cause” and if the executive has five or more years of service at such termination, the Bank will release its interest in the policy. If we experience a change in ownership, a change in effective ownership or control or a change in the ownership of a substantial portion of our assets as contemplated by Section 280G of the Code, a portion of the value of the Bank’s interest in the policy so released might constitute an “excess parachute payment” under current federal tax laws. Any excess parachute payment would be subject to a federal excise tax payable by the executive, would be non-deductible by us for federal income tax purposes and would not be subject to any tax indemnity payable by us.

2003 Director and Officer Deferred Compensation Plan. In 2002, the Bank adopted a Deferred Compensation Plan for Directors and Officers (effective commencing calendar year 2003), which allowed participants to defer receipt of, for directors, their fees or, for officers, a portion of their compensation. At the time of deferral, the participant opted for the value to be determined as either “book” or “market” and elected the future year in which the deferred compensation was to be paid to him or her. The restricted stock shares were held in a “rabbi trust.” The value was paid to the participant at the first to occur of the time of maturity or the participant’s termination of service as a director or officer. Residual cash (only whole shares were issued) and all dividends were held in a cash account at the Bank. Additional shares of stock were purchased when the cash balance exceeded the then-current share value. The board of directors voted to discontinue the plan for calendar year 2006, and all balances were frozen at that time. One of our officers who is not a named executive officer and one non-employee director currently hold balances under this plan.

Equity and Equity-Based Incentive Plans

2014 Omnibus Incentive Plan

General. On September 17, 2014, the Company’s board of directors adopted the Radius Bancorp Inc. 2014 Omnibus Incentive Plan, or the 2014 Plan, and we expect the Company’s stockholders to approve the 2014 Plan prior to the completion of this offering. The 2014 Plan will become effective upon closing of the offering. We believe that adoption and maintenance of the 2014 Plan will assist us in recruiting, rewarding, and retaining employees, officers, non-employee directors, and other service providers. We believe that granting awards under the 2014 Plan will provide recipients with an incentive to contribute to the success of the Company and to operate and manage the Company’s business in a manner that will provide for the Company’s long-term growth and profitability to benefit its stockholders and other important stakeholders. To this end, the 2014 Plan provides for the grant of options, restricted stock, stock units, unrestricted stock, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards, and cash bonus awards. Any of these awards may, but need not, be made as performance incentives to reward attainment of annual or long-term performance goals. A summary of the material terms of the 2014 Plan is set forth below. The summary is qualified in its entirety by reference to the full text of the 2014 Plan, which is filed as an exhibit to the registration statement of which this prospectus is a part.

Administration of the 2014 Plan. The 2014 Plan is administered by the compensation committee, or the Committee, of our board of directors, and the Committee determines all terms of awards under the 2014 Plan. The Committee determines who will receive awards under the 2014 Plan, the type of award and its terms and conditions, and the number of shares of common stock subject to the award. The Committee also interprets the provisions of the 2014 Plan. During any period of time in which we do not have a compensation committee, the 2014 Plan will be administered by the board or another committee appointed by the board. References below to the “Committee” include a reference to the board or another committee appointed by the board for those periods in which the board or such other committee appointed by the board is acting.

Eligibility. All employees of the Company, the Bank, and their affiliates are eligible to receive awards under the 2014 Plan. In addition, non-employee directors, consultants, and advisors who perform services for the Company, the Bank, or their affiliates and any other individual whose participation in the 2014 Plan is determined to be in the best interests of the Company by the Committee may receive awards under the 2014 Plan, other than incentive stock options.

Share Authorization. We have reserved 500,000 shares of common stock for issuance pursuant to the 2014 Plan. In connection with stock splits, distributions, recapitalizations, and certain other events, the board or the Committee will make proportionate adjustments that it deems appropriate in the aggregate number of shares of common stock that may be issued under the 2014 Plan and the terms of outstanding awards. If any awards terminate, expire, or are canceled, forfeited, exchanged, or surrendered without having been exercised or paid or if any awards are forfeited or expire or otherwise terminate without the delivery of any shares of common stock, the shares of common stock subject to such awards will again be available for purposes of the 2014 Plan. However, the number of shares of common stock available for issuance under the 2014 Plan will not be increased by the number of shares of common stock (i) tendered or withheld or subject to an award surrendered in connection with the purchase of shares of common stock upon exercise of an option, (ii) deducted or delivered from payment of an award of a stock option in connection with the Company’s tax withholding obligations, or (iii) purchased by the Company with the proceeds from option exercises. The number of shares of common stock available for issuance under the 2014 Plan will be increased by the number of shares of common stock (i) tendered or withheld or subject to an award other than a stock option surrendered in connection with the purchase of shares of stock or deducted or (ii) delivered from the payment of an award other than a stock option in connection with the Company’s tax withholding obligations. Shares of common stock that are subject to awards will be counted against the 2014 Plan share limit as one share of common stock for every one share of common stock subject to the award. An award that, by its terms, cannot be settled in shares of common stock will not count against the share limits of the 2014 Plan.

The maximum number of shares of common stock subject to options that may be granted under the 2014 Plan to any person in any single calendar year is equal to 125,000 shares. The maximum number of shares of common stock that may be granted under the 2014 Plan to any person pursuant to an award, other than pursuant to an option, that is stock-denominated and is either stock- or cash-settled in any single calendar year is equal to 125,000 shares. The maximum amount that may be paid as a cash-denominated performance-based award (whether or not cash-settled) for a performance period of 12 months or less to any person eligible for an award is $1 million, and the maximum amount that may be paid as a cash-denominated performance-based award (whether or not cash-settled) for a performance period of greater than 12 months to any person eligible for an award is $1 million.

Options. The 2014 Plan permits the grant of incentive stock options (under Section 422 of the Code) and options that do not qualify as incentive stock options (that is, non-qualified stock options). Any or all of the shares of common stock available for issuance under the 2014 Plan are available for issuance pursuant to incentive stock options, but incentive stock options may only be granted to employees of the Company, the Bank, and their affiliates. The exercise price of each option will be determined by the Committee, provided that the exercise price cannot be less than 100% of the fair market value of a share of common stock on the date on which the option is granted. If the Company grants incentive stock options to any 10% stockholder, the exercise price may not be less than 110% of the fair market value of a share of our common stock on the date on which the option is granted. The Committee may not, without stockholder approval, reduce the exercise price of an option after the grant of the option, cancel an outstanding option in exchange for or substitution of a new option having an exercise price below that of the option that was surrendered, or cancel an outstanding option with an exercise price above the current share price in exchange for cash or other securities.

To the extent that the aggregate fair market value of shares of common stock determined on the date of grant with respect to which incentive stock options are exercisable for the first time during any calendar year exceeds $100,000, the option will be treated as a non-qualified stock option.

The term of an option cannot exceed 10 years from the date of grant. If the Company grants incentive stock options to any 10% stockholder, the term cannot exceed 5 years from the date of grant. The Committee determines at what time or times each option may be exercised and the period of time, if any, after retirement, death, disability, or termination of employment during which options may be exercised. Options may be made exercisable in installments. The exercisability of stock options may be accelerated by the Committee. Awards of options are nontransferable, except (i) for transfers by will or the laws of descent and distribution or (ii) if authorized in the applicable award agreement, for transfers of non-qualified stock options, not for value, to family members pursuant to the terms and conditions of the 2014 Plan.

Stock Awards. The 2014 Plan permits the grant of stock awards (which includes restricted stock and unrestricted stock). A stock award is an award of shares of common stock that may be subject to restrictions on transferability and other restrictions as the Committee determines in its sole discretion on the date of grant. The restrictions, if any, may lapse over a specified period of time or through the satisfaction of conditions, in installments, or otherwise, as the Committee may determine. Unless otherwise provided in an award agreement, a grantee who receives restricted stock will have all of the rights of a stockholder as to those shares, including, without limitation, the right to vote and the right to receive dividends or distributions on the shares of common stock, except that the Committee may require any dividends to be reinvested in shares of common stock. Dividends paid on restricted stock which vests based on the achievement of performance goals will not vest unless the applicable performance goals are achieved. During the period, if any, when stock awards are non-transferable or forfeitable, a grantee is prohibited from selling, transferring, assigning, pledging, or otherwise encumbering or disposing of his or her award shares.

Stock Units. The 2014 Plan also permits the grant of stock units. Stock units represent the grantee’s right to receive a compensation amount, based on the value of the shares of common stock, if vesting criteria established by the Committee are met. If the vesting criteria are met, the Company will settle stock units in cash, shares of

common stock, or a combination of the two. A grantee who receives stock units will have no rights of a stockholder as to the shares of common stock on which the stock unit is based, though the Committee may provide that a grantee of stock units will be entitled to receive dividends paid on an equivalent number of shares of common stock. The Committee may provide that any such dividends will be deemed reinvested in shares of common stock. Dividends paid on stock units which vest based on the achievement of performance goals will not vest unless the applicable performance goals are achieved. During the period, if any, when stock units are non-transferable or forfeitable, a grantee is prohibited from selling, transferring, assigning, pledging, or otherwise encumbering or disposing of his or her stock units.

Dividend Equivalents. The 2014 Plan permits the grant of dividend equivalents in connection with the grant of any equity-based award. Dividend equivalents may be paid currently or accrued as contingent cash obligations and may be payable in cash, shares of common stock, or a combination of the two. The Committee will determine the terms of any dividend equivalents. No dividend equivalent rights can be granted in tandem with an option, and no dividend equivalent rights granted as a component of a performance award will vest unless the underlying performance goals are achieved.

Performance-Based Awards. The 2014 Plan permits the grant of performance shares, cash incentives, and other performance-based awards in such amounts and upon such terms as the Committee may determine. Each grant of a performance-based award will have an initial value or an actual or target number of shares of common stock that is established by the Committee at the time of grant. The Committee may set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of performance shares or other performance-based awards that will be paid out to a grantee. The performance goals generally will be based on one or more of the performance measures described below. The Committee will establish the performance periods for performance-based awards. Performance-based awards may be payable in cash or shares of common stock, or a combination thereof, as determined by the Committee.

The 2014 Plan identifies some conditions that may warrant revision or alteration of performance goals after they are established by the Committee. Such conditions may include the following: (a) asset write-downs; (b) litigation or claims, judgments, or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) any reorganization or restructuring events or programs; (e) extraordinary, non-core, non-operating, or non-recurring items; (f) acquisitions or divestitures; (g) foreign exchange gains and losses; (h) tax valuation allowance reversals; (i) impairment expense; and (j) environmental expense.

Performance Measures. The 2014 Plan permits the Committee to grant awards to covered executive officers that will constitute qualified performance-based compensation for purposes of Section 162(m) of the Code. Section 162(m) of the Code limits publicly-held companies to an annual deduction for U.S. federal income tax purposes of $1 million for compensation paid to each of their chief executive officer and their three highest compensated executive officers (other than the chief financial officer) determined at the end of each year, referred to as covered employees. However, performance-based compensation is excluded from this limitation. The 2014 Plan is designed to permit the Committee to grant awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m) of the Code, but it is not required under the 2014 Plan that awards qualify for this exception.

To qualify as performance-based: (i) the compensation must be paid solely on account of the attainment of one or more pre-established, objective performance goals; (ii) the performance goal under which compensation is paid must be established by a committee of the board, such as the Committee, comprised solely of two or more directors who qualify as outside directors for purposes of the exception; (iii) the material terms under which the compensation is to be paid must be disclosed to and subsequently approved by stockholders before payment is made in a separate vote; and (iv) the relevant committee must certify in writing before payment of the compensation that the performance goals and any other material terms were in fact satisfied.

Under the 2014 Plan, one or more of the following business criteria will be used by the Committee in establishing performance goals: (1) net earnings or net income; (2) operating earnings; (3) pretax earnings; (4) earnings per share; (5) share price, including growth measures and total stockholder return; (6) earnings before interest and taxes; (7) earnings before interest, taxes, depreciation, and/or amortization; (8) earnings before interest, taxes, depreciation, and/or amortization as adjusted to exclude any one or more of the following: stock-based compensation expense; income from discontinued operations; gain on cancellation of debt; debt extinguishment and related costs; restructuring, separation, and/or integration charges and costs; reorganization and/or recapitalization charges and costs; impairment charges; gain or loss related to investments; sales and use tax settlement; and gain on non-monetary transactions; (9) sales or revenue growth, whether in general, by type of product or service, or by type of customer; (10) gross or operating margins; (11) return measures, including return on assets, capital, investment, equity, sales, or revenue; (12) cash flow, including: operating cash flow; free cash flow, defined as earnings before interest, taxes, depreciation, and/or amortization (as adjusted to exclude any one or more of the items that may be excluded pursuant to the performance measure specified in clause (8) above) less capital expenditures; levered free cash flow, defined as free cash flow less interest expense; cash flow return on equity; and cash flow return on investment; (13) productivity ratios; (14) expense targets; (15) market share; (16) financial ratios as provided in credit agreements of the Company and its subsidiaries; (17) working capital targets; (18) completion of acquisitions of businesses or companies; (19) completion of divestitures and asset sales; (20) customer satisfaction; or (21) any combination of the foregoing business criteria. The Committee may base performance goals on a Company-wide basis, with respect to one or more business units, divisions, affiliates, or operating segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices.

The Committee has the authority to provide for accelerated vesting of any performance-based award based on the achievement of performance goals pursuant to the performance measures and the discretion to adjust awards that are intended to qualify as performance-based compensation, either on a formula or discretionary basis, or on any combination thereof, as the Committee determines in a manner consistent with the requirements of Code Section 162(m) for deductibility.

Other Equity-Based Awards. The 2014 Plan permits the grant of other types of stock-based awards. Other equity-based awards are payable in cash, shares of common stock or other equity, or a combination thereof, and may be restricted or unrestricted, as determined by the Committee. The terms and conditions that apply to other equity-based awards are determined by the Committee.

Change in Control. Unless otherwise provided in an applicable award agreement, if the Company experiences a change in control in which outstanding awards that are not exercised prior to the change in control will not be assumed or continued by the surviving entity: (1) except for performance-based awards, all shares of restricted stock and stock units will vest and the underlying shares of common stock and all dividend equivalent rights will be delivered immediately before the change in control; and (2) at the discretion of the Committee, either of the following actions will be taken: (A) all options will become exercisable 15 days before the change in control and terminate upon the completion of the change in control, or (B) all options, restricted stock, stock units, and dividend equivalents will be cashed out in connection with the change in control. In the case of performance-based awards, the awards will be treated as though target performance has been achieved and will be paid in cash or converted into unrestricted stock.

Unless otherwise provided in an applicable award agreement, if the Company experiences a change in control in which outstanding awards will be assumed or continued by the surviving entity: (1) the 2014 Plan and awards granted thereunder will continue under their terms, with appropriate adjustments as to the number of shares and option exercise prices, and (2) to the extent the employment of a grantee is terminated without “cause” (as defined in the 2014 Plan) within one year following the consummation of such change in control, the grantee’s award will fully vest and may be exercised, to the extent applicable, during the one-year period immediately following such termination of employment.

Adjustments for Stock Splits and Similar Events. The Committee will make appropriate adjustments in outstanding awards and the number of shares of common stock available for issuance under the 2014 Plan, including the individual limitations on awards, to reflect stock splits and other similar events.

Amendment or Termination. The board of directors may amend, suspend, or terminate the 2014 Plan at any time; provided that no amendment, suspension, or termination may adversely impair the benefits of grantees with outstanding awards without the grantees’ consent. The Company’s stockholders must approve any amendment if such approval is required by the board or under applicable law or stock exchange requirements. The Company’s stockholders also must approve any amendment that changes the no-repricing provisions or the option pricing provisions of the 2014 Plan. The 2014 Plan will automatically terminate on the day preceding the 10^th anniversary of the closing of the offering, but it may be terminated earlier by the board at any time.

Phantom Performance Unit Program

General. In June 2012, the Bank and the Company established a Phantom Performance Unit Program. The purpose of the program is to provide long-term incentive opportunities that are directly-linked to the long-term performance of the Company and the Bank to align the participant’s interests with the stockholders. All directors and officers, including our named executive officers, are eligible to participate in the program. The Company and the Bank have determined not to grant any additional awards under the program after the closing of the offering. However, the program will continue to govern the terms and conditions of the awards granted under the program outstanding as of the date of this prospectus, which include the 2012-2014, 2013-2015, and 2014-2016 performance cycles and which constitute 170,400 target phantom performance units (after giving effect to the 10-for-1 forward stock split of our common stock which occurred on August 7, 2014) granted to both employees and non-employee directors.

Types and Terms of Awards. The program provides for the grant of phantom performance units. Each unit that vests represents the right to receive a lump sum cash payment equal to the number of vested units multiplied by the per unit value (determined as of the most recent valuation date preceding the date of payment). The phantom performance units are earned based on the achievement of certain absolute measures and relative total shareholder return targets, each weighted 50%, during each year of a three-year performance period and over the three-year performance period as a whole. After the end of the three-year performance period, participants become vested and receive a lump sum cash payment for the total number of units that are earned during the performance period. Participants must generally be employed at the time of payment to receive a payment under the program. If a participant has entered into an agreement with the Bank that provides for payment with respect to performance bonuses following a termination of employment, the participant will receive the greater of the payment under the program or the payment specified in such agreement for terminations unrelated to a change in control.

Upon a change in control during the three-year performance period, the program provides for accelerated payment of outstanding awards in a lump sum based on actual performance for completed performance segments and based on a pro-rated portion of the greater of the target or actual performance for any ongoing performance segment. The closing of the offering shall not constitute a change in control under this program.

2009 Deferred Incentive Plan

General. In June 2009, the Company established the 2009 DIP. The Company may amend or terminate the 2009 DIP at any time, and the Company has determined not to grant any additional awards under the 2009 DIP after the closing of the offering. However, the 2009 DIP will continue to govern the terms and conditions of the awards granted under the 2009 DIP outstanding as of the date of this prospectus, which constitute (1) aggregate deferred incentive awards totaling approximately $372,500 to both employees and non-employee directors and (2) restricted stock awards covering approximately 1,970 shares (after giving effect to the 10-for-1 forward stock split of our common stock which occurred on August 7, 2014) to non-employee directors.

Types and Terms of Awards. The 2009 DIP provides for the grant of deferred incentive awards and restricted stock to certain employees and non-employee directors designated by the plan administrator and approved by the Company’s board of directors. Deferred incentive awards and dividends on unvested restricted stock are credited to a participant’s account. A participant’s account balance accrues interest credits equal to the one-year U.S. Treasury Note published in the Wall Street Journal plus 1% each January 1^st and July 1^st.

Upon vesting, a participant’s account is settled in a lump sum cash payment, and the restrictions applicable to shares of restricted stock lapse. A participant fully vests in his or her award under the 2009 DIP on the third anniversary of the date of grant, or if the participant has attained age 62 and at least 25 years of service on the date of grant, on the first day of the 14^th month from the date of grant. The 2009 DIP provides for accelerated vesting of outstanding awards upon the participant’s termination of employment other than “cause” following a change in control. The closing of the offering shall not constitute a change in control under the 2009 DIP. The 2009 DIP also provides for accelerated vesting of outstanding awards upon a director participant’s failure to be re-elected to the Company’s board of directors.

Director Compensation

Director Fees. During 2014, each non-employee director, with the exception of the chairman of our board of directors, will receive an annual base retainer of $17,500, and the chairman of our board of directors will receive an annual base retainer of $27,500. These amounts shall be paid in equal monthly installments. In addition, our non-employee directors will receive the following compensation for their board services, as applicable:

•

each non-employee director will receive a $5,000 long-term incentive award;

•

each non-employee director will receive $500 per meeting of the board of directors or a committee thereof attended in person and $300 per meeting of the board of directors or a committee thereof attended via conference call; and

•

chairs of each committee will receive an additional annual retainer of $3,000.

Notwithstanding the foregoing, non-employee directors will not receive payment for attendance of meetings of the governance and nominating committee, which will be renamed the nominating and corporate governance committee upon the effectiveness of the offering, unless such meetings are held outside the standard board meeting schedule.

During 2013, with the exception of Mr. Peciaro, each non-employee director received the same annual base retainer, long-term incentive award, and per meeting fees as set forth above for 2014. The following table sets forth information concerning compensation accrued or paid to our non-employee directors during the year ended December 31, 2013, for their service on our board. Directors who are also our employees receive no additional compensation for their service as directors and are not set forth in the table below.


Name	Fees Earned or Paid in Cash⁽¹⁾ ($)		Stock Awards⁽²⁾ ($)		Total ($)
Dale Stuhlmiller		41,800		5,000		46,800
Stephan Adamic⁽³⁾		19,767		5,000		24,767
Robert Carlino⁽³⁾		28,600		5,000		33,600
Georgina Macdonald⁽³⁾		30,100		5,000		35,100
Thomas Mackell, Jr.⁽³⁾		26,700		5,000		31,700
William Mausert⁽³⁾		30,742		5,000		35,742
Howard Newburg		28,500		5,000		33,500
Albert Peciaro⁽³⁾⁽⁴⁾		0		0		0
Thomas Roberts⁽⁵⁾		14,150		5,000		19,150
Raymond Weaving⁽³⁾		28,500		5,000		33,500

(1)	Includes annual base retainer payments, per meeting fees, and/or chairmanship fees earned during fiscal year 2013, whether such fees were paid currently or deferred.

(2)

(3)	Will resign as a director of the Company and the Bank immediately following the completion of this offering.

(4)	As a representative of the New England Carpenters’ Combined Funds and the Empire State Carpenters’ Pension Fund, Mr. Peciaro did not receive any compensation for his services as a director.

(5)	Mr. Roberts received compensation for his service as a member of the board of directors until his death on June 10, 2013.

Mr. Weaving has a balance under the 2003 Director and Officer Deferred Compensation Plan. Upon his resignation as a director of the Company and the Bank immediately following the completion of this offering, the value of his balance will be paid to him in a lump sum. For additional information about this plan, see “Executive and Director Compensation—Retirement Benefits.”

Non-employee directors also participate in the Phantom Performance Unit Program and 2009 DIP. The long-term incentive awards granted to non-employee directors are granted pursuant to the Phantom Performance Unit Program. For additional information about this program and plan and awards granted thereunder, see “Executive and Director Compensation—Phantom Performance Unit Program” and “—2009 Deferred Incentive Plan.”

Directors’ Retention Payments. Each non-employee director who will resign as a director of the Company and the Bank immediately following the completion of the offering is eligible to receive a retention payment of up to $8,750 in the sole discretion of our board of directors based upon such director’s service and efforts related to the offering.

Certain Relationships And Related Party Transactions

The following is a description of transactions, since January 1, 2011, to which we have been a party or will be a party, in which the amount involved exceeded or will exceed $120,000, and in which any of our executive officers or directors, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest, other than compensation, termination and change of control arrangements, which are described under “Executive and Director Compensation—Employment Agreements and Severance Arrangements” and “—Directors’ Compensation.”

Loans and Extensions of Credit. The Sarbanes-Oxley Act of 2002 generally prohibits loans to our executive officers and directors. However, the Sarbanes-Oxley Act contains a specific exemption from such prohibition for loans by a bank to its executive officers and directors in compliance with federal banking regulations. Federal regulations require that all loans or extensions of credit to executive officers and directors of insured institutions must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to the bank and must not involve more than the normal risk of repayment or present other unfavorable features. The aggregate amount of our loans to our directors, executive officers and their related entities was $414 thousand and $37 thousand and $0 at June 30, 2014, December 31, 2013 and December 31, 2012, respectively. These loans were originated in compliance with applicable federal regulations and, as of June 30, 2014, were performing according to their original terms.

Deposit Retention Agreements. As of June 30, 2014, the Funds (with their related parties) controlled $159.7 million, or 26.8% of our total deposits. Because the Funds use their deposit accounts with us as a source of liquidity, the daily balances in the accounts fluctuate significantly. We have entered into deposit retention agreements with the Funds pursuant to which the Funds have agreed to maintain certain savings and demand deposit accounts with the Bank for a period of not less than three years following the completion of this offering, to continue to use such accounts for the same purpose and in the same manner as they have recently, and to continue to obtain deposit and cash management services from the Bank in substantially the same proportion (as compared to other providers of such services) as each funds has recently obtained such services. Each of the Funds has further agreed to maintain its accounts and related deposits in a manner consistent with any applicable governmental authority’s definition of “core deposits” applicable to the Bank. If the Funds do not comply with the terms of the deposit retention agreements, remove a significant portion of their deposits in accordance with the terms of the agreements, which permit the Funds to withdraw deposits in certain circumstances, including if the Bank fails to be deemed “well capitalized” by its regulators, or remove a significant portion of their deposits following the expiration of the agreements, we may be forced to seek other sources of deposits or increase our borrowings, which may increase our costs, thereby adversely affecting our results of operations and financial condition.

Other Transactions. Since the beginning of our last fiscal year, there have been no transactions and there are no currently proposed transactions in which we were or are to be a participant and the amount involved exceeds $120,000, and in which any of our executive officers or directors had or will have a direct or indirect material interest.

Principal and Selling Stockholders

The following table sets forth certain information regarding the beneficial ownership of our common stock as of June 30, 2014, and as adjusted to reflect the sale of shares of common stock in this offering.

We have based our calculation of beneficial ownership prior to this offering on 4,212,830 shares of common stock outstanding on June 30, 2014. We have based our calculation of beneficial ownership after this offering on 5,543,381 shares of our common stock outstanding immediately following the completion of this offering, which gives effect to the issuance of 5,000,000 shares of common stock in this offering. Ownership information assumes no exercise of the underwriters’ over-allotment option.

As of June 30, 2014, none of our directors and executive officers beneficially owned shares of our common stock. As described under “Executive and Director Compensation—Employment Agreements and Severance Arrangements,” in connection with the completion of the offering and in exchange for the cancellation of their Senior Management Transaction Incentive Performance Award agreements, Mr. Butler, Mr. Rainie and one other officer who is not a named executive officer will each receive a lump sum bonus payment, the net after-tax proceeds of which will be reinvested in shares of our common stock purchased in the offering. The information set forth in the table below does not reflect any potential purchase of any shares in this offering by such parties.

Information with respect to beneficial ownership has been furnished to us by each stockholder who holds more than 5% of any class of our voting securities. Beneficial ownership is determined according to the rules of the SEC and generally means that a party possesses sole or shared voting or investment power of that security. Each of the beneficial owners named in the table below has, and upon completion of this offering will have, to our knowledge, sole voting and investment power with respect to all shares of common stock listed as beneficially owned, except, in the case of our directors and executive officers, for shares owned jointly with that person’s spouse. Unless otherwise indicated, the address for each stockholder in the table below is c/o Radius Bancorp Inc., One Harbor Street, Suite 201, Boston, Massachusetts 02210.


	Shares Beneficially Owned Before this Offering				Shares of Common Stock Being Offered		Shares of Common Stock Beneficially Owned After this Offering⁽⁶⁾
Name And Address Of Beneficial Owner⁽¹⁾	Number		%		Shares of Common Stock Being Offered		Number		%
5% Stockholders:

New England Carpenters’ Pension Fund⁽²⁾		1,350,960		32.1		1,177,893		173,067		3.12
New England Carpenters’ Guaranteed Annuity Fund⁽²⁾		755,390		17.9		656,832		98,558		1.78
Empire State Carpenters’ Pension Fund⁽³⁾		2,106,350		50.0		1,834,724		271,626		4.90
Directors and Executive Officers:
Michael Butler		—		—		—
Dale Stuhlmiller		—		—		—
Stephan Adamic⁽⁴⁾		—		—		—
Robert Carlino⁽⁴⁾		—		—		—
Seth Felix		—		—		—
Christopher Flynn⁽⁵⁾		—		—		—
Bradford Kopp⁽⁵⁾		—		—		—
Robert Kozik⁽⁵⁾		—		—		—
Robert Landstein		—		—		—
Alicia Lopez⁽⁵⁾		—		—		—
Georgina Macdonald⁽⁴⁾		—		—		—
Thomas Mackell, Jr.⁽⁴⁾		—		—		—
James Malerba		—		—		—
William Mausert⁽⁴⁾		—		—		—
Robert McCambridge⁽⁵⁾		—		—		—
Howard Newburg		—		—		—
Joann Noble		—		—		—
Albert Peciaro⁽⁴⁾		—		—		—
Shepard Rainie		—		—		—
Raymond Weaving⁽⁴⁾		—		—		—
Robert Sullivan⁽⁵⁾		—		—		—
All executive officers and directors as a group (21 persons)		—		—		—

(1)	At June 30, 2014, 130 shares were held in the rabbi trust established in connection with the Company’s Director and Officer Deferred Compensation Plan.

(2)

The address for New England Carpenters’ Combined Funds is 350 Fordham Road, Wilmington, Massachusetts 01887. As trustees of New England Carpenters’ Combined Funds, the following persons exercise dispositive powers over the common stock: Thomas Steeves, Michael Shaughnessy, George A. Allen, William Shea, George Bidgood, C. Joseph Williams, Thomas O’Connor, III, Thomas Gunning, John Dargin, Mark Erlich, Gary DeCosta, John Murphy, Richard Braccia, Brian Richardson, Joseph Gangi, Jr., Jack Donahue and Jason Garand.

(3)	The address for Empire State Carpenters’ Pension Fund is 270 Motor Parkway, Hauppauge, New York 11788. The following persons exercise voting and dispositive power over the common stock of Empire State

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Carpenters’ Pension Fund: Samuel Halpern, Nicholas Davies, Frank Domeisen, Michael Johnson and Ryan Lennie. Voting power also is exercised by Andrew Irving and Eric Elbell. The address for each of these individuals is 2 Pierce Place, Itasca, IL 60143.

(4)	Will resign as director of the Company and the Bank upon completion of this offering.

(5)	Will become a director of the Company and the Bank upon the completion of this offering.

(6)	Column values represent amounts of shares that the named entities and individuals have indicated they would like to purchase in the offering. Assumes the underwriters’ over-allotment option is not exercised.

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Supervision and Regulation

General

The Bank is a federal savings association and our wholly owned subsidiary. We are a Delaware corporation and a registered savings and loan holding company. The Bank’s deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation, or FDIC. The Bank is subject to extensive regulation by the Office of the Comptroller of the Currency, or OCC, its primary federal regulator, and by the FDIC, its deposit insurer. The Bank is required to file reports with, and is periodically examined by, the OCC concerning its activities and financial condition and must obtain regulatory approvals prior to entering into certain transactions, including, but not limited to, mergers with or acquisitions of other financial institutions. The Bank must comply with consumer protection regulations issued by the Consumer Financial Protection Bureau, or CFPB. The Bank is a member of and owns stock in the Federal Home Loan Bank, or FHLB, of Boston, which is one of the 12 regional banks in the FHLB System.

As a savings and loan holding company, we are subject to examination, supervision and regulation by, and are required to file certain reports with, the Federal Reserve Board. We also will be subject to the rules and regulations of the SEC under the federal securities laws.

The federal bank regulatory structure limits the activities in which an institution can engage and is intended primarily for the protection of depositors and the deposit insurance fund, rather than for the protection of stockholders and creditors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies concerning the establishment of deposit insurance assessment fees, classification of assets and establishment of adequate loan loss reserves for regulatory purposes. Any change in such regulatory requirements and policies, whether by the OCC, the FDIC, the Federal Reserve Board or the United States Congress, could have a material adverse impact on the financial condition and results of operations of the Company and the Bank. As is further described below, the Dodd-Frank Act has significantly changed the bank regulatory structure and may affect the lending, investment and general operating activities of depository institutions and their holding companies.

Set forth below are certain material regulatory requirements that are applicable to us and the Bank. This description of statutes and regulations is not intended to be a complete description of such statutes and regulations and their effects on us and the Bank. Any change in these laws or regulations, whether by Congress or the applicable regulatory agencies, could have a material adverse impact on us, the Bank and our operations.

Dodd-Frank Act

The Dodd-Frank Act made significant changes to the regulatory structure for depository institutions and their holding companies. However, the Dodd-Frank Act’s changes go well beyond that and affect the lending, investments and other operations of all depository institutions. The Dodd-Frank Act required the Federal Reserve Board to set minimum capital levels for savings and loan holding companies that are as stringent as those required for the insured depository subsidiaries, and the components of Tier 1 capital for holding companies were restricted to capital instruments that were then currently considered to be Tier 1 capital for insured depository institutions. The legislation also established a floor for capital of insured depository institutions that cannot be lower than the standards in effect upon passage and directed the federal banking regulators to implement new leverage and capital requirements that take into account off-balance sheet activities and other risks, including risks relating to securitized products and derivatives.

The Dodd-Frank Act created the CFPB with broad powers to supervise and enforce consumer financial protection laws. The CFPB has extensive rule-making authority for a wide range of consumer financial protection laws that apply to all banks, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets with respect to the consumer financial protection laws. Banks and savings

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institutions with $10 billion or less in assets are still examined for compliance by their applicable bank regulators. The new legislation also weakened the federal preemption available for national banks and federal savings associations, and gave state attorneys general the ability to enforce applicable federal consumer protection laws.

The Dodd-Frank Act broadened the base for FDIC insurance assessments. Assessments are now based on the average consolidated total assets less tangible equity capital of an insured depository financial institution, rather than on total deposits. The legislation also permanently increased the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250 thousand per depositor, retroactive to January 1, 2008. The Dodd-Frank Act increased stockholder influence over boards of directors by requiring companies to give stockholders a non-binding vote on executive compensation and so-called “golden parachute” payments. The legislation also directed the Federal Reserve Board to promulgate rules prohibiting excessive compensation paid to executives of insured depository institutions and their holding companies, regardless of whether the company is publicly traded or not. Further, the legislation mandated regulations requiring that originators of securitized loans retain a percentage of the risk for transferred loans, directed the Federal Reserve Board to regulate pricing of certain debit card interchange fees and contained a number of reforms related to mortgage origination.

The Dodd-Frank Act also required the CFPB to issue regulations requiring lenders to make a reasonable good faith determination as to a prospective borrower’s ability to repay a residential mortgage loan. The final “ability to repay” rules, which became effective January 10, 2014, establish a “qualified mortgage” safe harbor for loans whose terms and features are deemed to make the loan less risky.

Many provisions of the Dodd-Frank Act involve delayed effective dates and/or require implementing regulations that have not been written or issued in final form. Their impact on our operations cannot yet fully be assessed. However, there is a significant possibility that the Dodd-Frank Act will result in an increased regulatory burden and compliance, operating and interest expense for us and the Bank.

Holding Company Regulation

General. We are a savings and loan holding company within the meaning of the Home Owners’ Loan Act, as amended, or HOLA. As such, we are registered with the Federal Reserve Board and subject to regulations, examinations, supervision and reporting requirements applicable to savings and loan holding companies. In addition, the Federal Reserve Board has enforcement authority over us. Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the subsidiary insured depository institution.

Activity Restrictions. Laws governing savings and loan holding companies historically have classified such entities based upon the number of thrift institutions which they control. We are classified as a unitary savings and loan holding company because we control only one thrift, the Bank. Under the Gramm Leach Bliley Act of 1999, or the GLB Act, any company which becomes a unitary savings and loan holding company pursuant to a charter application filed with the Office of Thrift Supervision after May 4, 1999, is prohibited from engaging in non-financial activities or affiliating with non-financial companies. We became a unitary savings and loan holding company after May 4, 1999 and are prohibited from engaging in non-financial activities or affiliating with non-financial companies.

Acquisition of Control. HOLA and the Federal Reserve Board’s implementing regulations prohibit a savings and loan holding company, directly or indirectly, or through one or more subsidiaries, from acquiring control of another savings institution without prior Federal Reserve Board approval. In addition, a savings and loan holding company is prohibited from directly or indirectly acquiring, through mergers, consolidation or purchase of assets, another insured depository institution or a holding company thereof, or acquiring all or substantially all of the assets of such institution or company without prior Federal Reserve Board approval.

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Under the Federal Change in Bank Control Act and the Federal Reserve Board’s implementing regulations, no person may acquire control of a savings and loan holding company unless the Federal Reserve Board has been given 60 days’ prior written notice and has not issued a notice disapproving the proposed acquisition. Acquisitions subject to approval under the HOLA are exempt from the prior notice requirement, but are subject to the requirement to obtain prior Federal Reserve Board Approval. Control, as defined under the Change in Bank Control Act and the Federal Reserve Board’s implementing regulations, means the power to directly or indirectly direct the management or policies of a savings and loan holding company or to vote 25% or more of any class of voting securities of a savings and loan holding company. Acquisition of more than 10% of any class of a savings and loan holding company’s voting stock, is subject to a rebuttable presumption of control by the Federal Reserve Board if the savings and loan holding company has registered securities under Section 12 of the Securities Exchange Act or if no other person will own, control or hold the power to vote a greater percentage of that class of voting stock immediately after the acquisition. There are also rebuttable presumptions in the regulations concerning whether a group is “acting in concert,” including presumed concerted action among members of an “immediate family.” Accordingly, the filing of a notice with the Federal Reserve Board would be required before any person or group of persons acting in concert could acquire 10% or more of our common stock, unless the person or group of persons files a rebuttal of control that is accepted by the Federal Reserve Board.

Capital. In July 2013, the Federal Reserve Board, the OCC and the FDIC approved new rules, or the New Capital Rules, establishing a new comprehensive capital framework for U.S. banking organizations. Prior to the enactment of the Dodd-Frank Act, savings and loan holding companies were not subject to regulatory capital requirements. Pursuant to the Dodd-Frank Act, as a saving and loan holding company, we will be subject to the New Capital Rules.

The New Capital Rules: (i) introduce a new capital measure called “Common Equity Tier 1,” or CET1, and related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain revised requirements; (iii) mandate that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital; and (iv) expand the scope of the deductions from and adjustments to capital as compared to existing regulations. Under the New Capital Rules, for most banking organizations, including us, the most common form of Additional Tier 1 capital is non-cumulative perpetual preferred stock and the most common forms of Tier 2 capital are subordinated notes and a portion of the allocation for loan and lease losses, in each case, subject to the New Capital Rules’ specific requirements.

Pursuant to the New Capital Rules, the minimum capital ratios as of January 1, 2015 will be as follows:

•

4.5% CET1 to risk-weighted assets

•

6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets

•

8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and

•

4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”).

The New Capital Rules also introduce a new “capital conservation buffer,” composed entirely of CET1, on top of these minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer will face constraints on dividends, equity and other capital instrument repurchases and compensation based on the amount of the shortfall. Thus, when fully phased-in on January 1, 2019, the capital standards applicable to us will include an additional capital conservation buffer of 2.5% of CET1, effectively resulting in minimum ratios inclusive of the capital conservation buffer of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to risk-weighted assets of at least 8.5%, and (iii) Total capital to risk-weighted assets of at least 10.5%.

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The New Capital Rules provide for a number of deductions from and adjustments to CET1. These include, for example, the requirement that mortgage servicing rights, deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such items, in the aggregate, exceed 15% of CET1.

In addition, under the current general risk-based capital rules, the effects of accumulated other comprehensive income or loss, or AOCI, items included in stockholders’ equity (for example, mark-to-market of securities held in the available-for-sale portfolio) under U.S. GAAP are reversed for the purposes of determining regulatory capital ratios. Pursuant to the New Capital Rules, the effects of certain AOCI items are not excluded; however, non-advanced approaches banking organizations, including us, may make a one-time permanent election to continue to exclude these items. This election must be made concurrently with the first filing of certain of our periodic regulatory reports in the beginning of 2015. The New Capital Rules also preclude certain hybrid securities from inclusion in a holding company’s Tier 1 capital. However, depository institution holding companies with total consolidated assets of less than $15 billion as of year-end 2009 are permitted to continue to count as Tier 1 capital trust preferred securities issued before May 19, 2010.

Implementation of the deductions and other adjustments to CET1 will begin on January 1, 2015 and will be phased-in over a 4-year period (beginning at 40% on January 1, 2015 and an additional 20% per year thereafter). The implementation of the capital conservation buffer will begin on January 1, 2016 at the 0.625% level and increase by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019.

The New Capital Rules prescribe a new standardized approach for risk weightings that expand the risk-weighting categories from the current four Basel I-derived categories (0%, 20%, 50% and 100%) to a larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S. government and agency securities, to 600% for certain equity exposures, and resulting in higher risk weights for a variety of asset classes.

We believe that we will be able to comply with the targeted capital ratios upon implementation of the New Capital Rules.

Source of Strength. Federal Reserve Board policy requires savings and loan holding companies to act as a source of financial and managerial strength to their depository institutions. The Dodd-Frank Act codified the requirement that holding companies act as a source of financial strength. As a result, we will be expected to commit resources to support the Bank, including at times when we may not be in a financial position to provide such resources.

Dividends. We receive substantially all of our revenue from dividends from the Bank. These dividends are the principal source of funds to pay dividends on our common stock and interest and principal on our debt. Federal laws and regulations limit the amount of dividends that the Bank may pay to us and may limit the dividends that we may pay our stockholders. Also, our right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. In the event the Bank is unable to pay dividends to us, we may not be able to service debt, pay obligations or pay dividends on our preferred or common stock. The inability to receive dividends from the Bank could have a material adverse effect on our business, financial condition and results of operations.

Regulation of Federal Savings Associations

General. As a federal savings association, the Bank is subject to supervision, regulation and examination by the OCC and to HOLA and regulations of the OCC which govern, among other things, investment powers, lending and deposit-taking activities, borrowings, maintenance of surplus and reserve accounts, distribution of earnings and payment of dividends. In addition, the Bank is subject to federal consumer financial protection laws

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and regulations. The approval of the OCC is required for a federal savings association to establish or close branches, merge with other financial institutions, issue stock and undertake certain other activities. Any federal savings association that does not operate in accordance with the regulations, policies and directives of the OCC may be sanctioned. The OCC may suspend or remove directors or officers of a bank who have violated the law, conducted a bank’s business in a manner that is unsafe, unsound or contrary to the depositors’ interests, or been negligent in the performance of their duties. In addition, the OCC has the authority to appoint a receiver or conservator if it is determined that the bank is conducting its business in an unsafe or unauthorized manner, and under certain other circumstances.

Business Activities. The Bank derives its lending and investment powers from HOLA, and the regulations of the OCC. Under these laws and regulations, the Bank may invest in mortgage loans secured by residential and commercial real estate, commercial and consumer loans, certain types of debt securities, and certain other assets. The Bank may also establish service corporations that may engage in activities not otherwise permissible for the Bank, including certain real estate equity investments. The Bank’s authority to invest in certain types of loans or other investments is limited by federal law and regulation.

Loans to One Borrower. The Bank is generally subject to the same limits on loans to one borrower as a national bank. With specified exceptions, the Bank’s total loans or extensions of credit to a single borrower cannot exceed 15% of the Bank’s unimpaired capital and surplus, which does not include accumulated other comprehensive income. The Bank may lend additional amounts up to 10% of its unimpaired capital and surplus, which does not include accumulated other comprehensive income, if the loans or extensions of credit are fully-secured by readily-marketable collateral. The Bank currently complies with applicable loans-to-one borrower limitations.

QTL Test. Under federal law, the Bank must comply with the qualified thrift lender, or QTL test. Under the QTL test, the Bank is required to maintain at least 65% of its “portfolio assets” in certain “qualified thrift investments” in at least nine months of the most recent 12-month period. “Portfolio assets” means, in general, the Bank’s total assets less the sum of:

•

specified liquid assets up to 20% of total assets;

•

goodwill and other intangible assets; and

•

the value of property used to conduct the Bank’s business.

“Qualified thrift investments” include certain assets that are includable without limit, such as residential and manufactured housing loans, home equity loans, education loans, small business loans, credit card loans, mortgage backed securities, Federal Home Loan Bank stock and certain U.S. government obligations. In addition, certain assets are includable as “qualified thrift investments” in an amount up to 20% of portfolio assets, including, certain consumer loans and loans in “credit-needy” areas.

The Bank may also satisfy the QTL test by qualifying as a “domestic building and loan association” as defined in the Internal Revenue Code of 1986, as amended. The Bank met the QTL test at June 30, 2014, and in each of the prior 12 months, and, therefore, is a “qualified thrift lender.” Failure by the Bank to maintain its status as a QTL would result in restrictions on activities, including restrictions on branching and the payment of dividends. If the Bank were unable to correct that failure for a specified period of time, it must either continue to operate under those restrictions on its activities or convert to a bank charter. In the event the Bank converts its charter to a national bank charter, the Bank would no longer be required to comply with the QTL test.

Capital Requirements. OCC regulations require savings associations to meet three minimum capital standards:

•

a tangible capital ratio requirement of 1.5% of total assets as adjusted under the OCC regulations;

•

a leverage ratio requirement of 3.0% of core capital to such adjusted total assets, if the Bank has been assigned the highest composite rating of 1 under the Uniform Financial Institutions Rating System; otherwise, the minimum leverage ratio for any other depository institution that does not have a

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composite rating of 1 will be a leverage ratio requirement of 4.0% of core capital to adjusted total assets; and a risk-based capital ratio requirement of 8.0% of the Bank’s risk-weighted assets, provided that the amount of supplementary capital used to satisfy this requirement may not exceed 100% of the Bank’s core capital.

Higher capital ratios may be required if warranted by particular circumstances, including the risk profile of the depository institution. In determining the amount of risk-weighted assets for purposes of the risk-based capital requirement, a savings association must multiply its on-balance sheet assets and certain off-balance sheet items by the appropriate risk weights, which range from 0% for cash and obligations issued by the United States government or its agencies to 100% for consumer, commercial loans, home equity and construction loans and certain other assets as assigned by the OCC capital regulations based on the risks found by the OCC to be inherent in the type of asset.

Tangible capital is defined, generally, as common stockholder’s equity (including retained earnings), certain noncumulative perpetual preferred stock and related earnings, minority interests in equity accounts of fully consolidated subsidiaries, less intangible assets (other than certain servicing rights and nonsecurity financial instruments) and investments in and loans to subsidiaries engaged in activities not permissible for a national bank. Core capital (or tier 1 capital) is defined similarly to tangible capital. Supplementary capital (or tier 2 capital) includes cumulative perpetual and other perpetual preferred stock, mandatory convertible subordinated debt securities, perpetual subordinated debt and the allowance for loan and lease losses. In addition, up to 45% of unrealized gains on available-for-sale equity securities with readily determinable fair values may be included in tier 2 capital. The allowance for loan and lease losses includable in tier 2 capital is limited to a maximum of 1.25% of risk-weighted assets.

As with the Company, the Bank will be subject to the New Capital Rules on the same phase-in schedule. We believe that the Bank similarly will be able to comply with the targeted capital ratios upon implementation of the New Capital Rules.

Dividends. The OCC imposes various restrictions or requirements on the Bank’s ability to make capital distributions, including cash dividends. The Bank must file an application for prior approval with the OCC if the total amount of its capital distributions, including the proposed distribution, for the applicable calendar year would exceed an amount equal to the Bank’s net income for the year-to-date plus the Bank’s retained net income for the previous two years, or that would cause the Bank to be less than adequately capitalized. The OCC may disapprove a notice or application if:

•

the 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.

Section 10(f) of the HOLA requires a subsidiary savings association of a saving and loan holding company, such as Bank, to file a notice with and receive the nonobjection of the Federal Reserve prior to declaring certain types of dividends. Our ability to pay dividends, service debt obligations and repurchase common stock is dependent upon receipt of dividend payments from the Bank.

In addition, beginning in 2016, the Bank’s ability to pay dividends will be limited if the Bank does not have the capital conservation buffer required by the New Capital Rule, which may limit our ability to pay dividends to our stockholders.

Community Reinvestment Act and Fair Lending Laws. All institutions have a responsibility under the Community Reinvestment Act, or CRA, and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers. In connection with its examination of a federal savings association, the OCC is required to assess the institution’s record of compliance with the CRA. The CRA

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does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA does require the OCC to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution, including applications to acquire branches and other financial institutions. The CRA requires the OCC to provide a written evaluation of an institution’s CRA performance utilizing a four-tiered descriptive rating system. An institution’s failure to comply with the provisions of the CRA could, at a minimum, result in denial of certain corporate applications such as branches or mergers, or in restrictions on its activities. The CRA requires all institutions insured by the FDIC to publicly disclose their rating. The Bank received a “Satisfactory” CRA rating in its most recent federal examination.

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. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the OCC, as well as other federal regulatory agencies and the Department of Justice.

Transactions with Related Parties. An insured depository institution’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and federal regulation. An affiliate is generally a company that controls, or is under common control with an insured depository institution such as the Bank. We are an affiliate of the Bank because of our control of the Bank. In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative and qualitative limits and collateral requirements. Transactions with affiliates also must be consistent with safe and sound banking practices, generally not involve the purchase of low-quality assets and be on terms that are as favorable to the insured depository institution as comparable transactions with non-affiliates.

The 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 generally require that extensions of credit to insiders:

•

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

•

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 the Bank’s capital.

In addition, extensions of credit in excess of certain limits must be approved by the Bank’s loan committee or board of directors. Extensions of credit to executive officers are subject to additional limits based on the type of extension involved.

Enforcement. The OCC has extensive enforcement responsibility over federal savings associations and has authority to bring enforcement actions against all “institution-affiliated parties,” including directors, officers, stockholders, attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an institution. Formal enforcement action by the OCC 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 money penalties cover a wide range of violations and actions, and range up to $25 thousand per day, unless a finding of reckless disregard is made, in which case penalties may be as high as $1 million per day. The OCC is required, with certain exceptions, to appoint a receiver or conservator for federal savings association if that institution was “critically undercapitalized” on average during the calendar quarter beginning 270 days after the date on which the institution became “critically undercapitalized.” The OCC may also appoint the FDIC as conservator or receiver for a federal savings association under specified circumstances, including: (1) insolvency; (2) substantial dissipation of assets or

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earnings through violations of law or unsafe or unsound practices; (3) existence of an unsafe or unsound condition to transact business; (4) insufficient capital; or (5) the incurrence of losses that will deplete substantially all of the institution’s capital with no reasonable prospect of replenishment without federal assistance. The FDIC also has the authority to terminate deposit insurance.

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 the prompt corrective action, or PCA, statute and regulations implemented by the OCC, the OCC is required to take certain, and is authorized to take other, supervisory actions against savings associations whose capital falls below certain levels. For this purpose, a savings association is placed in one of the following four categories based on the association’s capital:

•

well capitalized;

•

adequately capitalized;

•

undercapitalized; or

•

critically undercapitalized.

The PCA statute and regulations provide for progressively more stringent supervisory measures as a savings association’s capital category declines. At June 30, 2014, the Bank met the criteria for being considered “well capitalized.”

The New Capital Rule modifies the prompt corrective action categories to incorporate the revised minimum capital requirements of that rule when it becomes effective. Under the new standards, in order to be considered “well capitalized,” the Bank would have to have a common equity Tier 1 ratio of at least 6.5% (new), a Tier 1 risk-based capital ratio of at least 8.0% more (increased from 6.0%), a total risk-based capital ratio of at least 10.0% (unchanged), and a Tier 1 leverage ratio of 5.0% (unchanged). See “—New Capital Rule.”

Insurance of Deposit Accounts. The Deposit Insurance Fund of the FDIC insures deposits at FDIC-insured depository institutions such as the Bank. Deposit accounts in the Bank are insured by the FDIC up to a maximum of $250 thousand per separately insured depositor and up to a maximum of $250 thousand for self-directed retirement accounts. The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund.

Under the FDIC’s risk-based assessment system, insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other risk factors. Rates are based on each institution’s risk category and certain specified risk adjustments. Stronger institutions pay lower rates while riskier institutions pay higher rates. Assessments are based on an institution’s average consolidated total assets minus average tangible equity instead of total deposits. Assessment rates (inclusive of possible adjustments) currently range from 2.5 to 45 basis points of each institution’s total assets less tangible capital. The FDIC may increase or decrease the scale uniformly, except that no adjustment can deviate more than two basis

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points from the base scale without notice and comment rulemaking. The FDIC’s current system represents a change, required by the Dodd-Frank Act, from its prior practice of basing the assessment on an institution’s volume of deposits.

In addition to the FDIC assessments, the Financing Corporation, or FICO, is authorized to impose and collect, with the approval of the FDIC, assessments for anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the former Federal Savings and Loan Insurance Corporation. The bonds issued by the FICO are due to mature in 2017 through 2019. For the quarter ended June 30, 2014, the annualized FICO assessment was equal to 0.620 basis points of total assets less tangible capital.

The FDIC has authority to increase insurance assessments. Any significant increases would have an adverse effect on the operating expenses and results of operations of the Bank. Management cannot predict what assessment rates will be in the future.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not currently know of any practice, condition or violation that may lead to termination of our deposit insurance.

Prohibitions Against Tying Arrangements. Federal savings associations are prohibited, subject to certain exceptions, from extending credit 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 Reserve System. Federal Reserve Board regulations require depository institutions to maintain reserves against their transaction accounts (primarily NOW and regular checking accounts). The Bank’s required reserves can be in the form of vault cash and, if vault cash does not fully satisfy the required reserves, in the form of a balance maintained with the Federal Reserve Bank of Boston. The Federal Reserve Board regulations currently require that reserves be maintained against aggregate transaction accounts except for transaction accounts up to $13.3 million, which are exempt. Transaction accounts greater than $13.3 million up to $89.0 million have a reserve requirement of 3%, and those greater than $89.0 million have a reserve requirement of $2.27 million plus 10% of the amount over $89.0 million. The Federal Reserve Board generally makes annual adjustments to the tiered reserves. The Bank is in compliance with these requirements.

Federal Home Loan Bank System. The Bank is a member of the FHLB of Boston, which is one of the 12 regional Federal Home Loan Banks comprising the FHLB System. Each FHLB serves as a central credit facility primarily for its member institutions as well as other entities involved in home mortgage lending. As a member of the FHLB, the Bank is required to acquire and hold shares of capital stock in the FHLB. As of June 30, 2014, the Bank was in compliance with this requirement. Based on redemption provisions of the FHLB, the stock has no quoted market value and is carried at cost. The Bank reviews for impairment based on the ultimate recoverability of the cost basis of the FHLB stock. As of June 30, 2014, no impairment has been recognized.

At its discretion, the FHLB may declare dividends on the stock. The Federal Home Loan Banks are required to provide funds for certain purposes including the resolution of insolvent thrifts in the late 1980s and to contributing funds for affordable housing programs. These requirements could reduce the amount of dividends that the Federal Home Loan Banks pay to their members and result in the Federal Home Loan Banks imposing a higher rate of interest on advances to their members. As a result of losses incurred, the FHLB suspended and did not pay dividends in 2009 and 2010. However, the FHLB resumed payment of quarterly dividends in 2011 equal to an annual yield of 0.30% and continued to pay quarterly dividends in 2012 equal to an annual yield of 0.50% and in 2013 equal to an annual yield of 0.38%. The annual yield for the first and second quarters of 2014 was 1.49% and 1.48%, respectively. There can be no assurance that such dividends will continue in the future. Further, there can be no assurance that the impact of recent or future legislation on the Federal Home Loan Banks also will not cause a decrease in the value of the FHLB stock held by the Bank.

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Proposed Bank Charter Conversion

We intend to convert the Bank from a federal savings association to a national bank. Regulatory approval would be required for the proposed conversion and for us to become a registered bank holding company upon conversion of the Bank. Following the proposed conversion, we would continue to be subject to extensive regulation by the Federal Reserve. We would, however, be a bank holding company subject to the Bank Holding Company Act of 1956, as amended, and the Federal Reserve’s implementing regulations instead of a savings and loan holding company subject to HOLA. The Bank would continue to be subject to extensive regulation by the OCC, which would continue to be its primary federal regulator, and by the FDIC, which would continue to be its deposit insurer. After the proposed conversion, however, the Bank would be a national bank subject to the National Bank Act and the OCC’s implementing regulations instead of a federal savings association subject to HOLA.

Certain powers, operational requirements, and restrictions that apply to savings and loan holding companies and bank holding companies are different. The Federal Reserve has indicated, however, that it will use similar policies and procedures with respect to savings and loan holding companies and bank holding companies when appropriate.

A key difference between federal savings associations and national banks is that national banks are not required to meet the QTL test. There are also differences between the general powers and operational requirements of national banks and federal savings associations, in addition to the OCC’s policies and procedures for their corporate activities and transactions. Recently, the OCC proposed changes to integrate some of its policies and procedures for corporate activities and licensing requirements to provide some parity for filings by national banks and federal savings associations.

Other Regulations

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

•

Truth-In-Lending Act, which governs disclosures of credit terms to consumer borrowers;

•

Real Estate Settlement Procedures Act, which requires that borrowers of mortgage loans for one- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;

•

Home Mortgage Disclosure Act, which requires 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, which prohibits discrimination on the basis of race, creed or other prohibited factors in extending credit;

•

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

•

Biggert-Waters Flood Insurance Reform Act of 2012, which mandates flood insurance for mortgage loans secured by residential real estate in certain areas; and

•

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

In addition, the CFPB issues regulations and standards under these federal consumer protection laws that affect our consumer businesses. These include regulations setting “ability to repay” and “qualified mortgage” standards for residential mortgage loans and mortgage loan servicing and originator compensation standards. The

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Bank is evaluating recent regulations and proposals, and devotes significant compliance, legal and operational resources to compliance with consumer protection regulations and standards.

The operations of the 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;

•

Truth in Savings Act, which governs the disclosure of terms and conditions regarding interest and fees related to deposit accounts;

•

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;

•

Check Clearing for the 21st Century Act, or 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;

•

USA PATRIOT Act, which requires depository institutions 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 existing compliance requirements that also apply to financial institutions under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and

•

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.

Federal Securities Laws

Our common stock will be registered with the SEC under the Exchange Act. As a result of the registration, we will be subject to the period reporting, proxy solicitation, insider trading restrictions and other requirements of the Exchange Act.

All of the shares sold in this offering will be freely tradable unless purchased by our affiliates. Shares purchased by our affiliates will be subject to the resale restrictions of Rule 144 under the Securities Act. Beginning 90 days after the date of this prospectus, a person who is our affiliate or who was our affiliate at any time during the preceding three months, and who has beneficially owned restricted securities for at least six months, including the holding period of any prior owner other than one of our affiliates, is entitled to sell within any three-month period a number of shares that does not exceed the greater of:

Title of each class of

securities to be registered

Amount

to be

registered⁽¹⁾

Proposed

maximum

aggregate

offering price⁽²⁾

Amount of
registration fee

Common Stock, $0.0001 par value per share

$79,062,500

Radius Bancorp Inc. S-1/A